© 2016 Ipsos 1

Customer Engagement Feedback

Development of the Distribution System Plan

1

© 2016 Ipsos 2

Agenda

03 Background and Context

04 Objectives and Methodology

10 Findings

17 Appendix

© 2016 Ipsos 3

Background and Context

Ipsos was commissioned by Hydro One Networks Inc. (Hydro One) to assist with the design, execution, documentation and analysis of feedback for its distribution-connected customer engagement process.

The role of the customer engagement process is to ensure Hydro One’s distribution investment plan is informed by customer needs, preferences and priorities.

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Engagement Objectives

To obtain customer feedback on the following:

• Level of satisfaction with Hydro One and desired improvements.

• Expectations of reliable electricity distribution.

• How customers prioritize or trade-off spending on reliability, customer service, upgrades to the system to connect renewable energy customers, and keeping costs low as possible.

• The types of reliability improvements that customers value.

• Willingness to accept rate impacts to maintain and/or improve reliability and service levels.

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Participation Methods Residential, Seasonal and Small Business Customers (R&SB) Large Distribution Customers:

LDA, LDC, DG and C&I

INFORMED SAMPLE (online workbook)

• A representative sample of n=1604 residential and seasonal customers drawn online panel sample

• An open-link of n=17,201 responses representing 17,053 R&SB customers

INFORMED SAMPLE (focus groups)

• Eight online focus groups with 56 R&SB customers

CENSUS OF ALL LARGE CUSTOMERS

• Nine In-person Workshop Sessions were conducted in seven locations (Collingwood, Windsor, Hamilton, Kingston, London, Thunder Bay and Timmins). A total of 129 individuals attended representing 103 customers.* In addition to verbal feedback, participants were provided with a workbook to complete.

• An online workbook was completed by 87 customers who did not attend the in-person Workshop sessions.**

*Two one-on-one meetings were conducted with large customers in lieu of attending a Workshop session. In both cases, an Ipsos note-taker was present to record the conversation. ** The Online Workbook presented the same information that was shared at the Workshop and posed nearly identical questions. The only difference in the questions was that the Online Workbook used a statistical technique called paired-choice to quantitatively measure the relative importance customers place on various aspects of service. This technique could not be replicated in hard-copy, thus the Workshop survey booklet used a “pick the most important” approach instead.

UNINFORMED SAMPLE (telephone survey)

These results are based on a statistically valid and reliable survey and can be projected to broader customer population

• Telephone survey of random and representative sample of n=500 residential and seasonal customers

• Telephone survey of a random and representative sample of n=200 general service customers (demand and non-demand)

• Telephone survey of a random and representative sample of n=300 First Nations customers

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Level of Engagement RESIDENTIAL, SEASONAL AND SMALL BUSINESS CUSTOMERS LARGE DISTRIBUTION

CUSTOMERS TOTAL NUMBER OF RESPONSES

Focus Groups

Online Workbook

(Representative sample)

Online Workbook (Open-link)

Telephone Survey (Representative

sample)

In-person Facilitated

Workshop†

Online Workbook

RESIDENTIAL CUSTOMERS 32 1,502 15,689 400 17,623

SEASONAL CUSTOMERS 102 1,106 100 1,308

SMALL BUSINESS CUSTOMERS 24 406 200 630

300 300 FIRST NATIONS CUSTOMERS

LDA 40 5 45

20 3 23 LDC or DG

54 79 133 C&I

TOTAL 56 1,604 17,201* 1,000 114 87 20,062 †One-on-one meetings were undertaken with two customers (1 LDC and 1 C&I) *A total of 148 customers who responded to the open-link survey completed the survey twice – once as a residential or seasonal customer and once as a small business customer. Therefore, the total number of responses to the open-link is 17,201 (17,053 unique respondents + 148). A total of 19,904 unique customers participated across all of the consultation components For large customers the numbers provided represent the number of responses received through the Workshop booklet or the online workbook, not the number of organizations, Some organizations had more than one person attend the workshops and not all participants at the Workshop completed the booklet. A total of 129 participants, representing 104customers attended the Workshops, of which 114 completed the booklet in-person at the session.

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REPRESENTATIVE SAMPLE Sample

Size Margin of error (95% confidence

level)

Fielding dates

Screening Quotas Weighting variables

Survey length

(minutes)

Response Rate

RESIDENTIAL CUSTOMERS 400 ±4.9% June 2-

17, 2016 Bill payer, pay to Hydro

One Region, Density

Density (urban, medium, low) 17 13%

SEASONAL CUSTOMERS 100 ±9.8% June 2-

17, 2016 Bill payer, pay to Hydro

One Region None 17 13%

SMALL BUSINESS CUSTOMERS

200 ±6.9% June 2-17, 2016

Bill payer, pay to Hydro One Region Demand/ Non-

Demand, Region 13 11%

FIRST NATIONS CUSTOMERS

300 ±5.7% June 2-17, 2016

Bill payer, pay to Hydro One

Region and within region

urban/rural

None 18 13%

Telephone Survey

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Online Workbook REPRESENTATIVE SAMPLE

Sample Size Fielding dates Screening Quotas Weighting variables Survey length (minutes)

RESIDENTIAL CUSTOMERS 1,502 June 2- 23, 2016 Bill payer, pay to

Hydro One Region Region/urban/rural 15

SEASONAL CUSTOMERS 102 June 2-23, 2016 Bill payer, pay to

Hydro One Region Region/urban/rural 10

OPEN-LINK SAMPLE Sample Size Fielding dates Screening Quotas Weighting variables Survey length

(minutes)

RESIDENTIAL CUSTOMERS 15,689 June 2- July 20, 2016 Bill payer, pay to

Hydro One None None 18

SEASONAL CUSTOMERS 1,106 June 2- July 20, 2016 Bill payer, pay to

Hydro One None None 18

SMALL BUSINESS CUSTOMERS 406 June 2- July 20, 2016 Bill payer, pay to

Hydro One None None 18

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Large Customers

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FINDINGS Customer Engagement

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• Keeping costs as low as possible is customers’ top priority. • For those who identify cost as their top priority, maintaining

reliable electricity service is consistently their second priority.

Customer Priorities

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• Residential and Small Business Customers: A majority of the representative

sample of residential and small business customers who offer an opinion are willing to accept a {residential 1.1% or $2.00 / small business 1% or $5.20} increase on their total monthly bill each year for five years to maintain the current reliability and service levels. Acceptance is directionally lower among some segments of open-link respondents. The majority of R&SB customers are unwilling to accept higher rate impacts for better reliability.

• Large Customers: Rate increases are difficult for many Large Customers to accept as they have concerns and need more information about Hydro One’s operational efficiencies and its ability to effectively manage costs. As such, at present there is limited acceptance of any of the illustrative rate impact scenarios.

Acceptability of Rate Impacts

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• Reliability Improvements: Opinions are varied, but most Large Customers prioritize

the Renewal Program that focuses on replacing equipment that affects reliability ahead of other options.

• LDA customers place the second greatest priority on the Smart Grid, that is, using technology to reduce their chances of losing power. They place this slightly ahead of increased tree-trimming and grid strengthening. LDC/DG customers rank tree-trimming as their second preference. C&I customers place as much of a priority on grid strengthening as replacing equipment.

• Service Improvements: Providing more accurate estimates of when power will be restored and power quality are the most preferred service improvement options across most Large Customers.

Reliability and Service Preferences

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Desired Improvements Residential, small business, and large customers from focus groups and large workshops are seeking improvements from Hydro One in several key areas: • Operational efficiencies: Residents, small businesses and large businesses are

concerned with the rising cost of electricity prices. Many participants stated their belief that Hydro One should improve efficiencies in other areas and re-invest these funds in capital expenditures, rather than increasing rates.

• Power quality: Power quality is the reliability issue of most concern to large customers as these have major impacts on their operations. Service interruptions lasting less than one minute are not currently being tracked by Hydro One and this is a source of frustration for many large customers.

• Customer service: Service is an issue for C&I and Small Business customers in particular, as they lack dedicated account contacts (as with LDA/LDC), and have more complex needs than residential customers.

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Desired Improvements (continued) Residential, small business, and large customers from focus groups and large workshops are seeking improvements from Hydro One in several key areas: • Connections and Capacity: Large customers in certain regions and certain

industries have been seeking additional capacity for their needs and have found the process and service to facilitate this unsatisfactory.

• Credibility: Commentary was made on Hydro One and its workers being perceived as being unproductive and poorly managed, which is particularly difficult to accept with electricity costs being very high. Some stated that the information being presented was to justify a distribution rate increase. They are seeking increased accountability and transparency from Hydro One.

• Communication: Improved and more accurate communication during outages, information on cost saving ideas and programs, as well as general information on Hydro One, were all mentioned as being of interest.

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QUESTIONS? Thank You.

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APPENDIX

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Overall Satisfaction with Hydro One

As you may know, Hydro One builds and maintains power lines, towers and poles, safely delivers electricity, reads meters, calculates your charges, answers your calls, responds during outages, and clears trees and brush from power lines. Hydro One does not generate electricity or set electricity prices. Q1., How satisfied are you with Hydro One overall? Note: During the first week of fielding the response scale was changed from 1 to 5 to a word scale to be consistent with the Annual Customer Satisfaction survey. Base: Uninformed customers - Post Q change; Residential (n=243), Seasonal (n=68), Small Business (n=159), First Nations (n=204)

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Overall Satisfaction with Hydro One

As you may know, Hydro One builds and maintains power lines, towers and poles, safely delivers electricity, reads meters, calculates your charges, answers your calls, responds during outages, and clears trees and brush from power lines. Hydro One does not generate electricity or set electricity prices. Q1., How satisfied are you with Hydro One overall? Note: During the first week of fielding the response scale was changed from 1 to 5 to a word scale to be consistent with the Annual Customer Satisfaction survey. Base: Informed customers - Post Q change; Online Workbook: Representative Sample: Residential (n=1384), Seasonal (n=98) / Online Workbook: LDA (n=45), LDC/DG (n=23), C&I (n=133)

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Acceptability of Rate Increase to Maintain Levels

Q17. Hydro One has determined that in order to at least maintain the level of reliability and customer service it currently provides, a typical [residential or seasonal / small business] customer’s total monthly bill will need to increase by [1.1% or the equivalent of $2.00 /1% or the equivalent of $5.2O. The increase will be applied each year for the next 5 years. By the fifth year, a typical monthly bill will be roughly [IF RESIDENTIAL OR SEASONAL $10.00 / IF BUSINESS: $26.00] higher than it is now. Please note that this increase reflects the cost to maintain the current level of reliability and service to customers. The monthly bill could still increase for other reasons which are outside the control of Hydro One. Would you be willing to accept this increase to maintain the current level reliability and customer service across the electricity system? Base: Uninformed customers - Residential (n=400), Seasonal (n=100), Small Business (n=200), First Nations (n=300). Base: Informed customers - Online Workbook: Representative Sample: (n=1502), Seasonal (n=102)

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Acceptance of Investment Scenarios

Q15. Would you be willing to accept a 2.5% distribution deliver rate increase where reliability and service performance declines (Scenario 2)? Base: LDA (n=45), LDC/DG (n23), C&I (n= 133)

Q16. Would you be willing to accept a 3.4% distribution delivery rate increase where reliability and service performance remains the same as it is now (Scenario 1)? Base: LDA (n=45), LDC/DG (n23), C&I (n= 133):

Q17. Would you be willing to accept a 4.05% distribution delivery rate increase where reliability and service performance improves (Scenario 3)? Base: LDA (n=45), LDC/DG (n23), C&I (n= 133)

DECLINE

MAINTAIN

IMPROVE

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Customer Preferences for Ways to Improve Reliability Percentages shown represent % who ranked the item in the first or second position

Q11. Please rank the RELIABILTIY items below in the order in which they would have the greatest positive impact on your organization, where 1 represents the item that would have the most positive impact and 6 represents the least positive impact? Base: LDA (n=45), LDC/DG (n=23), C&I (n=133)

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Customer Preferences for Ways to Improve Service Percentages shown represent % who ranked the item in the first or second position

Q12. Please rank the SERVICE items below in the order in which they would have the greatest positive impact on your organization, where 1 represents the item that would have the most positive impact and 7 represents the least positive impact? Base: LDA (n=45), LDC/DG (n=23), C&I (n=133)

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How Large Customers Would Allocate Spending Data shown below is the mean score – representing the average amount ($) customers would spend on these items.

Q13. To better understand your preferences for reliability, service and level of rates, please complete the following. If you had $100 to spend on the following, how would you allocate the month?

The data shown above excludes customers who do not answer the question or whose answer did not total $100. Base: LDA (n=39), LDC/DG (n=20), C&I (n=121)