ALLOCATION OF REVENUES

Interpretation 1. (1) In this Regulation, “Ontario Hydro” means Ontario Hydro within the meaning of the Power Corporation Act, as that Act read on March 31, 1999; “transition period” means the period April 1, 1999 to the day subsection 26 (1) of the Act comes into force. O. Reg. 80/01, s. 1 (1). (2) The following are successors within the meaning of this Regulation: 1. Ontario Power Generation Inc. 2. Hydro One Inc. and its subsidiaries. 3. Independent Electricity Market Operator. 4. Electrical Safety Authority. 5. Ontario Electricity Financial Corporation. O. Reg. 80/01, s. 1 (2). Purpose 2. (1) The purpose of this Regulation is to provide stability and fairness during the transition period in relation to the allocation among the successors of certain kinds of revenues that, before April 1, 1999, were entirely Ontario Hydro’s. O. Reg. 80/01, s. 2 (1). (2) For this purpose, this Regulation provides for the money collected under section 4 to be allocated among the successors in a manner that is consistent with the functions each successor has taken over from Ontario Hydro. O. Reg. 80/01, s. 2 (2). Forecasted amounts 3. (1) For the purposes of this Regulation, a forecasted amount is an amount determined under this section. O. Reg. 80/01, s. 3 (1). (2) The successors shall by agreement from time to time determine, (a) forecasts of the amount of money to be collected by Ontario Power Generation Inc. under section 4; (b) forecasts of the amount of electricity to be delivered during the transition period by Ontario Power Generation Inc. to meet Ontario’s primary electricity demand; (b.1) forecasts of the costs to be incurred by Ontario Electricity Financial Corporation during the transition period under the power purchase agreements between it and generators other than Ontario Power Generation Inc.; (c) the forecasts referred to in paragraphs 3, 5 and 8 of section 6. O. Reg. 80/01, s. 3 (2); O. Reg. 200/01, s. 1. (3) If the successors fail to agree on a forecasted amount as required by subsection (2) within a reasonable time, any of Ontario Power Generation Inc., Hydro One Inc. or Ontario Electricity Financial Corporation may refer the matter to arbitration. O. Reg. 80/01, s. 3 (3). (4) The arbitrator shall determine whether conditions for referral under subsection (3) have been met and if, in the opinion of the arbitrator, they have been met, the arbitrator shall determine the forecasted amount for the purposes of subsection (2). O. Reg. 80/01, s. 3 (4). (5) Determinations of the arbitrator under this section are final and binding and shall not be reviewed in any court. O. Reg. 80/01, s. 3 (5). (6) Forecasts determined under this section shall be made in relation to each calendar year or part of a calendar year in the transition period and shall be reasonable having regard to the information available at the time of the determination. O. Reg. 80/01, s. 3 (6). Collection by Ontario Power Generation Inc. 4. (1) During the transition period, Ontario Power Generation Inc. shall collect money, on behalf of the successors, in accordance with Ontario Regulations 253/99 and 77/01 and in accordance with subsection (2). O. Reg. 80/01, s. 4 (1). (2) Ontario Power Generation Inc. shall collect amounts from Hydro One Inc. and its subsidiaries on account of electricity provided, during the period April 1, 1999 to May 31, 2001, to Hydro One Inc. and its subsidiaries by Ontario Power Generation Inc. O. Reg. 80/01, s. 4 (2). (3) The amounts to be collected in accordance with subsection (2) shall be calculated in accordance with rates agreed to by Ontario Power Generation Inc., Hydro One Inc. and Ontario Electricity Financial Corporation. O. Reg. 80/01, s. 4 (3). (4) If Ontario Power Generation Inc., Hydro One Inc. and Ontario Electricity Financial Corporation do not agree in writing on the rates referred to in subsection (3) by May 31, 2001, Ontario Electricity Financial Corporation shall refer the matter to arbitration. O. Reg. 80/01, s. 4 (4). (5) On a referral under subsection (4), the arbitrator shall determine the rates. O. Reg. 80/01, s. 4 (5). (6) Determinations of the arbitrator under subsection (5) are final and binding and shall not be reviewed in any court. O. Reg. 80/01, s. 4 (6). Allocation 5. The money collected by Ontario Power Generation Inc. under section 4 during the transition period shall be allocated by Ontario Power Generation Inc. among the successors, in accordance with the rules set out in section 6. O. Reg. 80/01, s. 5. Rules 6. The following are the rules referred to in section 5: 1. Ontario Power Generation Inc. shall receive, out of the money collected by it under section 4, payment at the rate of 4 cents per kilowatt hour for electricity delivered by it during the transition period to meet Ontario’s primary electricity demand. 2. Hydro One Networks Inc. shall receive, out of the money collected by Ontario Power Generation Inc. under section 4, the revenue requirements of Hydro One Networks Inc.’s transmission business for the period April 1, 1999 to December 31, 2000, as approved by the Ontario Energy Board under section 78 of the Ontario Energy Board Act, 1998. 3. Hydro One Networks Inc. shall receive, out of the money collected by Ontario Power Generation Inc. under section 4, the forecasted revenue requirements of Hydro One Networks Inc.’s transmission business for the period January 1, 2001 to the day subsection 26 (1) of the Act comes into force, determined in accordance with the rates derived from the revenue requirements approved for the 2000 calendar year by the Ontario Energy Board under section 78 of the Ontario Energy Board Act, 1998. 4. Hydro One Networks Inc. shall receive, out of the money collected by Ontario Power Generation Inc. under section 4, Hydro One Networks Inc.’s distribution facilities charges for the transition period, as approved by the Ontario Energy Board under section 78 of the Ontario Energy Board Act, 1998. 5. If Hydro One Networks Inc.’s forecasted gross margin from its retail business during the period from April 1, 1999 to September 30, 2001 falls below the 1998 level, Hydro One shall receive, out of the money collected by Ontario Power Generation Inc. under section 4, an amount sufficient to bring that gross margin up to the 1998 level. 6. Independent Electricity Market Operator shall receive, out of the money collected by Ontario Power Generation Inc. under section 4, i. Independent Electricity Market Operator’s revenue requirements for the period April 1, 1999 to December 31, 1999, in the amount actually received by it on account of those requirements before the day on which this Regulation is filed, and ii. Independent Electricity Market Operator’s revenue requirements for the period January 1, 2000 to the day subsection 26 (1) of the Act comes into force, as approved by the Ontario Energy Board under section 19 of the Electricity Act, 1998. 7. Independent Electricity Market Operator shall receive, out of the money collected by Ontario Power Generation Inc. under section 4, the rural and remote electricity rate protection amounts for the transition period, determined in accordance with Ontario Regulations 647/98 and 315/99. 8. Independent Electricity Market Operator shall receive, out of the money collected by Ontario Power Generation Inc. under section 4, the forecasted total of payments to be made by Independent Electricity Market Operator in respect of ancillary services provided during the transition period by Ontario Power Generation Inc. 9. Electrical Safety Authority shall receive, out of the money collected by Ontario Power Generation Inc. under section 4, Electrical Safety Authority’s start-up costs, in the amount actually received by it on account of those costs before the day on which this Regulation is filed. 10. Ontario Electricity Financial Corporation shall receive, out of the money collected by Ontario Power Generation Inc. under section 4, i. the costs incurred by Ontario Electricity Financial Corporation during the transition period under the power purchase agreements between it and generators other than Ontario Power Generation Inc., and ii. the costs incurred by Ontario Electricity Financial Corporation for managing those agreements during the period April 1, 1999 to December 31, 1999. 11. Ontario Electricity Financial Corporation shall receive, from Ontario Power Generation Inc., the amount by which the forecast referred to in clause 3 (2) (a) exceeds the total of, i. the amount that Ontario Power Generation Inc. would have received under paragraph 1 based on the forecast referred to in clause 3 (2) (b), ii. the forecast referred to in clause 3 (2) (b.1), iii. the costs incurred by Ontario Electricity Financial Corporation for managing the power purchase agreements between it and generators other than Ontario Power Generation Inc. during the period April 1, 1999 to December 31, 1999, and iv. the total of the allocations under paragraphs 2 to 9, and Ontario Electricity Financial Corporation shall apply that excess to its debts and liabilities and the costs associated with those debts and liabilities. 12. If the actual collection by Ontario Power Generation Inc. under section 4 exceeds the total allocations under paragraphs 1 to 11, Ontario Power Generation Inc. shall retain the excess. 13. If the total allocations under paragraphs 1 to 11 exceed the actual collection by Ontario Power Generation Inc. under section 4, Ontario Power Generation Inc. shall absorb the shortfall. 14. Independent Electricity Market Operator shall transfer amounts received by it under paragraph 7 to Hydro One Inc. 15. Independent Electricity Market Operator shall transfer amounts received by it under paragraph 8 to Ontario Power Generation Inc. O. Reg. 80/01, s. 6; O. Reg. 200/01, s. 2.