Bases y criterios de la estrategia de telecomunicaciones (WAN y LAN)

Our company is taking significant steps to operate our business more efficiently as well as manage or reduce costs. In response to the Saskatchewan Rate Review Panel’s recommendations as part of our 2009 application, SaskPower initiated the Business Renewal Program to increase effectiveness and improve performance.

It is a long-term initiative that covers a large number of areas within SaskPower and is creating results in all expense categories, including: OM&A; finance charges; capital spending; and fuel and purchased power. To the end of 2013, SaskPower has realized savings of more than $269 million. Multi-year initiatives include:

• Shifting a portion of borrowing to the short term and replacing equity with lower cost debt in the capital structure; • Extending the run time between power plant overhauls;

• Transforming procurement practices by optimizing purchasing arrangements;

• Reducing information technology costs through a number of initiatives, such as implementing a new sourcing strategy, reducing the number of printers, outsourcing the service desk, and introducing improvements to the service request process;

• Creating customer connect process improvements, including the redesign of customer connect quoting and construction work processes that have led to the introduction of standardized quick quotes, new expeditor roles, and improved crew efficiencies;

• Lowering office costs by standardizing designs and reducing workspace areas; • Outsourcing Head Office caretaking activities;

• Eliminating the majority of manual meter reads as AMI is introduced; and

• Increasing productivity by using automated work scheduling and dispatching tools as a result of the recent completion of the Schedule and Dispatch Project.

SaskPower is pursuing other savings initiatives within the Business Renewal Program, including one related to distribution materials management. A new model is being developed to optimize the flow of materials and reduce capital tied up in on-hand inventory. Another savings initiative being developed is related to major transmission project delivery.

While the Business Renewal Program started by focussing on independent consultant recommendations, it has since evolved into a continuous improvement program that creates new savings initiatives as we complete existing activities. This new emphasis is being supported by the building of internal SaskPower capacity in performance benchmarking, as well as business process and benefits realization management. As well, our company is continuing to grow in our ability to measure and forecast program savings.

Performance measure

OPERATING, MAINTENANCE AND ADMINISTRATION (OM&A)/REVENUE (%)

20121 _{2013 2014 2015 2016}

Target 29.9 29.5 • • •

Actual 32.3 29.8

1. The 2012 results have been restated for IFRS adjustments and therefore differ from the amounts reported in the prior year. • Measure will be retired beginning in 2014.

Executing the responsible use of resources is crucial to the financial health of SaskPower. The OM&A as a percentage of revenue illustrates SaskPower’s operational efficiency. OM&A costs include those expenses associated with the daily operation and maintenance of our business. The lower the ratio, the more efficient our company’s operations. The OM&A figure used in the calculation excludes DSM costs.

In 2013, despite significant SaskPower capital and demand growth, OM&A spending was relatively flat. Our company’s OM&A as a percentage of revenue was 29.8%, which was slightly higher than target, however decreased relative to the prior year. The drivers for the increase in OM&A relative to the prior year are discussed in further detail in the financial results section of the MD&A.

This measure will be replaced by the new OM&A as a percentage of property, plant and equipment metric in 2014.

Performance measure

OPERATING, MAINTENANCE AND ADMINISTRATION (OM&A)/PROPERTY, PLANT AND EQUIPMENT (%) (NEW)

2012 2013 2014 2015 2016 Target • • 7.6 7.2 7.2 Actual • •

• Denotes that actuals or targets were not available or reported for that time period.

Asset management offers SaskPower a way to systematically coordinate activities and practices so that we can optimally manage our assets and their performance. This requires our company to focus on the full life cycle of assets and look for opportunities to reduce capital and maintenance expenditures while improving overall performance. The new OM&A as a percentage of property, plant and equipment metric illustrates whether or not SaskPower’s asset management program is achieving results. A lower ratio represents more efficient company operations.

The OM&A as a percentage of property, plant and equipment target for 2014 is 7.6%. SaskPower’s objective is to show steady and significant improvements in future years, with a long-term target of 7.0%.

Performance measure THERMAL UTILITIES RATES (%)

2012 2013 2014 2015 2016 Target ≤110.0 ≤100.0 ≤100.0 ≤100.0 ≤100.0

Actual 77.9 82.0

At SaskPower, we recognize that the price of electricity has a direct impact on Saskatchewan’s competitive position as well as quality of life for residents. As a result, our company has a target of ensuring SaskPower’s system average rates are less than or equal to the system average rates for customers served by utilities dependent on thermal generation (using coal, natural gas, or oil).

The 2013 annual survey for thermal rate comparisons shows that SaskPower’s system average rates are currently 82% of those other Canadian thermal utilities, across all customer classes. This demonstrates that our company continues to remain competitive with our thermal industry peers in Canada. Electricity pricing in Saskatchewan is subject to review by the Saskatchewan Rate Review Panel (SRRP), with final approval by cabinet.

In October of 2013, SaskPower requested a system-wide average rate increase of 5.5% effective January 1, 2014; 5% effective January 1, 2015; and 5% effective January 1, 2016. The 2014 rate increase was implemented on an interim basis on January 1, 2014. In April 2014, the SRRP is expected to make a recommendation regarding the complete rate application, with a final decision by cabinet in May.

The requested rate increases are largely due to the need to help cover the costs of replacing and refurbishing old infrastructure, as well as constructing new infrastructure to meet increasing electricity demand. Increases to fuel costs are also a significant factor.