KEY GOVERNING LEGISLATION, STANDARDS AND CODES

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1 Filed: September, 0 EB-0-00 Tab Page of KEY GOVERNING LEGISLATION, STANDARDS AND CODES.0 INTRODUCTION Hydro One Inc. is subject to direction from its shareholder (the Government of Ontario), Ontario Energy Board decisions and government legislation and regulations. Each one of these sources has the potential to be a driver for change affecting Hydro One policies, processes and work programs, with associated cost implications. Hydro One complies with all regulatory and legislative requirements and incurs costs to do so. When new legislation or regulations are passed or when OEB decisions are released, Hydro One responds to the directive by developing appropriate programs or initiatives to implement the required changes in a cost effective fashion. As the electricity industry in Ontario continues to evolve, Hydro One actively participates in the design of industry-related changes with the intent of ensuring that costs are reasonable and that the impacts on customers are manageable. The costs of implementing the outcomes of ongoing industry changes include communicating changes to customers, modifying the impacted business processes, information systems, policies and procedures and staff training programs. The remainder of this Exhibit provides a brief summary of the key pieces of legislation, regulatory requirements, standards and guidelines to which Hydro One s Transmission Business must respond..0 BILL 0, THE ELECTRICITY RESTRUCTURING ACT, 0 Bill 0, the Electricity Restructuring Act, 0, was passed by the Ontario Legislature at the end of 0, and amended the Electricity Act, and the Ontario Energy Board Act,. As result of Bill 0 the Ontario Power Authority (OPA) was created. The OPA is responsible for preparing an Integrated Power System Plan (IPSP), which will identify needed generation and transmission infrastructure for the Province. Hydro One is

2 Filed: September, 0 EB-0-00 Tab Page of working closely with the OPA to help identify future transmission infrastructure requirements..0 THE TRANSMISSION SYSTEM CODE Hydro One is bound by the terms of its Transmission licence to adhere to the requirements of the Transmission System Code, administered by the Ontario Energy Board. The Code addresses standards for the operation, maintenance, management and expansion of transmission systems and requires Hydro One to operate and maintain its system in accordance with good utility practice. The Transmission System Code sets out the obligations of electricity transmitters with respect to their customers, including the rules governing the economic evaluation of transmission system connections and expansions and also the minimum standards for facilities connected to a transmission system. It also includes a Connection Agreement which covers the technical and commercial responsibilities of both transmitters and their customers. The Transmission System Code was amended in 0, as the result of an extensive review process undertaken by the Board, which incorporated input from numerous stakeholders. The revised Code required Hydro One to file a series of eight connection procedures for approval by the Board within a year of the Code revision date. These procedures have been filed with the Board in accordance with this requirement..0 MARKET RULES The Market Rules are administered by the Independent Electricity System Operator (IESO) under authority granted to it by the Electricity Act,. The Market Rules define the IESO-Administered Markets and describe how they will operate. Hydro One is bound to follow the Market Rules and also good utility practice in its day-to-day

3 Filed: September, 0 EB-0-00 Tab Page of operations. The IESO is responsible for ensuring compliance. In cases of disagreement, the rules set out a procedure for resolving disputes..0 NORTHEAST POWER COORDINATING COUNCIL (NPCC) STANDARDS The Northeast Power Coordinating Council (NPCC) is an international electric regional reliability council which was formed shortly after the Northeast Blackout to promote the reliability and efficiency of the interconnected power systems within its geographic area. The NPCC can enforce reliability criteria. Hydro One is a member of NPCC and must adhere to its reliability standards..0 OTHER RELEVANT LEGISLATION. Bill (Internal Controls), December, 0 Bill (Keeping the Promise for a Strong Economy Act - Budget Measures) was given Royal Assent on December, 0. As a result of this legislation the Ontario Securities Commission (OSC) developed several new Multilateral Instruments (MI) that govern internal controls. Hydro One, as a debt issuer, will need to be compliant with CEO and CFO financial reporting and attestation aspects as required under OSC Multilateral Instrument - and Multilateral Instrument -. As Hydro One Inc. (HOI) is a public debt issuer, the CEO and CFO of HOI are required to make certain statements attesting to the appropriateness and effectiveness of internal financial controls and financial disclosure processes for the consolidated financial information of HOI. Prior to December, 0 the CEO and CFO may make this statement using a best of their knowledge test. For fiscal years commencing on or

4 Filed: September, 0 EB-0-00 Tab Page of after June, 0 the CEO and CFO must certify that they have designed the internal controls over financial reporting to provide reasonable assurance regarding the reliability of financial reporting. On March, 0, the Canadian Securities Administrators(CSA)released notice - to update market participants on the status of Multilateral Instruments - and -. The notice included a statement that the CSA would not be proceeding with Multilateral Instrument -. Further, it delayed the timing for the CEO and CFO to certify that they have evaluated the effectiveness of the internal control over financial reporting so that the earliest that this certification will apply is in respect of years ending on or after December, 0. Bill requires that the controls that oversee the processes and systems that impact how the financial information of the company initiates, records, processes, and reports transactions in significant accounts must be documented and evaluated on an annual basis. Hydro One has begun a project to ensure that full compliance is achieved. Hydro One has completed its documentation, testing and evaluation of its internal controls for financial reporting and is in the process of remediating deficient controls discovered during the testing phase of the project. Changes in process and technology will be undertaken to meet the requirements of Bill. There will be a one time cost to make the required changes to processes and technologies to ensure appropriate documentation is in place for the first year of compliance (0). In addition, a unit has been put in place to sustain the Bill requirement on an ongoing basis. The costs associated with this initiative are in Exhibit C, Tab, Schedule.

5 Filed: September, 0 EB-0-00 Tab Page of. Access to Information (FIPPA) and Personal Privacy (PIPEDA), 0-0 On December th, 0, Hydro One Inc. became subject to Ontario s Freedom of Information and Protection of Privacy (FIPPA) legislation. On January st, 0, Hydro One Inc. also became subject to Canada s Protection of Individual Privacy and Electronic Documents Act (PIPEDA). And most recently, on November st, 0, the Corporation also became subject to Ontario s Personal Health Information Protection Act. These pieces of legislation require that the Corporation provide public access to business records, as well as appropriate access to (and protection of) personal information. The personal information of customers and, in specific circumstances, employees, is now subject to legislated standards of protection. Funding for these activities is included in Shared Services OM&A (see Exhibit C, Tab, Schedule ).. Other Provincial Legislation Hydro One Transmission is also subject to the Technical Standards and Safety Act, 00, which regulates boiler and pressure vessels, among other items.. Environmental Management Hydro One Transmission is subject to a wide range of legislation, regulation and standards related to environmental impacts. The following are the major acts that govern Hydro One Transmission s activities. Many others can apply in specific circumstances but the following are applicable to most Transmission work.

6 Filed: September, 0 EB-0-00 Tab Page of.. Federal Legislation Canadian Environmental Protection Act, which regulates the management of hazardous substances such as Polychlorinated Biphenyls ( PCBs ). Fisheries Act, which regulates fish habitat and pollution prevention in and around water bodies that support fish... Provincial Legislation Environmental Protection Act, which regulates waste management/disposal, spills and Certificates of Approval. Ontario Water Resources Act, which regulates discharges, sewage works and water works. Pesticides Act, which regulates the storage, use and application of pesticides. Environmental Assessment Act, which regulates the planning and environmental approvals of projects, such as high voltage lines and transformer stations... Municipal Legislation Many municipal by-laws regulate noise, discharges to sewers, pesticide use and the upkeep/maintenance of properties. The application of these will vary depending on the municipality... Environmental Management and Governance In order to comply with all legislated requirements, Hydro One Transmission has developed a number of environmental management programs. In addition, governance

7 Filed: September, 0 EB-0-00 Tab Page of activities such as management system maintenance, program monitoring and reporting are provided by staff in the Health, Safety & Environment function. The following is a summary of the major programs developed by Hydro One to comply with environmental legislation, regulation and standards:... Land Assessment and Remediation Land and groundwater contamination is a legacy issue from spills, leaks and historical use of persistent herbicides at transformer stations for vegetation control. At the time that these herbicides were used by Ontario Hydro, they were commonly used by North American utilities, and were compliant with regulatory requirements in place at the time. There was no knowledge of their potential negative environmental impact. Underground piping systems and tanks containing insulating oil, which were designed to comply with applicable standards at the time, have also been a source of land and water contamination. In some cases contaminants have migrated from Hydro One Transmission properties onto adjacent private properties. Program management and funding requirements are described in Exhibit C, Tab, Schedule.... Management of Hazardous Materials and Wastes Hazardous materials such as PCBs and wastes (oils, solvents, etc) are managed in accordance with regulatory requirements and good management practices. PCBs are a contaminant in a small percentage of oil-filled electrical equipment. The amount of PCBs has declined due to a program of PCB phase-out and destruction,

8 Filed: September, 0 EB-0-00 Tab Page of which began in the mid-0s. The continuous removal of equipment from service in the future will ensure that Hydro One Transmission becomes a PCB-free utility. Management of these programs and funding requirements are described in Exhibit C, Tab, Schedule.... Emissions such as Spills, Leaks and Fires Occasionally spills, leaks and fires occur as a result of equipment failure, adverse weather or other causes. Most spills involve mineral oil from electrical equipment such as transformers. The environmental impact of spills is mitigated by a welldeveloped spill reporting and response system. This involves the timely reporting of spills to all appropriate authorities and the clean-up and remediation of areas impacted by the spill. Management of this program and funding requirements are described in Exhibit C, Tab, Schedule... Herbicides Herbicide use is an integral part of the vegetation management program associated with maintenance of the Transmission system, including rights-of-ways and stations. Environmental impacts are minimized through the use of approved product types, and approved methods and procedures for application. Property owner approval is obtained prior to the application of any herbicide on private properties. Vegetation management programs and funding requirements are fully described in Exhibit C, Tab, Schedule.