HYDRO PLANTS

FACILITY REHABILITATION

Project Cost

$1,771,000

Nature of Project

This project is necessary for the replacement or rehabilitation of deteriorated hydro plant components that have been identified through routine inspections. It also includes expenditures necessary to improve the efficiency and reliability of the hydro plants or to maintain environmental compliance.

The project involves:

a) replacement/rehabilitation work at 11 of the Company’s 23 hydroelectric plants. The work includes the replacement or rehabilitation of various retaining walls, dams, bridges, a power house crane, cooling coils and a generator breaker;

b) work related to plant efficiency, reliability or the environment. The work includes the addition of a trash rack clearing system, fisheries habitat, and replacement of programmable logic controllers (PLC) and governors at various hydroelectric plants.

The following table lists the projects for 2002:

Project	Cost (000s)
Fisheries Habitat - various plants	$150
Public Safety Items - various plants	148
Cooling Coil and Controls Replacement - various plants	80
Generator Switchgear Replacement - Seal Cove	153
Generator Governor and PLC Replacements -various plants	762
Pivot Valve Replacement - Seal Cove	145
Power House Crane Replacement - Seal Cove	55
Dam Rehabilitation - Fall Pond	50
Retaining Wall Rehabilitation - Heart’s Content	50
Various Projects < $50,000	178
Total	$1,771

HYDRO PLANTS

FACILITY REHABILITATION (Cont’d)

Customer Impact

These facilities provide energy to the Island Interconnected Electrical System and maintaining these generating facilities and infrastructure reduces the need for developing additional, more expensive generation capacity.

Project Justification

Projects such as these ensure the continued operation of Newfoundland Power’s existing 23 hydroelectric generation facilities in a safe, reliable and environmentally compliant manner. The alternative to maintaining these facilities would be to retire them. These facilities produce a combined average annual production of 423 GWh. Replacing only the energy produced by these facilities by increasing production at the Holyrood generation facility would require approximately 700,000 barrels of fuel annually. At current oil prices ($28/bbl), this translates into approximately $20 million in annual savings. Maintaining these generating facilities also contributes to system stability and in many cases provides a source for local power backup.

All significant expenditures on hydroelectric plants such as the replacement of penstocks, surge tanks, runners, or forebays are justified individually on the basis of maintaining access to hydroelectric generation at a cost that is lower than the cost of replacement options.

The Company will ensure this project is completed at the lowest possible cost consistent with reliable service. All material and contract labour will be obtained through competitive tendering.

Future Commitments

None.

THERMAL PLANTS

FACILITY REHABILITATION

Project Cost

$478,000

Nature of Project

This project is necessary for the replacement or rehabilitation of deteriorated thermal plant (diesel and gas turbine) components that have been identified through routine inspections. It also includes expenditures necessary to improve the safety and reliability of the thermal plants or to enhance environmental compliance.

The following table lists the projects for 2002:

Project	Cost (000s)
Air Intake Enclosure Replacement - Salt Pond Gas Turbine	$150
Replacement of Fuel Tank - Greenhill Gas Turbine	250
Various Projects < $50,000	78
Total	$478

Customer Impact

These facilities benefit customers by ensuring the availability of backup power sources during system problems.

Project Justification

These projects ensure the continued operation of Newfoundland Power’s existing thermal generation facilities in a safe, reliable and environmentally compliant manner. These plants are used to provide emergency power during system problems, to facilitate repair to radial systems and to support the system peak when one or more generation facilities are unavailable.

An alternative to maintaining these facilities would be to retire them. These facilities currently provide approximately 50 MW of backup generation capacity. Replacement of this capacity would cost in excess of $1,000,000 per MW utilizing existing sites. Therefore, the replacement cost of these facilities would be approximately $50,000,000.

THERMAL PLANTS

FACILITY REHABILITATION (Cont’d)

The Company will ensure this project is completed at the lowest possible cost consistent with reliable service. All material and contract labour will be obtained through competitive tendering.

Future Commitments

None.

GAS TURBINE

REPLACE GOVERNOR & CONTROL LOGIC

Project Cost

$500,000

Nature of Project

This project is necessary to replace deteriorated and obsolete equipment and involves replacing the governor and associated control logic on the gas turbine currently located at Salt Pond. The gas turbine is to be relocated to the Wesleyville Substation (Schedule B, page 15 of 66).

Customer Impact

This generator is normally utilized during emergency situations. Failure of the governor could lead to the unavailability of this unit for such emergencies.

Project Justification

The governor is deteriorated and obsolete. There is minimal support available from the manufacturer and spare parts are not readily available. If the governor is not replaced, the viability of the plant’s operational status is threatened.

An alternative to maintaining this facility would be to retire it. This facility currently provides approximately 13 MW of backup generation capacity. Replacement of this capacity would cost in excess of $1,000,000 per MW, for a total replacement cost of approximately $13,000,000.

The Company will ensure this project is completed at the lowest possible cost consistent with reliable service. All material and contract labour will be obtained through competitive tendering.

Future Commitments

None.

PENSTOCK REPLACEMENT

SEAL COVE

Project Cost

$2,600,000

Nature of Project

This project is necessary to replace deteriorated equipment and involves the replacement of a 1,220 metre penstock at the Seal Cove Hydroelectric Plant.

Customer Impact

This project will help minimize increases in electricity rates by maintaining existing hydro generation and avoiding more expensive thermal generation.

Project Justification

The 49-year-old penstock at the Seal Cove plant is in a deteriorated condition, and the deterioration is accelerating. Replacement is now essential for the continued safe operation of the plant.

The alternative to maintaining this plant would be to retire it. This facility has an average annual production of approximately 9.7 GWh. Replacing only the energy produced by this facility by increasing production at the Holyrood generation facility would require approximately 16,000 barrels of fuel annually. At a cost of $28 per barrel, this translates into a fuel saving of approximately $450,000 annually.

The Company will ensure this project is completed at the lowest possible cost consistent with reliable service. All material and contract labour will be obtained through competitive tendering.

Future Commitments

None.

REBUILD SUBSTATIONS

Project Cost

$428,000

Nature of Project

This project is necessary for the replacement of deteriorated substation infrastructure, such as bus structures, poles and support structures, equipment foundations, switches and other equipment.

The following table lists the projects for 2002:

Project	Cost ($000s)
Replace bus structure - Gander Substation	$250
Site improvement/repairs at ten substations	118
Replace switch connectors - St. John’s Area	60
Total	$428

Customer Impact

This project will maintain the reliability and continuity of electrical service and eliminate potential employee safety hazards associated with the deteriorated substation infrastructure.

Project Justification

The project is justified by the need to replace deteriorated equipment. These expenditures will ensure reliable service and address potential safety concerns.

The Company will ensure this project is completed at the lowest possible cost consistent with reliable service. All material and contract labour will be obtained through competitive tendering.

Future Commitments

None.

REPLACEMENT AND SPARE SUBSTATION EQUIPMENT

Project Cost

$1,605,000

Nature of Project

This project is necessary for the replacement of obsolete and/or unreliable electrical equipment and the maintenance of appropriate levels of spare equipment for use during emergencies.

The following table lists the projects for 2002:

Project	Cost ($000s)
Replace deteriorated power transformers - Rattling Brook	$730
Replace radiators/cooling fans – King’s Bridge, Laurentian and Salt Pond	100
Replace circuit breakers - Clarke’s Pond and Harmon	332
Purchase of spare substation equipment	443
Total	$1,605

The need to replace equipment is determined on the basis of tests, inspections and the operational history of the equipment. The maintenance of adequate levels of spare equipment is based on past experience and engineering judgement, as well as a consideration of the impact the loss of a particular apparatus would have on the electrical system.

Customer Impact

This project provides for the ready availability of spare or replacement equipment to facilitate restoration of service following failure of a major component of the electrical equipment infrastructure.

REPLACEMENT AND SPARE SUBSTATION EQUIPMENT (Cont’d)

Project Justification

The cost of this project is justified based on the need to replace equipment to restore and maintain service. The budget estimate is based on equipment inspections and historical replacement requirements, as well as on assessments of the current stock of spare equipment.

The Company will ensure this project is completed at the lowest possible cost consistent with reliable service. All material and contract labour will be obtained through competitive tendering.

Future Commitments

None.

RELIABILITY AND POWER QUALITY IMPROVEMENTS

Project Cost

$110,000

Nature of Project

This project involves the addition to substations of equipment that is necessary to improve power quality and reliability.

A transformer with an on-load tap changer will be installed at the Harbour Grace Substation to ensure appropriate distribution voltages are maintained for customers in the area. Equipment will be installed at Gander Bay and Port Union Substations to accommodate transmission line switching, thus eliminating the need for an outage to customers.

Customer Impact

This project will ensure customers are supplied appropriate voltage levels and will reduce power interruptions to customers.

Project Justification

The installation of the transformer will alleviate voltage regulation problems being experienced in the area. The Company follows guidelines established by the Canadian Standards Association for maintaining voltage levels. The installation of appropriate equipment at Gander Bay and Port Union will minimize the number of outages required in order to maintain the transmission lines in the area.

The Company will ensure this project is completed at the lowest possible cost consistent with reliable service. All material and contract labour will be obtained through competitive tendering.

Future Commitments

None.

MODIFICATIONS TO ACCOMMODATE GAS TURBINE

Project Cost

$480,000

Nature of Project

This project is necessary to complete the substation work associated with the relocation of a gas turbine from the Salt Pond Substation to the Wesleyville Substation. The project will involve enlarging the site at Wesleyville to accept the relocated generating unit, as well as modifications to substation structures to accommodate the connection of the gas turbine. The project also includes enhancements to the control equipment at the Gambo Substation for system synchronizing.

Customer Impact

This project will provide increased electrical system reliability to customers in the Bonavista North area by providing a backup source of energy during outages on the single radial transmission line serving the area.

Project Justification

The Bonavista North area is currently served by a single radial transmission line. This line has experienced higher than average annual SAIFI and SAIDI statistics for the past five years (an average of 3.59 outages and 9.06 hours respectively). The reliability statistics are impacted by the nature of the environment in this area and the fact that approximately 30% of the transmission line is remotely located making access to the line for repairs difficult and service restoration time longer. The Company has explored various options for improving the reliability of service to the area. These options include constructing a second transmission line to serve the area, installing a new source of generation, and relocating an existing generator. Of the three alternatives the least cost option is the relocation of an existing generator. The estimated cost of a second transmission line is approximately $7.0 million, while the cost of a new generator is estimated to be approximately $8.0 million.

The Company will ensure this project is completed at the lowest possible cost consistent with reliable service. All material and contract labour will be obtained through competitive tendering.

Future Commitments

None.

SUBSTATION PROTECTION AND MONITORING IMPROVEMENTS

Project Cost

$261,000

Nature of Project

This project is necessary for the replacement of protective relaying equipment and metering equipment required to maintain system protection and increase operating reliability.

Protective relaying equipment is used to detect abnormal conditions on the electrical system, and to either initiate a disconnection of the affected portion of the system, where appropriate, or warn system operators of the existence of the condition.

This project will make improvements to the protection and monitoring systems to allow for the safe and reliable operation of substations. It includes such items as the installation of digital recording voltmeters, replacement of control panels, and the addition of voltage measuring devices (potential transformers) to improve energy and demand metering at substations.

Customer Impact

This project will help maintain the reliability and security of the electrical system.

Project Justification

The project is justified on the basis of maintaining the reliability and safe operation of the electrical system. Protection modifications will minimize outage times, while monitoring improvements will allow potential problems such as voltage variations to be identified before they lead to deteriorated service to customers.

The Company will ensure this project is completed at the lowest possible cost consistent with reliable service. All material and contract labour will be obtained through competitive tendering.

Future Commitments

None.

DISTRIBUTION SYSTEM

FEEDER REMOTE CONTROL

Project Cost

$1,000,000

Nature of Project

This project involves replacing a number of aging, limited function, electromechanical feeder relays and oil-filled reclosers with modern multi-function electronic relays and reclosers that can be remotely controlled from the System Control Center (SCC).

Customer Impact

The installation of electronic reclosers and relays that can be monitored and controlled from the SCC will result in faster detection of a failure on the feeder system and provide for more rapid restoration of service. Also, the SCC will be able to remotely de-energize feeders or sections of feeders in emergency situations thus increasing public safety.

Project Justification

The Company’s existing electromechanical feeder relays and oil-filled reclosers are nearing the end of their useful life and will require replacement over the next few years. These devices are integral to maintaining the safety and reliability of the electrical system. The safety function of a recloser or relay stems from its ability to disrupt power to a section of a distribution feeder should the line become unstable due to a catastrophic event, such as a downed power line or broken pole. A recloser will aid reliability in that it can operate to automatically restore service in the event of a temporary fault on the electrical system (e.g. lines slapping together), therefore reducing outage duration.

The project is justified on the basis of improvements in safety, operating efficiencies, power system reliability and a reduction in risk to the environment. The benefits of installing electronic reclosers include: reduced operating costs by eliminating the need to undertake a field visit to manually operate the recloser for maintenance on distribution lines, and by the fact that the new electronic reclosers will require less maintenance; reduced power outage restoration times, as the SCC will receive immediate notification of the location of power interruptions on the distribution line and can dispatch crews accordingly; reduced environmental risk from the elimination of oil-filled reclosers; increased public safety as the SCC will be able to remotely de-energize feeders or sections of feeders in emergency situations.

DISTRIBUTION SYSTEM

FEEDER REMOTE CONTROL (Cont’d)

The Company will ensure this project is completed at the lowest possible cost consistent with reliable service. All material and contract labor will be obtained through competitive tendering.

Future Commitments

None.

ST. JOHN’S AREA TRANSMISSION RELAYING

IMPROVEMENT PROGRAM

Project Cost

$593,000

Nature of Project

This project is necessary to help maintain the reliability and security of the electrical system.

This project represents the second phase of an ongoing initiative to establish and/or upgrade pilot wire relaying, as well as breaker and relay failure monitoring schemes, for identified 66 kV transmission lines. The pilot wire portion of the initiative will be completed in 2001. This second phase of the project will complete the monitoring schemes to detect failure of relays and high voltage breakers in substations where pilot wire relaying has been installed.

Customer Impact

This project provides for the safe clearing of faults on the electrical system and maintains operation of the system to avoid unnecessary power interruptions to customers.

Project Justification

This project results from recommendations jointly developed by Newfoundland Power and Newfoundland and Labrador Hydro to reduce system-wide disturbances related to problems on the transmission grid. These improvements are being made to designated transmission line protection schemes so as to disconnect faulted lines from the electrical system in a shorter time frame and reduce the likelihood of impacting the stability of major generation facilities, such as Holyrood, Bay d’Espoir and Cat Arm. This project will aid in avoiding situations which could result in system-wide customer outages or damage to customer or utility equipment.

From 1999 to 2001, pilot wire relaying using fibre optic communication cables was installed as the primary means of protection for designated transmission lines. In 2002, backup protection involving monitoring schemes to detect relay and high voltage breaker failures will be incorporated into substations where the pilot wire relaying has been installed.

These schemes will monitor the actions of the pilot wire relays and their associated breakers. If a faulted transmission line is not disconnected from the electrical system within the prescribed 10 cycles (or 1/6 second) by the primary pilot wire protection, the monitoring schemes will provide backup protection and initiate action to ensure the faulted line is removed from service within 30 cycles (or 1/2 second), thereby reducing the likelihood of any significant impact on the provincial electrical system.

ST. JOHN’S AREA TRANSMISSION RELAYING

IMPROVEMENT PROGRAM (Cont’d)

This project will help maintain the reliability and security of the electrical system.

The Company will ensure this project is completed at the lowest possible cost consistent with reliable service. All material and contract labour will be obtained through competitive tendering.

Future Commitments

None.

REBUILD TRANSMISSION LINES

Project Cost

$2,811,000

Nature of Project

This project is necessary to replace poles, crossarms, conductors, insulators and miscellaneous hardware due to deficiencies identified during annual inspections.

This project category includes numerous projects aimed at rebuilding and replacing deteriorated transmission structures and conductors. The project cost is based on a combination of historical costs and individual project estimates.

Expenditures on transmission line rebuilds is increasing as many older lines are experiencing pole, crossarm, and brace deterioration to the point where replacement is required to maintain the strength and integrity of the line. Thirty per cent of the Company’s transmission lines are in excess of forty years of age. As well, inspections and testing activities have revealed significant increases in the quantities of corroded conductors in some locations. This is causing upward pressure on transmission rebuild requirements.

The following table lists the projects for 2002:

Project	Cost (000s)
Goulds to Mobile - 24L	$800
Salt Pond to Grand Bank - 301L	870
Clarenville to Catalina - 123L	83
Clarenville to Gambo - 124L	60
St. John’s Main to Goulds - 4L	54
Repairs to various lines in St. John’s Area	225
Repairs to various lines in Avalon Area	150
Repairs to various lines in Burin Area	50
Projects < $50,000	519
Total	$2,811

Customer Impact

This project maintains the structural integrity of transmission lines and addresses upgrade requirements identified during inspections. This is critical for the safe operation and reliable performance of the transmission system.

REBUILD TRANSMISSION LINES (Cont’d)

Project Justification

Replacement of this deteriorated transmission line equipment is necessary to prevent service interruptions.

The Company will ensure this project is completed at the lowest possible cost consistent with reliable service. All material and contract labour will be obtained through competitive tendering.

Future Commitments

None.

RELOCATION OF TRANSMISSION LINES

FOR THIRD PARTIES

Project Cost

$50,000

Nature of Project

This project is necessary to accommodate requests from third parties for the relocation of transmission lines.

For 2002, relocation is required on one transmission line in St. John’s. This relocation is being done at the request of the Department of Works, Services and Transportation in order to facilitate new road construction.

The project cost is based on an individual project estimate.

Customer Impact

There is no direct customer impact related to this project.

Project Justification

This project responds to specific requests from third parties to relocate sections of transmission lines.

A portion of the cost to relocate lines for the government will be recovered. All government contributions associated with this project have been included in the $1.5 million contribution in aid of construction amount referred to in the Application.

The Company will ensure this project is completed at the lowest possible cost consistent with reliable service. All material and contract labour will be obtained through competitive tendering.

Future Commitments

None.

METERS

Project Cost

$783,000

Nature of Project

This project is necessary to accommodate customer growth and to replace deteriorated electrical equipment. The project cost includes the cost of meters for new customers and replacement meters for existing customers. The quantity of meters for new customers is based on the Company’s forecast of customer growth. The quantity of meters for replacement purposes is determined using historical data for damaged meters and sampling results from previous years. Sampling is done in accordance with regulations under the Electricity and Gas Inspection Act.

Customer Impact

This project provides for metering installations necessary to meet customer’s electrical service requirements. Through a rigorous meter testing and replacement program, customers are provided with accurate metering of their electricity consumption.

Project Justification

This project is justified on the basis of customer requirements and Industry Canada regulations.

The Company will ensure this project is completed at the lowest possible cost consistent with reliable service. All material and contract labour will be obtained through competitive tendering.

Future Commitments

None.

SERVICES

Project Cost

$1,665,000

Nature of Project

This project is necessary to provide for the installation of service wires to connect new customers to the electrical distribution system. Service wires are low voltage wires that connect the customer’s electrical service equipment to the utility’s transformers. Also included in this category is the replacement of existing service wires due to deterioration, failure or damage, as well as the installation of larger wires to accommodate customers’ additional load.

Expenditures on this project are driven by both customer growth and the Company’s experience with regard to service wires that must be replaced to maintain reliable service and power quality. The projected expenditures for Services for 2002 are $1,168,000 for new services and $497,000 for replacement services.

With the exception of some small individually estimated projects, the project cost is calculated on the basis of historical data. For new services, historical annual expenditures are adjusted for inflation and divided by the number of new customers in each year to derive an average new service cost per customer. Unusually high and low data is excluded from the average. This historical average is then modified by the GDP Deflator for Canada before being multiplied by the forecast number of new customers to determine the budget estimate. A similar process is followed for replacement services using historical actual expenditures to replace damaged or deteriorated service wires. Street light customers are excluded for the purpose of this calculation.

Customer Impact

These projects provide and maintain electric service to new and existing customers. Service wire replacements help maintain a reliable high quality power supply to customers.

Project Justification

These projects are justified on the basis of customer requirements.

The Company will ensure this project is completed at the lowest possible cost consistent with reliable service. All material and contract labour will be obtained through competitive tendering.

Future Commitments

None.

STREET LIGHTING

Project Cost

$1,020,000

Nature of Project

This project is necessary to provide for the installation of new lighting fixtures, replacement of existing street light fixtures, and provision of associated overhead and underground wiring. A street light fixture includes the light head complete with bulb, photocell and starter as well as the pole mounting bracket and other hardware. The project is driven by customer requests and historical levels of lighting fixture failures requiring replacement.

The project cost is calculated on the basis of historical data. For new street lights, historical annual expenditures are adjusted for inflation and divided by the number of new customers in each year to derive an average cost per new customer. This historical average is then modified by the GDP Deflator for Canada before being multiplied by the forecast number of new customers to determine the budget estimate.

For replacement street lights, historical annual expenditures for replacement of damaged, deteriorated or failed street lights are adjusted for inflation and divided by the total number of customers served in each year to derive an average replacement street light cost per customer. This historical average is then modified by the GDP Deflator for Canada before being multiplied by the forecast of the total number of customers served to determine the budget estimate.

The projected expenditures for Street Lighting for 2002 are $657,000 for new street light services and $363,000 for replacement street light services.

Customer Impact

These projects provide and maintain street and area lighting service to new and existing customers.

STREET LIGHTING (Cont’d)

Project Justification

These projects are justified on the basis of customer requirements.

The Company will ensure this project is completed at the lowest possible cost consistent with reliable service. All material and contract labour will be obtained through competitive tendering.

Future Commitments

None.

TRANSFORMERS

Project Cost

$4,805,000

Nature of Project

This project is necessary to accommodate customer growth and to replace deteriorated electrical equipment. The project includes the cost of purchasing transformers for customer growth and the replacement or refurbishment of units that have deteriorated or failed. The project cost is based on historical data and field surveys.

Transformer requirements can be divided into three categories as follows:

a) Transformers for new customers are based on an historical ratio of transformers per new customer for each of the Company’s operating areas. This ratio is multiplied by the forecast number of new customers.

b) Replacement transformers are based on field surveys of rusty or deteriorated transformers.

c) The “other” category is for transformers required for conversions and upgrades, plus an allowance for contingency (burnouts and storm damage, etc.). This category is estimated on the basis of planned projects and historical data.

Total transformer requirements are met by new purchases and refurbishment of units removed from service. The Company expects to refurbish 340 units and purchase 2,760 new units in 2002 for a total of 3,100 units. Of this total, 1,490 units are projected for customer growth, 1,240 units to replace deteriorated transformers, and 370 units for upgrades and burnouts, etc.

Customer Impact

Transformers provide service to new customers, increase supply capacity for existing customers who increase their load, and replace units that deteriorate or fail.

TRANSFORMERS (Cont’d)

Project Justification

This project is required to provide and maintain service to customers.

The Company continues to experience significant corrosion problems with transformer tanks. This presents both potential service reliability and environmental issues for the Company. In response, the Company started to purchase stainless steel tanks in 2001 to address this problem on a go forward basis. This initiative has placed upward pressure on overall transformer expenditures as the stainless steel tanks are approximately 18% more expensive than the electrostatic tanks purchased previously. The Company expects this trend to continue for the next few years.

Transformers are purchased through a competitive tendering process.

Future Commitments

None.

TRUNK FEEDERS

REBUILD DISTRIBUTION LINES (Cont’d)

Customer Impact

This project is focused on rebuilding and maintaining distribution lines so as to replace lines and equipment before failures due to deterioration create power interruptions, safety hazards and increased operating costs associated with emergency repairs.

Project Justification

The Company has over 8,000 kilometres of distribution line in service and has an obligation to maintain this plant in good condition to safeguard the public and its employees. The replacement of deteriorated distribution structures and equipment is critical in preventing failures and maintaining reliable service to customers.

The Company will ensure this project is completed at the lowest possible cost consistent with reliable service. All material and contract labour will be obtained through competitive tendering.

Future Commitments

None.

TRUNK FEEDERS

RELOCATE/REPLACE DISTRIBUTION LINES FOR THIRD PARTIES

Project Cost

$270,000

Nature of Project

This project is necessary to accommodate third party requests for relocation of distribution lines. The relocation or replacement of distribution lines result from (1) work initiated by municipal, provincial and federal governments, (2) work initiated by other utilities such as Aliant Telecom and Rogers Cable, (3) requests from customers or (4) vehicle accident damage.

The cost estimate is based on historical expenditures and some individual project estimates. Generally these expenditures are associated with a number of small projects that are not specifically identified at the time the budget is prepared.

Work initiated by government is estimated to be $100,000 in 2002 and is primarily associated with road widening and road realignment. Aliant Telecom and Rogers Cable work, estimated at $40,000 in 2002, involves relocation or replacement of lines for additional conductor installations. Customer requests typically involve relocation of poles, anchors and guy wires from private property. The cost of such work is estimated to be $80,000 in 2002. The estimated cost for vehicle accident damage in 2002 is $50,000. The decrease in this budget category compared to the 2001 forecast of $577,000 is a reflection of a forecast reduction in work initiated by the Department of Works, Services and Transportation.

Customer Impact

There is no direct customer impact, except in the case of some vehicle accidents where electrical service will be restored.

Project Justification

The Company must respond to requests for relocation and replacement of distribution facilities under the provisions of agreements in place with the requesting parties.

Estimated contributions from customers and requesting parties associated with this project have been included in the $1.5 million contribution in aid of construction amount referred to in the Application.

TRUNK FEEDERS

RELOCATE/REPLACE DISTRIBUTION LINES FOR THIRD PARTIES (Cont’d)

The Company will ensure this project is completed at the lowest possible cost consistent with reliable service. All material and contract labour will be obtained through competitive tendering.

Future Commitments

None.

TRUNK FEEDERS

DISTRIBUTION RELIABILITY INITIATIVE

Project Cost

$1,050,000

Nature of Project

This project is necessary to improve service reliability on distribution lines with below-average reliability. The project involves the upgrading of trunk feeder structures and equipment to reduce both the frequency and duration of power interruptions to the customers served by the distribution line. The nature of the upgrading work follows from a detailed assessment of past problems, knowledge of local environmental conditions (such as salt contamination and wind and ice loading), and engineering knowledge to apply location specific design and construction standards. Project plans are subsequently developed from an engineering analysis and options are evaluated that improve reliability performance.

These are special projects selected on the basis of reliability performance of the lines. Prioritizing these projects also requires consideration of the costs, the number of customers affected, and judgment as to the reliability improvement that can be expected as a result of the line upgrade project.

Customer Impact

The customers served by the feeders selected for upgrading will experience reductions in both the number of power interruptions and the duration of outages that may occur.

Project Justification

These projects are justified on the basis of reliability improvement. Customers supplied by these feeders experience power interruptions significantly more often than the Company average. Individual feeder projects have been prioritized based on their historic SAIFI and SAIDI statistics.

Expenditures on the distribution reliability initiative have had a positive impact on the reliability performance of the feeders that have been upgraded.

TRUNK FEEDERS

DISTRIBUTION RELIABILITY INITIATIVE (Cont’d)

The following table identifies the feeder projects selected for upgrading in 2002 and indicates the estimated project cost, the number of customers affected, and the average yearly interruption statistics for the five-year period ending June 30, 2001. The SAIFI and SAIDI statistics exclude planned power interruptions and interruptions due to loss of supply from Hydro.

Feeder	Cost (000s)	Number of Customers	SAIFI¹ Interruptions Per Year	SAIDI² Hours Per Year
Victoria (VIC-02)	$350	1,187	3.4	4.3
Trepassey (TRP-01)	100	680	2.1	2.7
Glovertown (GLV-02)	300	1,221	3.9	8.4
Doyle’s (DOY-01)	300	1,080	2.5	4.4

Company Average			1.6	2.8

Notes:

¹System Average Interruption Frequency Index (SAIFI) is the average number of interruptions per customer.

It is calculated by dividing the number of customers that have experienced an outage by the total number of customers in an area.

² System Average Interruption Duration Index (SAIDI) is the average interruption duration per customer. It is calculated by dividing the number of customer-outage-hours (e.g., a two hour outage affecting 50 customers equals 100 customer-outage-hours) by the total number of customers in an area.

The Company will ensure this project is completed at the lowest possible cost consistent with reliable service. All material and contract labour will be obtained through competitive tendering.

Future Commitments

None.

TRUNK FEEDERS

IMPROVE DISTRIBUTION SYSTEM PROTECTION/OPERATION

Project Cost

$328,000

Nature of Project

Distribution system protection involves the installation of equipment and devices that provide for improved operation of the electrical system when problems such as electrical faults, short circuits or lightning strikes occur. This project involves the installation of lightning arresters on transformers and other electrical equipment, the installation of fuses, and the installation of switches to improve sectionalizing of distribution lines.

For 2002, this category includes $83,000 for lightning arresters in Burin and Bonavista Areas, $125,000 for the installation of fuses or cutouts in St. John’s and Corner Brook Areas, and $120,000 for switches in St. John’s Area that will improve the Company’s ability to transfer customers from one distribution feeder to another.

Customer Impact

This project will improve service reliability, reduce outage time, and reduce the number of customers affected by certain distribution problems.

Project Justification

This project will improve distribution system protection so as to increase system reliability and reduce damage costs associated with lightning strikes.

The Company will ensure this project is completed at the lowest possible cost consistent with reliable service. All material and contract labour will be obtained through competitive tendering.

Future Commitments

None.

TRUNK FEEDERS

REPLACE UNDERGROUND SWITCHES - WATER STREET, ST. JOHN’S

Project Cost

$362,000

Nature of Project

This project is necessary to replace one high voltage oil-filled switch and three banks of platform-mounted transformers that form part of the Water Street underground distribution system. The project will require the installation of two pad-mount switches and one pad-mount transformer as well as the establishment of a loop feed for the section of the underground distribution system at Baird’s Cove.

Customer Impact

This project will improve the reliability of service to customers in the Water Street area.

Project Justification

The high voltage switch is 30 years old and approaching the end of its useful life. The manufacturer no longer supplies replacement parts for this type of switch. There are safety issues associated with certain operations of the existing switch. The switch relies on manual operation and internal arcing and deterioration of contacts may occur. New switches have technology that eliminates these safety concerns. Until such time as the switches are replaced, large segments of the feeder must be de-energized prior to performing any switching operations.

The platform-mounted transformers are also 30 years old and are located close to the exterior walls of existing buildings, causing clearance issues for workers maintaining the exterior of the buildings.

The proposed new arrangement will eliminate the oil-filled switch and platform-mounted transformers and, with the establishment of the loop feed, will result in improved reliability.

The Company will ensure this project is completed at the lowest possible cost consistent with reliable service. All material and contract labour will be obtained through competitive tendering.

Future Commitments

None. However, there will be five switches of this type remaining in service following completion of this project. The Company plans to replace or remove all switches and is currently finalizing the engineering and acquiring the necessary property rights.

INTEREST DURING CONSTRUCTION

Project Cost

$100,000

Nature of Project

This is an estimate of the interest during construction that will be charged on distribution work orders with an estimated expenditure of less than $50,000 and a construction period in excess of three months. This calculation is based on an estimated monthly average of total distribution work in progress of $1.0 million. The interest rate which is applied each month is dependent on the source of funds to finance the capital expenditure and is calculated in accordance with Order No. P.U. 37 (1981).

Customer Impact

No direct customer impact.

Project Justification

These costs are justified on the same basis as the distribution work orders to which they are charged.

Future Commitments

None.

TOOLS AND EQUIPMENT

Project Cost

$347,000

Nature of Project

This project is necessary for the addition or replacement of tools and equipment utilized by line and support staff in the day-to-day operations of the Company, as well as the replacement or addition of office furniture and equipment.

The following table lists the projects for 2002:

Category	Cost (000s)
Line Tools and Equipment¹	$287
Office Furniture and Equipment²	60
Total	$347

Notes:

¹Line Tools and Equipment includes various tools and equipment used by line staff, electrical maintenance staff, and engineering and field technical staff. The tools and equipment include hydraulic tools, instruments, test gear, and inspection equipment.

²Office Furniture and Equipment includes the replacement of broken or deteriorated furniture and office equipment, as well as the purchase of additional filing and storage equipment.

The project cost is based on historical costs for the replacement of tools and equipment that become broken or worn out. Additional tools are purchased to increase employee productivity, quality of work and overall operational efficiency.

Customer Impact

The addition or replacement of these tools and equipment help employees work efficiently and produce higher quality work.

TOOLS AND EQUIPMENT (Cont’d)

Project Justification

This equipment enables staff to perform work in a safe, effective and efficient manner.

The Company will ensure this project is completed at the lowest possible cost consistent with reliable service. All material and contract labour will be obtained through competitive tendering.

Future Commitments

None.

ADDITIONS TO REAL PROPERTY

Project Cost

$323,000

Nature of Project

The project is necessary to maintain buildings and facilities and to operate them in an efficient manner. It involves the addition to, or renovation of, Company property.

The following table lists the projects for 2002:

Category	Cost (000s)
Additions¹	$152
Renovations²	171
Total	$323

Notes

¹Additions include a spill containment pad and a transformer storage ramp for the electrical maintenance facility
on Topsail Road and the installation of a fire alarm system at the vehicle service centre at Duffy Place.

²Renovations includes replacement of the roof at the Duffy Place building and other service building improvements.

The project cost is based on a combination of historical costs and individual project estimates.

Customer Impact

Most of these projects have no direct customer impact. However, some are renovations to buildings and property frequented by customers.

Project Justification

Property renovations are required to ensure safe and efficient working areas for employees.

The Company will ensure this project is completed at the lowest possible cost consistent with reliable service. All material and contract labour will be obtained through competitive tendering.

Future Commitments

None.

ALLOWANCE FOR UNFORESEEN ITEMS

Project Cost

$750,000

Nature of Project

This item is necessary to cover any unforeseen capital expenditures which have not been budgeted elsewhere. Examples of such expenditures are the replacement of facilities and equipment due to major storm damages or equipment failure.

Customer Impact

This project provides funds for timely service restoration.

Project Justification

Projects for which these funds are intended are justified on the basis of reliability, or on the need to immediately replace deteriorated or damaged equipment.

The Company will ensure this project is completed at the lowest possible cost consistent with reliable service. All material and contract labour will be obtained through competitive tendering.

Future Commitment

None.

FIBRE OPTIC NETWORKING

Project Cost

$264,000

Nature of Project

This project is necessary to achieve increased power system reliability. It involves establishing fibre optic links to major substations in the St. John’s area. The fibre links will be used for communications and power system protection schemes.

Customer Impact

This project contributes to improved customer service and safety by supporting relay protection systems, and assisting in the maintenance of power system reliability and hydroelectric generation availability.

Project Justification

This project is justified on the basis of power system reliability improvements. The fibre optic link to major substations supports faster fault clearing times thus minimizing fault impacts on the power system.

The Company will ensure this project is completed at the lowest possible cost consistent with reliable service. All material and contract labour will be obtained through competitive tendering.

Future Commitments

None.

REPLACE/UPGRADE COMMUNICATIONS EQUIPMENT

Project Cost

$136,000

Nature of Project

This project is necessary to upgrade or replace obsolete or deteriorated communications equipment.

The project involves:

a) The relocation of two repeater sites.

b) The replacement of mobile VHF radios.

c) Upgrading to VHF radio towers.

d) Performing ground potential rise calculations at four substations.

The project cost is based on a combination of historical costs and individual project estimates.

Customer Impact

Effective communications are critical to ensuring the safe and reliable operation of the power system.

Project Justification

This project is required to ensure the integrity of the Company’s communication system. Equipment is being either replaced or upgraded due to deterioration or technological obsolescence.

The Company will ensure this project is completed at the lowest possible cost consistent with reliable service. All material and contract labour will be obtained through competitive tendering.

Future Commitments

None.

COMMUNICATIONS FOR

GAS TURBINE RELOCATION

Project Cost

$102,000

Nature of Project

This project is necessary to complete the telecommunication work associated with the relocation of a gas turbine from the Salt Pond Substation to the Wesleyville Substation. This project will provide for remote monitoring and control of the generating unit from the System Control Centre.

Customer Impact

Project Justification

The Company will ensure this project is completed at the lowest possible cost consistent with reliable service. All material and contract labour will be obtained through competitive tendering.

Future Commitments

None.

APPLICATION ENHANCEMENTS

Project Cost

$702,000

Nature of Project

This project is necessary to provide enhancements to a variety of computer applications.

The project involves:

a) Updating record keeping to support Range Rated Meters. These meters can be calibrated for installation on services of different voltage levels. The change involves tracking information about the type and size of the electrical service based on information recorded on the meter. This information is important to ensure the safety of employees who maintain electrical services ($65,000).

b) Enhancing the CSS to automate the process of final meter readings utilizing the new Handheld Meter Reading system and the CSS batch entry system ($51,000).

c) Reorganizing automated work queues in the CSS to present tasks in a more efficient order ($51,000).

d) The identification, design and implementation of small changes and upgrades to approximately 30 existing corporate applications to ensure regulatory requirements are met and productivity gains are realized ($535,000).

Customer Impact

This project will contribute to the Company’s ongoing efforts to achieve operating efficiencies and improve customer service.

Project Justification

This project is justified on the basis of improvements in customer service and increased operational efficiencies.

APPLICATION ENHANCEMENTS (Cont’d)

All materials and services for this project will be purchased after examining the competitive bids of prospective suppliers.

Future Commitment

None.

APPLICATION ENVIRONMENT

Project Cost

$670,000

Nature of Project

This project is necessary for the acquisition and upgrade of software required to maintain the Company’s core applications. These consist primarily of upgrades to software development tools, the Database Management System, Microsoft productivity tools, as well as related software licenses.

The project involves:

a) Microsoft Enterprise Agreement ($250,000)

The Microsoft Enterprise Agreement provides the Company with the right to use and upgrade Microsoft desktop products including Word, Excel, Access, PowerPoint and backoffice products such as SQL Server.

b) Business Support Systems ($61,000)

The Business Support System will require report writing, software development and security management tools, as well as consulting services to ensure their efficient use.

c) Workflow Environment ($80,000)

The Lotus Notes workflow environment is outdated and costly both to maintain and to integrate with other environments. Applications in this environment, which include the CIAC Application, will be re-written in a technology that can be supported and maintained by Newfoundland Power personnel. The existing Lotus Notes environment will be retired.

d) Corporate Reporting Environment ($120,000)

To avoid degradation of the on-line performance of the Customer Service System (CSS), a separate environment will be implemented for the creation and printing of reports.

e) Application Software Upgrades ($67,000)

The Application Software Upgrades are necessary to keep versions of the database management system software and application development software up-to-date in order to maintain vendor support.

f) Environment Management ($92,000)

Environment Management ensures that application tools, delivery methods and system environments are updated and maintained to reflect changing technology and business requirements. The project includes various software tool purchases and updates, as well as the associated internal labour.

APPLICATION ENVIRONMENT (Cont’d)

Customer Impact

This project will contribute to the Company’s ongoing efforts to achieve operating efficiencies and improve customer service.

Project Justification

This project is necessary to take advantage of newly developed technology capabilities and to ensure corporate applications continue to operate in a stable and reliable manner. A program for the proper maintenance of the application environment also ensures the environment has the flexibility to accommodate new requirements.

All materials and services for this project will be purchased after examining the competitive bids of prospective suppliers.

Future Commitment

None.

FACILITIES MANAGEMENT

Project Cost

$939,000

Nature of Project

The Company’s facilities management application (known as MP2) tracks and schedules maintenance activities associated with the Company’s distribution and substation electrical equipment. This two-year project involves expanding the application to cover additional applications, such as the street light management system, that currently run on the OpenVMS operating system. Together with process improvements and the training of personnel, the expansion of the MP2 application will provide the Company with more effective facilities management and preventative maintenance capabilities.

Customer Impact

Establishment of an effective facilities management capability will allow the Company to improve operating effectiveness, and enhance the Company’s ability to respond to customers’ service requirements.

Project Justification

An improved facilities management system will enable the effective management of facilities which are critical to providing reasonable levels of reliability, safety, environmental stewardship, operations efficiency and customer service.

This project will also result in the replacement of a number of systems currently running on the Company’s aging, proprietary computer operating system, known as OpenVMS. Due to declining industry support for OpenVMS, the business risk associated with running software applications on the OpenVMS operating system is unacceptable to Newfoundland Power.

All materials and services for this project will be purchased after examining the competitive bids of prospective suppliers.

Future Commitments

Further expenditures of $270,000 are estimated for 2003.

OPERATIONS SUPPORT SYSTEMS

Project Cost

$1,322,000

Nature of Project

This is a two-year project involving the replacement of a large number of small computer applications used by the Company’s operations and engineering personnel with a computer application that will support the planning, estimating, scheduling, assigning and tracking of work.

Customer Impact

Implementation of an integrated computer solution for managing work in the Company’s engineering and operations groups will improve operating effectiveness and enhance the Company’s ability to respond to customers’ service requirements.

Project Justification

There is a significant opportunity to improve operating efficiency and customer service through enhanced work management in the operations and engineering areas of the Company. This core function is currently being supported by a variety of ad hoc solutions, requiring significant manual coordination and causing reduced productivity.

Replacement of the existing applications is also necessary because they run on the Company’s aging, proprietary computer operating system, known as OpenVMS. Due to declining industry support for OpenVMS, the business risk associated with running software applications on the OpenVMS operating system is unacceptable to Newfoundland Power.

All materials and services for this project will be purchased after examining the competitive bids of prospective suppliers.

Future Commitments

Further expenditures of $636,000 are estimated for 2003.

BUSINESS SUPPORT SYSTEMS

Project Cost

$590,000

Nature of Project

This is a continuation of a project initiated in 2001. It is necessary for the replacement of the aging and functionally deficient major computer applications used to manage the Company’s resources. The systems being replaced are the human resources, payroll, finance, and materials management applications.

Customer Impact

This project will contribute to the Company’s ongoing efforts to achieve operating efficiencies and improve customer service.

Project Justification

The Company’s major corporate applications have growing functional shortcomings and are aging to the point where it is necessary to replace them. These applications lack the flexibility required to keep pace with changing business needs and the cost of maintaining their current functionality is increasing. Further, these applications run on an aging proprietary computer operating system, known as OpenVMS, for which vendor support is expected to decline in the near future.

All materials and services for this project have been purchased after examining the competitive bids of prospective suppliers.

Future Commitments

None.

HANDHELD METER READING SYSTEM

Project Cost

$619,000

Nature of Project

This project is necessary for the replacement of the existing Handheld Meter Reading System.

Customer Impact

This project will contribute to the Company’s ongoing efforts to achieve operating efficiencies and improve customer service.

Project Justification

The handheld meter reading system, which was acquired in 1991, will have reached the end of its useful life, with vendor support being discontinued by mid-2002.

All materials and services for this project will be purchased after examining the competitive bids of prospective suppliers.

Future Commitments

None.

PERSONAL COMPUTER INFRASTRUCTURE

Project Cost

$654,000

Nature of Project

This project is necessary for the replacement or upgrade of personal computers, printers and associated assets that have reached the end of their useful life. Of the Company’s total of 565 personal computers, 137 desktop computers and 27 laptop computers will be replaced. This is in keeping with the Company’s expectation of a three to four year life cycle for personal computers.

The Company annually reviews its computing requirements in detail as part of its capital budgeting process.

The project also involves the replacement of 6 laser printers, and the purchase of several scanners and other peripheral equipment.

The following table contains a projection of the number of personal computers in the Company.

Type	2000 Total	2001			2002
Type	2000 Total	Added	Retired	Total	Added	Retired	Total
Desktop	473	57	59	471	137	137	471
Laptop	94	21	21	94	27	27	94
Total	567	78	80	565	164	164	565

Customer Impact

This project will contribute to the Company’s ongoing efforts to achieve operating efficiencies and improve customer service.

Project Justification

This project will enable the Company to accommodate application enhancements and new applications while maintaining current performance standards. The replacement of personal computer infrastructure and the reassignment of older, less powerful personal computers to users with lesser capacity requirements will extend the useful life of personal computers and reduce costs.

PERSONAL COMPUTER INFRASTRUCTURE (Cont’d)

All materials and services for this project will be purchased after examining the competitive bids of prospective suppliers.

Future Commitments

None.

SHARED SERVERS INFRASTRUCTURE

Project Cost

$689,000

Nature of Project

This project is necessary to maintain current performance standards on the Company’s 69 servers and the network infrastructure, and to provide the additional infrastructure needed to accommodate the new Business Support System and operations and engineering applications. This involves the replacement and upgrade of routers, switches, disks, processors and memory, as well as security and monitoring software.

Customer Impact

This project will contribute to the Company’s ongoing efforts to achieve operating efficiencies and improve customer service.

Project Justification

This project is justified on the basis of the need to maintain the performance standards of the Company’s servers and network infrastructure. Some of the Company’s major shared computers are used by as many as 400 employees at one time. Degradation of server and network performance can have a negative impact on employee productivity and on customer service. It could also endanger the integrity of stored corporate data.

All materials and services for this project will be purchased after examining the competitive bids of prospective suppliers.

Future Commitments

None.

INTERNET

Project Cost

$113,000

Nature of Project

The purpose of this project is to upgrade and enhance the Company’s Internet site to improve navigation and performance, as well as provide additional information and functions to our customers. These improvements will include modifications to the front page, upgrades to obsolete software components to enhance graphic displays, and the provision of additional information to address customer expectations as identified in the Company’s customer surveys.

Customer Impact

This project will contribute to the Company’s ongoing efforts to achieve operating efficiencies and improve customer service.

Project Justification

This project is justified on the basis of customer expectations and on the basis of efficiencies to be gained by providing on-line information to customers.

All materials and services for this project will be purchased after examining the competitive bids of prospective suppliers.

Future Commitments

None.

Project	Cost (000s)
Rebuild line to Fox Harbour/Ship Harbour	$350
Rebuild Kings Bridge (KBR-06) feeder	210
Rebuild Kings Bridge (KBR-11) feeder	103
Upgrade distribution clearances - Lewisporte and Norris Arm	100
Replace poles Noggins Cove/Fredrickton	90
Rebuild line to Gull Pond	70
Relocate section of Port-aux-Basques (PAB-03) feeder	70
Rebuild line to Newman’s Cove	63
Rebuild line from Spillar’s Cove to Elliston	62
Upgrade line to Botwood	60
Rebuild line from Hare Bay Substation to Hare Bay	56
Replace poles - Stephenville Area	50
Insulator replacements	742
Small projects < $50,000	914
Total	$2,940

Category	Cost (000s)	No. of Units
Passenger/Off-Road Vehicles ¹	$1,023	50
Heavy Fleet Vehicles ²	1,177	8
Total	$2,200	58

ENERGY SUPPLY

REPLACEMENT AND SPARE SUBSTATION EQUIPMENT 1,605

ST. JOHN’S AREA TRANSMISSION RELAYING

TOTAL – SUBSTATIONS $4,477

Improve Distribution System Protection/Operation 328

GENERAL PROPERTY

2002 Capital Budget

TELECOMMUNICATIONS

TOTAL – TELECOMMUNICATIONS $502

2002 Capital Budget

INFORMATION SYSTEMS

HYDRO PLANTS

FACILITY REHABILITATION

Fisheries Habitat - various plants

Public Safety Items - various plants

Cooling Coil and Controls Replacement - various plants

Generator Switchgear Replacement - Seal Cove

Generator Governor and PLC Replacements -various plants

Pivot Valve Replacement - Seal Cove

Power House Crane Replacement - Seal Cove

Dam Rehabilitation - Fall Pond

Retaining Wall Rehabilitation - Heart’s Content

Various Projects < $50,000

Total

THERMAL PLANTS

FACILITY REHABILITATION

Air Intake Enclosure Replacement - Salt Pond Gas Turbine

Replacement of Fuel Tank - Greenhill Gas Turbine

Various Projects < $50,000

Total

THERMAL PLANTS

FACILITY REHABILITATION (Cont’d)

None.

None.

SUBSTATIONS

REBUILD SUBSTATIONS

Project Cost

Nature of Project

Replace bus structure - Gander Substation

Site improvement/repairs at ten substations

Replace switch connectors - St. John’s Area

Customer Impact

Project Justification

Future Commitments

None.

REPLACEMENT AND SPARE SUBSTATION EQUIPMENT

Project Cost

Nature of Project

Project

Replace deteriorated power transformers - Rattling Brook

Replace circuit breakers - Clarke’s Pond and Harmon

Purchase of spare substation equipment

Customer Impact

REPLACEMENT AND SPARE SUBSTATION EQUIPMENT (Cont’d)

Project Justification

Future Commitments

Project Cost

Nature of Project

Customer Impact

Project Justification

Future Commitments

MODIFICATIONS TO ACCOMMODATE GAS TURBINE

None.

Project Cost

Nature of Project

Customer Impact

Project Justification

Future Commitments

DISTRIBUTION SYSTEM

FEEDER REMOTE CONTROL

Project Cost

Nature of Project

Customer Impact

Project Justification

DISTRIBUTION SYSTEM

Future Commitments

Project Cost

Nature of Project

Customer Impact

Project Justification

Line Tools and Equipment¹

Office Furniture and Equipment²

Additions¹

Renovations²

Passenger/Off-Road Vehicles ¹

Heavy Fleet Vehicles ²