Transmission GROSS DIRECT COSTS. Original: HQT-6, Document 2 Page 1

Transcription

1 GROSS DIRECT COSTS Page 1

2 TABLE OF CONTENTS 1 SUMMARY SALARY COSTS (MASSE SALARIALE) SALARY COST COMPONENTS Base Salary (Salaire de base) Bonuses and Various Revenues (Primes et revenus divers) Benefits (Avantages sociaux) EVOLUTION OF THE WORKFORCE UNIT LABOUR COSTS (COÛTS UNITAIRES DE MAIN-D OEUVRE) VARIABLE REMUNERATION SCHEMES Performance Management Scheme (Régime de gestion de la performance) Profit-Sharing Scheme (Régime d'intéressement) Costs of the Variable Remuneration Schemes (Coûts de régimes de rémunération variable) Degree of Attainment (Degré d atteinte) Maximum Percentage of Base Salary Payable as Bonus (Pourcentage maximal du salaire de base pouvant être versé à titre de bonis) Corporate Objectives of the TransÉnergie Division (Objectifs corporatifs de la division TransÉnergie) PENSION COSTS (COÛT DE RETRAITE) SALARY COMPETITIVENESS STUDY (ÉTUDE SUR LA POSITION SALARIALE) MAIN PARAMETERS IN THE COLLECTIVE BARGAINING AGREEMENTS (PRINCIPAUX PARAMÈTRES DES CONVENTIONS COLLECTIVES) OTHER DIRECT COSTS (AUTRES CHARGES DIRECTES) EXTERNAL SERVICES (SERVICES EXTERNES) STOCK, PURCHASES OF GOODS, FINANCIAL RESOURCES, RENT AND OTHERS COST RECOVERY (RÉCUPÉRATION DE COÛTS) Page 2

3 1 SUMMARY The Provider s gross direct costs are made up of three categories: Salary costs Other direct costs Cost recovery. The evolution of the gross direct costs since 2005 is as follows: Gross direct costs Table 1 (in millions of dollars) Historic year Base year Test year Salary costs Other direct costs Cost recovery (3.8) (1.7) (1.7) Total The following sections deal with each of the categories in more detail. 2 SALARY COSTS (MASSE SALARIALE) 2.1 SALARY COST COMPONENTS Table 2 below details the salary costs components for the Provider from 2005 to The costs related to labour represent, on average, 76% of the Provider s gross direct costs. Page 3

4 During the period of , the Provider s salary costs increased at an average annual rate of 5.5%. This growth is mainly the result of pension costs; collective bargaining with the unions representing the Company s employees; the increase in the workforce of annual full-time equivalents (FTEs); as well as benefit costs Base Salary (Salaire de base) During this same period, the growth in base salaries of the Provider s employees was $19.8 million, which represents an annual average increase of 4.5%, as a result of the following causes: increases granted by virtue of signed collective bargaining agreements ($11.5 million); growth in the workforce of annual FTEs ($5.8 million) as further described in Section 2.2 below. Page 4

5 2.1.2 Bonuses and Various Revenues (Primes et revenus divers) Bonuses and various revenues amount to $22.5 million in 2007, a decrease of $1.8 million in comparison with This decrease is attributed mainly to a legal settlement in 2005 with a group of employees. Regarding the respective costs of $3.0 million and $7.4 million for the two variable remuneration schemes, these relate to the performance management scheme (régime de gestion de la performance) and the profit-sharing scheme (régime d intéressement) described in Section 2.4 of the current Exhibit Benefits (Avantages sociaux) The cost of benefits includes a range of employee benefits schemes, in addition to government plans, which are classified in line item of Benefits Other (Avantages sociaux Autres). The cost of benefits also includes pension costs (coût de retraite), as well as complementary pension benefits (avantages complémentaires à la retraite). These different schemes are assigned to the Provider by means of a benefit rate applicable to the forecast base salary costs. In the event of a significant variance, the annual benefit expenditure is corrected by a rate adjustment at the end of each year. Increasing by $23.2 million from 2005 to 2007, the benefits costs are up largely due to the evolution in pension costs ($19.1 million). Pension costs are described in Section 2.5. The portion relating to government plans and insurance plans, in the line item Benefits Other (Avantages sociaux Autres) shows an increase ($3.4 million) which can be attributed to growth in overall salary costs, to the costs of the health insurance plan which continue to increase, as well as to the temporary takeover by the employer of part Page 5

6 of the group insurance costs (life and health insurance) which are normally borne by the employees. 2.2 EVOLUTION OF THE WORKFORCE Table 3 below shows the evolution by job grouping of the workforce in annual FTEs: Table 3 Full-time Equivalents by Job Grouping (Équivalents Temps Complet (ÉTC) par groupe d emploi) Note: Bureau = Office; Métiers = Trades; Techniciens = Technicians; Ingénieurs = Engineers; Spécialistes = Specialists; Professionnels = Professionals; Cadres = Management. During the period of , the projected number of FTEs should increase by 89 over the previous year. The increase in the workload is set as a function of the anticipated volume of activities for the preparation and the training of the new Page 6

7 employees for the execution of the operating activities and the undertaking of investment projects. Exhibit HQT-6, Document 4 provides the additional details on this cost element. 2.3 UNIT LABOUR COSTS (COÛTS UNITAIRES DE MAIN-D OEUVRE) The following table shows the evolution by job grouping of the average base salary, as well as that of the benefits of s active employees over the period of 2005 to Table 4 Unit Labour Costs The salaries and benefits reflect the parameters of the collective bargaining agreements made with the employee unions. They also reflect the experience and seniority of the employees. 2.4 VARIABLE REMUNERATION SCHEMES The two variable remuneration schemes described below are in effect at. Page 7

8 2.4.1 Performance Management Scheme (Régime de gestion de la performance) This scheme targets the company personnel that are not subject to the collective bargaining agreements. With respect to the Provider, the scheme has a corporate component and an individual component specifically related to the Hydro- Québec TransÉnergie division. The payment of a bonus by virtue of the corporate component is contingent on attaining a financial trigger, the level of net profit targeted, as approved by the Board of Directors. The level of net profit targeted corresponds to 87.5% of the expected net profit. If the net profit targeted for a given year is not met, there will be no bonus payment. If the financial trigger is attained, there will be a bonus payment, of which the amount depends on the degree of attainment of results specific to the division. Each division and other units of have three categories of objectives to attain: Objectives related to the customer base (customer satisfaction and service continuity); Objectives related to employees (mobilization, health and job security indicators); Objectives related to the shareholder (indicators pertaining to the control of operating costs and the division profits). The second component of the scheme is a component by which individual objectives are seen as contributing to the attainment of the division objectives. The amount paid depends on the degree of attainment of the individual objectives Profit-Sharing Scheme (Régime d'intéressement) This scheme targets company personnel subject to the collective bargaining agreements. This is a corporate scheme similar to the corporate component of the performance management scheme. It relies on the same financial trigger as the performance management scheme. However, if a bonus is awarded, the amount depends on the degree of attainment of results by s CEO. These results are a composite of the division results and those of the corporate units, calculated according to a weighted average. Page 8

9 The generation company (HQP), the Provider and the Distributor each contribute 20% to the CEO s results. The Equipment Division and SEBJ, the Technology, Human Resources and Shared Services Groups, as well as the General Audit contribute 40% to the CEO s results. It should be noted that as of January 1, 2007, following the renewal of the collective bargaining agreement for specialists for the period of January 1, 2005 to December 31, 2009, the amount that can be paid by virtue of this component will depend on the business results of the employee s division. Since 2004, the profit-sharing regime provides for the payment of an additional bonus of 1.5% related to the attainment of the net profit targeted by. The functioning of the profit-sharing scheme is presented in Table 5 of the following page. Page 9

10 Table 5 Functioning of the Profit-Sharing Scheme Note 1: Includes Equipment, and the Executive Vice-Presidencies of Human Resources and Shared Services, Finance, Technology, Corporate Affaires and the General Secretariat, as well as General Audit. Page 10

11 2.4.3 Costs of the Variable Remuneration Schemes (Coûts de régimes de rémunération variable) Table 6 below indicates, for each job grouping, the amounts paid in 2005 to the variable remuneration schemes, as well as the projected amounts for 2006 and Table 6 Variable Remuneration Schemes by Grouping Page 11

12 Note: s.o. means non-applicable Degree of Attainment (Degré d atteinte) In the calculation of the Cost of Service, the Provider assumes that the company will attain the targeted net profit, thus triggering the bonus payment. Table 7 below presents the hypotheses which have been used to set the forecast amounts to be paid by virtue of the variable remuneration schemes. Table 7 Degree of Attainment of the Business Results Note: s.o means non-applicable. Note (1) Weighted average of the division results; Note (2) Contributory to the attainment of HQT s results Maximum Percentage of Base Salary Payable as Bonus (Pourcentage maximal du salaire de base pouvant être versé à titre de bonis) Table 8 below presents the maximum percentage of base salary payable as a bonus. Page 12

13 Table 8 Maximum Bonus as a % of Base Salary Note: s.o means non-applicable. Note (1) Weighted average of the division results; Note (2) Contributory to the attainment of HQT s results Corporate Objectives of the TransÉnergie Division (Objectifs corporatifs de la division TransÉnergie) Table 9 below presents the objectives and the corporate results of the TransÉnergie Division for the year 2005, whereas Tables 10 and 11 present its objectives for the year Page 13

14 Table 9 TransÉnergie 2005 Corporate Objectives and Results Page 14

15 Table Corporate Objectives for the Purposes of the Profit-Sharing Scheme and Variable Remuneration: TransÉnergie Division Page 15

16 Table 11 APPENDIX A: 2006 Corporate Objectives for the Purposes of the Profit- Sharing Scheme and Variable Remuneration: TransÉnergie 2.5 PENSION COSTS (COÛT DE RETRAITE) The Provider s pension costs increase from an amount of $30 million in 2005 to $49 million for each of the years 2006 and 2007, as evidenced in Table 12 below. The increase of $19 million between the 2005 costs and the base year 2006 and test year 2007 can be essentially explained by a decrease in long-term interest rates for the markets between 2004 and Page 16

17 2.6 SALARY COMPETITIVENESS STUDY (ÉTUDE SUR LA POSITION SALARIALE) s last job market evaluation (Study on Salary Competitiveness or Étude sur la position salariale) was carried out in It was filed at the Régie de l énergie during phase 2 of Distributor s R application. Table 13 below recalls the main points of the results of this study. Table 13 Salary Competitiveness Study Note (1) Cash remuneration includes basic remuneration and bonuses. Note (2) Overall remuneration includes basic remuneration, bonuses and benefits. Page 17

18 A salary variance of +/- 5% is not considered significant. Within this range, it is considered that there is no difference between the salary data of the companies being compared. 2.7 MAIN PARAMETERS IN THE COLLECTIVE BARGAINING AGREEMENTS (PRINCIPAUX PARAMÈTRES DES CONVENTIONS COLLECTIVES) Table 14 below presents the main parameters in the collective bargaining agreements concluded with the unions representing the employees of the Provider. Page 18

19 Table 14 Main parameters of the Agreements Negotiated between Hydro- Québec and its Unions for the Year 2004 Onward Note (1) Collective agreement renewed in September 2005 for the period of January to December with the Professional Union of Scientists of IREQ. Note (2) Collective agreement renewed in June 2006 for the period of January to December Page 19

20 3 OTHER DIRECT COSTS (AUTRES CHARGES DIRECTES) The other direct costs represent on average close to 24% of the total of the gross direct costs. Table 15 shows the evolution of the other direct costs for the years 2005 to Showing an increase of $3.3 million, the other direct charges went from $116.0 million in 2005 to $119.3 million in 2007 mainly due to inflation ($4.7 million). 3.1 EXTERNAL SERVICES (SERVICES EXTERNES) The external services total $46.4 million in 2007, an increase of $3.1 million with respect to The 2007 test year includes, among others, the fees payable to the Régie de l énergie of $2.4 million and the Provider s contribution in the order of $2.3 million to the Northeast Power Coordinating Council. 3.2 STOCK, PURCHASES OF GOODS, FINANCIAL RESOURCES, RENT AND OTHERS The line item of stock, purchases of goods, financial resources, rent and others totals $61.2 million for 2007, an increase of $1.1 million. In 2005, the expenditure of $60.1 million took into account a negative non-recurring amount of $2.4 million related to stock management activities and to a reversal of a provision of $1.7 million for unused stock. Without these elements, the variation would be a decrease of $3 million. Page 20

21 4 COST RECOVERY (RÉCUPÉRATION DE COÛTS) Cost recovery totals $1.7 million for 2007, a cost decrease of $2.1 million with respect to 2005, which is explained, in large part, by the implementation of the valorization plan for s foreign activities, leading to a decrease in the services provided to affiliated entities ($1.1 million). Table 16 below details the evolution from 2005 to 2007 of the cost recovery. Note: Travaux ou services facturés à des tiers = Work or services billed to third parties; Revenus divers = Various revenues; Entités affiliées = Affiliated entities. Page 21