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Hydro One Networks Inc.

Hydro One Networks Inc., a subsidiary of Hydro One Inc., owns and operates the largest electricity transmission and distribution system in Ontario with 1.2 million customers.

Hydro One operates a high-voltage electricity transmission system and a largely rural low-voltage distribution system throughout the province. It represents one of the ten largest electricity transmission and distribution systems in North America.

The passage of the Electricity Act in 1998 fundamentally restructured Ontario’s electricity industry. By the following April, transmission and distribution wire operations became regulated by the Ontario Energy Board (OEB) by law. The industry started the transition towards competitive bidding in the wholesale and retail electricity markets, with the energy market scheduled to open competition within three years.

Responsible for the former Ontario Hydro transmission and distribution wires facilities, the mandate for Hydro One Networks Inc. was to:

• operate, maintain and administer its transmission and distribution facilities in a safe and reliable manner
• continuously improve operating efficiencies
• facilitate access to the electricity supply marketplace in Ontario.

The Challenge

In order to be successful under the new market conditions, Hydro One had to streamline its business. It had to be leaner and more cost effective. To be prepared for a competitive environment, management chose to focus on building Hydro One’s core wires business. Non-core, yet essential functions were taking up valuable time and resources and Hydro One’s management understood that these functions could be more efficiently managed by an experienced third party.

The sheer scale of deregulation activity in the sector globally was presenting alternative and proven approaches to managing non-core components of the utility business. Examples from around the world, and in Ontario, provided Hydro One with successful examples of solutions and best practices adopted by players facing similar challenges.

Management at Hydro One had been following one particular example very closely. The approach in that instance included a unique, innovative solution, one that had been watched with much interest throughout the global energy and utility community. The solution, having found root some 18 months earlier had Capgemini as the partner, delivering IT services through existing infrastructure and technology.

Capgemini had been providing consulting services to Hydro One for a number of years. This long-standing relationship provided evidence of Capgemini’s leadership role in the Canadian energy and utility industry and gave Hydro One confidence in its partner’s ability to deliver results on time and within budget.

Following a competitive bid tender, Hydro One awarded a landmark $ 1 billion CDN contract to Capgemini to manage and operate technology-enabled services to Hydro One over 10 years.

Capgemini Approach

A number of elements differentiated Capgemini’s proposal, including:

• experience with local labor groups
• service delivery from the Toronto area to facilitate workforce reduction by Hydro One without loss of the skills
• aggressive pricing based on knowledge of business
• leverage pre-existing IT infrastructure and resources
• leverage relationship with Vertex for CRM-based solutions.

These elements, when combined with Capgemini’s capabilities across people, process, technology and knowledge management, facilitated the development of effective solutions, executed in close collaboration with Hydro One.

The strategy was underpinned by one fundamental principle - lower costs through economies of scale. This was going to be achieved by leveraging specialized services being delivered by Capgemini to other clients from a dedicated service delivery centre in Toronto. Capgemini’s delivery centre manages and delivers technology-enabled and business process management services.

In the transition process, about 900 employees transferred their employment from Hydro One to Capgemini. The due diligence process was successfully completed, according to the contract and on time.

Capgemini then commenced delivery of HR, finance and settlements, supply chain management services, IT and infrastructure support to Hydro One, with Vertex, a valued partner, providing customer care support to the utility. The delivery centre offers unique and specialized outsourcing services to major Canadian utilities and other industry sectors. Combined, over 1,500 fulltime and contract employees provide expertise to support enterprise technology, business process and IT management services.

These services are not just provided to Hydro One, but also to Ontario Power Generation, Nuclear Safety Solutions and Bruce Power. The dedicated centre has the capability and infrastructure to provide back office and IT support to utilities and other companies across North America. It is this element of the approach that takes the capabilities of Capgemini beyond traditional outsourcing.

Value Delivered

Management at Hydro One is pleased with the consistent delivery of services during the first year of the contract when significant changes in the Ontario electricity marketplace were taking place. Developed in collaboration, with close attention paid to detail, the service illustrates effective partnership with Capgemini. The professionally delivered service is comprehensive, encompassing:

Information Technology
This includes enterprise technology services, infrastructure management, network outsourcing, applications management and support.

Business Process Management
This covers finance and accounting, payroll, settlements (wholesale, retail, data management) customer care (contact center, billing, collections), supply management services (demand management, strategic sourcing, logistics).

As a result, Hydro One can:

• focus on its core wires business, with the flexibility to adapt to change as required
• develop a competitive pricing structure based on cost savings
• enjoy cost-savings from economies of scale.

In an effort to improve customer service, enhance operational efficiencies and continue to reduce costs, Capgemini implemented a speech recognition solution as part of the customer care component of the contract. Speech recognition software has ability to recognize general, naturally flowing utterances from a wide variety of users. It recognizes the caller’s answers to move along the flow of the call.

Hydro One’s customers have been enjoying the convenience of obtaining account information, entering their meter reading or reporting a power outage using the speech recognition system. As a consequence, the daily percentage of calls successfully completed using the software has increased between five and ten per cent.

Another benefit of the arrangement is to the 900 employees who were transferred to Capgemini. They comprise the core of Capgemini’s delivery centre and are able to leverage their experience to serve their former employer, now a valued customer.

As a result of this arrangement, Hydro One management retains focus on its core wires business in the knowledge that essential functions of its non-core business are in capable hands.