MODIFICATION TO OEB COST ALLOCATION METHODOLOGY AND RESULTS

Updated: February 20, 2008 Exhibit G2 Tab 1 Schedule 1 Page 1 of 20 1 2 MODIFICATION TO OEB COST ALLOCATION METHODOLOGY AND RESULTS 3 4 1.0 INTRODUCTION 5 6 7 8 This exhibit details the modifications that Hydro One Distribution made to the OEB Cost Allocation model to reflect its unique circumstances and also presents the results of the Cost Allocation Study. 9 10 2.0 COMPUTER MODEL 11 12 13 14 15 Hydro One modified the OEB Cost Allocation model to take into account density aspects, serving a large number of Embedded customers through its Low Voltage system and having multiple customer classes in addition to over 270 customer classes for Acquired LDCs. 16 17 18 19 20 21 Hydro One used Version 50 of the Cost Allocation model as a starting point and understands from Board staff that differences between version 50 and the first official Cost Allocation model version are mainly cosmetics. In addition, Hydro One has implemented updates to version 50 as identified by Board staff in the releases of the latest Cost Allocation Model versions 1.1 and 1.2. 22 23 24 25 includes the Input and Output sheets of the Cost Allocation model, the same information provided for the Cost Allocation Information filing under Proceeding EB-2007-0001.

Filed: December 18, 2007 Exhibit G2 Tab 1 Schedule 1 Page 2 of 20 1 3.0 DENSITY WEIGHTING FACTORS 2 3 4 5 Density factors have been incorporated as weighting factors for Overhead lines and Transformers, consistent with the customer classes approved by the OEB that are based on Density definitions. The Density definitions have also been approved by the OEB. 6 7 8 9 10 11 12 For lines, Customer Density weighting factors were developed by calculating for all feeders the number of customers by customer class on each feeder and assigning the total distance of the feeders to the various customer classes proportionally. A similar method was used to develop Demand Density weighting factors, by using energy by customer class by feeder and total energy supplied by feeder to assign the feeder length for each feeder to customer classes proportionally. 13 14 15 16 17 18 19 For transformers, Customers Density weighting factors were developed by calculating Net Book Value of Transformation Assets by feeder and assigning the total Net Book Value of Transformation assets by feeder to the various customer classes proportionally. A similar method was used to develop Demand Density weighting factors, by using energy by customer class by feeder and total energy supplied by feeder to assign the Net Book Value of Transformation assets for each feeder to customer classes proportionally. 20 21 4.0 MODIFICATIONS 22 23 24 25 26 27 Hydro One created a new customer class, Subtransmission (ST) class that includes all Directs, Large Users, most T-class customers, all Embedded LDCs, some three-phase General Service, one Farm customer, some Acquired General Service customers, and some Urban General Service customers. All these customers are directly served at voltages between 44 kv and 13.8 kv, have consumption above 500 kw and provide

Filed: December 18, 2007 Exhibit G2 Tab 1 Schedule 1 Page 3 of 20 1 2 their own transformation. Some of the LDCs are served below 13.8 kv and Hydro One provides an additional level of transformation. 3 4 5 6 7 8 9 Distribution assets which are used to supply the planned ST customer group include: High Voltage Distribution Stations, a small number of Low Voltage Distribution Stations whose secondary voltages are between 27.6 kv and 13.8 kv inclusive, and power lines between the voltages of 44 kv and 13.8 kv inclusive. In addition Distribution assets which are used to supply customers below 13.8 kv include Low Voltage Distribution Stations and power lines between the voltages of 12.5 kv and 4.16 kv inclusive. 10 11 12 13 14 15 To better align with the customer classes in other LDCs that typically have one Residential customer class and two General Service customers broken down between below and above 50 kw, and to better reflect customer characteristics, Hydro One has modified its Residential and General Service customer groupings. Four Residential customer classes have been created: 16 17 18 19 20 21 22 23 24 1. Urban includes the current Urban Residential customer class and customers from 12 Acquired LDC Residential customer classes who met the Urban Density Criteria, 2. Residential R1 includes the current high density and 88 Residential Acquired LDCs customers 3. Residential R2 includes normal density residential classes as well as Farm single phase and three phase energy billed customer classes that currently receive RRRP, 4. Seasonal includes the current high density and normal density seasonal residential customer classes. 25 26 Four General Service customer classes have been created: 27

Filed: December 18, 2007 Exhibit G2 Tab 1 Schedule 1 Page 4 of 20 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 1. General Service below 50 kw includes the existing single-phase General Service, three-phase General Service, Farm single-phase and Three-phase that do not qualify for RRRP, T-class customers that are energy billed, and Acquired General Service customers that are energy billed. 2. General Service above 50 kw includes General Service single-phase, General Service three-phase, T-class customers that are demand billed and consumption below 500 kw and all Farms that are demand billed and all these customers have not been reclassified into the ST customer class. 3. Urban General Service below 50 kw includes all current Urban General Service customers that are energy billed and energy billed single-phase General Service, three-phase General Service, single phase Farms and Acquired General Service customers in 11 Acquired LDCs that meet the Urban density criteria. 4. Urban General Service above 50 kw includes all current Urban General Service customers that are demand billed and demand billed single-phase General Service, three-phase General Service, and Acquired General Service customers in 11 Acquired LDCs that meet the Urban density criteria and that have not been reclassified into the ST customer class. 18 19 20 21 22 23 24 25 As per OEB direction, Hydro One has created a new customer class for Merchant Generators (Distributed Generators). This class is composed of 76 interval meter customers and 5 non-interval metered customers. These customers are currently threephase General Service, T-class customers, and one Acquired General Service customer. The load profile for this class is based on the consumption Distributed Generators require as station service when the active generators are not operating. No meter costs have been allocated to this class, as these customers are required to provide their own meters. 26 27 Customer classes (Input Sheet 2) 28

Filed: December 18, 2007 Exhibit G2 Tab 1 Schedule 1 Page 5 of 20 1 2 In Input Sheet 2, reproduced below, Hydro One is using the following Customer classes compared to the customer classes in the Model: 3 Utility's Class Definition 1 Residential Urban - Residential, Acquired Residential 2 GS <50 Residential R1, Acquired Residential 3 GS>50-Regular Residential R2, Farms with RRRP 4 GS> 50-TOU Seasonal 5 GS >50-Intermediate General Service Energy-Billed 6 Large Use >5MW General Service Demand-Billed 7 Street Light Street Lights 8 Sentinel Sentinel Lights 9 Unmetered Scattered Load N/A 10 Embedded Distributor N/A 11 Back-up/Standby Power N/A 12 Rate Class 1 Distributed Generators 13 Rate Class 2 Sub-Transmission 14 Rate Class 3 Urban General Service Energy-Billed 15 Rate Class 4 Urban General Service Demand-Billed 4 5 4.0 MODEL CHANGES 6 7 8 As per Board staff instructions in version 1.1, Hydro One removed reference to step 4 and updated text for steps 1-3. 9 10 Trial Balance (Input Sheet 3) 11 12 13 14 Transformer Ownership Allowance not populated as Hydro One s approved Revenue Requirement of $1,067 million already includes cost of Transformer Ownership allowance.

Filed: December 18, 2007 Exhibit G2 Tab 1 Schedule 1 Page 6 of 20 1 2 3 4 5 6 7 8 Adjusted formula dealing with Working Capital (Cell G 20) to reflect the proposed Hydro One total working Capital of $296.5 million, or 11.2% instead of 15% for other LDCs. Hydro One s Working Capital includes $273.3 million of cash working capital and $23.3 million of Materials and Supplies Inventory in USoA 1330. USoA 1985 Sentinel Lights is also taken into account when calculating Working Capital. Hydro One has an exemption from the Government that allows it to continue maintaining Sentinel Lights. 9 10 Wholesale meters of $1.04 million reclassified from USoA 1815 to USoA 1820. 11 12 13 14 External Revenues of $5.85 million reclassified from USoA 4380 to USoA 5135, ($5.3 million Forestry Line work) and USoA 5420, (.58 million Health and Safety external revenues). 15 16 17 $4.5 million in USoA 5065 for Interval Meter Reads and Retail Settlements directly allocated to classes using number of interval meters by delivery point by customer class. 18 19 20 Amortization Environmental Assets of $8 million in USoA 5715 mapped 10% to USoA 5112 and 90% to USoA 5114 based on number of stations per category. 21 22 23 $1.19 million moved from USoA 5170 to USoA 5665 to reflect Sentinel Light and allocated directly to this class. 24 25 26.3 million moved from USoA 5172 to USoA 5665 to reflect Sentinel Lights and allocated directly to this class. 27

Filed: December 18, 2007 Exhibit G2 Tab 1 Schedule 1 Page 7 of 20 1 2 3 $31.6 million moved from USoA 5715 to USoA 5645 reflecting amortization of OPEB, [$23.6million] and to USoA 5112/5114 reflecting land reclamation around stations [$8million]. 4 5 6 7 8 9 Billing and Settlement Costs directly attributable to Interval Metered customers was determined for further direct assignment to classes using number of interval meters by delivery point by customer class. Balances direct assigned are: $59k from USoA 5610, $600k from USoA 5615, $11k from USoA 5630, $284k from USoA 5665 and $190k from USoA 5675. 10 11 Asset Breakout (Input Sheet 4) 12 13 14 15 16 Created sub-accounts for USoA 1815 1-5 Transformer Station Equipment to take into account that Hydro One owns High Voltage Distribution Stations and Low Voltage Distribution Stations. The stations can be shared between Low Voltage (LV) system customers and other end-use customers, or used exclusively by one customer group. 17 18 19 Created sub-accounts for USoA 1830-3 Poles, Towers and Fixtures Sub-Transmission Bulk Delivery to provide a split between LV and other end use customers. 20 21 22 Created sub-accounts for USoA 1830-4 Poles, Towers and Fixtures - Primary to provide a split between LV and other end use customers. 23 24 25 Created sub-accounts for USoA 1835-3 Overhead Conductors and Devices Sub- Transmission Bulk Delivery to provide a split between LV and other end use customers. 26 27 28 Created sub-accounts for USoA 1835-4 Overhead Conductors and Devices - Primary to provide a split between LV and other end use customers.

Filed: December 18, 2007 Exhibit G2 Tab 1 Schedule 1 Page 8 of 20 1 2 3 Created sub-accounts for USoA 1850 1-2 Line Transformers to provide a split between LV and other end use customers. 4 5 6 Created sub-accounts for USoA 1860 Meters to provide a split between single, poly, LV, and Smart meters. 7 8 Added USoA 1985 Sentinel Lights. 9 10 11 Modified Totals to include Sub Accounts and exclude Main Accounts when creating new sub-accounts. 12 13 Miscellaneous Data (Input Sheet 5) 14 15 16 The fixed service charge for the proposed rate classes is the customer weighted average service charge of the customer classes being mapped to the new classes. 17 18 Customer Data (Input Sheet 6) 19 20 The default Billing weighting factors were aligned with Hydro One s customer classes. 21 22 23 Meter Capital (Input Sheet 7.1) 24 25 26 Hydro One matched its new customer classes (column B) with the default Cost per Meter (installed) Col 1. Column C default rate class definition not used. 27 28 Meter Reading (Input Sheet 7.2)

Filed: December 18, 2007 Exhibit G2 Tab 1 Schedule 1 Page 9 of 20 1 2 3 Used Hydro One specific Meter Reading weighting factors based on Hydro One Meter Reading Optimization analysis. The weights range between values of 1 to 4. 4 5 Demand Data (Input Sheet 8) 6 7 8 9 10 11 Total Loss Factor by class introduced in cells C16 to W25 to calculate load data at different delivery levels: TS, Bulk, Primary, and Secondary. The LT NCPs were developed using the ratio of the billed demand for customers that receive transformer ownership allowance over the total customer class billed demand as shown in Input Sheet 6. 12 13 Direct Allocation (Input Sheet 9) 14 15 16 17 18 19 20 21 The following USoA accounts were directly allocated: 5065 Meter Expense ($4.5 million), 5610 Management Salaries and Expenses ($59,000), 5615 General Administrative Salaries and Expenses (.6 million), 5630 Outside Services Employed ($11,000) 5665 Miscellaneous General Expenses ($1.8 million) 5675 Maintenance of General Plant (.19 million). 22 23 24 These expenses relate to interval meters and to staff dealing with this type of larger customers and Sentinel Light costs. 25 26 27 28 The allocation factor used for all these accounts is number of Interval Meter by delivery point by class except for Sentinel Lights included in account 5665 ($1.48 million) that has been allocated directly to Sentinel Lights..

Filed: December 18, 2007 Exhibit G2 Tab 1 Schedule 1 Page 10 of 20 1 2 Revenue To Cost RR (Output Sheet 1) 3 4 5 6 7 Hydro One Depreciation Expense includes $23.6 million for Other Post Employment Benefits (OPEB) and $8.2 million for Environmental work. OPEB was added to USoA 5645 in Input Sheet 3 and Environment was added to USoA 51112/5114 in Input Sheet 3. [Refer to rows 53 and 54.] 8 9 10 11 12 Also in Input Sheet 3 USoA 1330 of $23.3 million was included. Since Output Sheet 1 picks up the OM&A values from Input Sheet 3, Hydro One has to deduct these two amounts from the OM&A and add USoA 1330 when calculating Working Capital as a percentage of OM&A costs.[refer to row 59] 13 14 15 Hydro One s Working Capital is based on 11% of OM&A instead of 15% in RP-2005-0020/EB-2005-0378. [Refer to row 58] 16 17 18 Rows 76 to 100 have been added to reflect Hydro One s Miscellaneous External Revenues and Common and Preferred Equity financial structure. 19 20 21 Rows 87 to 94 have been added to properly allocate Miscellaneous External Revenues instead of using Weighted Number of Bills (CWNB) as per OEB model. 22 23 24 25 26 Rows 97 to 100 reflect revenues and costs of standard distribution rates, including Miscellaneous External Revenues. The proposed Revenue Requirement of $1,067 million is recovered from Standard Distribution rates and from Miscellaneous External Revenues. 27

Filed: December 18, 2007 Exhibit G2 Tab 1 Schedule 1 Page 11 of 20 1 2 3 Adjusted the Rate Base checking formulae in Row 62 to be based on nearest million dollar. Fixed Charge Floor Ceiling (Output Sheet 2) 4 5 Formula on row 28 changed for Gross Plant to include USoA 1985 Sentinel Light Assets. 6 7 8 Adjusted formulas in rows 94, 97, 131, 148, 149, 152, 153, 163 and 164 to reflect new sub-accounts. 9 10 Line Transformers PLCC Adjustment (Output Sheet 2.1) 11 12 Adjusted formulas in rows 11, 41, and 42 to reflect new sub-accounts. 13 14 Formula on row 28 changed for Gross Plant to include USoA 1985 Sentinel Light Assets. 15 16 17 Formula on row 25 adjusted to ensure allocated cost does not exceed total cost when the PLCC kw is changed from the default of 400 W in E3: PLCC. 18 19 Primary Costs PLCC Adjustment (Output Sheet 2.2) 20 21 Adjusted formulas in rows 11, 12, 43, 44, 49, 50, 58, and 59 to reflect new sub-accounts. 22 23 Formula on row 30 changed for Gross Plant to include USoA 1985 Sentinel Light Assets. 24 25 Secondary Costs PLCC Adjustment (Output Sheet 2.3) 26 27 28 Titles of USoA accounts in rows 11, 12, 13, 14, 41, 42, 43, 44, 47, 48, 49 and 50 changed to Secondary 5, instead of -4.

Filed: December 18, 2007 Exhibit G2 Tab 1 Schedule 1 Page 12 of 20 1 2 Formula on row 28 changed for Gross Plant to include USoA 1985 Sentinel Light Assets. 3 4 Line Transformer Unit Costs (Output Sheet 3.1) 5 6 Adjusted formulas in rows 11, 44, and 45 to reflect new sub-accounts. 7 8 Formula on row 31 changed for Gross Plant to include USoA 1985 Sentinel Light Assets. 9 10 Substation Transformation Unit Costs (Output Sheet 3.2) 11 12 Formula on row 36 changed for Gross Plant to include USoA 1985 Sentinel Light Assets. 13 14 Primary Cost Pools (Output Sheet 3.3) 15 16 Adjusted formulas in rows 11, 12, 37, 38, 43, 44, 52, and 53 to reflect new sub-accounts. 17 18 Formula on row 24 changed for Gross Plant to include USoA 1985 Sentinel Light Assets. 19 20 Secondary Cost Pools (Output Sheet 3.4) 21 22 23 Titles of USoA accounts in rows 11, 12, 13, 14, 37, 38, 39, 40, 43, 44, 45, and 46 changed to Secondary 5, instead of -4. 24 25 Formula on row 24 changed for Gross Plant to include USoA 1985 Sentinel Light Assets. 26 27 Formulas on rows 52 and 53 adjusted to reflect new sub-accounts. 28

Filed: December 18, 2007 Exhibit G2 Tab 1 Schedule 1 Page 13 of 20 1 USL Metering Credit (Output Sheet 3.5) 2 3 Formulas on rows 11, 41, and 42 adjusted to reflect new sub-accounts. 4 5 Formula on row 28 changed for Gross Plant to include USoA 1985 Sentinel Light Assets. 6 7 Summary By Class and Accounts (Output Sheet 4) 8 9 10 11 New rows added to reflect new Sub-accounts: 1815-1, 2, 3, 4, 5, 1830 3A and 3B, 4A and 4B, 1835-3A and 3B, 4A and 4B, 1850 1 and 2, 1860 1, 2, 3, and 4, and 1985 Sentinel Lights. 12 13 Details By Class and Accounts (Output Sheet 5) 14 15 16 17 New rows added to reflect new Sub-accounts: 1815-1, 2, 3, 4, 5, 1830 3A and 3B, 4A and 4B, 1835-3A and 3B, 4A and 4B, 1850 1 and 2, 1860 1, 2, 3, and 4, and 1985 Sentinel Lights. 18 19 20 Trial Balance Totals in column E of Main Accounts are zero to avoid double counting with new sub-accounts. 21 22 Source Data for E2, (Output Sheet 6) 23 24 25 26 New rows added to reflect new Sub-accounts: 1815-1, 2, 3, 4, 5, 1830 3A and 3B, 4A and 4B, 1835-3A and 3B, 4A and 4B, 1850 1 and 2, 1860 1, 2, 3, and 4, and 1985 Sentinel Lights. 27 28 Main account formulas adjusted to reflect the sum of sub-accounts.

Filed: December 18, 2007 Exhibit G2 Tab 1 Schedule 1 Page 14 of 20 1 2 Amortization (Output Sheet 7) 3 4 5 6 New rows added to reflect new Sub-accounts: 1815-1, 2, 3, 4, 5, 1830 3A and 3B, 4A and 4B, 1835-3A and 3B, 4A and 4B, 1850 1 and 2, 1860 1, 2, 3, and 4, and 1985 Sentinel Lights. 7 8 Main account formulas adjusted to reflect the sum of sub-accounts. 9 10 USoA 1985 directly allocated to Sentinel Lights. 11 12 Categorization (Exhibit Sheet 1) 13 14 15 16 17 18 19 20 New rows added to reflect new Sub-accounts: 1815-1, 2, 3, 4, 5, 1830 3A and 3B, 4A and 4B, 1835-3A and 3B, 4A and 4B, 1850 1 and 2, 1860 1, 2, 3, and 4, and 1985 Sentinel Lights. Based on an updated Minimum System done for Hydro One, the Categorization factors for Fixtures, Conductors and Rural Transformers have been updated from the Rural default of 60% to 47.8%, 54.8% and 61.9%, respectively. 21 22 23 24 25 26 27 This was accommodated in the model by using the above on the following USoA Asset accounts and sub-accounts: 1830 Overhead Fixtures 47.8% 1835 Conductors 54.8% 1840/45 Underground 54.8% 1850 Transformers 61.9% 28

Filed: December 18, 2007 Exhibit G2 Tab 1 Schedule 1 Page 15 of 20 1 2 3 4 5 Further, the associated O&M accounts were also adjusted to track the Asset Accounts. For example: USoA 5035, 5055 and 5160 for Rural Transformers was set at 61.9% USoA 5120 for Fixtures Maintenance was set at 47.8% Conductor Related USoA set to 54.8%. 6

Filed: December 18, 2007 Exhibit G2 Tab 1 Schedule 1 Page 16 of 20 1 Allocators (Exhibit Sheet 2) 2 3 New Allocators applicable to Hydro One added after row 119. 4 Allocator ID Basis Mtr-Single CWMC-1 Number of single-phase meters by class Mtr-Poly CWMC-2 Number of poly-phase meters by class Mtr-LV CWMC-3 Number of LV meters by class Mtr-Smart CWMC-4 Number of smart meters by class 1805/1806/1808/1810-2: <50 kv Assets BCP(1-4-12)AA Bulk CP with est of RCD of ST 1815-1 BCP (1-4-12) B High Voltage DS Rural Only 1815-2 1815-2D High Voltage DS Low Specific - LV Only 1815-3 1815-3D High Voltage DS High Specific - LV Only 1815-4 1815-4D High Voltage DS Low LV - LV Only 1815-5 1815-5D High Voltage DS High LV - LV Only 1820-2 PNCP(1-4-12)AA NCP with estimate for RCD of ST 1820-3 Cen2 Class Energy less Market Participants 1830-3A 1830-3A Bulk Fixtures LV 1830-3B BCP(1-4-12) DlinesB Bulk Fixtures Retail (Density Weights) 1830-4A 1830-4AC 1830-4AD Primary Fixtures LV Customer Related Primary Fixtures LV Demand Related 1830-4B PNCP(1-4-12) DlinesB CCP-DLinesC Primary Fixtures Retail (Density Wts) Retail customers with Density Wts 1835-3A 1835-3A Bulk Lines LV

Filed: December 18, 2007 Exhibit G2 Tab 1 Schedule 1 Page 17 of 20 Allocator ID Basis 1835-3B BCP(1-4-12)-DlinesB Bulk Lines Retail (Density Weights) 1835-4A 1835-4B 1835-4AC 1835-4AD PNCP(1-4-12)-DlinesB CCP-DLinesC 1840-4 &1845-4 PNCP(1-4-12)C CCP-C 1840-5 & 1845-5 1850-1 1850-2 SNCP(1-4-1)C CCS-C 1850-1D 1850-1C LTNCP(1-4-12)RtransfB CCLT-RtransfB Primary Lines LV Customer Related Primary Lines LV Demand Related Primary Lines Retail (Density Weights) Retail Customers Density Weighted Excludes ST/LV Excludes ST/LV Excludes ST/LV Excludes ST/LV 100% to ST/LV class 100% to ST/LV class Rural Transformers Retail Demand Related (Density Weights) Rural Transformers Retail Customer Related (Density Weights) 1 2 3 PLCC (Exhibit Sheet 3) 4 5 6 Hydro One has updated the 400 W PLCC default with new values based on Updated Minimum System study : 544 W for Conductors and 3100 W for Rural Transformers. 7 8 9 10 11 12 13 The PLCC-Customer Watts calculated in rows 24 to 28 were updated to replace 400 W: PLCC-CCA 544W x number of customers PLCC-CCB 544W x number of customers on bulk PLCC-CCP 544W x number of customers on primary PLCC-CCLT 3100W x number of customers with Rural Transformation PLCC-CCS 544W x number of customers on secondary

Filed: December 18, 2007 Exhibit G2 Tab 1 Schedule 1 Page 18 of 20 1 2 Trial Balance Allocation Details (Exhibit Sheet 4) 3 4 5 6 New rows added to reflect new Sub-accounts: 1815-1, 2, 3, 4, 5, 1830 3A and 3B, 4A and 4B, 1835-3A and 3B, 4A and 4B, 1850 1 and 2, 1860 1, 2, 3, and 4, and 1985 Sentinel Lights. 7 8 Hydro One specific allocators were chosen and derived in E2: Allocators. 9 10 Reconciliation (Exhibit Sheet 5) 11 12 13 14 New rows added to reflect new Sub-accounts: 1815-1, 2, 3, 4, 5, 1830 3A and 3B, 4A and 4B, 1835-3A and 3B, 4A and 4B, 1850 1 and 2, 1860 1, 2, 3, and 4, and 1985 Sentinel Lights. 15

Filed: December 18, 2007 Exhibit G2 Tab 1 Schedule 1 Page 19 of 20 1 Cost Allocation Results 2 3 4 5 6 7 8 9 The results of the cost allocation methodology are presented below. Revenues collected from each customer class, Revenue Requirement by customer class, revenue cost ratios and the amount of miscellaneous revenues credited to each customer class is shown. The OEB Cost Allocation Methodology also determines the fixed charges based on three methods: a) Avoided costs, b) Directly Related customer costs and c) Minimum System with PLCC Adjustment. The table below shows the results of methods a and c. Finally, the credit applicable to USL connections is shown. 10 Existing Rev [$M] Rev- Cost Misc Rev Fixed Charge Method a Fixed Charge Method c Alloc Cost Rev Req [$M] Ratio [$M] Avoid Cost Min System USL Credit UR 57.70 65.95 0.87 3.82 $ 8.47 $ 22.12 R1 197.14 240.19 0.82 10.63 $ 8.56 $ 29.67 R2 404.61 390.30 1.04 11.96 $ 9.41 $ 45.37 Seasonal 76.96 83.60 0.92 2.15 $ 6.34 $ 30.58 GSe 119.59 111.13 1.08 5.67 $ 10.72 $ 30.97 $ 6.86 GSd 107.88 105.43 1.02 2.35 $ 26.49 $ 54.46 UGe 12.08 9.34 1.29 0.47 $ 10.73 $ 12.33 UGd 16.00 16.81 0.95 0.33 $ 29.19 $ 39.65 St Lgt 4.89 8.11 0.60 0.11 $ 5.01 $ 12.40 Sen Lgt 4.92 7.96 0.62 4.03 $ 2.36 $ 32.77 Dgen 0.63 0.39 1.63 0.00 $ 25.26 $ 36.66 ST 64.18 27.35 2.35 0.76 $ 192.71 $ 372.12 1,066.58 1,066.58 1.00 42.30

Updated: February 20, 2008 Exhibit G2 Tab 1 Schedule 1 Page 20 of 20 1 2 In designing the proposed ST rates, the following information was calculated in the Cost Allocation Study. 3 Amounts ($) Fixed Revenue Requirement 8,381,668 Variable Revenue Requirement 18,968,378 Total ST Revenue Requirement 27,350,045 4 5 Minimum System Study 6 7 8 9 10 Hydro One retained Black and Veatch in 2007 to update the Minimum System Study used in the Cost Allocation Methodology. The Minimum System Study was first developed in the mid 1980 s by Ontario Hydro. The results of the original Ontario Hydro study and the current Black and Veatch study are presented in the Table below. 11 12 Minimum System Study % of Fixed Costs 13 % Fixed 1980 s 2007 Overhead Lines 61 54.8 Underground Lines 61 Included in Overhead Lines Transformers 62 61.9 Poles Towers and Fixtures N/A 47.8 14 15 16 17 18 The Minimum System Study update from Black and Veatch also updated the value of the Peak Load Carrying Capabilities (PLCC) and the new value for Conductors is 544 Watts and for Transformers is 3,100 Watts. These new values have been used in the Cost Allocation Study. The Black and Veatch report is included as Attachment B.

Ontario Energy Board 2008 COST ALLOCATION MODEL Sheet I1 Utility Information Sheet I1 Intro Filed: February 28, 2008 Pages 1 of 134 Hydro One Networks - Distribution 2008 Distribution Rate Filing Introduction Sheet Name of LDC Hydro One Networks - Distribution Contact Information Name Title Phone Email Mike Roger Manager - Distribution Rates 416-345-5876 Mike.Roger@hydroone.com This Iteration Hydro One Distribution: 12 Rate Classes Colour Coding Input Output Exhibition Brought Forward Calculation Default Numbers Diagnostic Brought Forward Calculation INPUTS I1 Intro Brief explanation of what the pages do. I2 LDC data and Classes Enter LDC specific information and number of classes etc I3 TB Data Balance from approved 2006 EDR Trial Balance I4 BO ASSETS Break out assets into detail functions - bulk deliver, primary and secondary I5 Misc Data Input for miscellaneous data where necessary - TBD I6 Customer Data Input customer related data for generating customer allocators I7.1 Meter Capital Input meter related data for calculating capital costs weighing factors I7.2 Meter Reading Input meter related data for calculating meter reading weighing factors I8 Demand Data Input demand allocators using load data and making LDC specific adjustments I9 Direct Allocation OUTPUTS O1 Revenue to cost Output showing revenue to cost ratios, inter class subsidy etc. O2 Fixed Charge Output showing the range for the Basic Customer charge - TBD O3.1 Line Tran Unit Cost Output showing the line transformation unit cost O3.2 Substat Tran Unit Cost Output showing the substation transformation unit cost O3.3 Primary Cost Pool Output showing the primary pool unit cost O3.4 Secondary Cost Pool Output showing the secondary pool unit cost O3.5 USL Metering Credit Output showing the unit cost for meters O4 Summary by Class Output showing summary of all allocation by class and by US of A O5 Detail by Class Output showing details of individual allocation by class and by US of A O6 Source Data for E2 Output showing the source allocation data for E2 O7 Amortization Output showing the details for amortization and capital contribution EXHIBITS E1 Trial Balance Index Exhibit showing 1. how accounts are grouped for reporting, how accounts are categorized and how accounts are allocated E2 Categorization Exhibit showing how costs are categorized E3 PLCC Backup documentation for calculating Peak Load Carrying Capability. E4 Allocation Factors Exhibit summarizing all allocation factors created in I5 to I8 and present the findings in percentages E5 Reconciliation Exhibit showing reconciliation of accounts included and excluded from the allocation study to TB balance

Return to I1 Intro I2 LDC class Filed: February 28, 2008 Pages 2 of 134 Hydro One Networks - Distribution 2008 Distribution Rate Filing Input Sheet for Selection of Classes, Demand Allocators and Specific Allocators Hydro One Distribution: 12 Rate Classes Instructions Step 1 - Please input your existing classes Step 2 - If this is your first run, select "First Run" in the drop down menu below Step 3 - After all classes have been entered, Click the "Update" in cell E41. If this is your first run, select "First Run" and click on the "Update" button. Note: You must always do a first run with current selected. First Run Utility's Class Definition Current 1 Residential UR YES 2 GS <50 R1 YES 3 GS>50-Regular R2 YES 4 GS> 50-TOU Seasonal YES 5 GS >50-Intermediate GSe YES 6 Large Use >5MW GSd YES 7 Street Light St Lgt YES 8 Sentinel Sen Lgt YES 9 Unmetered Scattered Load NO 10 Embedded Distributor NO 11 Back-up/Standby Power NO 12 Rate Class 1 Dgen YES 13 Rate class 2 ST YES 14 Rate class 3 UGe YES 15 Rate class 4 UGd YES 16 Rate class 5 NO 17 Rate class 6 NO 18 Rate class 7 NO 19 Rate class 8 NO 20 Rate class 9 NO After you have set all rate classes Update

Return to I1 Intro Hydro One2008 Distribution Rate Filing Input Sheet for Trial Balance Figures Instructions 1 Enter 2007 values Enter amounts you need to reclassify to 2 column E Hydro One Distribution: 12 Rate Classes I3 TB Data Filed: February 28, 2008 Pages 3 of 134 Enter Net Income component of Return on Capital from Exhibit E1-1-1 3 Approved Target Net Inocme ($) $151,400,000 Enter Taxes from Exhibit E1-1- 4 1 Approved PILs ($) $50,100,000 5 Enter Interest component of Return on Capital from Exhibit E1-1-1 Approved Interest ($) $148,500,000 6 Enter External Revenues from EB-2007-0671 Approved Specific Service Charges ($) $27,800,000 Enter Transformation Ownership Allowance 7 Credit Approved Transformer Ownership Allowance ($) Approved Low Voltage Wheeling Enter Low Voltage Wheeling Adjustment 8 Adjustment ($) Enter Revenue Requirment from EB-2007-9 0681 Exhibit E1-1-1 Approved Revenue Requirement ($) $1,066,575,593 From this Sheet Revenue Requirement to be Used in this model ($) Enter Total Rate Base from EB-2007-06581 10 Exhibit D2-1-1 Approved Rate Base ($) $ 4,382,000,000 Rate Base to be Used in this model ($) $1,066,575,593 $1,066,575,593 $4,382,000,000 $4,382,000,061 Rev Req Matches Rate Base Matches Uniform System of Accounts - Detail Accounts: USoA Account Accounts # Financial Statement 1005 Cash - 1010 Cash Advances and Working Funds - 1020 Interest Special Deposits - 1030 Dividend Special Deposits - 1040 Other Special Deposits - 1060 Term Deposits - 1070 Current Investments - 1100 Customer Accounts Receivable - Model Adjustments Reclassify accounts Direct Allocation Reclassified Balance $ $ $ $ $ $ $ $

USoA Account Accounts # Financial Statement 1102 Accounts Receivable - Services - 1104 Accounts Receivable - Recoverable Work - 1105 Accounts Receivable - Merchandise, Jobbing, etc. - 1110 Other Accounts Receivable - 1120 Accrued Utility Revenues - 1130 Accumulated Provision for Uncollectible Accounts--Credit - 1140 Interest and Dividends Receivable - 1150 Rents Receivable - 1170 Notes Receivable - 1180 Prepayments - 1190 I3 TB Data Filed: February 28, 2008 Model Adjustments Reclassify accounts Direct Allocation Reclassified Balance $ $ $ $ $ $ $ $ $ $ Miscellaneous Current and Accrued Assets $ - 1200 Accounts Receivable from Associated Companies $ - 1210 Notes Receivable from Associated Companies $ - 1305 Fuel Stock $ - 1330 Plant Materials and Operating Supplies $ 23,300,000 $23,300,000 1340 Merchandise $ - 1350 Other Materials and Supplies $ - 1405 Long Term Investments in Non-Associated Companies $ - 1408 Long Term Receivable - Street Lighting Transfer $ - 1410 Other Special or Collateral Funds $ - 1415 Sinking Funds $ - 1425 Unamortized Debt Expense $ - 1445 Unamortized Discount on Long-Term Debt-- Debit $ - 1455 Unamortized Deferred Foreign Currency Translation Gains and Losses $ - 1460 Other Non-Current Assets $ - 1465 O.M.E.R.S. Past Service Costs $ - 1470 Past Service Costs - Employee Future Benefits $ - 1475 Past Service Costs - Other Pension Plans $ - 1480 Portfolio Investments - Associated Companies $ - 1485 Investment in Associated Companies - Significant Influence $ - 1490 Investment in Subsidiary Companies $ - 1505 Unrecovered Plant and Regulatory Study Costs $ - 1508 Other Regulatory Assets $ - Pages 4 of 134

USoA Account # 1510 Accounts Financial Statement I3 TB Data Filed: February 28, 2008 Model Adjustments Reclassify accounts Direct Allocation Reclassified Balance Preliminary Survey and Investigation Charges $ - 1515 Emission Allowance Inventory $ - 1516 Emission Allowances Withheld $ - 1518 RCVARetail $ - 1520 Power Purchase Variance Account $ - 1525 Miscellaneous Deferred Debits $ - 1530 Deferred Losses from Disposition of Utility Plant $ - 1540 Unamortized Loss on Reacquired Debt $ - 1545 Development Charge Deposits/ Receivables $ - 1548 RCVASTR $ - 1560 Deferred Development Costs $ - 1562 Deferred Payments in Lieu of Taxes $ - 1563 Account 1563 - Deferred PILs Contra Account $ - 1565 Conservation and Demand Management Expenditures and Recoveries $ 6,400,000 $6,400,000 1570 Qualifying Transition Costs $ - 1571 Pre-market Opening Energy Variance $ - 1572 Extraordinary Event Costs $ - 1574 Deferred Rate Impact Amounts $ - 1580 RSVAWMS $ - 1582 RSVAONE-TIME $ - 1584 RSVANW $ - 1586 RSVACN $ - 1588 RSVAPOWER $ - 1590 Recovery of Regulatory Asset Balances $ - 1605 Electric Plant in Service - Control Account $ - 1606 Organization $ - 1608 Franchises and Consents $ - 1610 Miscellaneous Intangible Plant $ - 1615 Land $ - $ - 1616 Land Rights $ - $ - 1620 Buildings and Fixtures $ - $ - 1630 Leasehold Improvements $ - $ - 1635 Boiler Plant Equipment $ - $ - 1640 Engines and Engine-Driven Generators $ - $ - 1645 Turbogenerator Units $ - $ - 1650 Reservoirs, Dams and Waterways $ - $ - 1655 Water Wheels, Turbines and Generators $ - $ - 1660 Roads, Railroads and Bridges $ - $ - 1665 Fuel Holders, Producers and Accessories $ - $ - 1670 Prime Movers $ - $ - 1675 Generators $ - $ - Pages 5 of 134

USoA Account Accounts # Financial Statement 1680 Accessory Electric Equipment - 1685 Miscellaneous Power Plant Equipment - 1705 Land - 1706 Land Rights - 1708 Buildings and Fixtures - 1710 Leasehold Improvements - 1715 Station Equipment - 1720 Towers and Fixtures - 1725 Poles and Fixtures - 1730 Overhead Conductors and Devices - 1735 Underground Conduit - 1740 Underground Conductors and Devices - 1745 Roads and Trails - 1805 Land 61,219,197 1806 Land Rights 239,478,047 1808 Buildings and Fixtures 5,437,793 1810 Leasehold Improvements - I3 TB Data Filed: February 28, 2008 Model Adjustments Reclassify accounts Direct Allocation Reclassified Balance $ $ - $ $ $ $ $ $ $ $ $ $ $ $ $ $61,219,197 $ $239,478,047 $ $5,437,793 $ 1815 Transformer Station Equipment - Normally Primary above 50 kv $ 108,889,874 ($1,037,400) $107,852,474 1820 Distribution Station Equipment - Normally Primary below 50 kv $ 326,199,765 $1,037,400 $327,237,165 1825 Storage Battery Equipment $ - 1830 Poles, Towers and Fixtures $ 1,931,765,752 $1,931,765,752 1835 Overhead Conductors and Devices $ 1,291,841,808 $ - $1,291,841,808 1840 Underground Conduit $ 23,984,390 $23,984,390 1845 Underground Conductors and Devices $ 679,439,007 $679,439,007 1850 Line Transformers $ 1,283,933,745 $1,283,933,745 1855 Services $ - 1860 Meters $ 172,889,855 $172,889,855 1865 Other Installations on Customer's Premises $ - 1870 Leased Property on Customer Premises $ - 1875 Street Lighting and Signal Systems $ - 1905 Land $ 3,283,798 $3,283,798 1906 Land Rights $ - 1908 Buildings and Fixtures $ 94,901,052 $94,901,052 1910 Leasehold Improvements $ 4,620,582 $4,620,582 1915 Office Furniture and Equipment $ 2,536,853 $2,536,853 1920 Computer Equipment - Hardware $ 55,593,665 $55,593,665 1925 Computer Software $ 205,570,861 $205,570,861 1930 Transportation Equipment $ 199,220,074 $199,220,074 1935 Stores Equipment $ 6,587,180 $6,587,180 1940 Tools, Shop and Garage Equipment $ 2,282,022 $2,282,022 1945 Measurement and Testing Equipment $ 3,066,387 $3,066,387 1950 Power Operated Equipment $ 85,055,133 $85,055,133 1955 Communication Equipment $ 28,160,887 $28,160,887 1960 Miscellaneous Equipment $ 2,998,695 $2,998,695 Pages 6 of 134

USoA Account # Accounts I3 TB Data Filed: February 28, 2008 Model Adjustments Reclassify accounts Direct Allocation Reclassified Balance Financial Statement 1965 Water Heater Rental Units $ - 1970 Load Management Controls - Customer Premises $ - 1975 Load Management Controls - Utility Premises $ - 1980 System Supervisory Equipment $ 21,869,131 $21,869,131 1985 Sentinel Lighting Rental Units $ 16,327,748 $16,327,748 1990 Other Tangible Property $ 5,274,886 $5,274,886 1995 Contributions and Grants - Credit -$ 418,704,641 ($418,704,641) 2005 Property Under Capital Leases $ - 2010 Electric Plant Purchased or Sold $ - 2020 Experimental Electric Plant Unclassified $ - 2030 Electric Plant and Equipment Leased to Others $ - 2040 Electric Plant Held for Future Use $ - 2050 Completed Construction Not Classified--Electric $ - 2055 Construction Work in Progress--Electric $ - 2060 Electric Plant Acquisition Adjustment $ - 2065 Other Electric Plant Adjustment $ - 2070 Other Utility Plant $ - 2075 Non-Utility Property Owned or Under Capital Leases $ - 2105 Accum. Amortization of Electric Utility Plant - Property, Plant, & Equipment -$ 2,364,639,589 ($2,364,639,589) 2120 Accumulated Amortization of Electric Utility Plant - Intangibles $ - 2140 Accumulated Amortization of Electric Plant Acquisition Adjustment $ - 2160 Accumulated Amortization of Other Utility Plant $ - 2180 Accumulated Amortization of Non-Utility Property $ - 2205 Accounts Payable $ - 2208 Customer Credit Balances $ - 2210 Current Portion of Customer Deposits $ - 2215 Dividends Declared $ - 2220 Miscellaneous Current and Accrued Liabilities $ - 2225 Notes and Loans Payable $ - 2240 Accounts Payable to Associated Companies $ - 2242 Notes Payable to Associated Companies $ - 2250 Debt Retirement Charges( DRC) Payable $ - 2252 Transmission Charges Payable $ - 2254 Electrical Safety Authority Fees Payable $ - Pages 7 of 134

USoA Account Accounts # Financial Statement 2256 Independent Market Operator Fees and Penalties Payable - 2260 Current Portion of Long Term Debt - 2262 Ontario Hydro Debt - Current Portion - 2264 Pensions and Employee Benefits - Current Portion - 2268 Accrued Interest on Long Term Debt - 2270 Matured Long Term Debt - 2272 Matured Interest on Long Term Debt - 2285 Obligations Under Capital Leases--Current - 2290 Commodity Taxes - 2292 Payroll Deductions / Expenses Payable - 2294 Accrual for Taxes, Payments in Lieu of Taxes, Etc. - 2296 Future Income Taxes - Current - 2305 Accumulated Provision for Injuries and Damages - 2306 Employee Future Benefits - 2308 Other Pensions - Past Service Liability - 2310 Vested Sick Leave Liability - 2315 Accumulated Provision for Rate Refunds - 2320 Other Miscellaneous Non-Current Liabilities - 2325 Obligations Under Capital Lease--Non-Current - 2330 Development Charge Fund - 2335 Long Term Customer Deposits - 2340 Collateral Funds Liability - 2345 Unamortized Premium on Long Term Debt - 2348 O.M.E.R.S. - Past Service Liability - Long Term Portion - 2350 Future Income Tax - Non-Current - 2405 Other Regulatory Liabilities - 2410 Deferred Gains from Disposition of Utility Plant - 2415 Unamortized Gain on Reacquired Debt - 2425 Other Deferred Credits - 2435 Accrued Rate-Payer Benefit - 2505 Debentures Outstanding - Long Term Portion - 2510 Debenture Advances - 2515 Reacquired Bonds - 2520 Other Long Term Debt - 2525 Term Bank Loans - Long Term Portion - 2530 Ontario Hydro Debt Outstanding - Long Term Portion - 2550 Advances from Associated Companies - I3 TB Data Filed: February 28, 2008 Model Adjustments Reclassify accounts Direct Allocation Reclassified Balance $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ Pages 8 of 134

USoA Account Accounts # Financial Statement 3005 Common Shares Issued - 3008 Preference Shares Issued - 3010 Contributed Surplus - 3020 Donations Received - 3022 Development Charges Transferred to Equity - 3026 Capital Stock Held in Treasury - 3030 Miscellaneous Paid-In Capital - 3035 Installments Received on Capital Stock - 3040 Appropriated Retained Earnings - 3045 Unappropriated Retained Earnings - 3046 Balance Transferred From Income 151,400,000 3047 Appropriations of Retained Earnings - Current Period - 3048 Dividends Payable-Preference Shares - 3049 Dividends Payable-Common Shares - 3055 Adjustment to Retained Earnings - 3065 Unappropriated Undistributed Subsidiary Earnings - 4006 Residential Energy Sales - 4010 Commercial Energy Sales - 4015 Industrial Energy Sales - 4020 Energy Sales to Large Users - 4025 Street Lighting Energy Sales - 4030 Sentinel Lighting Energy Sales - 4035 General Energy Sales - 4040 Other Energy Sales to Public Authorities - 4045 Energy Sales to Railroads and Railways - 4050 Revenue Adjustment - 4055 Energy Sales for Resale - 4060 Interdepartmental Energy Sales - 4062 Billed WMS - 4064 Billed-One-Time - 4066 Billed NW - 4068 Billed CN - 4080 Distribution Services Revenue - 4082 Retail Services Revenues - 4084 Service Transaction Requests (STR) Revenues - 4090 Electric Services Incidental to Energy Sales - 4105 Transmission Charges Revenue - 4110 Transmission Services Revenue - 4205 Interdepartmental Rents - 4210 Rent from Electric Property - 4215 Other Utility Operating Income - 4220 Other Electric Revenues - I3 TB Data Filed: February 28, 2008 Model Adjustments Reclassify accounts Direct Allocation Reclassified Balance $ $ $ $ $ $ $ $ $ $ $ ($151,400,000) ($151,400,000) $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $1,024,275,593 ($1,024,275,593) $ $ $ $ $ $ $ $ $ Pages 9 of 134

USoA Account Accounts # Financial Statement 4225 Late Payment Charges 14,500,000 4230 Sales of Water and Water Power - 4235 Miscellaneous Service Revenues - 4240 Provision for Rate Refunds - 4245 Government Assistance Directly Credited to Income - 4305 Regulatory Debits - 4310 Regulatory Credits - 4315 I3 TB Data Filed: February 28, 2008 Model Adjustments Reclassify accounts Direct Allocation Reclassified Balance -$ ($14,500,000) $ $ ($27,800,000) $ $ $ $ Revenues from Electric Plant Leased to Others $ - 4320 Expenses of Electric Plant Leased to Others $ - 4325 Revenues from Merchandise, Jobbing, Etc. $ - 4330 Costs and Expenses of Merchandising, Jobbing, Etc. $ - 4335 Profits and Losses from Financial Instrument Hedges $ - 4340 Profits and Losses from Financial Instrument Investments $ - 4345 Gains from Disposition of Future Use Utility Plant $ - 4350 Losses from Disposition of Future Use Utility Plant $ - 4355 Gain on Disposition of Utility and Other Property $ - 4360 Loss on Disposition of Utility and Other Property $ - 4365 Gains from Disposition of Allowances for Emission $ - 4370 Losses from Disposition of Allowances for Emission $ - 4375 Revenues from Non-Utility Operations $ - 4380 Expenses of Non-Utility Operations $ 5,850,000 -$ 5,850,000.00 4385 Non-Utility Rental Income $ - 4390 Miscellaneous Non-Operating Income $ - 4395 Rate-Payer Benefit Including Interest $ - 4398 Foreign Exchange Gains and Losses, Including Amortization $ - 4405 Interest and Dividend Income $ - 4415 Equity in Earnings of Subsidiary Companies $ - 4505 Operation Supervision and Engineering $ - 4510 Fuel $ - 4515 Steam Expense $ - 4520 Steam From Other Sources $ - 4525 Steam Transferred--Credit $ - 4530 Electric Expense $ - Pages 10 of 134

USoA Account Accounts # Financial Statement 4535 Water For Power - 4540 Water Power Taxes - 4545 Hydraulic Expenses - 4550 Generation Expense - 4555 Miscellaneous Power Generation Expenses - 4560 Rents - 4565 Allowances for Emissions - 4605 Maintenance Supervision and Engineering - 4610 Maintenance of Structures - 4615 Maintenance of Boiler Plant - 4620 Maintenance of Electric Plant - 4625 Maintenance of Reservoirs, Dams and I3 TB Data Filed: February 28, 2008 Model Adjustments Reclassify accounts Direct Allocation Reclassified Balance $ $ $ $ $ $ $ $ $ $ $ Waterways $ - 4630 Maintenance of Water Wheels, Turbines and Generators $ - 4635 Maintenance of Generating and Electric Plant $ - 4640 Maintenance of Miscellaneous Power Generation Plant $ - 4705 Power Purchased $ 1,959,300,000 $1,959,300,000 4708 Charges-WMS $ - 4710 Cost of Power Adjustments $ - 4712 Charges-One-Time $ - 4714 Charges-NW $ - 4715 System Control and Load Dispatching $ - 4716 Charges-CN $ - 4720 Other Expenses $ - 4725 Competition Transition Expense $ - 4730 Rural Rate Assistance Expense $ - 4805 Operation Supervision and Engineering $ - 4810 Load Dispatching $ - 4815 Station Buildings and Fixtures Expenses $ - 4820 Transformer Station Equipment - Operating Labour $ - 4825 Transformer Station Equipment - Operating Supplies and Expense $ - 4830 Overhead Line Expenses $ - 4835 Underground Line Expenses $ - 4840 Transmission of Electricity by Others $ - 4845 Miscellaneous Transmission Expense $ - 4850 Rents $ - 4905 Maintenance Supervision and Engineering $ - 4910 Maintenance of Transformer Station Buildings and Fixtures $ - Pages 11 of 134

USoA Account # 4916 Accounts Financial Statement I3 TB Data Filed: February 28, 2008 Model Adjustments Reclassify accounts Direct Allocation Reclassified Balance Maintenance of Transformer Station Equipment $ - 4930 Maintenance of Towers, Poles and Fixtures $ - 4935 Maintenance of Overhead Conductors and Devices $ - 4940 Maintenance of Overhead Lines - Right of Way $ - 4945 Maintenance of Overhead Lines - Roads and Trails Repairs $ - 4950 Maintenance of Overhead Lines - Snow Removal from Roads and Trails $ - 4960 Maintenance of Underground Lines $ - 4965 Maintenance of Miscellaneous Transmission Plant $ - 5005 Operation Supervision and Engineering $ 2,234,150 $2,234,150 5010 Load Dispatching $ 849,600 $849,600 5012 Station Buildings and Fixtures Expense $ 396,000 $396,000 5014 Transformer Station Equipment - Operation Labour $ 590,000 $590,000 5015 Transformer Station Equipment - Operation Supplies and Expenses $ 290,000 $290,000 5016 Distribution Station Equipment - Operation Labour $ 6,620,000 $6,620,000 5017 Distribution Station Equipment - Operation Supplies and Expenses $ 2,500,000 $2,500,000 5020 Overhead Distribution Lines and Feeders - Operation Labour $ 6,030,870 $6,030,870 5025 Overhead Distribution Lines & Feeders - Operation Supplies and Expenses $ 987,630 $987,630 5030 Overhead Subtransmission Feeders - Operation $ 564,400 $564,400 5035 Overhead Distribution Transformers- Operation $ - 5040 Underground Distribution Lines and Feeders - Operation Labour $ - 5045 Underground Distribution Lines & Feeders - Operation Supplies & Expenses $ - 5050 Underground Subtransmission Feeders - Operation $ - 5055 Underground Distribution Transformers - Operation $ - 5060 Street Lighting and Signal System Expense $ - 5065 Meter Expense $ 12,700,400 $4,543,350 $8,157,050 5070 Customer Premises - Operation Labour $ 15,338,600 $15,338,600 Pages 12 of 134

USoA Account # 5075 Accounts Financial Statement I3 TB Data Filed: February 28, 2008 Model Adjustments Reclassify accounts Direct Allocation Reclassified Balance Customer Premises - Materials and Expenses $ 2,325,800 $2,325,800 5085 Miscellaneous Distribution Expense $ 11,169,190 $11,169,190 5090 Underground Distribution Lines and Feeders - Rental Paid $ - 5095 Overhead Distribution Lines and Feeders - Rental Paid $ 162,160 $162,160 5096 Other Rent $ - 5105 Maintenance Supervision and Engineering $ 11,257,600 $11,257,600 5110 Maintenance of Buildings and Fixtures - Distribution Stations $ - 5112 Maintenance of Transformer Station Equipment $ 1,097,800 $797,700 $1,895,500 5114 Maintenance of Distribution Station Equipment $ 11,160,000 $7,179,300 $18,339,300 5120 Maintenance of Poles, Towers and Fixtures $ 20,408,580 $20,408,580 5125 Maintenance of Overhead Conductors and Devices $ 51,236,400 $51,236,400 5130 Maintenance of Overhead Services $ - 5135 Overhead Distribution Lines and Feeders - Right of Way $ 115,890,000 $5,265,000 $121,155,000 5145 Maintenance of Underground Conduit $ 265,540 $265,540 5150 Maintenance of Underground Conductors and Devices $ 1,130,000 $1,130,000 5155 Maintenance of Underground Services $ - 5160 Maintenance of Line Transformers $ 3,196,880 $3,196,880 5165 Maintenance of Street Lighting and Signal Systems $ - 5170 Sentinel Lights - Labour $ 1,187,120 -$ 1,187,120.00 5172 Sentinel Lights - Materials and Expenses $ 296,780 -$ 296,780.00 5175 Maintenance of Meters $ 1,846,200 $1,846,200 5178 Customer Installations Expenses- Leased Property $ - 5185 Water Heater Rentals - Labour $ - 5186 Water Heater Rentals - Materials and Expenses $ - 5190 Water Heater Controls - Labour $ - 5192 Water Heater Controls - Materials and Expenses $ - 5195 Maintenance of Other Installations on Customer Premises $ - 5205 Purchase of Transmission and System Services $ - 5210 Transmission Charges $ - 5215 Transmission Charges Recovered $ - Pages 13 of 134

USoA Account Accounts # Financial Statement 5305 Supervision - 5310 Meter Reading Expense 23,513,850 5315 Customer Billing 35,828,600 5320 Collecting 8,626,330 5325 Collecting- Cash Over and Short - 5330 Collection Charges 869,820 5335 Bad Debt Expense 17,396,400 5340 Miscellaneous Customer Accounts Expenses 4,763,820 5405 Supervision - 5410 Community Relations - Sundry 673,080 5415 Energy Conservation 1,000,000 5420 Community Safety Program 279,318 5425 Miscellaneous Customer Service and Informational Expenses 10,200 5505 Supervision - 5510 Demonstrating and Selling Expense - 5515 Advertising Expense - 5520 Miscellaneous Sales Expense - 5605 Executive Salaries and Expenses 5,793,895 5610 Management Salaries and Expenses 21,658,559 5615 General Administrative Salaries and Expenses 32,392,404 5620 Office Supplies and Expenses - 5625 Administrative Expense Transferred Credit 49,300,954 5630 Outside Services Employed 6,559,043 5635 Property Insurance 2,715,447 5640 Injuries and Damages 1,694,082 5645 Employee Pensions and Benefits - 5650 Franchise Requirements - 5655 Regulatory Expenses 4,993,529 5660 General Advertising Expenses - 5665 Miscellaneous General Expenses 129,370 5670 Rent 7,740,487 5675 Maintenance of General Plant 58,502,009 5680 Electrical Safety Authority Fees - 5685 Independent Market Operator Fees and I3 TB Data Filed: February 28, 2008 Model Adjustments Reclassify accounts Direct Allocation Reclassified Balance $ $ $23,513,850 $ $35,828,600 $ $8,626,330 $ $ $869,820 $ $17,396,400 $ $4,763,820 $ $ $673,080 $ $1,000,000 $ $585,000 $864,318 $ $10,200 $ $ $ $ $ $5,793,895 $ $59,000 $21,599,559 $ $598,000 $31,794,404 $ -$ ($49,300,954) $ $11,000 $6,548,043 $ $2,715,447 $ $1,694,082 $ $23,592,000 $23,592,000 $ $ $4,993,529 $ -$ $ 1,483,900 $ 1,767,900 ($413,370) $ $7,740,487 $ $190,000 $58,312,009 $ Penalties $ - 5705 Amortization Expense - Property, Plant, and Equipment $ 207,380,346 $207,380,346 5710 Amortization of Limited Term Electric Plant $ - 5715 Amortization of Intangibles and Other Electric Plant $ 31,569,000 -$ 31,569,000.00 5720 Amortization of Electric Plant Acquisition Adjustments $ - 5725 Miscellaneous Amortization $ - Pages 14 of 134