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2006 OEB Rate Submission

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									                                                                            Hydro Ottawa Limited
                                                                                   RP-2005-0020
                                                                                   EB-2005-0381
                                                                                           Tab B
                                                                                Filed 2005-08-02
                                                                                   Page 1 of 118




                                ONTARIO ENERGY BOARD




                       IN THE MATTER OF the Ontario Energy Board
                       Act, 1998, S.O. 1998, c. 15, Sched. B, as amended;

                       AND IN THE MATTER OF an Application by
                       Hydro Ottawa Limited for an Order or Orders
                       approving or fixing just and reasonable rates
                       for distribution service.




                                Hydro Ottawa Limited



                                 Manager’s Summary




                                     August 2, 2005




2006 EDR Application
                                                                                                                                  Hydro Ottawa Limited
                                                                                                                                         RP-2005-0020
                                                                                                                                         EB-2005-0381
                                                                                                                                                 Tab B
                                                                                                                                      Filed 2005-08-02
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CHAPTER 1 – INTRODUCTION ...................................................................................................................7

1.0             HISTORICAL PERSPECTIVE....................................................................................................7

CHAPTER 2 – COMPONENTS OF THE APPLICATION AND SCHEDULES .......................................8

2.0             INTRODUCTION ..........................................................................................................................8
    2.1     GENERAL INFORMATION                                                                                                                           8
      2.1.1   Description of the Distributor                                                                                                              8
      2.1.2   Corporate Structure                                                                                                                        10
      2.1.3   Audited Financial Statements                                                                                                               12
      2.1.4   Compliance with Licence                                                                                                                    12
      2.1.5   Complete Listing of Rates and Charges                                                                                                      12
      2.1.6   Summary of Application                                                                                                                     15
CHAPTER 3 – TEST YEAR AND ADJUSTMENTS ..................................................................................16

3.0             INTRODUCTION ........................................................................................................................16
    3.1     HISTORICAL TEST YEAR VERSUS FUTURE TEST YEAR                                                                                                 16
    3.2     TIER 1 ADJUSTMENTS                                                                                                                           16
      3.2.1    Tier 1 Adjustments: Distribution Expenses                                                                                                 16
      3.2.2    Tier 1 Adjustments: Rate Base                                                                                                             16
      3.2.3    Non-routine/unusual Tier 1 Adjustments                                                                                                    16
    3.3     TIER 2 ADJUSTMENTS                                                                                                                           16
CHAPTER 4 – RATE BASE ..........................................................................................................................17

4.0             RATE BASE .................................................................................................................................17
      4.0.1      Smart Meters                                                                                                              19
      4.0.2      New distribution stations put into service in 2002, 2003 and 2004                                                         20
      4.0.3      Customer Information System (CIS)                                                                                         21
      4.0.4      Light Rail Transit Line (LRT)                                                                                             22
    4.1      AMORTIZATION RATES                                                                                                            22
    4.2      CAPITAL INVESTMENTS                                                                                                           23
      4.2.1      Summary                                                                                                                   23
      4.2.2      Asset Management Strategy                                                                                                 24
      4.2.3      Facilities Asset Strategy                                                                                                 26
      4.2.4      Capital Programs/Projects                                                                                                 27
         4.2.4.1     Residential Subdivision ($6,939,884) ................................................................................29
         4.2.4.2     Distribution Transformer Replacement ($6,601,265) ........................................................29
         4.2.4.3     Distribution Enhancements ($6,522,466) ..........................................................................30
         4.2.4.4     Planned Pole Replacement ($5,879,898) ...........................................................................31
         4.2.4.5     New Commercial Development ($4,330,881) ...................................................................33
         4.2.4.6     Station Capacity - New Cyrville Substation ($4,061,259) .................................................33
         4.2.4.7     Plant Relocation and Upgrades ($2,874,076) ....................................................................35
         4.2.4.8     System Expansion ($2,789,377) ........................................................................................35
         4.2.4.9     End-of-life Cable Works ($2,128,956) ..............................................................................36
         4.2.4.10 Station Transformer Refurbishment ($1,989,510) .............................................................39



2006 EDR Application
                                                                                                                              Hydro Ottawa Limited
                                                                                                                                     RP-2005-0020
                                                                                                                                     EB-2005-0381
                                                                                                                                             Tab B
                                                                                                                                  Filed 2005-08-02
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        4.2.4.11 Infill and Upgrades ($1,859,220) .......................................................................................40
        4.2.4.12 Station Circuit Breaker Control Refurbishment ($1,695,999) ...........................................41
        4.2.4.13 Meter Replacement and Re-verification ($1,301,511) .......................................................41
        4.2.4.14 Station Switchgear Replacement ($1,101,796) ..................................................................41
        4.2.4.15 Vault Rehab or Removal ($1,006,709) ..............................................................................43
        4.2.4.16 Wholesale Meter Upgrade ($930,318) ...............................................................................44
        4.2.4.17 Plant Failure Capital ($698,934) ........................................................................................46
        4.2.4.18 Damage to Plant ($558,921) ..............................................................................................46
        4.2.4.19 Elbow and Insert Replacement ($553,478) ........................................................................46
        4.2.4.20 Insulator Replacement ($475,198) .....................................................................................47
        4.2.4.21 Distribution Automation ($464,867) ..................................................................................47
        4.2.4.22 Station Transformer PCB Removal ($422,920) .................................................................48
        4.2.4.23 Station Automation ($385,921) ..........................................................................................48
        4.2.4.24 Overhead Equipment - New and Rehabilitation ($278,901) ..............................................49
        4.2.4.25 East End Operations Centre ($7,026,078)..........................................................................49
        4.2.4.26 GIS and OMS ($4,901,719) ...............................................................................................50
        4.2.4.27 SCADA and Control Room Upgrades ($3,019,289)..........................................................52
        4.2.4.28 Vehicle Replacements ($2,589,689) ..................................................................................54
        4.2.4.29 Bank Street Rehabilitation ($1,981,694) ............................................................................55
        4.2.4.30 CIS Software Enhancements ($1,819,600) ........................................................................55
        4.2.4.31 Merivale Road Additions ($1,278,083) .............................................................................56
        4.2.4.32 Albion Road ($905,245) ....................................................................................................56
        4.2.4.33 Carling Operations Centre Storage Building ($615,715) ...................................................56
        4.2.4.34 Stations Building Rehabilitation ($572,940)......................................................................56
        4.2.4.35 Upgrade to JDE Financial System ($571,651) ...................................................................57
        4.2.4.36 Business Continuity Plan ($315,117) .................................................................................57
        4.2.4.37 Conservation & Demand Management ($1,420,012) ........................................................57
   4.3      INTEREST ON DEFERRAL ACCOUNTS AND CONSTRUCTION WORK IN PROGRESS (CWIP)                                                          57
   4.4      CAPITALIZATION POLICY                                                                                                           58
   4.5      CONTRIBUTED CAPITAL                                                                                                             58
   4.6      TREATMENT OF CAPITAL GAINS AND LOSSES                                                                                           58
     4.6.1     Assets Sold to a Non-Affiliate                                                                                               58
     4.6.2     Assets Sold to an Affiliate                                                                                                  58
CHAPTER 5 – COST OF CAPITAL.............................................................................................................59

5.0            INTRODUCTION ........................................................................................................................59
   5.1         MAXIMUM ALLOWED RETURN ON EQUITY                                                                                                   59
   5.2         DEBT RATE                                                                                                                          59
   5.3         CAPITAL STRUCTURE                                                                                                                  59
   5.4         WORKING CAPITAL ALLOWANCE                                                                                                          60
CHAPTER 6 – DISTRIBUTION EXPENSES ..............................................................................................61

6.0            INTRODUCTION ........................................................................................................................61
   6.1      OPERATIONS, MAINTENANCE AND ADMINISTRATION                                                                                       62
     6.1.1      Operations and Maintenance                                                                                                   62
        6.1.1.1    Vegetation Management ....................................................................................................63
        6.1.1.2    Thermographic (IR) Scanning and CO2 Washing ..............................................................65


2006 EDR Application
                                                                                                                                    Hydro Ottawa Limited
                                                                                                                                           RP-2005-0020
                                                                                                                                           EB-2005-0381
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                                                                                                                                        Filed 2005-08-02
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         6.1.1.3      Insulator Washing ..............................................................................................................66
         6.1.1.4      Graffiti Abatement .............................................................................................................66
      6.1.2      Billing and Collection                                                                                                                    66
      6.1.3      Administration and General Expense                                                                                                        66
      6.1.4      Community Relations                                                                                                                       67
    6.2      DETAILED REPORT FOR SPECIFIC DISTRIBUTION EXPENSES                                                                                            67
      6.2.1      Insurance Expense                                                                                                                         67
      6.2.2      Bad Debt Expense                                                                                                                          67
         6.2.2.1      Billed Accounts ..................................................................................................................68
         6.2.2.2      Unbilled Revenue...............................................................................................................68
         6.2.2.3      Meter Disputes ...................................................................................................................68
         6.2.2.4      Account Write-off Practice ................................................................................................68
      6.2.3      Information Technology Expenses                                                                                                           69
      6.2.4      Advertising, Political Contributions, Employee Dues, Charitable Donations, Meals/ Travel
                 and Business Entertainment, Research and Development                                                                                      70
         6.2.4.1      Advertising .........................................................................................................................70
         6.2.4.2      Political Contributions .......................................................................................................70
         6.2.4.3      Employee Dues ..................................................................................................................70
         6.2.4.4      Charitable Donations..........................................................................................................70
         6.2.4.5      Meals/Travel and Business Entertainment .........................................................................71
         6.2.4.6      Research and Development ................................................................................................71
      6.2.5      Employee Total Compensation                                                                                                               71
      6.2.6      Pensions and Post-retirement Benefits                                                                                                     75
      6.2.7      Distribution Expenses Paid to Affiliates                                                                                                  76
CHAPTER 7 – TAXES/PILS ..........................................................................................................................79

7.0              INTRODUCTION ........................................................................................................................79
    7.1      GENERAL METHODOLOGY                                                                                                                         79
    7.2      PRINCIPLES                                                                                                                                  79
      7.2.1    Non-recoverable and disallowed expenses                                                                                                   79
      7.2.2    Capital tax exemptions                                                                                                                    79
      7.2.3    Loss carry-forwards                                                                                                                       79
      7.2.4    Undepreciated capital cost (UCC) and capital cost allowance (CCA)                                                                         80
      7.2.5    Regulatory tax treatment of Eligible Capital Expenditures (ECE)                                                                           82
      7.2.6    Interest deduction                                                                                                                        82
      7.2.7    Interest capitalized for accounting, but deducted for tax purposes                                                                        82
      7.2.8    Overlapping year-ends                                                                                                                     82
      7.2.9    Estimating taxable capital                                                                                                                83
      7.2.10   Ontario Corporate Minimum Tax                                                                                                             83
      7.2.11   Non-distribution elimination                                                                                                              83
      7.2.12   Tax credits                                                                                                                               83
      7.2.13   Impact of CDM expenditure and Smart Meter expenditures                                                                                    83
      7.2.14   Property Taxes                                                                                                                            83
      7.2.15   Capital Leases                                                                                                                            83
    7.3      TAX PAYABLE FILINGS                                                                                                                         84
      7.3.1    Information to be Provided with 2006 OEB Tax Model Filings                                                                                84
      7.3.2    Tax Information Disclosure in Future                                                                                                      84
      7.3.3    Supporting Documentation                                                                                                                  84


2006 EDR Application
                                                                                                                                  Hydro Ottawa Limited
                                                                                                                                         RP-2005-0020
                                                                                                                                         EB-2005-0381
                                                                                                                                                 Tab B
                                                                                                                                      Filed 2005-08-02
                                                                                                                                         Page 5 of 118
CHAPTER 8 – REVENUE REQUIREMENT ..............................................................................................85

8.0             INTRODUCTION ........................................................................................................................85
   8.1          SERVICE REVENUE REQUIREMENT                                                                                                            85
   8.2          BASE REVENUE REQUIREMENT                                                                                                               85
   8.3          CDM, SMART METER AND REGULATORY ASSET RECOVERY                                                                                         87
CHAPTER 9 – COST ALLOCATION ..........................................................................................................89

9.0             INTRODUCTION ........................................................................................................................89
   9.1          CUSTOMER CLASSES                                                            89
   9.2          APPROPRIATE SHARE OF THE 2006 REVENUE REQUIREMENT FOR EACH CLASS            91
   9.3          APPROPRIATE SHARE OF THE 2006 CDM, SMART METER AND REGULATORY ASSET REVENUE
                REQUIREMENTS                                                                94
CHAPTER 10 – RATES AND CHARGES ...................................................................................................95

10.0            INTRODUCTION ........................................................................................................................95
     10.0.1    Load Forecast                                                                                                                             95
        10.0.1.1 Model .................................................................................................................................95
        10.0.1.2 Historical Data Set .............................................................................................................95
        10.0.1.3 Influencing Factors ............................................................................................................95
        10.0.1.4 Results ................................................................................................................................96
   10.1     FIXED/VARIABLE SPLITS                                                                                                                        97
   10.2     UNMETERED SCATTERED LOADS                                                                                                                    97
   10.3     TIME OF USE DISTRIBUTION RATES                                                                                                               98
   10.4     TRANSFORMER OWNERSHIP ALLOWANCE                                                                                                              98
   10.5     UPDATE OF LOSS ADJUSTMENT FACTORS                                                                                                            99
   10.6     STANDBY CHARGES                                                                                                                            100
     10.6.1    Rate Structure                                                                                                                          100
     10.6.2    Customer Classification                                                                                                                 100
     10.6.3    Contract Backup Demand                                                                                                                  100
     10.6.4    Determination of Billed Backup Demand                                                                                                   101
     10.6.5    Backup Overrun Adjustment                                                                                                               101
     10.6.6    Standby Monthly Service Charge                                                                                                          102
     10.6.7    Parallel Generation Data Requirements                                                                                                   104
   10.7     LOW VOLTAGE (LV) CHARGES                                                                                                                   104
   10.8     DEMAND DETERMINANTS                                                                                                                        104
CHAPTER 11 – SPECIFIC SERVICE CHARGES ...................................................................................105

11.0            INTRODUCTION ......................................................................................................................105
   11.1         METHODOLOGY                                                                                                                          106
   11.2         CUSTOMER ADMINISTRATION                                                                                                              106
   11.3         NON-PAYMENT OF ACCOUNT                                                                                                               106
     11.3.1       Late Payment Charge                                                                                                                106
     11.3.2       Collection of Account Charge                                                                                                       106
     11.3.3       Reconnection of Electricity Service Charge                                                                                         106
   11.4         SERVICE CALLS                                                                                                                        106


2006 EDR Application
                                                                                                                                       Hydro Ottawa Limited
                                                                                                                                              RP-2005-0020
                                                                                                                                              EB-2005-0381
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                                                                                                                                           Filed 2005-08-02
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    11.5         TEMPORARY ELECTRICITY SERVICE CHARGE                                                                                                      106
    11.6         SPECIFIC CHARGE FOR ACCESS TO POWER POLES                                                                                                 106
    11.7         OTHER SERVICES AND CHARGES                                                                                                                107
    11.8         REVENUE FROM SPECIFIC SERVICE CHARGES                                                                                                     108
CHAPTER 12 – OTHER REGULATED CHARGES................................................................................110

12.0             INTRODUCTION ......................................................................................................................110
    12.1     RPP (FORMERLY SSS) ADMINISTRATION CHARGE                                                                                                      110
    12.2     RETAIL SERVICE CHARGES                                                                                                                        110
      12.2.1   Establishing Service Agreements                                                                                                             110
      12.2.2   Distributor-Consolidated Billing                                                                                                            110
      12.2.3   Retailer-Consolidated Billing                                                                                                               110
      12.2.4   Service Transaction Requests (STR)                                                                                                          110
      12.2.5   Monitoring and Cost Tracking                                                                                                                111
    12.3     NON-COMPETITIVE ELECTRICITY CHARGES                                                                                                           111
      12.3.1   Wholesale Market Service Rate                                                                                                               111
      12.3.2   Retail Transmission Service Rates                                                                                                           111
      12.3.3   Charges/Taxes Levied by the Government of Ontario                                                                                           111
CHAPTER 13 – MITIGATION ...................................................................................................................112

13.0             IMPACT ANALYSIS.................................................................................................................112
    13.1         MITIGATION METHODOLOGIES                                                                                                                  112
    13.2         RATE HARMONIZATION (AMALGAMATED OR ACQUIRED SERVICE AREAS)                                                                                112
CHAPTER 14 – COMPARATORS AND COHORTS ...............................................................................113

14.0             COMPARATORS AND COHORTS........................................................................................113

CHAPTER 15 – SERVICE QUALITY REGULATION ...........................................................................114

15.0             INTRODUCTION ......................................................................................................................114

EXHIBIT A.....................................................................................................................................................116




2006 EDR Application
                                                                                       Hydro Ottawa Limited
                                                                                              RP-2005-0020
                                                                                              EB-2005-0381
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Chapter 1 – Introduction

1.0      Historical Perspective
Hydro Ottawa Limited (“Hydro Ottawa”) was created as a distributor in conjunction with the
restructuring of the former Regional Municipality of Ottawa-Carleton. The following is a description
of this process that is intended to provide a historical context for this Manager‟s Summary.

The City of Ottawa Act, 1999 (the “Ottawa Act”) established the new City of Ottawa that was an
amalgamation, in effect, of the following old municipalities on January 1, 2001: Cumberland,
Gloucester, Goulbourn, Kanata, Nepean, Osgoode, Ottawa, Rideau, Rockcliffe Park, Vanier, and
West Carleton (i.e., all of the municipalities within the former regional municipality). The Ottawa Act
provided for the establishment of a “transition board,” prior to the amalgamation, as a corporation
without share capital composed of persons appointed by the Minister of Municipal Affairs and
Housing. The Ottawa Transition Board was given certain powers of the old municipalities as a
means of facilitating the transition from the old municipalities and their local boards, such as their
public utility commissions, to the new City of Ottawa.

Hydro Ottawa was incorporated on October 3, 2000 pursuant to the Business Corporations Act. The
Ottawa Transition Board transferred the electricity distribution and transmission assets, liabilities,
and employees of the following old municipalities (and/or their public utility commissions under the
following business names) to Hydro Ottawa on November 1, 2000: Gloucester (Gloucestor Hydro),
Goulbourn (Goulbourn Hydro), Kanata (Kanata Hydro), Nepean (Nepean Hydro), and Ottawa
(Ottawa Hydro). This transfer was effected by a series of transfer by-laws enacted under Part IX of
the Electricity Act, 1998 and Ontario Regulation 100/00 made under the Ottawa Act.

This transfer is frequently referred to as the “amalgamation” of the five former municipal electricity
utilities. Ottawa Hydro was also serving the old municipalities of Rockcliffe Park and Vanier, at the
time of amalgamation, and so Hydro Ottawa‟s service area comprised the geographic areas of
these seven old municipalities after the amalgamation. Hydro One Networks Inc. (“Hydro One”)
continued to serve the other four (and mostly rural) old municipalities.

Hydro Ottawa acquired the assets of Casselman Hydro Inc. in April 2002. The Ontario Energy
Board (the “Board”) approved this transaction and, as a result, amended Hydro Ottawa‟s distribution
licence to include the Village of Casselman in the description of Hydro Ottawa‟s service area.

Hydro Ottawa is a wholly-owned subsidiary of Hydro Ottawa Holding Inc. (the “Holding Company”),
which provides strategic direction to Hydro Ottawa and its other subsidiaries through its Board of
Directors and senior management. Hydro Ottawa, including its predecessor utilities, has been an
integral part of the growth and success of the Ottawa area for almost a century.




2006 EDR Application
                                                                                    Hydro Ottawa Limited
                                                                                           RP-2005-0020
                                                                                           EB-2005-0381
                                                                                                   Tab B
                                                                                        Filed 2005-08-02
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Chapter 2 – Components of the Application and Schedules

2.0       Introduction
Hydro Ottawa is filing its Application on the basis of a forward test year. Hydro Ottawa has
followed, as and when required, the methodology set out in the Board‟s 2006 Electricity Distribution
Rate Handbook (the “Handbook”). Hydro Ottawa has also used the Board‟s 2006 rates
spreadsheet model (the “2006 EDR Model”) as the basis for determining rates; however, the model
was adjusted to support a forward test year by substituting the years 2004, 2005 and 2006 for the
years 2002, 2003 and 2004 respectively. Hydro Ottawa is also filing those portions of the original
2006 EDR Model that provide relevant schedules for the 2002, 2003 and 2004 data.


2.1       General Information

Description of the Distributor

In 2004, Hydro Ottawa had annual energy sales exceeded 7.5 billion kilowatt-hours (kWhs) used by
a customer base of 274,040 as follows:

         Residential                                     247,760 Customers
         General Service                                   26,270 Customers
         Large User                                            10 Customers
         Street Lights                        15 Accounts, 44,932 Connections
         Unmetered Scattered Loads            218 Accounts, 2,770 Connections
         Sentinel Lights                                      125 Connections

Schedule 2-1 provides further details about Hydro Ottawa.


Schedule 2-1: Summary description of Hydro Ottawa
Name of Distributor:                        Hydro Ottawa

Current Licence Number:                     ED-2002-0556

Communities Served:                         City of Ottawa (most consumers)
                                            Village of Casselman

Adjacent Distributor:                       Hydro One

Characteristics of Service Area:            Hydro Ottawa owns and operates 70 distribution
                                            substations along with over 3,040 km of overhead and
                                            1,790 km of underground circuits. Hydro Ottawa‟s
                                            service area, including Casselman, is a mix of urban,
                                            suburban and rural customers spread out over some
                                            1,104 sq-km. From east to west the area is over 55 km
                                            wide, not including Casselman.


2006 EDR Application
                                                                         Hydro Ottawa Limited
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                                                                                EB-2005-0381
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Embedded or Host Distributor:   Hydro Ottawa is a market participant, but has a number
                                of delivery points embedded within Hydro One‟s
                                distribution service territory. Hydro Ottawa is not a host
                                distributor.

Mailing Address:                3025 Albion Rd North
                                PO Box 8700
                                Ottawa, Ontario K1G 3S4

Key Contacts:                   Hydro Ottawa
                                Lynne Anderson
                                Director, Regulatory Services
                                Telephone: 613-738-5499 x 527
                                Fax: 613-738-5498
                                E-mail: lynneanderson@hydroottawa.com

                                Fraser Milner Casgrain LLP
                                Helen Newland and Jerry Farrell
                                Suite 3900
                                1 First Canadian Place
                                100 King Street West
                                Toronto, Ontario
                                M5X 1B2
                                Telephone (for Newland): (416) 863-4471
                                Telephone (for Farrell): (416) 863-4384
                                Fax (for both): (416) 863-4592
                                E-mail (for Newland): helen.newland@fmc-law.com
                                E-mail (for Farrell): jerry.farrell@fmc-law.com




2006 EDR Application
                                                                                          Hydro Ottawa Limited
                                                                                                 RP-2005-0020
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Corporate Structure

Schedule 2-2: Corporate Structure

                                 Corporate Organization Chart

                                          City of Ottawa


                                          Hydro Ottawa
                                           Holding Inc.



                  Hydro Ottawa            Energy Ottawa             Telecom Ottawa
                    Limited                    Inc.                   Holding Inc.


                                                                       2038455 Ontario Inc.


                                                                  Telecom Ottawa Regional Limited


                                                                         Telecom Ottawa
                                                                             Limited

Figure 2.1 – Corporate Structure


Affiliated Businesses and Corporate Services

Hydro Ottawa is a wholly owned subsidiary of Hydro Ottawa Holding Inc. (the “Holding Company”),
which in turn is wholly owned by the City of Ottawa.

Hydro Ottawa and the City of Ottawa conduct their transactions on an arm‟s length basis. The City
purchases electricity and street lighting design services from Hydro Ottawa. The Hydro Ottawa
debt to the City of Ottawa was replaced with debt from the Holding Company (as a result of an
external bond issue) during 2005; therefore Hydro Ottawa is no longer making interest payments to
the City of Ottawa. Hydro Ottawa pays property taxes, permit fees and water and sewer charges as
a business operating within the City limits.

The principal business of the Holding Company is the oversight of Hydro Ottawa and two other
subsidiaries, Energy Ottawa Inc. and Telecom Ottawa Holding Inc., which also provide services to
the residents of Ottawa.

The role of the Holding Company is to:

        Assess the strategic value of the business activities of each subsidiary,
        Evaluate the performance of each subsidiary,
        Provide strategic direction to the subsidiaries on matters of financing, risk mitigation,
         taxation, laws and regulations, public affairs, human resources, and business development,


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        Provide financing for subsidiary operations, and
        Report to the Shareholder and Board of Directors on financial, governance, legal,
         compensation and internal control matters.

The Holding Company charges Hydro Ottawa for corporate services provided by the CEO, CFO,
Corporate Counsel and Internal Audit business units. In addition, the Holding Company charges
Hydro Ottawa interest for borrowings undertaken under corporate borrowing arrangements as
follows:

        Interest on the first $200 million of long-term borrowings is charged at 5.14%. This includes
         administrative costs associated with maintaining this debt and the costs of issuing this debt,
        Interest on the next $32 million of long-term borrowings is charged at 5.9%,
        For short-term borrowing, Banker‟s Acceptances are charged at 0.1% above the rate
         charged by the bank to cover standby, stamping and other fees associated with maintaining
         this facility.

The Holding Company pays Hydro Ottawa for:

        Human Resources Services, including administration of pay and benefits, processing of
         incentive bonuses, production of T-4s, OMERS year-end, reconciliation of employee health
         tax, implementation of annual government-imposed rates, documentation of new employees
         and regular maintenance activities,
        Facilities Management Services, including operations and office services, workspace
         provisioning, the procurement, maintenance and disposal of fixed assets, emergency
         preparedness and special facilities projects as required,
        Information Technology Services, to provide the IT infrastructure systems and services
         required for the business continuance needs of the Holding Company, including IT Help
         Desk, Technical Support, Network Management Services, Telecommunications Support
         Services and Applications Support Services.

Energy Ottawa Inc. (“Energy Ottawa”) is a licenced generator that produces EcoLogo certified
“green power” from hydroelectric generating stations at Chaudière Falls on the Ottawa River near
Parliament Hill. Energy Ottawa charges Hydro Ottawa for power purchased at market prices.
These costs are included in the cost of purchased power and therefore are not considered when
determining Hydro Ottawa‟s distribution costs.

Energy Ottawa pays Hydro Ottawa for:

        Furniture rental and property taxes,
        Human Resources Services, including administration of pay and benefits, processing of
         incentive bonuses, production of T-4s, OMERS year end, reconciliation of employee health
         tax, implementation of annual government-imposed rates, documentation of new
         employees, and regular maintenance activities,
        Information Technology Services including IT Help Desk, Technical Support, and
         Applications Support Services,
        Meter Data Services including MV90 Translation, Lodestar LPSS and Lodestar I Care, Web
         Portal Data Services, Data Repository Services and PeopleSoft CIS billing services,



2006 EDR Application
                                                                                       Hydro Ottawa Limited
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        Planned maintenance and emergency repair services for Chaudière Generating Stations
         Units 2 and 4.

Telecom Ottawa Holding Inc. (“Telecom Ottawa”) is a specialized telecommunications carrier
providing broadband services mainly to public institutions in the City and Internet services in Ottawa
and other parts of Eastern Ontario. Telecom Ottawa carries out its activities through three
operating subsidiaries: Telecom Ottawa Limited, Telecom Ottawa Regional Limited and 2038455
Ontario Inc. Telecom Ottawa provides Hydro Ottawa with the lease of dark fiber.

Telecom Ottawa pays Hydro Ottawa for:

        Human Resources Services, including benefit enrolment, change requests, inquiries and
         monthly billing of premiums together with associated maintenance activities and provision of
         Human Resources advice upon request,
        Facilities Management Services, including operations and office services, operation costs
         for utilities, emergency preparedness and special facilities projects as required,
        Supply Chain Services including Procurement Services; Supplier Relationship Management;
         Materials Management; Surplus Material and Equipment Sales,
        Pole and duct rentals,
        Information technology services including financial services (JDE application), technical
         support, and applications support services.

Work performed by Hydro Ottawa for the affiliated companies is done predominately on the basis of
Service Level Agreements (SLAs). Standard work orders, to recover Hydro Ottawa‟s actual costs,
are used occasionally for minor work not included in SLAs.

Details with regard to pricing and dollar value of services provided to Hydro Ottawa by its affiliates
and included in its distribution costs are provided in Schedule 6-8: Distribution Expenses Paid to
Affiliate(s).


Audited Financial Statements

Included as Schedule 2-3 in Tab E of the Application Binder are financial statements for Hydro
Ottawa for 2002, 2003 and 2004.


Compliance with Licence

Hydro Ottawa is not exempted from any conditions of its licence and does not have any special
conditions in its licence.


Complete Listing of Rates and Charges

Schedule 2-4 provides a complete listing of all current regulated charges approved by the Board.




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Schedule 2-4: Complete Listing of Current Rates and Charges


  Customer Classification                      Unit Of Measure          Rate
  Residential
  Electricity Charge – Tier 1                         kWh              $0.050
                     – Tier 2                         kWh              $0.058
  Transmission Network Charge                         kWh              $0.0057
  Transmission Connection Charge                       kWh              $0.0050
  Wholesale Market Charge                              kWh              $0.0062
  Debt Retirement Charge                               kWh             $0.00694
  Hydro Ottawa Fixed Charge                    per customer / month      $5.98
  Hydro Ottawa Variable Charge                         kWh              $0.0171
  General Service less than 50 kW
  Electricity Charge – Tier 1                         kWh              $0.050
                     – Tier 2                         kWh              $0.058
  Transmission Network Charge                         kWh              $0.0052
  Transmission Connection Charge                       kWh              $0.0045
  Wholesale Market Charge                              kWh              $0.0062
  Debt Retirement Charge                               kWh             $0.00694
  Hydro Ottawa Fixed Charge                    per customer / month      $6.78
  Hydro Ottawa Variable Charge                         kWh              $0.0159
  General Service 50 kW-1000 kW non-interval
  Electricity Charge                                  kWh             Spot Market
  Transmission Network Charge                          kW               $2.1218
  Transmission Connection Charge                       kW               $1.7882
  Wholesale Market Charge                             kWh               $0.0062
  Debt Retirement Charge                              kWh              $0.00694
  Hydro Ottawa Fixed Charge                    per customer / month    $201.63
  Hydro Ottawa Variable Charge                          kW              $2.39
  General Service 50 kW-1000 kW interval
  Electricity Charge                                  kWh             Spot Market
  Transmission Network Charge                          kW              $2.2535
  Transmission Connection Charge                       kW              $1.9603
  Wholesale Market Charge                             kWh              $0.0062
  Debt Retirement Charge                               kWh             $0.00694
  Hydro Ottawa Fixed Charge                    per customer / month     $201.63
  Hydro Ottawa Variable Charge                          kW               $2.39



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  Customer Classification             Unit Of Measure          Rate
  General Service 1000 kW – 1500 kW
  Electricity Charge                         kWh             Spot Market
  Transmission Network Charge                 kW              $2.2508
  Transmission Connection Charge               kW              $1.9763
  Wholesale Market Charge                     kWh              $0.0062
  Debt Retirement Charge                      kWh             $0.00694
  Hydro Ottawa Fixed Charge           per customer / month     $201.63
  Hydro Ottawa Variable Charge                 kW               $2.39
  General Service 1500 kW – 5000 kW
  Electricity Charge                         kWh             Spot Market
  Transmission Network Charge                 kW              $2.2508
  Transmission Connection Charge              kW              $1.9763
  Wholesale Market Charge                    kWh              $0.0062
  Debt Retirement Charge                      kWh            $0.00694
  Hydro Ottawa Fixed Charge           per customer / month   $3,087.06
  Hydro Ottawa Variable Charge                 kW              $2.04
  Large Use greater than 5000 kW
  Electricity Charge                          kWh            Spot Market
  Transmission Network Charge                  kW              $2.4952
  Transmission Connection Charge               kW              $2.2417
  Wholesale Market Charge                     kWh              $0.0062
  Debt Retirement Charge                      kWh             $0.00694
  Hydro Ottawa Fixed Charge           per customer / month   $11,675.71
  Hydro Ottawa Variable Charge                kW               $2.39
  Sentinel Lighting
  Electricity Charge                         kWh             Spot Market
  Transmission Network Charge                 kW              $1.6083
  Transmission Connection Charge              kW              $1.4113
  Wholesale Market Charge                    kWh              $0.0062
  Debt Retirement Charge                      kWh             $0.00694
  Hydro Ottawa Fixed Charge           per connection/month      $1.23
  Hydro Ottawa Variable Charge                 kW               $6.65
  Street Lighting
  Electricity Charge                         kWh             Spot Market
  Transmission Network Charge                 kW              $1.6002
  Transmission Connection Charge               kW              $1.3824
  Wholesale Market Charge                     kWh              $0.0062
  Debt Retirement Charge                      kWh             $0.00694
  Hydro Ottawa Fixed Charge           per connection/month      $0.26
  Hydro Ottawa Variable Charge                 kW               $2.29


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  Customer Classification                          Unit Of Measure            Rate
  Unmetered Scattered Loads
  Billed same as GS < 50 kW
  Miscellaneous Charges
  Account Set-up Charge                                   Each               $8.40
  Arrears Certificate                                     Each               $10.00
  Dispute Involvement Charge                              Each                $5.00
  Reconnection – seasonal service                         Each               $175.00
  Late Payment                                            Each                1.5%
  Returned Cheque Charge                                  Each               $11.00
  Collection of Account Charge                            Each                $5.00
  Special Meter Reading – successful                      Each               $20.00
  Special Meter Reading – unsuccessful                    Each               $10.00
  Reconnection during regular working hours               Each               $20.00
  Reconnection after regular working hours                Each               $50.00
  Temporary Service – Installation and removal            Each               $415.00
  Transformer Ownership Credit < 115 kV                    kW                 $0.45
  Transformer Ownership Credit > 115 kV                    kW                 $1.56
  Dry Core Transformer Loss Charge                                        See Table A.4
Table 2.1 – Current Rates


Summary of Application

The following chapters provide a complete summary formatted by the chapters in the Handbook.




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Chapter 3 – Test Year and Adjustments


3.0      Introduction


3.1      Historical Test Year versus Future Test Year

Hydro Ottawa is filing based on Option 4, forward test year. Full documentation is included as
supporting schedules.


3.2      Tier 1 Adjustments

Since Hydro Ottawa is filing on the basis of a forward test year, no review has been completed of
items that would have been Tier 1 adjustments if the historical test year had been adopted.
Amounts forecast for 2006 are summarized under Chapters 4 and 6. Hydro Ottawa is not seeking
approval for any incremental conservation and demand management (CDM) capital or operating
expenditures in 2006 beyond the amount already approved in the RP-2004-0203 proceeding.
However, the 2006 capital additions resulting from the previously approved plan have been added
to the rate base.


Tier 1 Adjustments: Distribution Expenses

N/A


Tier 1 Adjustments: Rate Base

N/A


Non-routine/unusual Tier 1 Adjustments

N/A


3.3      Tier 2 Adjustments

N/A




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Chapter 4 – Rate Base

4.0      Rate Base

Hydro Ottawa has separated its assets into Distribution Assets and Non-Distribution Assets as
required by the Board. Non-Distribution Assets include Construction-Work-in-Progress (CWIP), a
small amount of property used for other than distribution activity and a small number of Sentinel
Lights inherited from its predecessor utilities. Hydro Ottawa does not have an active Sentinel Light
program of its own.


                                                              2006 Ending
                                          Assets                Balance
                       Distribution Assets
                       Land and Buildings                         $13,853,124
                       TS Primary Above 50                        $30,838,797
                       Distribution Stations                      $45,308,801
                       Poles, Wires                             $438,179,454
                       Line Transformers                        $132,015,054
                       Services and Meters                      $118,773,521
                       General Plant                              $48,381,242
                       Equipment                                  $37,726,381
                       IT Assets                                  $68,163,793
                       CDM Expenditures and Recoveries             $2,616,912
                       Other Distribution Assets                  $14,442,910
                       Contributions and Grants                 ($73,142,036)
                       Amortization                            ($441,208,236)

                       Non-Distribution Assets                    $18,815,900

                  Table 4.1 - 2006 Asset Balances before Smart Meters


The amounts listed in Table 4.1 do not include the effects of Smart Meters. Smart Meters are
discussed later in this chapter.

Hydro Ottawa requests that the Board, in its decision on the Application, deem the stations and
associated assets listed below in Table 4.2, which are included in Account 1815 “Transformer
Station Equipment-normal primary over 50 kV”, as Distribution Assets. The Board deemed these
assets to be Distribution Assets by letter on October 3, 2000 with the exception of Hydro Ottawa‟s
newest stations, Kanata MTS and Uplands MS (27.6 kV).

On September 24, 2003 the Board authorized Hydro Ottawa to record, for transformation services,
$1.50/kW in its Retail Settlement Variance Account (“RSVA”), Account 1586, for incremental load
delivered through Kanata MTS. Hydro Ottawa is proposing to end this accounting practice
coincident with the inclusion of Kanata MTS in Hydro Ottawa‟s distribution rate base in 2006.


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            Station                     Description
            Epworth DS                  115 kV to 8kV Distribution Substation
            Merivale DS                 115 kV to 8kV Distribution Substation
            Manordale DS                115 kV to 8kV Distribution Substation
            Centerpointe DS             115 kV to 8kV Distribution Substation
            Uplands MS 8 kV             115 kV to 8kV Distribution Substation
            Uplands MS 27.6 kV          115 kV to 27.6kV Distribution Substation
            Limebank MS                 115 kV to 27.6kV Distribution Substation
            Moulton MS                  115 kV to 27.6kV Distribution Substation
            Marchwood MS                115 kV to 27.6kV Distribution Substation
            Bridlewood MS               115 kV to 27.6kV Distribution Substation
            Kanata MTS                  230 kV to 27.6kV Distribution Substation
         Table 4.2 –Stations to be included as Distribution Assets


Hydro Ottawa‟s net fixed distribution assets for inclusion in the 2006 rate base, prior to the inclusion
of Smart Meters, are $415,346,705. The working capital allowance to be included in the rate base is
$93,110,929. As a result, Hydro Ottawa‟s rate base for 2006 is $508,457,634 without Smart Meters.


            2006 Rate Base - without Smart Meters                 Adjustment      Rate Base

            2005 closing net asset balance                                        $394,743,692

            2006 capital additions (net of contributed capital)    $75,392,926

            2006 Amortization                                     ($34,186,901)

            Net Additions                                                          $41,206,025

            2006 closing net asset balance                                        $435,949,717

            2006 Average net asset balance                                        $415,346,705

            Working Capital Allowance                                              $93,110,929

            Total 2006 Rate Base                                                  $508,457,634
         Table 4.3 –2006 Rate Base without Smart Meters




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Smart Meters

The details of Smart Meter implementation are not final because the Minister of Energy has not yet
responded to the Board's report to him entitled "Smart Meter Implementation Plan Report" dated
January 26, 2005. Hydro Ottawa has nevertheless used the Board's report, including the
implementation plan, as the basis for its forecast of Smart Meter costs for 2006. If the Minister
decides on a different implementation plan, however, Hydro Ottawa would need to adjust its
forecast accordingly.

As part of Hydro Ottawa‟s approved CDM Plan, work is underway to deploy 200 residential Smart
Meters in the fall of 2005 and 730 commercial Smart Meters, for customers with a peak demand
greater than 200kW, by the end of first quarter of 2006. The costs of these specific conversions are
not included in Hydro Ottawa‟s 2006 revenue requirement as they were previously approved as part
of Hydro Ottawa‟s CDM plan.

The conversion schedule for 2006 to 2010 includes 100% of General Service customers greater
than 50 kW and 40% of residential customers by December 31, 2007. The customer data used to
arrive at the number of meters to be deployed in each customer class is from Hydro Ottawa‟s 2006
customer forecast in Tab D of the Application Binder.

The residential and small commercial Smart Meter cost was taken from the Board‟s Smart Meter
Implementation Plan Report, notes to Appendix C-2, Table 2. The incremental operating cost was
also based on the Board‟s report, which listed a monthly operating cost of $1.42 per month less
$0.39 per month operating benefits, as stated in Appendix C-2, Table 2. The Smart Meter
expenditures that are incremental to Hydro Ottawa‟s CDM Plan are as follows:


                       Expense                                           Dollars
                       Capital expenditures meters installed:             $   16,316,650
                       Less depreciation @ 15 years (with half-rate rule) $      543,888
                       Net increase in distribution assets:               $   15,772,762

                       Incremental operating costs:                     $       744,895
                       Depreciation expense:                            $       543,888
                       Incremental operating expense:                   $     1,288,783
             Table 4.4 –Smart Meter Costs


Table 4.5 summarizes Hydro Ottawa‟s final proposed 2006 rate base with Smart Meters included.




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            2006 Rate Base - with Smart Meters                    Adjustment      Rate Base

            2005 closing net asset balance                                        $394,743,692

            2006 capital additions (net of contributed capital)    $91,709,576

            2006 Amortization                                     ($34,730,789)

            Net Additions                                                          $56,978,787

            2006 closing net asset balance                                        $451,722,479

            2006 Average net asset balance                                        $423,233,086

            Working Capital Allowance                                              $93,222,664

            Total 2006 Rate Base                                                  $516,455,750
Table 4.5 –2006 Rate Base with Smart Meters


New distribution stations put into service in 2002, 2003 and 2004

Included in Hydro Ottawa 2004 closing asset balances are two distribution stations that were built in
2002 through to 2004.

Kanata MTS

Unprecedented load growth through the 1990‟s in the former City of Kanata prompted Kanata
Hydro to commission a study of supply facilities to ensure reliable power for the future. The study,
completed October 1998, concluded that additional transformation capacity would be required prior
to the summer 2002 peak.

Kanata Hydro and Ontario Hydro conducted a joint study of supply facilities through the remainder
of 1998. The conclusions, endorsed by Hydro One in 1999, confirmed that a Kanata Hydro owned
230kV/27.6 kV municipal transformer station (MTS) was the preferred option. However, a detailed
and updated analysis of load growth concluded the in-service date for the station had advanced to
summer 2001.

Elecsar Engineering was retained for a detailed engineering design in January 2000. The
amalgamation in November 2000 and changes in the structure of Ontario Hydro (property
management approvals) delayed approval for the station land. Phase one of Kanata MTS was
constructed in 2001 – 2002 and phase two, in 2003 – 2004. The present net book value of the new
station is $6,317,579.




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Uplands MS

In 1998, supply planning began at Gloucester Hydro for the proposed Ottawa International Airport,
and the redevelopment of the Uplands Military base. Key issues included high reliability for the
airport, additional capacity for projected redevelopment of the Uplands base, voltage conversion,
and the ultimate retirement of the existing 115kV/8 kV station.

With amalgamation the added benefits including:

        The establishment of a reliable 27.6 kV supply to service new commercial customers in the
         former Ottawa Hydro territory,
        Future off-loading of some large existing 13 kV customers, and
        The creation of a tie between the Gloucester Hydro and Nepean Hydro circuits across the
         Rideau River to support significant load growth in the south.

Uplands MS was commissioned in July 2003. The present net book value of the new station is
$2,979,925.


Customer Information System (CIS)

Since its formation on November 2000, Hydro Ottawa has faced and resolved a series of issues
related to the provision of customer care services to its customers. In particular, timelines for the
opening of the new electricity market forced the implementation of an interim CIS solution in order
to meet the “market opening date” and the new Market Rules. Subsequently, Hydro Ottawa
deemed it reasonable to select and install a different and more effective CIS in order to offset the
instability, performance issues, and operating costs of the interim solution. This has significantly
improved customer service and avoided the high operating cost of continuing an unstable customer
care environment.

Throughout this process, Hydro Ottawa has closely controlled both capital costs and annual
operating costs per customer, as shown in Table 4.6. Hydro Ottawa believes these costs are very
reasonable given the circumstances in which they were incurred. A full CIS review is included in
Tab C of the Application Binder.

        Item                                      Capital              Annual Operating
                                                ($ Millions)           Cost/ Customer ($)

        Former (AUS) CIS                            $7.3                      $60.36
        Implementation
        New (PeopleSoft) CIS                       $20.8                      $54.14
        Implementation

      Total                                        $28.1
Table 4.6 – CIS Expenditures

Hydro Ottawa has already fully amortized the capital costs of the AUS CIS implementation. Its 2006
rate base therefore does not include any amounts for this system. Hydro Ottawa has included the


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full capital cost of the PeopleSoft implementation, amounting to $20.8 million, together with
accumulated amortization. Hydro Ottawa believes that this treatment of the new CIS is very
reasonable under the circumstances.


Light Rail Transit Line (LRT)

The City of Ottawa is proposing an expansion of its rapid transit network with the construction of a
north – south transit line from the downtown core to the south Nepean sector and the Macdonald-
Cartier Airport, and an east-west transit line from the Kanata sector to Orléans. The environmental
assessment for both lines is currently underway. The City has targeted summer 2006 for start of
construction on the north-south line, with completion by the Fall of 2009. The environmental
assessment for the east-west line is scheduled to be completed by the Fall of 2006, with
construction to follow. The City has initiated preliminary discussions with Hydro Ottawa on
requirements for the relocation of existing distribution plant. Since the impact on Hydro Ottawa of
this project is still being assessed, no capital or operating expenses resulting from the LRT project
have been included in the Application. However, the impact of this project on Hydro Ottawa could
be extensive, and Hydro Ottawa will evaluate the financial and other implications once project
definition is finalized.


4.0      Amortization Rates

Hydro Ottawa has adopted the amortization rates as set out in the Appendix B of the Handbook.
The rates set out in Appendix B have an asset type for Account 1920 described as Computer
Equipment: Hardware, which depreciates over five years. There is no asset type included for
Computer Equipment: Software. Since no guidance was provided in the Accounting Procedures
Handbook or the 2000 Electricity Distribution Rate Handbook on the amortization of computer
software, Hydro Ottawa conducted its own review.

For smaller software items, Hydro Ottawa has adopted five years as a reasonable estimate for the
life of most software. However, given the September 2004 implementation of a new CIS, Hydro
Ottawa felt it prudent to complete a review to determine an appropriate amortization rate consistent
with General Accepted Accounting Principles (GAAP) for this specific asset, which is distinct in
nature. As a result of this review, Hydro Ottawa is currently amortizing its CIS over 10 years. This
approach was reviewed by Hydro Ottawa‟s external auditors and was considered appropriate for
GAAP in accordance with industry standards.

Table 4.7 summarizes the expected capital depreciation expense for assets that are expected to
exist at the end of 2006. This amount is made up of actual amounts incurred as at the 2004-year
end and capital additions included in the Application.

                       Amortization       Amortization on        Amortization on
                         on 2004            2005 Asset             2006 Asset               Total
                         Assets              Additions              Additions
      2006
                       $28,548,706               $ 3,503,375            $ 2,134,821      $ 34,186,901
  Amortization
Table 4.7 – Amortization


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4.1      Capital Investments

Summary

Hydro Ottawa is submitting its Application on the basis of a forward test year. The Hydro Ottawa
capital budget is divided into three categories; demand capital, sustainment capital and general
plant capital (as per the Board‟s definition). The distinction between the first two categories is based
on the following definitions:

Demand Capital - Activity done to address external requests for connection to, or relocation of,
Hydro Ottawa‟s distribution system plant, or to repair equipment damaged by external parties.
These activities result in a repair, relocation, change or expansion of the Hydro Ottawa distribution
system. External parties may be a regulator, a road authority, a developer or individual customers.
Hydro Ottawa is required to provide timely service for these activities.

Sustainment Capital - Activity done to enhance, strengthen or support, the Hydro Ottawa
distribution system so it may continue to function as intended. Activities include installation,
reinforcement, betterment, extension, relocation, or replacement of Hydro Ottawa owned electrical
distribution plant mainly driven by recurring or imminent system failures, capacity constraints, or
general growth. These activities are driven by an internal asset management strategy and not by
external parties.

The following table summarizes Hydro Ottawa‟s actual and planned distribution capital additions for
2004 to 2006.

                                                      2004                       2005                     2006
Land and Buildings                                           ($5,818)               $1,394,251             $1,145,880
TS Primary Above 50                                        6,929,865                 1,858,539               2,779,332
DS                                                         (291,413)                 2,406,403               5,862,095
Poles, Wires                                             23,245,014                 25,728,063             25,961,938
Line Transformers                                          7,317,881                 7,283,222               9,584,541
Services and Meters                                        8,858,886                13,760,814               9,098,665
General Plant                                              6,024,280                11,505,521               5,448,440
Equipment                                                  2,476,729                 4,360,784               4,911,907
IT Assets                                                32,550,202                  7,711,868             11,644,926
CDM Expenditures and Recoveries                              153,653                 1,043,247               1,420,012
Other Distribution Assets                                    (32,693)                  941,151               4,316,725
Contributions and Grants                                 (7,535,965)              (13,084,000)             (6,781,536)

Capital Additions Net of Contributed
Capital                                                 $79,690,620                $64,909,863            $75,392,926
Table 4.8 – Capital Additions
Note – negative values in 2004 relate to year over year changes in construction work-in-progress (CWIP)


The numbers in Table 4.8 do not include the Smart Meter impact. Smart Meters are discussed
separately in section 4.0.1



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All of Hydro Ottawa‟s capital forecasts have been prepared in accordance with the minimum
grouping of accounts from Appendix A of the Handbook. However, Hydro Ottawa internally
organizes its capital program as shown in the following table.

                         Category                   Capital Class
                         Distribution Demand
                                                    Commercial
                                                    Infill & Upgrade
                                                    Metering
                                                    Plant Relocation
                                                    Residential
                                                    Stations Embedded
                                                    Generation
                                                    System Expansion

                         Distribution Sustainment
                                                    Distribution Asset
                                                    Distribution Automation
                                                    Distribution Enhancement
                                                    Damage To Plant
                         Station Sustainment
                                                    Stations Asset
                                                    Stations Automation
                                                    Stations Capacity
                                                    Stations Enhancement
                         General Plant
                                                    GIS/OMS Project
                                                    CIS Project
                                                    Control Room
                                                    Modernization
                                                    Buildings - Facilities
                                                    Fleet Replacement
                                                    IT Infrastructure
                                                    Tool Replacement
                                                    Program
                                                    PC/Software/Servers
                                                    SCADA
                                                    Misc.
                  Table 4.9 – Capital Program Structure



Asset Management Strategy

The following describes in general the process used to develop the asset plans for each asset
class. This single-asset plan is referred to as an intermediate program. The intermediate program
for each asset class addresses the following major objectives:
        Identify a desired level of service and customer costs,
        Develop a long-term, sustainable plan for asset replacement,



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        Provide inputs to the final asset management optimization process, including a cost-benefit
         analysis consistent with all other assets.

Hydro Ottawa‟s asset management process uses relevant information about the asset such as
condition, criticality, and cost, along with important drivers from Hydro Ottawa, such as level of
service, corporate values, and regulatory requirements, in a quantitative way to develop a program
for each asset class. Figure 4.1 below illustrates process.
               Asset Evaluations                                                                                        DRIVERS
                    Asset                                              Risk Matrix Risk-Cost
                                                                        Equipment Class
                                                                                                                 •   Corporate Values
                 Demographics                                                                                    •   Economic/Financial
                                                                        H ig h                                       Constraints



                                         C o n s eq u en ce
                                                                                                                 •   Environmental and


                                                              C os t
                                                                        Me d              INCREASING
                Asset Condition                                                            RISK-COST
                                                                                                                     Safety
                                                                        Lo w
                                                                                                                 •   Resource
               Condition/Failure                                                 G oo d      F air     Po or         Capabilities
                                                                                   C o n d io n In
                                                                                   HealthitIndex d ex            •   Regulatory
                 Correlation
                                                                                                                     Requirements
                 Consequence                                                                                     •   Superseding
                    Costs                                               Risk & Economic                              Programs
                                                                           Evaluation
                                                                                                                 •   Benchmarking

                   Functional                                               Evaluation of
                                                                                                               Intermediate Program
                    Issues                                                  other drivers
Figure 4.1 – Asset Management Process


The existing utility data was maximized by thoroughly considering existing input data, by
supplementing the data with engineering estimates where needed, and by benchmarking to industry
standards and practices.

The application of this asset management process for each asset class will be instrumental for
ensuring desired performance at minimum cost over the long term. It is understood that some
assets must be addressed each year in order to minimize life-cycle cost and maintain the value and
performance of the entire asset class. The asset management process helps to determine the
optimum intervention strategy and provides justification for it.

Each asset program explicitly considers risk in a quantitative way, based on the condition of the
assets in the class and the consequences of their failure. Consequences include not only the costs
to Hydro Ottawa for repair, but also estimates of the costs to Hydro Ottawa‟s customers in the form
of outages and safety and environmental effects. The program is based on a least-cost method of
optimizing replacement rate.

Inputs related to condition, failure rate, and consequences of failure will continue to be developed.
Additional data will produce more precise programs in terms of the optimal intervention strategy as
well as the costs of delaying intervention. The process will be significantly enhanced and expanded
with the completion of the new Geographic Information System (GIS) scheduled for final completion
in 2006.




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Plan Results for Selected Programs

The above described process was applied to four of Hydro Ottawa‟s major asset classes; namely
Wood Poles, Underground Cables, Station Transformers, Station Switchgear. (It was also applied
to Vegetation Management; see Chapter 6.) These results are described in detail in subsequent
sections. Figure 4.2 below shows the collective optimized 20-year funding needs for these asset
classes based on their recommended programs.


                                                  Optimized Asset Program

                             45
                             40
                             35
                             30                                                                   Vegetation
                                                                                                  St. Swgr
                             25
                       $M




                                                                                                  St. Xfmr
                             20
                                                                                                  Cables
                             15                                                                   Wood Poles
                             10
                              5
                              0
                              06

                                     08

                                            10

                                                   12

                                                          14

                                                                 16

                                                                        18

                                                                               20

                                                                                      22

                                                                                             24
                            20

                                   20

                                          20

                                                 20

                                                        20

                                                               20

                                                                      20

                                                                             20

                                                                                    20

                                                                                           20
                                                        Year of Spending

Figure 4.2 – Optimized Funding Needs for Selected Asset Programs


Conclusions

Indications are that a large volume of the Hydro Ottawa distribution assets are nearing end-of-life
requiring increasing amounts of capital replacement/refurbishment expenditures over the next
twenty years. The Hydro Ottawa Sustainment Budget will contain these capital programs.

The proposed spending in these asset classes for 2006 totals approximately $14.0 million. Hydro
Ottawa‟s proposed capital additions are lower than those supported by the results of the asset
management process. Hydro Ottawa has chosen a conservative approach for 2006; however, it will
continue to evaluate its asset plans to ensure these asset programs are sufficiently funded to
reduce the impact of large expenditures projected.


Facilities Asset Strategy

Following the amalgamation of the five predecessor utilities in 2000, Hydro Ottawa began to
develop a realty plan that would support its new strategic direction and organizational structure. A
decision was made within Hydro Ottawa to establish various satellite work centers throughout its
service territory. This has improved customer response times and overall workforce productivity by
reducing vehicle travel time. This strategy is a direct result of the large size of Hydro Ottawa‟s
service territory and its diverse urban/rural mix. With over 55 km from east to west, travel time to
work sites by field crews from a central facility would have been excessive.

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This realty strategy included the need for consolidation of supply chain warehousing, emergency
control centers, vehicle repair facilities and the construction and renovation of new and existing
work centers. Rationalization of these properties was accompanied by reductions in inventory,
standardization of materials and improved dispatching of resources.

There are five main work centers occupied by Hydro Ottawa, which are located at Albion Road,
Merivale Road, Bank Street, Maple Grove Road and Carling Avenue. There have been renovations
made to the Merivale Road, Maple Grove Road and Carling Avenue facilities as part of the overall
plan to redistribute the workforce throughout Hydro Ottawa‟s service territory. This has resulted in a
significant reduction of field staff operating from the Albion Road work center. The disposal of this
property in favour of a smaller, less costly administrative facility is being considered for 2007. The
construction of the east-end operations work center to replicate the Maple Grove Road work center
in Ottawa west will begin in 2006.


Capital Programs/Projects

Schedule 4-1 provides a list of 2006 programs and projects exceeding the materiality threshold.
Detailed descriptions of these projects are provided following Schedule 4-1.




2006 EDR Application
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Schedule 4-1: Capital Expenditures
                                                                            2006 $    In-Service
         Projects Over Materiality of $300,000              Class          Amount        Date
Residential Subdivision                           Distribution Plant       $6,939,884    2006
Dist. Transformer Replacement                     Distribution Plant       $6,601,265    2006
Distribution Enhancements                         Distribution Plant       $6,522,466    2006
Planned Pole Replacement                          Distribution Plant       $5,879,898    2006
New Commercial Development                        Distribution Plant       $4,330,881    2006
New Cyrville Substation                           Distribution Plant       $4,061,259 2008*
Plant Relocation & Upgrade                        Distribution Plant       $2,874,076    2006
System Expansion                                  Distribution Plant       $2,789,377    2006
EOL Cable Works                                   Distribution Plant       $2,128,956    2006
Station TXF Refurbishment                         Distribution Plant       $1,989,510    2006
Infill & Upgrade                                  Distribution Plant       $1,859,220    2006
Station Circuit Breaker Control Refurbishment     Distribution Plant       $1,695,999    2006
Meter Replacement and Re-verification             Distribution Plant       $1,301,511    2006
Stations Switchgear Replacement                   Distribution Plant       $1,101,796    2006
Vault Rehab or Removal                            Distribution Plant       $1,006,709    2006
Wholesale Meter Upgrade                           Distribution Plant         $930,318    2006
Plant Failure Capital                             Distribution Plant         $698,934    2006
Damage to Plant                                   Distribution Plant         $558,921    2006
Elbow and Insert Replacement                      Distribution Plant         $553,478    2006
Insulator Replacement Program                     Distribution Plant         $475,198    2006
Distribution Automation                           Distribution Plant         $464,867    2006
Station Transformer PCB Removal                   Distribution Plant         $422,920    2006
Substation Automation                             Distribution Plant         $385,921    2006
O/H Equipment New and Rehab                       Distribution Plant         $278,901    2006
East End Operation Centre                         General Plant            $7,026,078 2007*
GIS & OMS Systems                                 General Plant            $4,901,719    2006
SCADA & Control Room Upgrades                     General Plant            $3,019,289    2006
Vehicle Replacements                              General Plant            $2,589,689    2006
Bank Street Office Rehabilitation                 General Plant            $1,981,694    2006
CIS Software Enhancements                         General Plant            $1,819,600    2006
Merivale Road Office Additions                    General Plant            $1,278,083    2006
Albion Road Office                                General Plant              $905,245    2006
Carling Operations Centre Storage Building        General Plant              $615,715    2006
Station Building Rehabilitation                   General Plant              $572,940    2006
Upgrade of JDE Financial System                   General Plant              $571,651    2006
Business Continuity Plan                          General Plant              $315,117    2006
Conservation & Demand Management                  CDM Capital              $1,420,012    2006
Table 4.10 – Capital Projects
* In-service dates beyond 2006 indicate cost will be Construction-Work-in-Progress (CWIP) in 2006 (except
    land).


2006 EDR Application
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4.1.1.1 Residential Subdivision ($6,939,884)

Description

Residential developments are new residential subdivisions requested by owners/developers, which
Hydro Ottawa is obligated to connect. It does not include secondary “in-fill” type services. The
capital expenditures of $6,939,884 are partially funded by developers through contributions in aid of
construction, as determined by the requirements of the Distribution System Code. Only the net
between the capital expenditures and the contributions are included in Hydro Ottawa‟s rate base.

Demographics

The majority of the residential work is in the west, south and east suburbs of Ottawa. Growth since
2000 has been high.

The Strategy

Residential development is primarily dependent on the local economy. The City of Ottawa is
projecting an average growth rate of 3% over the next year. However, the City‟s 2004 actual was
1.6%, 1.4% below projection. Hydro Ottawa is conservatively budgeting for a 1.7% growth rate in
2006, and approximately 3800 new homes.

The Plan

The expected cost of new residential development is based on historical levels, projected growth
rate, 2005 project carry-over, and potential 2006 project inquiries.


4.1.1.2 Distribution Transformer Replacement ($6,601,265)

Description

Distribution transformers are used to reduce higher distribution voltages to low voltages used in
commercial and residential buildings. Distribution transformers that contain PCBs, show visible
signs of leaking, or are known to pose a safety risk are scheduled for replacement with newer and
safer units. Typically, each distribution transformer services approximately 12 residential customers,
fewer if used for commercial applications.

Demographics

Hydro Ottawa has an estimated 36,000 distribution transformers in both overhead and underground
applications.

The Strategy

The strategy for 2006 is to replace transformers that contain mineral oil with PCBs, have visible
signs of oil leakage, or are of a pad-mounted “live-front” design. A distribution transformer survey
for levels of PCBs will commence in 2005 and be completed in 2006. It is estimated (based on
historical figures) that 6% of the distribution transformers inspected will contain low-level PCBs. As


2006 EDR Application
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                                                                                                      Tab B
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well, some will show visible signs of leakage and hence, pose a safety and/or environmental
concern. Overall it is estimated that 540 units per year will require replacement over the next five
years.

The Plan

The plan is to replace the identified transformers on a scheduled program over the next four years
(2006-2009) with any remainder being completed in 2010. The replacement of distribution
transformers is evaluated in conjunction with other project such as cable replacement to ensure
coordination between plans.


4.1.1.3 Distribution Enhancements ($6,522,466)

Description

Per the Board‟s definition, “Distribution Enhancements” represent projects that modify an existing
distribution system for the purpose of improving system-operating characteristics such as reliability
or power quality or for relieving system capacity constraints that could result from general load
growth.

Demographics

Hydro Ottawa‟s service area now comprises approximately 800 overhead and underground feeders
emanating from approximately 70 substations. Distribution voltages range from 44kV down to 4kV.

The Strategy

Projects are identified through two means:
    Joint reviews with Hydro One regarding bulk supply issues such as station capacity,
    Internal studies of distribution system supply reliability; future load growth, feeder loading,
       and station loading.

The Plan

Distribution Enhancements for 2006 include the following program categories:
    Cyrville-Orleans overhead trunk tie,
    Minor line extensions (overhead or underground),
    Fallowfield-Greenbank 44kV tie,
    South Urban trunk extension,
    Circuit load balancing,
    Kanata Eagleson south 27.6kV trunk tie,
    Trunk ties between stations or feeders for contingency and load relief,
    New egress feeders from stations,
    Vault space easements,
    Additions or extensions of System Neutral wires,
    Voltage Conversion,
    Animal guards on the distribution network.


2006 EDR Application
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4.1.1.4 Planned Pole Replacement ($5,879,898)

Description

Wood poles are used by Hydro Ottawa for most of its overhead electrical distribution system. They
are used to support the distribution conductors, pole-top transformers, and other equipment related
to the distribution system.

Demographics

Demographic information comes from two sources: a survey from 1996 of the poles within the
former City of Ottawa, and a more recent 2004 survey of the poles in the surrounding areas. For
each pole, these surveys note the pole‟s GPS coordinates, number and type of circuits attached to
each pole, condition based on a visual inspection, and the other attachments such as guy wires,
communication cables, and transformers.

Pole condition is scored from 1 (very good) to 5 (very poor) based on criteria established by Hydro
Ottawa. Figure 4.3 below shows the distribution of poles by condition.

The results show a very large concentration of poles in the middle (3) condition range, more
towards the good end (1) than the poor (5). This reflects that most of Hydro Ottawa‟s poles show
slight deterioration and are between 20 and 35 years old. Typically these poles would have about
15 to 30 years remaining of their useful lifetime.

                                               Wood Poles
                                            Summary of Condition
                               30,000


                               25,000
             Number of Poles




                               20,000                                  1996 Survey
                                                                       GIS Survey
                               15,000


                               10,000


                                5,000


                                   0
                                        1     2           3            4             5
                                                  Condition Category

Figure 4.3 – Wood Poles Condition Distribution


The Strategy

The strategy for the asset management intermediate program for the wood poles includes the
following major objectives:


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        Develop a long-term, sustainable plan for wood pole replacement,
        Identify the desired level of service and customer costs,
        Optimize plan on the formal asset management process with a cost-benefit analysis
         consistent with all other assets.

The asset management process is used to determine the optimum rate of replacement for wood
poles and provides consistent justification.

This program explicitly considers risk in a quantitative way, based on the condition of the asset and
the consequences of its failure. Consequences include not only the costs to Hydro Ottawa for
repair, but also estimates of the costs to Hydro Ottawa‟s customers in the form of outages, safety
and environmental impacts. The program is based on a least-cost method of optimizing
replacement rate.

The Plan

The asset management process results in an economically optimized plan for each group of poles
in the risk matrix. This optimal schedule is then adjusted to create a cost effective and sustainable
replacement program. The program is shown in Figure 4.4 below.




Figure 4.4 – Wood Poles Replacement Program


The figure shows that the optimal replacement rate in the future, starting in about year 2015,
increases significantly. This increase is caused by the concentration of poles in the middle range of
the condition distribution shown above. There is some uncertainty around projections of end-of-life
this far into the future, but prudence suggests that the levelized program today should take into
account the expectation that a large number of poles will require replacement within the planning
horizon (20 years).


2006 EDR Application
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This plan is based on managing risk, rather than on avoiding it. As such, there still exists in this
program some residual risk. In general, these risks can be managed in at least two ways: a) by
tracking the cost of the program and verifying its benefits over time; and b) by re-evaluating the
program periodically with updated information and adjusting it as needed.

The rate shown above for 2006, about 450 poles per year, is higher than the historical rate of pole
replacement at Hydro Ottawa. The peak replacement needed in 2016 is within the planning
horizon, which means that the long-term sustainable plan must take into account the need for very
high pole replacement rates in the future.


4.1.1.5 New Commercial Development ($4,330,881)

Description

Commercial developments are new, or upgraded, primary services. These services are at the
request of owners/developers, which Hydro Ottawa is obligated to connect.

Demographics

The majority of the commercial work is in the west, south and east suburbs of Ottawa. Growth since
2000 has been high.

The Strategy

Commercial development is primarily dependent on the local economy. The City of Ottawa is
projecting an average growth rate of 3% over the next year. However, their 2004 actual was 1.4%
below projection. Hydro Ottawa is conservatively budgeting for a 1.7% growth rate in 2006.

The Plan

The expected expenditures by Hydro Ottawa for new commercial development in 2006 is based on
historical levels, projected growth rate, 2005 project carry-over, and potential 2006 project inquiries.


4.1.1.6 Station Capacity - New Cyrville Substation ($4,061,259)

Description

Station Capacity is the program to install new station facilities, which are required to supply growth
in electrical demand. This could involve the installation of an additional transformer at an existing
station, the upgrading of existing transformers to larger ones, or the construction of a new
substation, complete with one or more new transformers. The options available to increase
capacity are subject to several factors, including the available space at existing stations, the
proximity of existing stations to the areas of load growth, equipment limitations at existing stations,
and the availability of suitable land for installing a new station.

Hydro Ottawa does not own all of the substations and related power transformers that supply Hydro
Ottawa load. Hydro One owns many of the larger transformer stations and terminal stations in


2006 EDR Application
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Ottawa. As a result, when load growth occurs in certain parts of the city, Hydro Ottawa must
consider the option of having Hydro One upgrade their facilities; sometimes this is the only practical
option. If Hydro One is requested to add more transformation to supply a particular area, then it
must perform an economic evaluation of future revenues that it will derive from the Transformation
Tariff that it collects at each of the stations under its ownership. If the present value of this revenue
exceeds the cost of the capacity installation, then Hydro Ottawa is not required to provide a
monetary contribution to the project.

Demographics

Significant growth in demand is possible throughout most of the core, urban and suburban areas of
the City of Ottawa. This is a result of two initiatives of the city government. One is to promote new
residential development, or redevelopment, within the core area of Ottawa. The second is to
encourage commercial and industrial development in the vicinity of the suburban areas. Clear
evidence exists that the first of these initiatives is taking hold with the development community.
Many new high-rise condominium developments have been undertaken in the last few years, and
more are in the planning or construction phase. Infill development also continues in much of the
downtown core.

In the major suburban communities of Kanata/Stittsville, South Nepean, South Gloucester, and
Orleans, single and multi-unit residential development has been strong over the last five years, with
an average of about 5,000 such dwellings being built each year. In these suburban areas,
commercial development remains strong, however major industrial growth in these areas has
generally been slow. A recovery of the high-tech sector could change this situation quickly
however.

The Strategy

The planning staffs of Hydro One and Hydro Ottawa have jointly undertaken a study of the available
capacity at the major supply stations, which provide power to our customers. It has shown that
there currently are loading concerns in the following areas:

        Ottawa Core 13 kV Area
        Ottawa South East 13 kV Area
        Cyrville-Orleans 28 kV Area

The Plan

For the Ottawa Core and Ottawa South East areas, a comprehensive expansion plan will be
developed by the end of 2005. There is a two to three year lead-time for design and approval for
station construction.

In 2006 and 2007 Hydro Ottawa plans to build a new 115 kV to 27.6 kV substation in the Cyrville
area. The 27.6 kV supply area of Cyrville-Orleans is currently fed from two stations, Bilberry TS,
which is owned by Hydro One, and Moulton MTS, which is owned by Hydro Ottawa. Two feeders
at Bilberry TS also supply about 30 MW of Hydro One retail load. The load in this area currently
exceeds the defined planning criteria. As such an additional source of capacity is required. Several
options were examined as part of the joint study. The recommended solution is for a new station to
be built in the Cyrville area. Negotiations are presently underway with the City of Ottawa for land to


2006 EDR Application
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build this facility. The anticipated in-service date for this new station is 2008, with the acquisition of
the land forecast in 2006.


4.1.1.7 Plant Relocation and Upgrades ($2,874,076)

Description

Plant relocation is largely driven by the City of Ottawa road works program. There typically is some
capital contribution as per the Public Service Works on Highway Act. It does not include work for
others (i.e., where the infrastructure involved is not Hydro Ottawa owned). This work is done at the
request of owners/developers.

Demographics

The work can be all across Hydro Ottawa‟s service area depending on the City of Ottawa roadwork
plan.

The Strategy

Plant relocation is primarily dependent on the local economy and on various levels of government
funding. The City of Ottawa has established a road works program for 2006.

The Plan

The expected financial impact on Hydro Ottawa of plant relocation is based on historical levels,
projected growth rate, 2005 project carry-over, and potential 2006 project inquiries.


4.1.1.8 System Expansion ($2,789,377)

Description

Per the Board‟s definition, “System Expansion” represents an addition to a distribution system in
response to a request for additional customer connections that otherwise could not be made; for
example, by increasing the length of the distribution system.

Development in areas with no current infrastructure requires expansion to service commercial or
residential development.

Demographics

Activity follows growth and government infrastructure investment patterns.

The Strategy

These projects are largely unpredictable in timing as they are dependent on needs or requests of
external parties.



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The Plan

2006 projects include expansion for the supply of Valour Drive Business Park, Terminal Lands
commercial development, and addressing long-term load transfers. The program proposed is
consistent with past annual programs.


4.1.1.9 End-of-life Cable Works ($2,128,956)

Description

Hydro Ottawa‟s underground cable asset class consists of underground cables, splices/joints,
elbows, potheads and terminations at voltage levels of 44 kV and below. This asset class includes
sections of underground cable running from distribution stations to overhead lines and from
overhead lines to transformers and switches. Underground cables are used mainly in residential
areas, and in urban areas where it is either impossible or extremely difficult to build overhead lines
due to aesthetic, legal, environmental or safety reasons. The configuration of the underground
system is mainly loop.

Hydro Ottawa currently manages a system of underground cables with a total length of about 3,100
km operating at voltages of 44 kV and lower. The system consists of approximately 72.5%
residential distribution plastic cables, 9% trunk plastic cables (XLPE), 18.5% lead cables (PILC) and
a very small percentage of butyl rubber cables (EPR).

Demographics

Demographic information for the underground cables has been collected from various sources
included in Hydro Ottawa‟s existing condition assessment and maintenance programs. Cable age
and length information is shown in Table 4.10 below.

                       Materials          Installation                             Total
               Lead (PILC)           1930s – present                           735 km
               Trunk Plastic (XLPE)  1970s – present                           310 km
               Distribution Plastic  1970s – present                           2,250 km
Table 4.10 – Underground Cable Demographics


The plastic cable population is composed of older, non-tree-retardant1 plastic cables installed prior
to 1989 and tree-retardant cables installed in 1989 and later. The non-tree-retardant cables are
considered to have a much lower useful life or about 25 years on average while the tree-retardant
cables can be expected to last about 40 years. A summary of the Health Indices for non-tree-
retardant distribution plastic cables is shown in Figure 4.5. A summary of Health Indices for tree-
retardant distribution plastic cables is shown in Figure 4.6. The age demographics (based on
identified segments of cable installed) of both types of these plastic cables are shown in Figure 4.7.

1
  Water molecules and other contaminants can cause “water trees”, electrically weak areas in a cable‟s
insulation, which can ultimately lead to cable failures. “Tree retardant” refers to cables that resist these water
trees.


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                                               Non-Tree-Retardant Plastic Cable - Sample
                                                               Survey

                                     40                               37
               Number of Segments

                                     35
                                     30
                                     25             22                                  22
                                     20
                                     15
                                     10
                                      5
                                      0
                                                   Poor               Fair             Good
                                                                   Condition

Figure 4.5 – Plastic Type Underground Cables Condition Distribution (installed before 1989)




                                               Tree-Retardant Plastic Cable - Sample Survey

                                          20                                             19
                                          18
                                          16
                          # of Segments




                                          14
                                          12
                                          10
                                           8
                                           6
                                           4                            2
                                           2          1
                                           0
                                                    Poor              Fair             Good
                                                                    Condition

Figure 4.6 – Plastic Type Underground Cables Condition Distribution (installed since 1989)




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                                                                          Distribution Plastic Cables

                                200
                                180
                                160
                                140
                 km of Cable




                                120
                                100
                                 80
                                 60
                                 40
                                 20
                                  0
                                      1966
                                             1968
                                                    1970
                                                            1972
                                                                   1974
                                                                             1976
                                                                                     1978
                                                                                               1980
                                                                                                      1982
                                                                                                              1984
                                                                                                                      1986
                                                                                                                             1988
                                                                                                                                       1990
                                                                                                                                              1992
                                                                                                                                                     1994
                                                                                                                                                            1996
                                                                                                                                                                    1998
                                                                                                                                                                           2000
                                                                                                                                                                                  2002
                                                                                                                                                                                         2004
                                                                                                      Year Installed

Figure 4.7 – Plastic Type Distribution Underground Cable Demographics


The Plan

The asset management process results in economically optimal replacement timing for each cable
type in the risk matrix. This optimal schedule is then adjusted to create a reasonable and
sustainable replacement program. The program for the three cable types is shown in Figure 4.8
below. Plastic cable installed since 1989 does not require replacement within the presently defined
planning horizon (20 years).

                                                            Underground Cable Replacement Program

                         $12,000,000


                         $10,000,000


                               $8,000,000
                                                                                                                                                              Distribution Plastic (Type C)
                Cost




                               $6,000,000                                                                                                                     Trunk Plastic (Type B)
                                                                                                                                                              Lead Cable (Type A)
                               $4,000,000


                               $2,000,000


                                      $0
                                        06

                                               07

                                                     08

                                                            09

                                                                   10

                                                                          11

                                                                                    12

                                                                                          13

                                                                                                 14

                                                                                                       15

                                                                                                              16

                                                                                                                      17

                                                                                                                             18

                                                                                                                                    19

                                                                                                                                          20

                                                                                                                                                21

                                                                                                                                                      22

                                                                                                                                                             23

                                                                                                                                                                    24

                                                                                                                                                                           25
                                       20

                                             20

                                                    20

                                                           20

                                                                 20

                                                                        20

                                                                               20

                                                                                         20

                                                                                               20

                                                                                                      20

                                                                                                             20

                                                                                                                     20

                                                                                                                           20

                                                                                                                                  20

                                                                                                                                         20

                                                                                                                                               20

                                                                                                                                                     20

                                                                                                                                                            20

                                                                                                                                                                   20

                                                                                                                                                                         20




                                                                                                             Year


Figure 4.8 – Levelized Underground Cables Replacement Program (all non-TR plastic and
lead cables)




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The replacement rates shown in Figure 4.8 are based on optimizing the trade-off between the
increasing risk of failure as the cables age and the benefit of delaying expenditures as long as
possible. As the cables reach their average end-of-life, the rate of failure increases. The optimum
strategy is to replace close to the average end-of-life. This is the strategy for the non-tree-retardant
cable. The last of this cable is to be replaced between 2016 and 2020. The PILC cable has a much
longer life, and the strategy is generally not to replace until failure (the cost shown for PILC in
Figure 4.8 is un-planned replacement).


4.1.1.10       Station Transformer Refurbishment ($1,989,510)

Description

Station transformers are used for stepping the voltage of incoming electric power down from higher
transmission or sub-transmission voltages to lower distribution voltages. The main components of
a station transformer are the bushings where the incoming and outgoing conductors are attached,
the high and low-voltage coils, and the tank that houses the coils and contains the oil used for
insulating and cooling the entire unit.

Demographics

Demographic information for the station transformers has been collected from various sources
included in Hydro Ottawa‟s existing condition assessment and maintenance programs. Age and
voltage information are shown in Table 4.11 below.


           High                               Age Group
                                                                                    Total
         Voltage       0-10yrs   10-20yrs 20-30yrs 30-40yrs 40-50yrs    >50yrs
       13 kV              1         0        4       107       3          0          115
       44 kV              1         11       11       16       0          0           39
       115 kV             4         10       2        0        4          0           20
       230 kV             2         0        0        0        0          0           2
       Total              8        21       17       123         7         0         176
       %                4.5%     11.9%     9.7%     69.9%      4.0%      0.0%      100.0%
Table 4.11 – Age and Voltage Demographics


Condition demographics were developed as part of the asset management process. A summary of
Health Indices for the station transformers is shown in Figure 4.9.




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The figure shows that nine of the transformers are assessed to be in poor condition and are
approaching the end of their useful life.



                                       Station Transformer Health Index
                                             (Transformer and Tapchanger)
                                                                                         111
                               120
             Number of Units




                               100
                                80
                                                                               52
                                60
                                40
                                20                   9            4
                                         0
                                 0
                                     Very Poor      Poor         Fair         Good    Very Good
                                       0-30        30-50        50-70         70-85     85-100

                                                         Health Index Group



Figure 4.9 – Station Transformers Condition Distribution


The Plan

The asset management process results in an economically optimal timing of intervention for each
transformer. The intervention modelled depended on the type of transformer. For high voltage
transformers (>50kV), Hydro Ottawa anticipates replacing them when they reach their economic
end-of-life. For station transformers (<50kV), Hydro Ottawa plans a major rehabilitation including a
rewind rather than full replacement. The optimal schedule of intervention is adjusted to create a
cost-efficient and sustainable replacement program.

The optimal intervention rate is three transformers per year for the next 10 years. Starting in about
year 2017, the number begins to increase. This increase is caused by the concentration of
transformers in the 30-40 year age range shown in Table 4.11.


4.1.1.11         Infill and Upgrades ($1,859,220)

Infill and upgrades are demand-based activities that include new residential and commercial
secondary services not located in new subdivisions or new business parks. This is a demand-based
activity. All costs in the category are customer dependant and estimates are based on historical
levels.




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4.1.1.12     Station Circuit Breaker Control Refurbishment ($1,695,999)

This program consists of upgrading and refurbishing circuit breaker control circuits typically 35
years of age or over. The program includes the installation of new control components and the
upgrading of several features to take advantage of newer more efficient and reliable technology.
The key elements of the program consist of enhancements such as remote controlled reclose-
blocking schemes to allow for the application of work protection. This will result in improvements in
efficiency for day-to-day operations.


4.1.1.13     Meter Replacement and Re-verification ($1,301,511)

This program covers capital additions for distribution meters for the following:

        Replacing meters for service upgrades
        Replacing damaged meters as a result of storms, vandalism or fire
        Replacing meters during the meter re-verification program.

These capital items are based on historical trends.


4.1.1.14     Station Switchgear Replacement ($1,101,796)

Description

Hydro Ottawa‟s Station Switchgear asset class consists of breakers, switches, bus insulation,
support structures, protection and control systems, arrestors, control wiring, ventilation and fuses.
The base unit of this asset class is a switchgear assembly, which includes buswork, feeder
breakers and appurtenances.

Demographics

Hydro Ottawa currently manages approximately 200 switchgear assemblies containing a total of
889 breakers, 66 reclosers and 1,079 switches.

Demographic information for the station switchgear has been collected from various sources
included in Hydro Ottawa‟s existing condition assessment and maintenance programs. Switchgear
assembly information is shown in Figure 4.10 below. The figure shows that about 30% of the
devices are over 40 years old, which is generally considered by the industry as the useful length of
life for this equipment.




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                                                                 Station Switchgear Age Profile
                                                                    196
                                              200
                                              180
               Number of Devices

                                              160             140
                                              140   120                        125
                                              120
                                              100                                                               91
                                               80
                                                                                     53              52
                                               60                                               36
                                               40
                                               20                                                                    5     12
                                                0
                                                    46-50 41-45 36-40 31-35 26-30 21-25 16-20 11-15 6-10                   0-5
                                                                                          Age

Figure 4.10 – Switchgear Demographics


A summary of the Health Indices for station switchgear by assembly is shown in Figure 4.9. This
graph shows that less than 10% of the assemblies are in poor or very poor condition. Given the age
profile of the equipment it would be expected that more assemblies would be in poor condition,
however, positive results are attributable to an effective maintenance and refurbishment program.



                                                                    Switchgear Health Index
                                                                                                                         100
                                              100


                                               80
                       Number of Assemblies




                                               60

                                                                                           42
                                               40
                                                                                                           28

                                               20
                                                                          10
                                                          2
                                                0
                                                     Very Poor        Poor                 Fair           Good       Very Good
                                                       0-30           30-50               50-70           70-85       85-100
                                                                                Health Index Category

Figure 4.11 – Station Switchgear Assembly Health Index




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The Plan

The asset management process results in economically optimal replacement for the switchgear
assemblies. This optimal schedule is then adjusted to create a reasonable and sustainable risk-
based replacement program.

In addition, there are some assemblies facing short circuit levels higher than their rating, which
means the breakers may fail if they are required to open on a fault. These breakers should be
replaced with assemblies with higher ratings.

Two assemblies will be replaced in 2006. Increased switchgear replacement will be required in
future years.


4.1.1.15     Vault Rehab or Removal ($1,006,709)

Description

A vault is an enclosed space containing essentially (one or more) distribution transformers,
switching units, and cable work. It is the point of connection from the high voltage distribution
network to the customers‟ electrical distribution system.

This program involves refurbishment of underground vaults in Hydro Ottawa‟s service area due to
the age or condition of the assets.

Demographics

Sidewalk Vaults: There were 30 sidewalk vaults (under the road right-of-way) in the downtown core
area (designated area bound by the Ottawa River, Rideau River, Rideau Street, and King Edward
Avenue) with a total of 43 submersible transformers in them. The transformers are at their end-of-
life and are rusting.

Other Vaults: There are approximately 1644 indoor vaults in Hydro Ottawa‟s service territory. The
vaults may be customer owned, shared, or Hydro Ottawa owned. Approximately 90% of the 8kV
and 28kV vaults contain Hydro Ottawa owned equipment. Refurbishment or replacement of vault
components may include jack bus, moles, circulating fans, switchgear, or transformers.


                            Vault Type        Total # Vaults
                            13 kV                        950
                            4kV                          530
                            16kV / 8 kV                  144
                            44 kV Customers                20
                            Total                       1644
                       Table 4.12 – Vault Types




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The Strategy

Public safety, and finding cost effective alternatives or solutions are key drivers. The goal is to
improve the reliability, cost and safety to the public who walk over the vaults. The high profile of the
Ottawa downtown can be negatively impacted when outages occur.

Sidewalk Vaults

        Retire the sidewalk vaults by moving electrical equipment into customer vaults on a 50 year
         vault lease agreement, and replace the double-doors on the vault with standard cable
         chamber collars and lids
        Refurbish sidewalk vaults with solid dielectric transformers, improved civil work, and other
         upgrades
        Find alternative supplies, such as customer vaults, consolidate sidewalk vaults or use a
         nearby padmount transformer

Benefits include increased reliability, reduced environmental liability, equipment standardization and
system utilization.

Other Vaults:

        Retire Slater Station supplied 4kV vaults
        Replace jack bus arrangements
        Replace open-air wall mounted switchgear

The Plan

In 2006 the plan is to replace six sidewalk vaults and one underground switching centre.


4.1.1.16     Wholesale Meter Upgrade ($930,318)

Description

Primary wholesale metering installations at supply points, presently owned by Hydro One, must be
replaced with new Independent Electricity System Operator (the “IESO”) approved meters, as per
the Market Rules. The cost of these upgrades is the responsibility of the market participant, who is
also required to take over ownership.

Demographics

Presently, there are 27 Hydro Ottawa substations that have been identified as requiring meter
registration with the IESO.

The Strategy

Hydro Ottawa as a Meter Service Provider (“MSP”) will register and commission all existing and
new registered wholesale metering (“RWM”) installations complying with all requirements as set
forth under the Market Rules. Meter point registration as required in the Market Rules include:

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         Design and construction of the RWM installations,
         Review of conceptual drawing and the submission of single line diagram to the IESO,
         Review of the alternative metering installation standard checklist or declaration of
          compliance of metering installation,
         Complete required calculations for the registered meter point,
         Create and submit the required totalization files to the IESO,
         Create and submit the required files to the IESO,
         Complete the required IESO forms and documents for IESO system access,
         Provide a detailed emergency restoration plan.

Meter point commissioning as required in the Market Rules includes:

         Perform the required on-site end to end testing,
         Confirmation of the engineering units report,
         Totalization table sign-off.

In addition to the registration and commissioning of the wholesale meter points, as MSP, Hydro
Ottawa will be responsible for maintenance and conformance monitoring as required in the Market
Rules as follows:

         Monitor and respond to all issued Meter Trouble Reports (MTR) via the IESO workflow,
         Perform required on-site diagnostic and maintenance of the RWM for an issued MTR from
          the IESO,
         Daily MV90 remote interrogation of each RWM,
         Maintain the Validating, Estimating and Editing (VEE) and MTR relationship required for the
          IESO meter data,
         Perform required remote diagnostic and maintenance of the RWM,
         Notify the IESO of planned and emergency switching,
         Annual review of documentation and tracking meter seal expiry,
         Dispute Resolution,
         Perform required trouble shooting and testing,
         Assist in IESO audits.

The Plan

Hydro Ottawa, as a MSP, will register and commission the wholesale meter points as the seals
expire on the existing meter installations. Several of the meter installations are past the seal expiry
date. Most utilities share a resource limitation with Hydro One in coordinating work within shared
and solely owned Hydro One facilities. The IESO has worked closely with the market participants
over recent years to achieve satisfactory completion of this registration work. Hydro Ottawa is
moving to compliance by furthering its registrations and arranging work with Hydro One on its own
installations.

This work will also be required on future metered substation installations connected to the IESO
controlled grid.




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4.1.1.17     Plant Failure Capital ($698,934)

This program covers the unplanned replacement of failed assets. These failures must be attended
to during the same outage response visit. This could include failed insulators, transformers or any
other distribution asset. The cost for this program is based on historical levels.


4.1.1.18     Damage to Plant ($558,921)

The program covers assets damaged by others (such as poles hit during car accidents or cable
failures due to dig-ins), where there is loss of functional use, and the asset must be replaced. An
attempt to recover 100% of the cost is made whenever possible. However, in many cases, the
persons at fault are unknown, and cost recovery is not possible. The estimated cost of this program
is based on historical levels.


4.1.1.19     Elbow and Insert Replacement ($553,478)

Description

Padmount transformers and switchgear units have conical bushings, called an insert, that accepts
an elbow, a form of a plug that is connected to the incoming and outgoing cables. On the 27.6kV
system, the elbow design has led to flashes as the field crew separates the elbow from the bushing
when energized. This program involves replacement of elbows and inserts that cannot be
separated safely under certain conditions while the circuit is energized. The flash is a safety risk to
employees and usually causes an outage. This is a safety driven program, with a positive impact
on reliability improvement.

Demographics

It is estimated there are 2,139 single and three-phase transformer units left with elbows and/or
inserts to replace.

The Strategy

The strategy is to replace the insert and/or the elbow. This work will be coordinated with other pad-
mounted transformer work (either maintenance or cable replacement) to optimize costs and reduce
outage time. Targeted completion of this program is in 2010.

The Plan

The plan is to replace all bushing inserts with the vented Elastimold Loadbreak 2000 or re-terminate
the cable with the Cooper Posi-Break elbow within the next five years. Some will be replaced when
cables or transformers are replaced.

The schedule is as follows:




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                 2006 - 300 in Bridlewood & 200 in Gloucester
                 2007 - 400 in Gloucester & 100 in Stittsville
                 2008 - 400 in Gloucester & 100 in Stittsville
                 2009 - 400 in Gloucester & 100 in Stittsville
                 2010 - 139 in Gloucester


4.1.1.20     Insulator Replacement ($475,198)

Description

Overhead insulators are devices that support electric wires and prevent an undesired flow of
electricity. They are usually manufactured from glass, porcelain or polymeric material and provide
electrical insulation and mechanical support on overhead lines. Certain horizontal post insulators
manufactured from porcelain have developed cracks and are a breakage hazard problem. The
failure of these insulators could cause overhead conductors to come into contact with each other
resulting in damage to equipment and a subsequent outage. Further, they pose a safety risk to staff
working on the overhead pole.

Demographics

Hydro Ottawa has an estimated 240,000 insulators installed on its overhead network, of which
approximately 7,000 are porcelain horizontal post insulators.

The Strategy

Hydro Ottawa has identified the circuits containing suspect insulators that are deemed a critical
hazard and outlined the requirements for work on poles containing these insulators. The work
procedure states that the insulators must be replaced prior to any work within a 3-meter proximity of
any circuit employing the device. The current practice is to, at minimum, change all insulators on
the pole the crew is working on (3-9 insulators) as well as the insulators on the poles directly
adjacent to the work area.

The Plan

Hydro Ottawa has selected a polymeric insulator for new installations and for replacement of old
units. An insulator replacement program has been introduced to deal with the replacement of
insulators on these affected circuits. The ongoing insulator replacement program deals with the
replacing of insulators on a circuit. Circuits are selected based on their inherent risk and associated
history.


4.1.1.21     Distribution Automation ($464,867)

Distribution Automation (DA) is an ongoing capital program to facilitate the quick transfer of circuit
open points with the objective of restoring the highest number of customers in the shortest amount
of time during an outage. In the past few years a large portion of these capital funds were devoted
to the Kanata sector, which was experiencing higher than average system outages.

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In 2006, the plan is to automate existing pad-mounted gear in the Kanata and the Gloucester
sectors. Six remote-operated overhead switches are also planned. These will be remotely operated
from Hydro Ottawa‟s control room.


4.1.1.22     Station Transformer PCB Removal ($422,920)

This program consists of replacing the oil in station transformers that contain PCB mineral oil with
new non-PCB oil. The main drivers behind this program are changes to the Canadian
Environmental Assessment Act, and are part of Hydro Ottawa's Environmental Management
Program. The retrofilling of power transformers has the added advantage of extending the useful
life beyond the economic life expectancy. The station transformer PCB removal program will target
all station transformers with oil PCB concentrations greater than 500 parts-per-million (ppm) by the
end of 2009.


4.1.1.23     Station Automation ($385,921)

Description

Station Automation (SA) is the program to install new protection and control equipment or data
collection equipment. Specifically, installation of new relays for the purpose of enhancing the
protection of equipment, and/or the installation of a data highway in the substation for retrieving
operational and non-operational data.

Demographics

Hydro Ottawa has 74 substations in which there are approximately 200 switchgear assemblies, 900
circuit breaker/switchers, 173 power transformers, and 80 battery banks.

The technology used in these stations range from basic electro-mechanical devices (1950‟s
technology) to state of the art microprocessor based devices. The older equipment has been
reliable, but is limited in its ability to provide information on activities that occur on the distribution
system. Typically replacement/improvements in these assets has been done in conjunction with the
switchgear arc-proofing retrofit program.

The Strategy

The approach is to install new relays during switchgear replacements or in some cases, when the
switchgear is retrofitted to meet arc-proof requirements. In all cases, installation of new relays will
be done in conjunction with either the Station Assets programs or the Station Enhancements
programs.

Data collection, separate from the protection and control, will help modernize the collection and
analysis of station data. This data will be used to determine asset condition enabling improved
investment decisions.




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The Plan

Asset condition needs to be monitored with both dynamic and static information with the information
integrated into the data pool in the asset management plan. The objective is to connect modern
microprocessor relays via a substation data highway.


4.1.1.24     Overhead Equipment - New and Rehabilitation ($278,901)

Description

Overhead equipment includes overhead conductors, switches and protective devices such as
lightning arrestors and cut-outs. It excludes insulators, potheads, transformers, and distribution
automation equipment, which are covered in individual programs.

This equipment typically fails due to operating and weather deterioration, flawed design, and/or
end-of-life. Some of the switches (e.g. SMD20) may fail upon operation causing both a hazard to
the employee, and a circuit outage.

Demographics

Over half of the distribution system is overhead plant. It is estimated that there are 48,000 lightning
arrestors, 47,000 fused and non-fused switches, and approximately 300 km of residential open-bus
secondary voltage conductor.

SMD20 switches in the 27.6kV system experience problems with porcelain breakage resulting in a
safety concern. There are approximately 8,000 single-phase and three-phase units in service.

The Strategy

The failed or suspect equipment will be replaced to new specifications. To enhance the operability,
reliability, or safety of the network some equipment may also be added.

For SMD20 switches, the plan is to replace switches that are frequently used (dip poles) with
improved units and to develop procedures to reduce the hazard when operating these switches.

The Plan

Estimated replacement of 800 switches on dip poles has been spread over three years.

These assets shall be replaced or added in planned and unplanned instances to ensure the
integrity of the distribution network for the safety of both employees and the public.


4.1.1.25     East End Operations Centre ($7,026,078)

In 2006, Hydro Ottawa will construct the final work center required to better serve those customers
located in the east end of Ottawa. Plans include a 13 bay truck garage and operations office facility
to accommodate 30 field staff along with a separate warehouse facility to store underground cable


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material. This facility will replicate the Maple Grove Road work center located in Ottawa west, which
is scheduled to open in late August 2005.

The project is dependant on land availability and the in-service date is not scheduled until 2007.
The only portion of this project being capitalized in 2006 is the land at $1.1 million. The remainder of
the cost will be construction-work-in-progress (CWIP) at the end of 2006.


4.1.1.26     GIS and OMS ($4,901,719)

Description

The Geographic Information System (GIS) and the Outage Management System (OMS) are parallel
projects to install first time technology. Included is data conversion to assist in automation. With
their implementation Hydro Ottawa will achieve significant efficiencies associated with mapping,
mapping products, and processes that use maps and their background data.

OMS is the primary database and tool for tracking /responding to system outages.

GIS will be the backbone of Hydro Ottawa‟s distribution plant asset records management.

Chronology

At the amalgamation in November 2000, the operational, distribution system asset, and technical
information from each of Hydro Ottawa‟s five predecessor utilities was in varying and inconsistent
forms. Approximately 85% of the system maps were in paper form with different presentation
metrics and information. The smaller utilities in Goulbourn (a predecessor utility) and Casselman
(acquired in April 2002) had no system mapping. Some technical information was tracked in
separate paper files, databases, and spreadsheets. System operation was slow and uncertain while
outage times increased. Formal methods for asset management and subsequent budgeting for the
electrical system sustainment programs were difficult and person dependent. Additional formal
systems were required to track new regulatory (reliability, response, system efficiency, safety,
environmental), operational, and financial information.

Demographics

Each of Hydro Ottawa‟s six predecessor utilities had its own records and mapping systems. Asset
management was very person dependent, relying heavily on individual experience and knowledge.
Hydro Ottawa‟s skilled workforce (knowledge base) is aging. Few people have knowledge of Hydro
Ottawa‟s entire territory. Staff requires timely direction from Dispatch in outage situations. The OMS
is providing this. Also, staff is being moved into unfamiliar neighbourhoods where easy access to
updated information for safe efficient system operation is required. The GIS will provide this.

The Strategy

Starting in 2002, assessment of the technical, operational, and mapping requirements and
challenges began. A business case was developed, and a competition was held to select an
industry standard off-the-shelf solution. Next steps are to develop common standards, correct
and/or gather key system information, and implement over several years.


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The Plan

The initial rollout of the OMS provided basic outage management control in the operational centre
without system mapping. Once the OMS was in place, the GIS configuration began. The Hydro
Ottawa electrical distribution system maps are overlaid onto base maps provided by provincial and
federal agencies. As digital map sections become available, the electrical distribution system is to
be transferred into the outage management system to assist operational staff in monitoring,
controlling, and restoring the electrical system. Since this project is being implemented over several
years, controls to ensure overall project risk mitigation were put into place with routine executive
review and external review.

System Functionality

The initial phase of the OMS has been in live operation since December 2003. Current functionality
consists of an automated system to log distribution system events as they occur and a
computerized map to display accurately the location of where events are occurring within the
system.

The mapping permits staff at the utility to have up to date and consistent information on what is
happening on the distribution system at any given time. The process involves Call Centre staff
inputting customer power outage calls directly into the outage mapping application to notify the
System Control office dispatching staff of where problems are happening. The display of the call
locations on a map results in faster trouble diagnosis and dispatching of crews and a reduction in
internal phone, fax, e-mail, and paper communications.

The event data is then communicated from dispatchers to field staff utilizing mobile computer
technology where crews receive assignments on a laptop installed in the vehicle. As a result, all
dispatch, response, and job completion times are logged in a central database. This information is
further used to generate reports regarding Hydro Ottawa response times. To date, reductions in
time to receive, diagnose, and respond to outage calls is the primary benefit.

Further expansion of the OMS throughout the utility in 2005 and 2006 will include using the tool to
capitalize on mobile communications to streamline current fieldwork.

Also scheduled for 2006 is the incorporation of the GIS electrical system data with the OMS to
facilitate a more efficient process to identify equipment failure and enable faster restoration times.

From 2003 until now, the GIS has been undergoing considerable development. Included in these
efforts has been the standardization of mapping, creation of facility databases, and adoption of best
practices acquired from each of the former utilities.

An intranet based GIS mapping application has also been released to enable users who require
information on transformers, poles, and streetlights to view and run inquiries on the data. Upon
completion of data conversion in 2006, users will have the ability to view information on all
distribution equipment within GIS.

The GIS data conversion stage of the project is presently at the pilot-testing phase with full
production data conversion scheduled to commence during the summer of 2005.



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Financial

The majority of the capital project costs have been and will be, incurred between 2003 and 2006.
Both the GIS and the OMS systems require computer hardware, application software, data
conversion, consultant implementation, in-house staffing resources, and staff training. Overall, the
OMS will cost approximately $6.0 million. The GIS will cost approximately $11.0 million of which
$4.0 million is directly related to the paper map conversion. The planned spending of $4.9 million in
2006 will complete the program.

Key efficiencies supporting the financial business case were:

        Reduce distribution, operating map and key database updates from the many regularly
         updated sources into one centrally available repository by 10%,
        Provide a system to improve expenditure with maintenance and replacement activities and
         optimize distribution network investments up to 10% in targeted program activities,
        Provide planning tools for system growth and reinforcement optimization,
        Enable timely electronic mapping exchange with external entities,
        New designs and changes prepared online thereby eliminating repetitive manual sketch
         transactions between internal groups,
        Provide additional functionality to track new and ongoing regulatory system information such
         as reliability, response, system efficiency, safety, and environmental,
        Eliminate the need to pin paper wall maps and provide online switching orders for system
         operation thus reducing the risk of switching errors that could lead to accidents,
        All outage information recorded digitally for analysis and follow up,
        Reduce outage time for system trouble calls by 5%,
        Analyze outages in the OMS to determine probable cause and identify better equipment
         isolation solutions for system restoration activities,
        Provide system mapping in the field for restoration and construction crews,
        Quickly identify medical and other critical customers with their electrical and geographic
         information,
        Immediate online notification of outage events to all inside and outside staff,
        Dispatching and crew management during system access and problems,
        Backup recovery system for system operation with IT and facility disasters,
        Eliminate the requirement to hire additional staff necessary to maintain manual systems.


4.1.1.27     SCADA and Control Room Upgrades ($3,019,289)

Description

The Supervisory Control and Data Acquisition (SCADA) system is used to monitor and control
station and distribution system equipment and is comprised of three main components:

        Master Station equipment – real time and historical databases, communication servers,
         Operator interface,
        Communication equipment – fibre, leased copper land-line, wireless (data radio & cellular),
        Remote equipment – remote terminal units (RTU‟s), intelligent end devices (IED‟s – relays,
         meters, etc.).


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Demographics

We are currently operating three distinct systems:

        Ottawa „Telvent‟ Master 1998 vintage – 56 Station & 15 Switch RTU‟s,
        Nepean „Quindar‟ Master 1996 vintage – 16 Station & 15 Switch RTU‟s,
        Gloucester „Quindar – Worldview‟ Master 1994 vintage – 8 Station & 42 Switch RTU‟s.

The oldest RTUs are approximately 15 years old and are from different manufacturers.

The Strategy

Migrate three SCADA systems to a single Telvent platform to reduce administration costs
(licensing, maintenance, upgrades, knowledgebase, etc.). Single platform will allow single source
for real-time data like peak system load and single source for historical SCADA data.

Develop the SCADA system to monitor the entire distribution system. Currently there is limited or no
monitoring at several stations.

Known Issues

Since amalgamation, all new SCADA development and Bow Networks protocol translation has
occurred on the Telvent platform. With the added stations and data, the real-time historical servers
and databases are being stressed and system performance is degrading.

The existing Quindar systems utilize QUICS IV protocol for Master-RTU communication. This is a
proprietary protocol and cannot easily be integrated into the „open‟ architecture Telvent system.

SCADA Communication is currently a mix of fibre, leased Bell lines, and wireless. Planned new
distribution automation will require wireless communication. Existing wireless communication in the
Gloucester sector has been unreliable. An overall wireless strategy is required to migrate existing
switch RTU‟s in the Nepean and Gloucester sectors onto the Telvent system.

Future Direction

The existing Telvent SCADA system cannot accommodate additional SCADA development,
migration of existing Quindar systems, and new SCADA requirements (distribution automation, new
substations, new RTU‟s to monitor entire distribution system). A Master Station upgrade is required.
Telvent is no longer developing the system currently in use, but an upgrade path is available with
the newer architecture. The majority of the Hydro Ottawa SCADA system is operating off the
Telvent system. Upgrade and database conversion will be implemented within the Telvent „family‟
of SCADA products.

The Plan

Hydro Ottawa is developing specification and functional requirements for a SCADA system upgrade
and request a proposal from our existing provider.

Investigation and testing of various wireless SCADA communication solutions has begun.


2006 EDR Application
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Hydro Ottawa is upgrading a number of RTUs with up-to-date models to improve reliability. These
upgrades are inexpensive since a complete RTU replacement is not required and the existing wiring
can remain in place.

        Master Station upgrade (2006). This project includes replacement of the existing Telvent
         system with the latest generation hardware and software.
        Upgrade existing Quindar station RTU’s to allow Master-RTU DNP protocol communication.
        Upgrade/replace existing Quindar switch/recloser RTU’s.
        RTU refurbishment/replacement. Currently, there are approximately 150 RTU‟s on the
         SCADA system ranging in age from new to 15 years old. An annual expenditure of $50,000
         is planned to upgrade/refurbish/replace older RTU‟s.
        Extend SCADA to unmonitored parts of the distribution system. This program involves the
         installation of new or upgrading existing supervisory equipment at wholesale supply points
         embedded within Hydro One owned distribution circuits or facilities.
        SCADA wireless communication. A new wireless data radio infrastructure is planned to
         accommodate the existing RTU migration as well as any new distribution automation
         devices proposed for these areas.
        SCADA fibre communication. This project involves upgrading the existing SCADA fibre
         communication system.
        Develop real-time and historical SCADA data reporting tools.
        SCADA integration of Distribution Automation devices. Approximately $25,000 per device is
         required for SCADA integration to allow remote operation and monitoring.


4.1.1.28     Vehicle Replacements ($2,589,689)

The following guiding principles govern the replacement of fleet vehicles. They define when new
acquisitions are required or when replacements are needed. They are based on a multi-year capital
plan.

        Provision of safe, reliable and efficient vehicles & equipment to meet the operational
         requirement of the corporation,
        Cost effectiveness (Life Cycle Management),
        Compliant with accepted industry norms & practices – replacement criteria consider age,
         accumulated km/hour, general condition and when exceeding one-time repair limits,
        Standardization of equipment specifications,
        Alignment of funding with corporate objectives,
        Environmental consideration – fuel economy, exhaust emissions,
        Optimization of size of fleet (kept to minimum critical level, elimination of redundancy),
        Purchasing options: new, used, refurbishment,
        Tendering and bulk buys,
        On-going consultation with the user community through the fleet council,
        Disposal through recognized and reputable commercial vehicle & equipment resellers.

The current status of Hydro Ottawa‟s fleet is that most vehicles are beyond the normal retirement
age based on accepted industry standard lifecycles. Additional investment is required to ensure the
fleet meets the needs of the workforce. The plan for 2006 is to replace eight large vehicles (boom


2006 EDR Application
                                                                                                                                                    Hydro Ottawa Limited
                                                                                                                                                           RP-2005-0020
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trucks and bucket trucks), 14 midsize vehicles (vans and pickup trucks) and three cars. A critical
component for quick outage restoration is well-maintained and operational vehicles. The
degradation of the fleet may jeopardize outage response capability if it is allowed to continue.

Figure 4.12 shows that the actual average age of Hydro Ottawa vehicles in all categories (except
for pole trailers) exceeds the target lifecycle average age. The target lifecycle average age is the
theoretical average age for vehicles in a category, if accepted industry standard lifecycles are
followed. The planned 2006 vehicle replacements bring Hydro Ottawa closer to, but still over, the
target lifecycle average age.



                                            Fleet Replacem ent Program - Curent Status vs Target Lifecycle


                       20
    Avg Years of Age




                       15

                       10

                       5

                       0
                            Cars   Bucket     St ake /   Radial Boom     Knuckle     Compact   Full Size    Full Size   Compact Vans St ep / Cube   Tension    Trailers - Pole
                                   Trucks     Flat bed    Derricks     Boom Trucks   Pick-Up   Pick-Up     Cargo Vans                    Vans       Machines
                                               Trucks                                Trucks    Trucks


                                                   Target Lifecycle                    Current Status                    Status After 2006


Figure 4.12 – Fleet Demographics


4.1.1.29                    Bank Street Rehabilitation ($1,981,694)

This 52,000 square-foot facility was partially renovated in 2004-2005 to accommodate the
relocation of the Fleet Vehicle Service Center from the Albion Road facility. This move was made in
part due to community safety concerns with the growing amount of urban in-fill around the Albion
Road facility and the high volume of large fleet vehicle traffic through the surrounding community.
Bank Street offered a more industrial location for our fleet repair facilities while utilizing an existing
property more effectively. Renovations in 2006 will include upgrades to the sanitary sewer system,
PCB storage facilities, fire suppression system and minor office interior repairs.


4.1.1.30                    CIS Software Enhancements ($1,819,600)

Changing standards and external requirements in 2005 have lead to changes in CIS requirements.
The CIS development is expected to be active in 2006 in response to continued evolving regulatory
requirements and increasing emphasis on improving business efficiencies. Although particular
items may shift based on evolving business priorities, the following are some items that will be
undertaken:

                       Rate changes for Regulated Price Plan (RPP),
                       Completion of RPP Smart Meter price implementation,

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        Refinements to bill presentment to satisfy customer requests and regulatory needs,
        Streamlining field orders to a non paper-based alternative,
        Leveraging workflow to automate repetitive actions currently triggered by users,
        Streamlining of work-list assignment to users,
        Development of further queries and reports for data intelligence gathering.

These will improve customer service, and internal efficiency.


4.1.1.31     Merivale Road Additions ($1,278,083)

This 50,000 square-foot property received an extensive upgrade in 2003 to accommodate the
relocation of a significant portion of the Operations and Engineering Design groups along with
construction of a 10 bay fleet garage and consolidated supply chain warehouse facility. As the final
step in the movement of the Operations Department from Albion to Merivale, renovations are
underway to relocate the Asset Management group and System Control room functions to Merivale
Road. Once completed in late 2006, the Merivale facility will be fully occupied.


4.1.1.32     Albion Road ($905,245)

As discussed in the Facilities Strategic Plan overview, the decentralizing of Operations personnel to
various satellite work centers throughout the Hydro Ottawa service territory will trigger the potential
disposal of Albion Road in favour of a smaller and less costly facility targeted for 2007. The 200,000
square-feet of office space on 21 acres of land is now in the middle of a highly concentrated urban
community. As well, the facility has become increasingly inadequate to support the organizational
structure or the long-term strategic direction of Hydro Ottawa.

The capital expenditures associated with Albion Road for 2006 are specifically directed at those
costs solely required to address environmental and legislative requirements in advance of property
disposal along with critical maintenance system repairs that must be completed to sustain
occupancy through to the end of 2007.


4.1.1.33     Carling Operations Centre Storage Building ($615,715)

This 15,000 square-foot facility received extensive upgrading in 2003 to serve as a central
Operations work center. Given its ideal geographic location within the City of Ottawa (central and
near the free-way), additional Operations construction personnel have been relocated to this site
resulting in the need for further investment in inventory and vehicle storage facilities.


4.1.1.34     Stations Building Rehabilitation ($572,940)

In concert with the rehabilitation of the electrical side of substations, this program addresses the
need to ensure station buildings are able to meet the needs for years to come. Roof, door and
window replacements at various stations, as required, are all included in the project.




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4.1.1.35     Upgrade to JDE Financial System ($571,651)

In 2003, Hydro Ottawa adopted JD Edwards as its financial management system. With the
necessary business processes and policy and procedures now documented within this system,
further upgrades are now necessary to retain vendor-managed warranties and support. Hydro
Ottawa had delayed such upgrades to the software system until the Oracle and JD Edwards merger
was finalized in early 2005, to ensure the systems would be secure.


4.1.1.36     Business Continuity Plan ($315,117)

Hydro Ottawa has an on-going effort to maintain appropriate system security, redundancy and life-
cycle management. Capital investment for this program will focus on the increased acquisition of
software and hardware related to Internet security, virus protection and network redundancy in
2006. Replacement of network servers, aging desktop computers and enhancements to the
telephony system are all part of this overall business continuity plan.


4.1.1.37     Conservation & Demand Management ($1,420,012)

This is part of Hydro Ottawa‟s CDM plan approved by the Board in December 2004. Hydro Ottawa‟s
spending for CDM continues as targeted.


4.2      Interest on Deferral Accounts and Construction Work in Progress (CWIP)

For 2005 and 2006, based on the Handbook, Hydro Ottawa has used its weighted average cost of
capital as the rate for the allowance for funds used during construction (AFUDC). For 2004 and
earlier, the rate used for AFUDC was the deemed long-term debt rate. The rates for 2005 and 2006
are calculated as follows:

2005

Deemed Debt rate: 6.9%
Deemed Return on Equity: 9.88%
Tax Rate: 36.12%
Deemed Debt / Equity: 60/40

After-tax weighted average cost of capital = 6.9% x 60% (1-36.12%) + 9.88% x 40% = 6.6%

2006

Average Long-Term Debt rate: 5.25%
Deemed Return on Equity: 9.0%
Tax Rate: 36.12%
Deemed Debt / Equity: 60%/40%

After-tax weighted average cost of capital = 5.25% x 60% (1-36.12%) + 9.0% x 40% = 5.6%



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4.3      Capitalization Policy

Included in Tab C of the Application Binder is a copy of Hydro Ottawa‟s capitalization policy. This
policy is based on capitalization of fully allocated costs.


4.4      Contributed Capital

Contributed capital collected prior to January 1, 2000 is included in rate base. From January 1,
2000 onwards, contributed capital has been netted out of net fixed assets and therefore, out of rate
base.


4.5      Treatment of Capital Gains and Losses

Assets Sold to a Non-Affiliate

Hydro Ottawa has no plans to sell non-depreciable assets to a non-affiliate in 2006.


Assets Sold to an Affiliate

Hydro Ottawa has no plans to sell non-depreciable assets to an affiliate in 2006.




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Chapter 5 – Cost of Capital

5.0      Introduction


5.1      Maximum Allowed Return on Equity

Hydro Ottawa has elected to use the maximum rate of return on equity of 9.00%.


5.2      Debt Rate

The weighted average debt rate proposed by Hydro Ottawa is 5.25%. Details of the calculation are
provided in Schedule 5-1.

Schedule 5-1: Weighted Debt Cost
(1)        (2)          (3)          (4)          (5)           (6)        (7)     (8)          (9)
                                 Is Debt
                                                                                          Debt rate used
                        Debt     Holder         Date of                   Term Actual
No. Description                                              Principal                     for weighted
                       Holder   Affiliated?    Issuance                  (Years) Rate
                                                                                          debt rate cost
                                   (Y/N)
                   Hydro
      Promissory
 1                Ottawa            Y         July 1, 2005 $200 million > 1 year 5.14%        4.43%
         Note
                 Holding Inc
                   Hydro
      Promissory                                             $32.185
 2                Ottawa            Y         July 1, 2005               > 1 year 5.90%       0.82%
         Note                                                 million
                 Holding Inc



                                                             $232.185
      Total:                                                                                  5.25%
                                                              million
Table 5.1 – Weighted Debt Cost


5.3      Capital Structure

Hydro Ottawa‟s deemed debt/equity structure is 60/40. The 2004 capital structure for Hydro Ottawa
is summarized in Schedule 5-2. The actual debt/equity is well within ten percentage points of the
deemed structure. For 2006, Hydro Ottawa continues to set 60/40 as its target debt/equity structure.




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Schedule 5-2: Actual Capital Structure of the Distributor

This Schedule is incorporated into the 2006 EDR Model under Tab 3-3 Capital Structure.

Line                                      ($000)     (%)      Deemed         Cost
                                                              Structure      Rate
(1)       Long Term Debt                  232,185    47%                     5.25%
(2)       Unfunded Short Term Debt         64,575    13%                     Variable%
(3)       Total Debt   (3) = (1) + (2)    296,760    60%        60%

(4)       Preferred Shares                 N/A       N/A      N/A            N/A
(5)       Common Equity                   197,631    40%       40%            9.0%
(6)       Total Equity (6) = (4) + (5)    197,631    40%       40%            9.0%

(7)       Total         (7) = (3) + (6)   494,391    100%
Table 5.2 – Capital Structure


5.4      Working Capital Allowance

Hydro Ottawa has complied with the Boards treatment of Working Capital Allowance. The cost of
power used to calculate the Working Capital Allowance is $575,112,014 from Hydro Ottawa‟s 2006
Load Forecast in Tab D of the Application Binder. The commodity rate was taken from the report
entitled “Summer 2005 Ontario Wholesale Power Market Assessment” authored by Navigant
Consulting dated May 2005. All other rates used in the cost of power calculation are from 2005
actuals.




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Chapter 6 – Distribution Expenses

6.0      Introduction

Among the most important events in 2004 for Hydro Ottawa was the implementation of a new CIS.
This new system enables Hydro Ottawa to meet the needs of its customers and other electricity
industry stakeholders. To accommodate this major project some operational activities were scaled
back to ensure adequate funding and resources were available for its successful completion.

A new collective bargaining agreement was signed in 2004 after Hydro Ottawa experienced its
longest work stoppage in more then 10 years (including predecessor utilities). The new collective
agreement includes wage increases of 3% each year for the 3-year term of the agreement.

Moderate weather in 2004 translated into lower costs for outages and system repairs. This weather
impact reduced the amount of power purchases in 2004 compared to other years. A comparison of
2004 to 2006 requires this unusually moderate weather experienced in 2004 to be taken into
account.

Regulation will continue to be a focus in 2006 because there is stronger hazardous substance
legislation and tighter handling restrictions, as well as increased regulation by the Electrical Safety
Authority. Hydro Ottawa achieved ISO 14000 certification for environmental stewardship in 2004
and will continue to take a leadership role in this area.

The following table summarizes Hydro Ottawa‟s distribution expenses based on the Board‟s
grouped accounts.

Operations, Maintenance and
Administration (OM & A)                         2003            2004           2005           2006
Operation                                     $19,866,853      $12,897,834   $13,698,000    $17,796,032
Maintenance                                     5,813,689        5,609,524      5,878,000     4,031,435
Billing and Collection                          8,606,249        8,336,519      8,724,000     9,257,432
Community Relations                             2,286,906        3,247,063      3,143,000     3,595,624
Community Relations - CDM                               0                0              0             0
Administrative and General Expenses             1,388,432        3,616,767      2,037,000     6,443,241
Insurance Expense                                 371,044          253,431        270,000       210,000
Bad Debt Expense                                4,179,485        1,110,205      1,175,000       900,000
Advertising Expenses                               17,139           38,701              0        62,000
Charitable Contributions                           60,589           86,130         99,000       100,000
Other Distribution Expenses                     4,016,619        4,631,169      3,311,000     3,331,751
                                      TOTAL $46,607,003        $39,827,343   $38,335,000    $45,727,516
Table 6.1 – OM & A Expenses




2006 EDR Application
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6.1                        Operations, Maintenance and Administration

Operations and Maintenance

Hydro Ottawa‟s Operations department continues to balance the needs of customers with the need
for fiscal responsibility. This department is the cornerstone of the commitment to deliver safe and
reliable service to the City of Ottawa. It is critical to have flexible programs that can adapt in an
ever-changing environment. Some of the challenges faced by staff are issues such as regulatory
compliance, collective agreements and an aging workforce.

Hydro Ottawa‟s corporate structure combines the operations and maintenance function into a single
unit. Some allocations between these two functions have changed between 2004 and 2006.
Therefore, for comparison purposes, operations and maintenance expenses should be considered
in their totality.

The re-instatement of a trades apprenticeship program will attempt to correct a looming problem of
depletion of skilled labour within Hydro Ottawa. Hydro Ottawa expects to hire 20 new apprentices
by the end of 2006 at a cost of $1.5 million for labour and training. These apprentices are
anticipated to be fully qualified in four years. Figure 6.1 below indicates the staff issue faced by
Hydro Ottawa based solely on normal retirements. Hydro Ottawa must start its apprentice program
now to ensure adequate staffing levels in the future. This constitutes the first apprentice hires by
Hydro Ottawa and its predecessor utilities since the mid 1990‟s. It is forecasted to hire 10
apprentices each year for the foreseeable future.


                                              Operations and Maintenance Staff

                          120

                          100
    Number of Employees




                          80

                          60

                          40
                          20

                           0
                             05
                             06

                             07
                             08
                             09
                             10
                             11
                             12
                             13
                             14
                             15
                             16
                             17
                             18
                             19

                             20
                             21
                             22
                             23
                             24
                           20
                           20

                           20
                           20
                           20
                           20
                           20
                           20
                           20
                           20
                           20
                           20
                           20
                           20
                           20

                           20
                           20
                           20
                           20
                           20




                                                                    Year

                                        Current Staff   Apprentice Graduates   Total Qualified Staff

Figure 6.1 – Apprentice Program




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In addition to the apprentice program, compensation expenses will also increase by approximately
$2.0 million as a result of the new collective bargaining agreement and positions to be filled in 2006.

Hydro Ottawa will increase expenditures to deal with provincial legislation governing hazardous
materials, including PCBs and asbestos, and to maintain the historical 3-year vegetation
management program. The following provides a more detailed description of some of the programs.


6.1.1.1      Vegetation Management

Description

Hydro Ottawa‟s Vegetation Management involves managing the distribution corridors within its
service area. A corridor is defined as the area adjacent to overhead lines. Hydro Ottawa has rights
to construct, operate and maintain electric utility distribution lines (i.e., distribution feeders) as a
licensed local distribution company (LDC) in the City of Ottawa. Corridors provide the land base for
constructing and installing lines at voltage levels of 44 kV and below. These corridors provide a
secure means for the safe and reliable distribution of electricity.

Demographics

Demographic information for corridors has been collected from various sources included in Hydro
Ottawa‟s existing condition assessment and vegetation management programs. Hydro Ottawa
manages about 4,830 km of lines that require tree clearance work. Those lines occupy corridors
that must be maintained regularly to ensure the safe and reliable supply of electricity to Hydro
Ottawa‟s customers.

Condition demographics were developed as part of the asset management process. A summary of
the condition assessment for corridors is shown in Figure 6.2. This is based on an initial survey of
12 areas scheduled for a full trim this year. The chart below shows that immediately leading up to a
trim, corridors are generally in Poor and Very Poor condition. The condition assessment of
corridors just prior to a trim indicates, that the trim rate should be no longer than the current 3-year
cycle. With increased cutback distances (e.g. greater than 10 feet), the cycle could be extended,
however increased trimming is limited by practical reasons such as National Capital Commission
(NCC) guidelines, the City of Ottawa, customer expectations and general aesthetics.




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                                                  Vegetation Condition Assessment
                                                           Before Trimming

                                                                                                 Fair
                                                                                                 8%

                                                Poor
                                                58%
                                                                         Very Poor
                                                                           34%



                                                                                                        Good
                                                                                                         0%
                                                                                       Very Good
                                                                                          0%

Figure 6.2 – Vegetation Condition Assessment (pre-trim)

The Plan

The asset management process compares the costs and benefits of a faster tree-trimming program.
Figure 6.3 shows the number of tree-related failure events for each year after a full trim. This
illustrates the direct correlation between power outages and the elapsed time since trees have been
trimmed.



                                                      Tree-Related Failure Events
                                          120


                                          100
               Number of Failure Events




                                          80


                                          60


                                          40


                                          20


                                           0
                                                  0                      1                   2
                                                               Years Since Last Trim

Figure 6.3 – Tree Related Failures in Relation to Last Tree-Trim




2006 EDR Application
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Figure 6.4 shows tree-trimming program costs. The annual cost of trimming (green curve) is based
on Hydro Ottawa‟s most recent contract amount of $1.7 million per year, to trim one-third of the total
system (i.e. the present 3-year trim cycle). Based on this, the annual cost of a one-year or a two-
year trimming cycle was estimated.

The Total Cost curve shows there may be an advantage to a faster tree-trimming program.
However, for 2006, the historic three-year cycle has been maintained.



                                      Total Cost of Trimming Program
                                250
                                                                                             $12




                                                                                                   Cost of Trimming (millions)
                                200                                                          $10
               Cost in Points




                                                                                             $8
                                150
                                                           Total Cost
                                                                                             $6
                                                           Average Annual Cost of Failures
                                100                        Annual Cost of Trimming
                                                                                             $4

                                50
                                                                                             $2


                                  0                                                          $0
                                      1                2                        3
                                           Period of Trimming Program

Figure 6.4 – Tree Trimming Costs


6.1.1.2      Thermographic (IR) Scanning and CO2 Washing

Hydro Ottawa uses infrared (IR) scanning, a heat detection technology, as an early detection
preventative maintenance method to find possible plant failure. The program results in an increase
in system reliability and safety, and extends the useful life of the assets in the distribution system.
The program involves Hydro Ottawa‟s entire distribution system consisting of substations, poles,
transformers, overhead conductor, underground cable and pad-mounted switchgear. The CO2
wash program is based on the scanning program report for pad-mounted switchgear. The CO2
method has allowed switchgear to be maintained in an efficient and cost effective manner. The
process involves cleaning energized switchgear using dry ice. Compared to washing with water,
this affords flexibility to schedule switchgear maintenance throughout the year while decreasing
maintenance costs, eliminating interruptions, avoiding switching thereby removing the associated
safety concerns, and freeing up manpower.




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6.1.1.3      Insulator Washing

The insulators in the Hydro Ottawa system become contaminated by road salt, vehicle exhaust, and
smoke stack emissions. The City of Ottawa uses more salt during the winter than many other
Ontario municipalities. In damp weather, these insulators can flashover, cause pole fires, and
jeopardize system‟s reliability. To avoid this, Hydro Ottawa has adopted an extensive insulator-
washing program along the major roadways where contamination builds normally; full washing of
these critical, 44kV, 27.6kV and 13.2 kV circuits is done in early spring (around mid-February), and
selective washing in the fall (around mid-October) each year. The program also involves washing
all under-build of 8 kV or more. Washing of polymer insulators on dead-ends and 44 kV switches is
also part of this program.


6.1.1.4      Graffiti Abatement

The purpose of the graffiti abatement is to remove and/or prevent inappropriate messages and
statements, graphical or text, on Hydro Ottawa‟s assets (e.g., buildings, pad-mounted transformers
or switchgear), from general public visibility. The requirement for this service is established under
Hydro Ottawa‟s commitment to the Ottawa Utility Coordinating Committee (UCC). Assets to be
addressed are identified by the City by-law enforcers, the police and the public at large.

The program typically involves provision of standard or anti-graffiti coating on Hydro Ottawa‟s pad-
mounted equipment. The standard paint coating is a quick-dry gloss enamel type, while the anti-
graffiti is an epoxy base or aliphatic clear finish. Normally, Hydro Ottawa‟s field representative
assesses the type of coating needed. The program also includes the re-instatement of the area
around the equipment, and re-labelling of the equipment using the approved materials and label
placement specifications.


Billing and Collection

Hydro Ottawa bills its residential and small commercial customers every two months. Commercial
customers above 50 kW are billed monthly. Manual meter reading services are linked to these
billing cycles and are out-sourced to an external provider. Hydro Ottawa‟s Meter Data Service
(MDS) group is responsible for reading interval meters on a daily basis. Details of Hydro Ottawa‟s
CIS and associated billing costs are discussed in a report in Tab C of the Application Binder.


Administration and General Expense

The 2006 expenses in the Administration and General Expense category have increased from
2005. As per the Board‟s letter dated December 20, 2004, OEB Cost Assessments are recorded in
a deferral account (sub-account of Account 1508) for a portion of 2004 and for all of 2005.
Furthermore, as per the Board‟s February 15, 2005 letter, Hydro Ottawa records its 2005 OMERS
pension contributions in a deferral account (sub-account of Account 1508). For 2006, these
amounts will no longer be recorded in deferral accounts, and therefore, become administrative
expenses.




2006 EDR Application
                                                                                    Hydro Ottawa Limited
                                                                                           RP-2005-0020
                                                                                           EB-2005-0381
                                                                                                   Tab B
                                                                                        Filed 2005-08-02
                                                                                          Page 67 of 118
Hydro One will be re-instating its Low Voltage (“LV”) charges in 2006. This amount has been placed
in Account 5665 as per the 2006 EDR Model sheet ADJ 5. The estimate for these charges is based
on Hydro One‟s current rates. If Hydro One receives approval from the Board for different rates,
Hydro Ottawa proposes to track the difference in a variance account.


Community Relations

Included in the cost for Community Relations are Hydro Ottawa‟s Call Centre activities (both
internal and outsourced). Cost increases are primarily due to the added call volumes received by
the outsourced Call Centre.


6.2      Detailed Report for Specific Distribution Expenses

Insurance Expense

Hydro Ottawa's liability, automobile and property insurance policies are underwritten by MEARIE,
the Municipal Electric Association Reciprocal Insurance Exchange, a reciprocal insurance
exchange created in 1987 to address the insurance needs of municipal electricity utilities. Crime
insurance (Great American Insurance) policies are provided through MEARIE commercial
underwriter partners. Hydro Ottawa‟s broker, Marsh Canada, provides insurance policies using
commercial insurers like Chubb for travel insurance.

Comprehensive general liability (CGL) is based on corporate revenue. As revenue increases, so do
premiums. Property insurance increased dramatically in 2003 due to the 9/11 attack in New York
City. Hydro Ottawa changed its insurance carrier in 2004, which resulted in a property insurance
rate reduction of more than 40%.


Schedule 6-1: Insurance Expense
Type of Insurance          2002           2003           2004           2005            2006
CGL                         $511,767       $536,835       $574,564       $611,515        $658,848
Auto                          44,513         49,056         58,223         58,568          60,925
Property                     125,452        327,198        181,920        199,422         209,291
Crime                          7,560           9,251         9,754          8,720           7,635
Travel                         3,000           2,836         2,836          2,623           2,570
                            $692,292       $925,176       $827,297       $880,848        $939,269
Table 6.2 – Insurance Expense



Bad Debt Expense

The allowance for doubtful accounts is developed based on an assessment of the following
components:
    Billed accounts receivable - active vs. finalled accounts,

2006 EDR Application
                                                                                       Hydro Ottawa Limited
                                                                                              RP-2005-0020
                                                                                              EB-2005-0381
                                                                                                      Tab B
                                                                                           Filed 2005-08-02
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        Unbilled revenue - active vs. finalled accounts,
        Meter disputes.

The methodology used to estimate the allowance for doubtful accounts in 2006 is consistent with
that used in prior years.


6.2.1.1 Billed Accounts

Billed accounts include accounts for Standard Supply Service (SSS) customers and retailer-
enrolled customers. In addition, some SSS customers are on payment plans.

In order to remain on the budget billing payment plan option, customers must keep their payments
current. Customers unable to do so are taken off the payment plan stream. Balances for payment
plan accounts are therefore not provided for.

Balances due from retailers are also considered 100% collectible as settlement is occurring in an
accurate and timely fashion.

The remaining active accounts are provided for at the rate of 10% of balances outstanding over 90
days. Finalled accounts are provided for at the rate of 95% of balances older than 90 days. The
approach is consistent with Hydro Ottawa‟s collection experience with these accounts.


6.2.1.2 Unbilled Revenue

Unbilled items are evaluated on a basis similar to that used for billed accounts except for balances
greater than $25,000, which are typically excluded. Accounts with amounts greater than $25,000
are with larger organizations with a good payment history and therefore are expected to be fully
recovered.


6.2.1.3 Meter Disputes

These items are excluded from the groupings above and a provision is set based on each account‟s
specific circumstances.


6.2.1.4 Account Write-off Practice

The current practice is to write-off all finalled accounts over 120 days after the reminder notices are
sent and internal reviews completed. These accounts are written off and sent to one of the three
collection agencies, which were selected through a request for proposal (RFP) process.




2006 EDR Application
                                                                                      Hydro Ottawa Limited
                                                                                             RP-2005-0020
                                                                                             EB-2005-0381
                                                                                                     Tab B
                                                                                          Filed 2005-08-02
                                                                                            Page 69 of 118

Schedule 6-2: Bad Debt Expense
                               2002           2003          2004          2005            2006

Residential                   $1,470,319     $3,255,819     $751,609      $795,475         $609,300
GS<50 kW                         263,903        580,948       234,253       247,925         189,900
GS>50 kW                          61,039        338,538        83,265        88,125          67,500
GSTOU (1500 to 5000 kW)                0          4,179        41,078        43,475          33,300
Large Use                              0              0             0             0               0
Street Lighting                        0              0             0             0               0
Sentinel Lights                        0              0             0             0               0
                              $1,795,261     $4,179,485    $1,110,205    $1,175,000        $900,000
Table 6.3 – Bad Debt Expense


There were no individual bad debt occurrences in 2004 that surpassed the materiality threshold of
0.2% of Distribution Expense.


Information Technology Expenses

Hydro Ottawa manages information technology (IT) through a federated IT structure as compared
to a centralized or decentralized model. A federated IT structure supports a common business
structure, driving financial efficiencies and optimizing processes, while providing agility within
individual lines of business within Hydro Ottawa.

Core IT infrastructure, corporate applications, voice and data services, are managed and operated
by the Information Services and Technology group. The SCADA system, the OMS application and
the GIS application (presently in implementation stage), are managed by groups within the
Operations department. Hydro Ottawa‟s CIS (Customer Information System) transitioned from
implementation phase to system start-up in 2004 and is managed by Customer Care‟s Business
Services component. Through a services management and hosting contract, IBM assists
Customer Care with operating and maintaining the CIS application.

Hydro Ottawa‟s IT governance process provides for alignment of information technology strategy
with corporate objectives and goals. Dedicated project teams are formed for large IT projects with
oversight and guidance provided through cross-functional Steering Committees. Similar project
management principles are applied to smaller projects but management and oversight are provided
within each department. As applications and systems evolve and become more integrated, the
day-to-day operation and management of these systems is usually transferred from the
implementing department to the Information Services and Technology group.




2006 EDR Application
                                                                                        Hydro Ottawa Limited
                                                                                               RP-2005-0020
                                                                                               EB-2005-0381
                                                                                                       Tab B
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Advertising, Political Contributions, Employee Dues, Charitable Donations, Meals/ Travel
      and Business Entertainment, Research and Development

6.2.1.5 Advertising

The advertising budget is spent primarily on educating customers about pending industry changes
and upcoming service affecting events such as rate changes, changes to bill layout, outages and
many others. It is important that all customers are made aware of these pending changes.

Newspaper advertisements are often used to inform customers of planned service outages to
repair, install or upgrade equipment. In addition, there is a follow-up with a customer letter to each
household.

Hydro Ottawa will not have any "branding" or corporate image advertising expenses in 2006.


6.2.1.6 Political Contributions

Political contributions are prohibited by Hydro Ottawa‟s code of conduct. Consequently none are
included for 2006.


6.2.1.7 Employee Dues

There were minimal amounts of employee dues for social and recreational activities in 2004,
however, they will not be continued in 2006 and are therefore not included in this Application.


6.2.1.8 Charitable Donations

Hydro Ottawa is not applying for the recovery of any of its charitable donations. Therefore, it has not
provided a comprehensive list.

Schedule 6-3: Charitable Donations
                                2002           2003           2004          2005            2006

Various Donations                       0              0         86,130         8,000          10,000
Ottawa Safe Community                   0         34,736              0        40,000          40,000
United Way Matching                     0         25,843              0        40,000          40,000
Dollars for Doers                       0              0              0        10,000          10,000

                                        0        $60,589       $86,130        $98,000       $100,000
Table 6.4 – Charitable Donation




2006 EDR Application
                                                                                       Hydro Ottawa Limited
                                                                                              RP-2005-0020
                                                                                              EB-2005-0381
                                                                                                      Tab B
                                                                                           Filed 2005-08-02
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6.2.1.9 Meals/Travel and Business Entertainment

Hydro Ottawa has included in Tab C its corporate Travel and Entertainment Policy outlining how
reimbursements for travel expenses are allowed and providing guidelines for travel expenses.


6.2.1.10     Research and Development

Hydro Ottawa has not included any Research and Development expenses in 2006, or in prior years.


Employee Total Compensation

In 2003, Hydro Ottawa reorganized by moving 100 employees in Corporate Services and Finance
from the Holding Company to Hydro Ottawa. There was no overall impact on cost as all employees
were dedicated to Hydro Ottawa activity. As well, 30 employees took advantage of the OMERS
early retirement incentive prior to December 31, 2003.

Hydro Ottawa experienced a work stoppage in 2004 where more then 350 unionized employees
were absent for seven weeks, representing almost 75% of its workforce. The effect was to reduce
the average base salary and overtime paid to unionized workers. During the same time period
Management was paid overtime to ensure adequate coverage for outages and customer support.

Hydro Ottawa will be filling a number of positions across the company in both 2005 and 2006, to
replace employees that have recently retired or to fill new positions required for functions such as
Environment and Emergency Preparedness, changes in regulatory requirements as well as the new
apprenticeship program.

The largest percentage of new employees, 33 employees, will reside in the Operations department.
The apprentice program, described in section 6.0.1, will have 20 new apprentice trades personnel
added by the end of 2006. Within System Operations (Control Room and 24/7 response) there are
a total of six employees, including additional shift supervisory staff both in the System Office and in
the field. This is part of Hydro Ottawa‟s plan to introduce management supervision for after-hours
response. The balance is made up of additional technical and administrative staff. The Stations
group will be filling three positions in 2006. The Construction group will be hiring two supervisors
into positions currently staffed with acting supervisors.




2006 EDR Application
                                                                                              Hydro Ottawa Limited
                                                                                                     RP-2005-0020
                                                                                                     EB-2005-0381
                                                                                                             Tab B
                                                                                                  Filed 2005-08-02
                                                                                                    Page 72 of 118


Schedule 6-4: Employee Compensation
Number of Employees (Full-time equivalents (FTEs)):

                                 2002            2003            2004            2005             2006

Executive                                 3               5                 10           10               10
Management                               69              65                 78           83               84
Non-unionized                             0              31                 31           37               39
Unionized                               387             359                353          361              390

                                        459             443*               472          491              523
Table 6.5 – Number of Employees

*Effective January 1, 2004 the actual FTE count was 513. This was a result of transferring 100 FTEs from the
Holding Company to Hydro Ottawa and the retirement of 30 FTE‟s. The net result is an increase of 70 FTE‟s
for Hydro Ottawa on January 1, 2004. With the introduction of Hydro Ottawa‟s new CIS in September 2004,
Customer Care staff levels were reduced, resulting in the lower year-end number for 2004.


Compensation – Average Yearly Base Wage ($):
                                 2002            2003            2004            2005             2006

Executive                          130,000         130,405        117,579         119,875           125,280
Management                          71,290          67,879         71,586          75,459            78,706
Non-unionized                            0          49,591         57,825          61,461            67,776
Unionized                           50,304          51,352         47,158          56,175            59,459
Table 6.6 – Base Wage


Compensation – Average Yearly Overtime ($):
                                                                       1
                                 2002            2003           2004             2005             2006

Executive                                0                0        11,666               0                 0
Management                               0                0        15,748               0                 0
Non-unionized                            0                0         9,027               0                 0
Unionized                            5,325            4,931         4,331           5,879             4,456
Table 6.7 - Overtime




1
 Management and non-union staff typically do not earn overtime. Overtime in 2004 was the result
of the 7-week strike by the unionized staff.



2006 EDR Application
                                                                                        Hydro Ottawa Limited
                                                                                               RP-2005-0020
                                                                                               EB-2005-0381
                                                                                                       Tab B
                                                                                            Filed 2005-08-02
                                                                                              Page 73 of 118


Compensation – Average Yearly Incentive ($):
                               2002           2003           2004           2005            2006

Executive                         29,943         31,452        42,895          29,868          31,058
Management                         9,110         10,394        14,723          12,584          12,392
Non-unionized                          0          4,941         7,653           6,146           6,118
Unionized                              0              0             0               0               0
Table 6.8 - Incentive


Compensation – Average Yearly Benefits ($):
                               2002           2003           2004           2005            2006

Executive                         14,677         10,430          9,486          9,769          9,018
Management                         3,877          3,470          3,496          4,649         4,698*
Non-unionized                          0          2,861          3,016          3,911
Unionized                          3,877          3,228          3,151          4,226          4,799
Table 6.9 – Benefits                                        * This number reflects the average for both
                                                             management and non-unionized

Included in Benefits are:     Basic Insurance:       Employer Share
                              Dental Single:         Employer Share
                              Dental Family:         Employer Share
                              Health Single:         Employer Responsibility
                              Health Family:         Employer Responsibility
                              Long Term Disability
                              Car Allowances

The numbers in Table 6.9 do not include OMERS Pension and Post-retirement benefits costs,
which are shown in Table 6.13 and Table 6.14.


2006 Incentive Plan

Hydro Ottawa‟s 2006 Incentive Plan is designed to reward the achievement of goals related to
organizational efficiency and customer service. It is comprised of two types of goals: Corporate, or
company related, and Individual. Corporate goals are divided into two categories: Financial and
Customer Service.




2006 EDR Application
                                                                                        Hydro Ottawa Limited
                                                                                               RP-2005-0020
                                                                                               EB-2005-0381
                                                                                                       Tab B
                                                                                            Filed 2005-08-02
                                                                                              Page 74 of 118
The Financial goals are as follows:

 Weight      Goal            Targets                        Benefit      Explanation of Benefit
 40%         Controllable    Reduction of Operating,        Ratepayer     Reduces organizational
             Costs           Maintenance and                               costs
                             Administration Costs                         Increases efficiency
                                                                          Focuses organization on
                                                                           appropriate goals
 10%         General         Achieve budgeted spend,        Ratepayer     Ensures appropriate dollars
             Capital         or less, per capital project                  spent on sustaining &
                             (identified fall 2005)                        improving the business
                                                                          Safeguards long term
                                                                           effectiveness of organization
 10%         Sustainment Achieve budgeted spend,            Ratepayer     Ensures appropriate spend
             Capital     or less, per reliability                          on equipment and programs
                         enhancing project, and                            directly related to servicing
                         meet project completion                           customers
                         dates (identified fall 2005)
Table 6.10 - Incentive Program Financial goals


The Customer Service goals are to be determined following the roll out of the 2006 business
strategy, but will be based on the following:

 Weight Goal             Targets                       Benefit            Explanation of Benefit
 25%    OEB              Meeting Board prescribed      Ratepayer          Monitors service levels to
        Performance      distribution service quality                      customers
        Standards        standards
 15%    Operational      Completion of major           Ratepayer          Increase well being of public
        Efficiency       endeavours related to                             and staff
                         improving safety, reliability                    Increase operational
                         and quality of service                            efficiency
Table 6.11- Incentive Program Customer Service goals


Individual goals will reflect individual contributions to Corporate goal achievement, and will therefore
all be of benefit to the ratepayer.

Total value of the 2006 Incentive Plan is estimated to be $1.6 million if all goals are achieved at the
target level.

Program affordability is safeguarded through the following measures:

        IF: Hydro Ottawa‟s financial performance (OM&A and Capital goals) is between threshold
         (0.5) and target (1.0):

             – Individual performance scores are multiplied by the Hydro Ottawa financial score (not
                  total Hydro Ottawa score) for all eligible employees


2006 EDR Application
                                                                                  Hydro Ottawa Limited
                                                                                         RP-2005-0020
                                                                                         EB-2005-0381
                                                                                                 Tab B
                                                                                      Filed 2005-08-02
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        IF: Hydro Ottawa Financial performance is less than threshold:

             –    No Incentive Plan payout for all levels


Pensions and Post-retirement Benefits

Hydro Ottawa is a member of OMERS. The OMERS premium holiday ended in 2002 with a partial
reinstatement in 2003 and full reinstatement in 2004.

The 2005 and 2006 amounts of post-retirement benefit expense include amortization of an actuarial
loss prepared by an external consultant.




2006 EDR Application
                                                                                         Hydro Ottawa Limited
                                                                                                RP-2005-0020
                                                                                                EB-2005-0381
                                                                                                        Tab B
                                                                                             Filed 2005-08-02
                                                                                               Page 76 of 118



Schedule 6-6: OMERS Pension Expense and Post-Retirement Benefits
                                 2002           2003           2004          2005            2006

Pension premiums                        N/A      657,776       1,964,699     2,385,069      2,743,217
Adjustments
Less: amount capitalized                N/A      368,354       1,100,231     1,335,638      1,536,201
Amount expensed in each
year                                            $289,422       $864,468    $1,049,431      $1,207,016
Table 6.13 - Pension


                                 2002           2003           2004          2005            2006

Post-Retirement Benefits
                                  300,346        314,947        490,250        582,100         600,000
Cost

Adjustment
Less: Amount capitalized          168,193        176,370        274,540        325,976         336,000
Amount expensed in each
year                             $132,153       $138,577       $215,710      $256,124        $264,000
Table 6.14 - Post-retirement Benefits Expense


Distribution Expenses Paid to Affiliates

Schedule 6-8: Distribution Expenses Paid to Affiliate(s)
2002
 Affiliate Names                 Activity                    Value                  Basis Pricing
                                                                           Pricing based on deemed rate
                       Interest expense                $16,021,000         of 6.9% by the Distribution
                                                                           Rate Handbook upon market
                                                                           opening
   City of Ottawa      Property Taxes                                      Market-based pricing as per
                                                           $1,622,000
                                                                           municipal assessment
                       Water and sewer charges, fuel
                                                                           Market-based pricing as per
                       and other miscellaneous city        $257,927
                                                                           municipal rate calculations
                       services
                       Administration and Corporate
                       Services expense including                          Cost-based pricing of 80% of
 Holding Company                                       $14,795,000
                       interest charged on a                               costs.
                       temporary loan
                                                                           Market-based pricing based on
                       Broadband data services and                         same determinants for external
  Telecom Ottawa                                           $1,069,000
                       dark fibre rental                                   customers including length of
                                                                           contract, number of strands,etc



2006 EDR Application
                                                                                                Hydro Ottawa Limited
                                                                                                       RP-2005-0020
                                                                                                       EB-2005-0381
                                                                                                               Tab B
                                                                                                    Filed 2005-08-02
                                                                                                      Page 77 of 118


2003
 Affiliate Names                    Activity                     Value                   Basis Pricing
                                                                                 Pricing based on deemed rate
                         Interest expense                     $16,021,000
                                                                                 of 6.9% by the Distribution
                                                                                 Rate Handbook upon market
                                                                                 opening
   City of Ottawa                                                                Market-based pricing as per
                         Property Taxes                        $1,597,000
                                                                                 municipal assessment
                         Water and sewer charges, fuel
                                                                                 Market-based pricing as per
                         and other miscellaneous city           $294,261
                                                                                 municipal rate calculations
                         services
                         Administration and Corporate
                         Services expense including                              Cost-based pricing of 80% of
 Holding Company                                              $15,071,000
                         interest charged on a                                   costs.
                         temporary loan
                                                                                 Market-based pricing based on
                                                                                 same determinants for external
                         Broadband data services and
  Telecom Ottawa                                               $1,236,000        customers including length of
                         dark fibre rental
                                                                                 contract, number of strands,
                                                                                 etc.

2004
 Affiliate Names                    Activity                     Value                   Basis Pricing
                                                                                 Pricing based on deemed rate
                         Interest expense                     $16,021,000
                                                                                 of 6.9% by the Distribution
                                                                                 Rate Handbook upon market
                                                                                 opening
   City of Ottawa                                                                Market-based pricing as per
                         Property Taxes                        $1,644,000
                                                                                 municipal assessment
                         Water and sewer charges, fuel
                                                                                 Market-based pricing as per
                         and other miscellaneous city           $221,128
                                                                                 municipal rate calculations
                         services
                                                                                 Cost-based pricing of 80% of
                         Administration and Corporate                            costs, excluding some specific
                         Services expense including                              shareholder costs absorbed by
 Holding Company                                               $2,483,000*
                         interest charged on a                                   the Holding Company. Interest
                         temporary loan                                          on short term borrowing was
                                                                                 charged at the bank rate
                                                                                 Market-based pricing based on
                         Broadband data services and                             same determinants for external
  Telecom Ottawa                                               $1,574,000
                         dark fibre rental                                       customers including length of
                                                                                 contract, number of strands,etc

       * The Holding Company contained 100 Finance and Corporate Services employees (whose activities were 100%
       devoted to Hydro Ottawa) in 2002 and 2003. These employees were transferred into Hydro Ottawa on December
       31, 2003.




2006 EDR Application
                                                                                  Hydro Ottawa Limited
                                                                                         RP-2005-0020
                                                                                         EB-2005-0381
                                                                                                 Tab B
                                                                                      Filed 2005-08-02
                                                                                        Page 78 of 118

2006 - Forecast
 Affiliate Names                 Activity                Value              Basis Pricing
                                                                     Market-based pricing as per
                       Property Taxes                  $1,800,000    expected municipal
                                                                     assessment
   City of Ottawa
                       Water and sewer charges, fuel                 Market-based pricing as per
                       and other miscellaneous city     $288,500     expected municipal rate
                       services                                      calculations
                                                                     Market-based pricing based on
                                                                     external debt held by the
                                                                     Holding Company inclusive of
                       Interest expense (long-term
                                                       $13,623,915   debt issuance costs and
                       and short-term)
                                                                     administration. Interest on
 Holding Company                                                     short-term borrowing to be
                                                                     charged at the bank rate.
                                                                     Cost-based pricing of 80% of
                       Administration and Corporate                  costs, excluding some specific
                                                       $1,488,000
                       Services expense                              shareholder costs absorbed by
                                                                     the Holding Company
                                                                     Market-based pricing based on
                       Broadband data services and                   same determinants for external
  Telecom Ottawa                                       $1,285,200
                       dark fibre rental                             customers including length of
                                                                     contract, number of strands,etc
Table 6.15 – Expenses Paid to Affiliates




2006 EDR Application
                                                                                        Hydro Ottawa Limited
                                                                                               RP-2005-0020
                                                                                               EB-2005-0381
                                                                                                       Tab B
                                                                                            Filed 2005-08-02
                                                                                              Page 79 of 118

Chapter 7 – Taxes/PILS

7.0      Introduction

Hydro Ottawa is filing on the basis of a forward test year and will be using the 2006 OEB Tax Model
(“Tax Model”). Any assumptions made to accommodate the forward test year information have
been documented in Tab I of the Application Binder. The Tax Model requires disclosure of all
dividends paid and their tax treatment. In 2002 Hydro Ottawa paid a $2.2 million dividend to the
Holding Company. As these companies are associated they flow through with no tax implications.


7.1      General Methodology

Hydro Ottawa, while filing on the basis of a forward test year, has followed the principles,
methodology, and provided the details as required by the Handbook and the Tax Model.


7.2      Principles

Non-recoverable and disallowed expenses

All disallowed and non-recoverable expenses have been identified and recorded in the regulatory
tax calculations.


Capital tax exemptions

Hydro Ottawa is claiming the full amount of both the Federal Large Corporation Tax Exemption and
the Ontario Capital Tax Exemption.


Loss carry-forwards

Schedule 7-1 shows a loss carry forward as of December 31, 2004 of $14,039,274. This loss carry
forward is expected to be fully utilized in 2005; therefore, no loss carry forward is available for 2006.

Schedule 7-1: Sharing Loss Carry-Forwards

A. Loss carry-forwards as at December 31, 2004:
       Distribution                                                   $14,039,274
       Non-distribution                                               ________ 0
       Total from the 2004 tax return                                 $14,039,274

B. Estimated loss carry-forwards as at December 31, 2005:
       Distribution                                                            0
       Non-distribution                                               ________ 0
       Total                                                          ________ 0


2006 EDR Application
                                                                                     Hydro Ottawa Limited
                                                                                            RP-2005-0020
                                                                                            EB-2005-0381
                                                                                                    Tab B
                                                                                         Filed 2005-08-02
                                                                                           Page 80 of 118
A – B: Loss carry-forwards available for use in 2005:
       Distribution                                                  $14,039,274
       Non-distribution                                             ________ 0
       Total                                                         $14,039,274


Undepreciated capital cost (UCC) and capital cost allowance (CCA)

Hydro Ottawa is taking the full CCA for 2006 and includes in this amount the effects of the 2001
Fair Market Value (FMV) bump.

Schedule 7-2: October 2001 FMV Adjustment

                         UCC                      1/2 of                                 UCC
                       Beginning     Additions   Additions               CCA            Ending
                           $            $           $        Rate         $               $

      2001                             N/A         N/A
    Class 1            36,146,556                              4%        1,445,862       34,700,694
    Class 2            20,451,467                              6%        1,227,088       19,224,379
    Class 3             9,275,024                              5%          463,751        8,811,273
    Class 8                (4,881)                            20%            (976)           (3,905)
    Class 10            2,872,653                             30%          861,796        2,010,857
    Class 12            (469,522)                            100%        (469,522)
    Class 42                                                  12%
     Totals            68,271,297                                        3,527,999       64,743,298

      2002                             N/A         N/A
    Class 1            34,700,694                              4%        1,388,028       33,312,666
    Class 2            19,224,379                              6%        1,153,463       18,070,916
    Class 3             8,811,273                              5%          440,564        8,370,709
    Class 8                (3,905)                            20%            (781)           (3,124)
    Class 10            2,010,857                             30%          603,257        1,407,600
    Class 12                                                 100%
    Class 42                                                  12%
     Totals            64,743,298                                        3,584,530       61,158,768

      2003                             N/A         N/A
    Class 1            33,312,666                              4%        1,332,507       31,980,159
    Class 2            18,070,916                              6%        1,084,255       16,986,661
    Class 3             8,370,709                              5%          418,535        7,952,174
    Class 8                (3,124)                            20%            (625)           (2,499)
    Class 10            1,407,600                             30%          422,280          985,320
    Class 12                                                 100%
    Class 42                                                  12%
     Totals            61,158,768                                        3,256,952       57,901,815


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                         UCC                      1/2 of                               UCC
                       Beginning     Additions   Additions            CCA             Ending
                           $            $           $        Rate      $                $

      2004                             N/A         N/A
    Class 1            31,980,159                              4%      1,279,206       30,700,953
    Class 2            16,986,661                              6%      1,019,200       15,967,462
    Class 3             7,952,174                              5%        397,609        7,554,565
    Class 8                (2,499)                            20%          (500)           (1,999)
    Class 10              985,320                             30%        295,596          689,724
    Class 12                                                 100%
    Class 42                                                  12%
     Totals            57,901,815                                      2,991,111       54,910,704

      2005                             N/A         N/A
    Class 1            30,700,953                              4%      1,228,038       29,472,915
    Class 2            15,967,462                              6%        958,048       15,009,414
    Class 3             7,554,565                              5%        377,728        7,176,837
    Class 8                (1,999)                            20%          (400)           (1,599)
    Class 10              689,724                             30%        206,917          482,807
    Class 12                                                 100%
    Class 42                                                  12%
     Totals            54,910,704                                      2,770,331       52,140,373

      2006                             N/A         N/A
    Class 1            29,472,915                              4%      1,178,917       28,293,998
    Class 2            15,009,414                              6%        900,565       14,108,849
    Class 3             7,176,837                              5%        358,842        6,817,995
    Class 8                (1,599)                            20%          (320)           (1,280)
    Class 10              482,807                             30%        144,842          337,965
    Class 12                                                 100%
    Class 42                                                  12%
     Totals            52,140,373                                      2,582,845       49,557,527


The FMV amount in tax differs from the accounting value by the full amount as a FMV bump
pursuant to Ontario Regulation 162/01 was recorded for tax purposes only.

The negative amounts in Schedule 7.2 only pertain to the FMV bump and the overall UCC pools are
in a positive position.

Please note the following on Schedule 7-2: The FMV bump for Class 2 ($20,451,467) and Class 3
($9,275,024) have been entered as one line item. The total of these two classes ($29,766,491) has
been removed from Class 1 assets in Account 2050. The totals for Class 1 and 8 differ by
$491,331 from the amount shown in the Tax Model, Tab 2001 Schedule 7-2 FMV. The FMV bump



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for Accounts 1970, 1975 and 1980 was included with Class 1 assets on Schedule 8 of the forecast
tax filing rather than Class 8 assets as shown in the Tax Model.


Regulatory tax treatment of Eligible Capital Expenditures (ECE)

Hydro Ottawa is taking the full ECE allowed for 2006. This account does not have any FMV
adjustments from the FMV bump and only includes costs for land rights.


Interest deduction

Hydro Ottawa has deducted the deemed interest in the Tax Model as it is higher than the
forecasted actual interest expense. Schedule 7-3 provides the required information.


Schedule 7-3: Interest Expense

1)       Deemed 2006 interest expense in 2006 EDR Model             =      $16,253,946


2)       2006 interest expense                                             $12,841,451
         Plus 2006 capitalized interest                             +      $__ 782,464
         2006 actual interest                                       =      $13,623,915

         Plus any interest forecast for Tier 1 or 2 adjustments +          $____N/A_

         Total interest                                             =      $13,623,915


3)       Additional Interest Expense for 2006 OEB Tax Model =              $2,630,031

4)        Hydro Ottawa intends to elect to capitalize interest incurred on Construction-Work-In-
          Progress (CWIP) for tax purposes in 2006 and has elected to capitalize interest incurred on
          CWIP for tax purposes for 2004 and prior years.


Interest capitalized for accounting, but deducted for tax purposes

Hydro Ottawa capitalized interest as per the capitalization policy. The amount in 2006 of $782,464
has been reflected in the Tax Model as well as Schedule 7-3.


Overlapping year-ends

Hydro Ottawa has assumed the rate year (May 1, 2006 to April 30, 2007) is the same as the tax
year (calendar 2006) in its calculations.


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Estimating taxable capital

Hydro Ottawa has chosen to estimate its capital base for Capital Tax calculations. Balance sheet
assumptions have been provided to support these numbers. See Tab I of the Application Binder.
The balance sheet has been prepared based on the assumption that the accounts have not
changed from the 2005 forecast except for the adjustments for capital additions and the additional
borrowing requirements.


Ontario Corporate Minimum Tax

Hydro Ottawa has not included any Ontario Corporate Minimum Tax in its calculations as this will
not apply.


Non-distribution elimination

Hydro Ottawa has excluded all non-distribution costs and revenues.


Tax credits

Hydro Ottawa has not claimed any tax credits in the Tax Model.


Impact of CDM expenditure and Smart Meter expenditures

Smart Meters amounts are included in the revenue requirement for 2006 and as such, no special
tax treatment is required.


Property Taxes

The Tax Model only addresses corporate income and capital taxes. Property tax is included in a
grouped account for distribution – other expenses.


Capital Leases

Hydro Ottawa does not have any capital leases now and does not expect to have any in 2006.




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7.3      Tax Payable Filings

Information to be Provided with 2006 OEB Tax Model Filings

Hydro Ottawa is providing the requested information in Tab I of the Application Binder. The variance
from 2004 to 2006 is fully explained by the utilization of the loss carry forward in 2005 so that no
loss carry forward remains for 2006.


Tax Information Disclosure in Future

Hydro Ottawa acknowledges the future information requirement of this section.


Supporting Documentation

Hydro Ottawa is providing supporting documentation in Tab I of the Application Binder.




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Chapter 8 – Revenue Requirement

8.0       Introduction

Hydro Ottawa has defined its revenue requirement for 2006 and has forecasted its annual costs
and revenues for 2006 in such a way as to avoid double recovery of any cost element in its rates,
regulated charges, and other incidental sources of revenue.


8.1       Service Revenue Requirement

The 2006 service revenue requirement is based on forecasted costs for 2006, including rate base
and distribution expenses, as detailed in previous chapters of this Manager‟s Summary.

With Smart Meters

Service Revenue Requirement = (Rate Base X Cost of Capital) + Distribution Expenses + PILs

         Rate Base = $516,455,750 as per Chapter 4
         Cost of Capital = (Debt ratio) x (Debt rate) + (1- Debt ratio) x Return on Equity
         Cost of Capital = 60% x 5.25% + 40% x 9% as per Chapter 5
         Cost of Capital = 9.75%
         Distribution Expenses = $81,103,199 as per Chapter 6
         PILS = $12,700,788 as per Chapter 7

Service Revenue Requirement = $128,650,340


8.2       Base Revenue Requirement

In order to determine the base revenue requirement, the following amounts were removed from the
service revenue requirement:

         The revenue determined in Schedule 11-3, Specific Service Charge Revenue, including
          Late Payment Charges, and
         The revenue received by the application of Other Board Approved Charges, (i.e.
          administration of the RPP (formerly SSS) Administration Charge (Account 4080b), Retail
          Services Revenue (Account 4082) and Service Transaction Requests (STR) Revenues
          (Account 4804)).
         Charges for retail services in Accounts 4082 ($283,953) and 4084 ($780) have been
          forecasted based on 8 months actuals from October 2004 to May 2005. The amounts have
          been annualized for 12 months.
         Details are provided in Schedule 8-1.




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Schedule 8-1: Derivation of Base Revenue Requirement
With Smart Meters


Row               Revenue Requirement                $              Source/Comments


                                                               (Rate Base X Cost of Capital)
 1      Service Revenue Requirement             $128,650,340   + Distribution Expenses +
                                                               PILS


        Less: Revenue from Specific Service
 2                                                $2,834,012   Schedule 11-3
        Charges and Late Payment Charges


        Less: Revenue from other Board-
 3                                                 $938,506    Details provided below
        approved charges


        Less: Revenue from sources other than
 4                                                       $0    Row 6 from Schedule 8-2
        Board-approved rates and charges



 5      Base Revenue Requirement                $124,877,822   Row 1 – 2 – 3 - 4


Table 8.1 - Base Revenue Requirement


SSS Administration Charge, Account 4080(b):                $653,773

Wheeling revenue:                                          N/A




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Schedule 8-2: Revenue from Sources Other Than Board-Approved
Rates and Charges

                                             2006 Revenue
 Row             Description of Revenue                                  Comments
                                                Offset


   1     Other Operating Revenues                $2,834,012   Accounts 4205 – 4245


         Less: Revenue from Late Payment
   2     Charges and Specific Service            $2,834,012   Accounts 4225, 4235
         Charges


   3     Net “Other Operating Revenues”                  $0   Row 1 – Row 2


                                                              Accounts 4305 – 4398
                                                              (not including 4375, 4380 and
   4     Other Income / Deductions                       $0   4385, as per Notes to EDR 2006
                                                              Model version 2.1 issued July 20,
                                                              2005)


   5     Investment Income                               $0   Accounts 4405 - 4415


                                                              Rows 3 + 4 + 5
   6     Total Revenue Offset # 2                        $0   Transferred to Row 4 of Schedule
                                                              8-1

Table 8.2 – Other Revenue


8.3      CDM, Smart Meter and Regulatory Asset Recovery

Hydro Ottawa is not seeking approval for any incremental CDM expenditures in 2006 beyond the
amount already approved in the RP-2004-0203 proceeding.

Hydro Ottawa is applying for final recovery of regulatory assets under a separate application.
Schedule 8-3 provides the proposed rate riders.




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    Schedule 8-3: Regulatory Asset Recovery

                 Class                   2005 Rate Rider *              2006 Rate Rider **
                                                $ / kWh                       $ / kWh
    Residential                                                               $0.0013
    General < 50 kW                                                           $0.0010
    Scattered Load                                                            $0.0008
                                        $/kW, or specify if other               $kW
    General Service >50 kW <                                                  $0.6098
    1500 kW
    General Service > 1500 kW                                                ($0.3146)
    < 5000 kW
    Large User                                                               ($0.4299)
    Street Lighting                                                          ($0.3882)
    Sentinel Lighting                                                        ($0.6224)

    Table 8.3 Regulatory Asset Recovery

*      2005 rate riders are a component of the volumetric distribution rate; no entry is necessary in this
       column.

** Hydro Ottawa is applying for these rate riders effective May 1, 2006 in a separate application.




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Chapter 9 – Cost Allocation

9.0       Introduction

As directed by the Handbook, Hydro Ottawa is maintaining the respective class distribution
revenues at approximately the same proportions as are currently the case.


9.1       Customer Classes

Hydro Ottawa is proposing to maintain its existing customer classes and sub-classes as currently
approved. Hydro Ottawa is seeking approval to add Standby Charges for embedded generators for
the classes shown below.


Schedule 9-1: Customer Classification

Customer Classification                              Current              Proposed

Residential
Regular                                                 √                      √
General Service
< 50 kW                                                 √                      √
> 50 kW non TOU (< 1500 kW)                             √                      √
> 50 kW TOU (>1500kW < 5000 kW)                         √                      √
Large Users                                             √                      √
Unmetered Scattered Load                                √                      √
Lighting
Street Lights                                           √                      √
Sentinel Lights                                         √                      √
Back-up/Standby Power
> 50 kW non TOU (< 1500 kW)                                                   √*
> 50 kW TOU (>1500kW < 5000 kW)                                               √*
Large Users                                                                   √*
Table 9.1 – Customer Classification


* See section 10.6 for a detailed explanation of Standby Charges.




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Schedule 9-2: Customer Eligibility Criteria

Hydro Ottawa has completed the applicable sections of this Schedule to indicate the eligibility
criteria that it uses to determine a specific customer's rate classification.

Customer Classification

Residential
Regular: This classification refers to an account taking electricity at 120/240 volts single phase
where the electricity is used exclusively in a separately metered living accommodation. Customers
shall be residing in single-dwelling units that consist of a detached house or one unit of a semi-
detached, duplex, triplex or quadruplex house, with a residential zoning. Separately metered
dwellings within a town house complex or apartment building also qualify as residential customers.

General Service
Less than 50 kW: This classification refers to a non residential account taking electricity at 750
volts or less whose monthly average peak demand is less than, or is forecast to be less than, 50
kW.

Greater than 50 kW non TOU (< 1500 kW): This classification refers to a non residential account
whose monthly average peak demand is greater than, or is forecast to be greater than, 50 kW but
less than 1,500 kW.

Greater than 50 kW TOU (>1500 kW < 5000 kW): This classification refers to a non residential
account whose monthly average peak demand is greater than, or is forecast to be greater than,
1500 kW but less than 5000 kW.

Large Use: This classification refers to an account whose monthly average peak demand is greater
than, or is forecast to be greater than 5,000 kW.

Unmetered Scattered Load: This classification refers to an account taking electricity at 120/240
volts single phase whose monthly average peak demand is less than, or is forecast to be less than,
50 kW and the consumption is unmetered. Such connections include cable TV power packs, bus
shelters, telephone booths, traffic lights, railway crossings, etc. The customer will provide detailed
manufacturer information/ documentation with regard to electrical demand/consumption of the
proposed unmetered load. Qualification for this classification is at the discretion of Hydro Ottawa as
defined its Conditions of Service.

Back-up/Standby Power: This classification refers to an account using local generation greater
than or equal to 500 kW to reduce monthly consumption normally provided by the distribution
system. The generation is used for load displacement only. The rate applies when the generation is
operational. Please refer to section 10.6 for complete details on the proposed rate structure.




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Lighting
Street Lights: This classification refers to an account for roadway lighting with a Municipality,
Regional Municipality, Ministry of Transportation and private roadway lighting operation, controlled
by photo cells.

Sentinel Lights: This classification refers to an account for privately owned non-roadway lighting
controlled by photocells. Hydro Ottawa currently owns a few sentinel lights installed by its
predecessor utilities.


9.2       Appropriate Share of the 2006 Revenue Requirement for Each Class

Hydro Ottawa has completed Schedule 9-3 to provide the 2002, 2003 and 2004 statistical data for
information purposes only. Hydro Ottawa has allocated the revenue requirement to each class
based on allocation factors determined by applying current distribution rates to Hydro Ottawa‟s
2006 forecast of kilowatts and kilowatt-hours by class.

Schedule 9-3: Allocation Factors to Customer Classifications

For 2002 Year End                    Customers          Total KWh or kW          Per Customer
Residential
Regular                                237,755          2,255,231,727 kWh          9,485 kWh
General Service
Less than 50 kW                         23,104          677,030,307 kWh            29,304 kWh
                                                        3,175,108,855 kWh         883,201 kWh
50 – 1500 kW                             3595
                                                          8,161,952 kW              2,270 kW
                                                        642,553,663 kWh          11,682,794 kWh
1500 – 5000 kW TOU                        55
                                                          1,303,349 kW             23,697 kW
                                                        664,970,205 kWh          60,451,837 kWh
Large Users                               11
                                                          1,229,882 kW             111,807 kW
Unmetered Scattered Load                 2723            17,668,066 kWh            6,488 kWh
Lighting
                                                         37,901,227 kWh             870 kWh
Street Lights                           43,580
                                                            98,838 kW               2.268 kW
Sentinel Lights                          130               93,986 kWh               723 kWh
Back-up/Standby Power                    N/A
                                                        7,470,558,036 kWh
Totals
                                                          10,794,021 kW


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For 2003 Year End          Customers   Total KWh or kW     Per Customer

Residential

Regular                     242,369    2,241,354,543 kWh     9,248 kWh
General Service
Less than 50 kW             23,844     802,608,939 kWh      33,661 kWh
                                       2,949,993,636 kWh   1,015,488 kWh
50 – 1500 kW                 2905
                                         6,964,189 kW        2,397 kW
                                       784,559,822 kWh     12,861,636 kWh
1500 – 5000 kW TOU            61
                                         1,696,853 kW        27,817 kW
                                       651,227,427 kWh     59,202,493 kWh
Large Users                   11
                                         1,164,450 kW       105,859 kW
Unmetered Scattered Load     2769       17,320,782 kWh       6,255 kWh
Lighting
                                        36,129,185 kWh        824 kWh
Street Lights               43,834
                                          95,675 kW          2.183 kW
Sentinel Lights               130         93,986 kWh          723 kWh
Back-up/Standby Power         N/A
                                       7,483,288,320 kWh
Totals
                                         9,921,167 kW



For 2004 Year End          Customers      KWh or kW        Per Customer

Residential

Regular                     247,760    2,266,659,492 kWh     9,147 kWh
General Service
Less than 50 kW             23,205     791,471,654 kWh      34,208 kWh
                                       2,989,300,526 kWh    987,546 kWh
50 – 1500 kW                 3004
                                         6,897,682 kW        2,279 kW
                                       791,670,830 kWh     12,978,210 kWh
1500 – 5000 kW TOU            61
                                         1,705,538 kW        27,960 kW
                                       621,338,901 kWh     62,133,890 kWh
Large Users                   10
                                         1,117,842 kW       111,784 kW
Unmetered Scattered Load     2770       17,067,540 kWh       6,161 kWh


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For 2004 Year End              Customers              KWh or kW     Per Customer

Lighting
                                                 37,334,619 kWh       831 kWh
Street Lights                   44,932
                                                      103,732 kW       2.3 kW
Sentinel Lights                   125                 90,794 kWh      726 kWh
Back-up/Standby Power             N/A
                                                7,514,934,356 kWh
Totals
                                                   9,824,794 kW
Table 9.2 – Class Statistics




Average 2002 to 2004                       Per Customer

Residential

Regular                                      9,293 kWh

General Service

Less than 50 kW                             32,391 kWh
                                            962,078 kWh
50 – 1500 kW
                                             2,315 kW
                                           12,507,547 kWh
1500 – 5000 kW TOU
                                             26,491 kW
                                           60,596,073 kWh
Large Users
                                            109,817 kW
Unmetered Scattered Load                     6,301 kWh

Lighting
                                              842 kWh
Street Lights
                                              2.25 kW
Sentinel Lights                               724 kWh

Back-up/Standby Power                           N/A
Table 9.3 – Class Averages




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9.3      Appropriate Share of the 2006 CDM, Smart Meter and Regulatory Asset
         Revenue Requirements

Hydro Ottawa is not seeking approval for any incremental CDM expenditures in 2006 beyond the
amount already approved in the RP-2004-0203 proceeding.




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Chapter 10 – Rates and Charges

10.0 Introduction

Load Forecast

10.0.1.1     Model

Hydro Ottawa‟s forecasting model is based primarily on historical load data. The loading information
is comprised of two sets of data; one set prior to the amalgamation in November 2000 and one set
after. The kWh and kW demand data is entered into a forecasting model using a Holt-Winters
seasonal algorithm to manage data in which there are both trends and seasonal variations of known
periods. The algorithm also allows for the linear model to be weighted towards the most recent data
set to take into account more recent economic and social trends.


10.0.1.2     Historical Data Set

The first data set is comprised of loads from the five predecessor utilities and spans the period of
January 1997 to December 2000. Although the kWh total is accurate, the peak kW may or may not
be coincidental. The second data set is wholly from Hydro Ottawa and includes coincidental peak
demand and total kWh from January 2001 to June 2005.


10.0.1.3     Influencing Factors

There are a number of factors that can influence the accuracy of load forecasts. The percentage of
residential customers to commercial customers influences the stability of the forecast. Residential
loads are easier to forecast then larger loads. If one residential customer does something
unexpected, it has virtually no impact. However, a downturn in the economy, or the unexpected
closure of a large customer could have a significant impact on future loads. The loss of many high
tech companies in 2000 contributed to lower kWh sales during the last few years. The most recent
survey by Royal Lepage has the office vacancy in the Kanata sector at 19%, down from an all-time
high of 28.8% in 2004.

The weather is the single most important factor affecting a forecast. Unfortunately, weather is not
easy to predict. By using a reliable data model with a long enough period, weather variations are
less likely to skew the results.

Individual events, such as the blackout of August 14, 2003 and load reduction appeals, can
influence how customers will consume electricity in the future. Air-conditioning loads may decrease
as customers heed the warnings about possible brownouts or worse.

Most, if not all, new housing starts in Ottawa are heating with natural gas. The impact new housing
starts have on the overall load profile is less significant then it would have been years ago.




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10.0.1.4       Results

Figure 10.1 indicates the expected future kWh usage for the period 2006 to 2010. The expected
load increase in 2006 is 0.4% with annual increases of 0.9% to 1.0% into 2010.

                                          Load Forecast

          9,000,000
          8,000,000
          7,000,000
          6,000,000
    MWh




          5,000,000                                                                          Forecast
          4,000,000                                                                          Historical
          3,000,000
          2,000,000
          1,000,000
                  0
                       01

                             02

                                   03

                                          04

                                                 05

                                                       06

                                                             07

                                                                    08

                                                                           09

                                                                                     10
                   20

                            20

                                  20

                                         20

                                               20

                                                      20

                                                            20

                                                                   20

                                                                         20

                                                                                20
Figure 10.1 – Load Forecast



                                          Customer Growth

    310000
    300000
    290000
    280000                                                                                   Actual
    270000                                                                                   Forecast
    260000
    250000
    240000        2002   2003     2004    2005      2006    2007    2008      2009    2010

      Actual     264520 269191 274040

      Forecast                            280323 284465 288607 292750 296893 301038


Figure 10.2 – Customer Growth

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Figure 10.2 shows Hydro Ottawa‟s 2006 customer forecast for revenue allocation and rate design
purposes. A slightly lower customer count was used for determining projected capital expenditures
for residential subdivisions. Overall, Hydro Ottawa is forecasting modest growth over the next 5
years due to the changing aspects of loads including economic trends, customer conservation
initiatives and a preference for natural gas in the residential sector.


10.1     Fixed/Variable Splits

Hydro Ottawa is not proposing any changes to the Fixed/Variable splits as calculated by the model.


10.2     Unmetered Scattered Loads

Hydro Ottawa currently bills its unmetered scattered loads with the same rates as for the General
Service < 50 kW class. For 2006, Hydro Ottawa is setting the monthly fixed service charge at 50%
of the monthly fixed service charge of the General Service < 50 kW class rate, as directed by the
Board. The rates will continue to apply on a per-connection basis. Hydro Ottawa does not propose
to reallocate the resultant revenue shortfall because the addition of a Standby Charge substantively
offsets any lost revenue.

Schedule 10-2: Unmetered Scattered Loads

1) Currently, the monthly service charge for unmetered scattered load customers, having multiple
unmetered connection points, is on a per customer and not a per connection point basis and the
level of the charge is equal to or less than the General Service <50 kW monthly service charge per
customer.
Yes ____ No __X__

2) Currently, there is a unique level of monthly service charge(s) payable by unmetered
scattered loads.

Yes ____ No __X__

Hydro Ottawa accordingly provides Table 10.1.


                                                      Connections                kWh
 2002 Unmetered Scattered Load                             2723               17,668,066
 2003 Unmetered Scattered Load                             2769               17,320,782
 2004 Unmetered Scattered Load                             2770               17,067,540
 Average Unmetered Scattered Load                          2754               17,352,129
Table 10.1 – Unmetered Scattered Loads




2006 EDR Application
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                                                                                             RP-2005-0020
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10.3     Time of Use Distribution Rates

Hydro Ottawa has a sub-class of General Service which is listed on Hydro Ottawa‟s current rate
schedule (for rates effective April 1, 2005) as General Service > 50 kW Time of Use. For Hydro
Ottawa, the General Service > 50 kW (Time of Use) class was defined as “those customers with an
average annual demand greater than 1500 kW” when the class was first created in November
2000. This was specified in Hydro Ottawa‟s rate application dated August 15, 2000; a copy is
provided in Tab E of the Application Binder. Only those customers with demand in excess of 1500
kW fall within the General Service >50 kW (Time of Use) class. All of these customers have interval
meters as required by the Distribution System Code and therefore would be considered Time of
Use.

The definition of this General Service > 50 kW Time of Use sub-class for Hydro Ottawa is different
than for most other LDC‟s. Hydro Ottawa accordingly proposes that this class be renamed as
General Service > 1500 kW < 5000 kW to avoid confusion.


10.4     Transformer Ownership Allowance

Hydro Ottawa is proposing to drop its Transformer Ownership Allowance for services greater than
115 kV since any customers connected at greater than 115 kV became market participants in May
2002 and are no longer Hydro Ottawa customers. The Transformer Ownership Allowance for
services less than 115 kV will remain unchanged for 2006.



Schedule 10-4: Transformer Ownership Allowance

2002                                                         kW                   $
General Service > 50 kW non TOU (<1500 kW)                  631,571         $   284,206.95

General Service > 50 kW TOU (>1500 kW)                      912,947         $   410,826.15

Large Users                                                 909,500         $   409,274.90

Total                                                      2,454,018        $ 1,104,308.10


2003                                                         kW                   $
General Service > 50 kW non TOU (<1500 kW)                  612,102         $   275,445.90

General Service > 50 kW TOU (>1500 kW)                      883,042         $   397,368.90

Large Users                                                 908,761         $   408,942.45

Total                                                      2,403,905        $ 1,081,757.25



2006 EDR Application
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2004                                                              kW                    $
General Service > 50 kW non TOU (<1500 kW)                    633,860             $   285,237.00

General Service > 50 kW TOU (>1500 kW)                        886,223             $   398,800.35

Large Users                                                   959,518             $   431,783.10

Total                                                        2,479,601            $ 1,115,820.45
Table 10.2 – Transformer Ownership Allowance


10.5     Update of Loss Adjustment Factors

Hydro Ottawa‟s current loss adjustment factor is 1.0364. The calculation in Table 10.3 represents a
reduction of 0.19%. The resultant loss adjustment factor is acceptable to Hydro Ottawa and is
below the 5% threshold. Hydro Ottawa is not proposing any changes to the loss adjustment factor
for the Large Use customer class.


Schedule 10-5: Determination of Loss Adjustment Factors

                                                         2002              2003               2004
   A    “Wholesale” kWh (IMO)                         7,751,077,843    7,755,187,001    7,702,017,686

        “Wholesale” kWh for Large Use Customer(s)
   B                                                   676,274,698       662,298,293        631,901,662
        (IMO)

   C    Net “Wholesale” kWh (A) –(B)                  7,074,803,144    7,092,888,708    7,070,116,024

   D    “Retail” kWh (Distributor)                    7,470,558,035    7,483,288,326    7,514,934,346

        “Retail” kWh for Large Use Customer(s) (1%
   E                                                   664,970,205       651,227,427        621,338,901
        loss)

   F    Net “Retail” kWh (D)-(E)                      6,805,587,830    6,832,060,899    6,893,595,445

   G    Loss Factor [(C)/(F)]                            1.0396           1.0382             1.0256

        Secondary Distribution Loss Adjustment
   H                                                                      1.0344
        Factor (3 year average)
        Primary Distribution Loss Adjustment Factor
   I                                                                      1.0240
        (SDLA Factor x 0.99)
Table 10.3 – Loss Adjustment Factor




2006 EDR Application
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10.6     Standby Charges

Hydro Ottawa is proposing to introduce a Standby Charge as part of its Application. The Standby
Charge will apply to all customers with load displacement generators with a total combined
nameplate rating greater than or equal to 500 kVA. The purpose of the Standby Charge is to
recover the cost of providing reserved capacity to these customers and to eliminate cross-
subsidization by other customers. Hydro Ottawa‟s distribution rates are designed based on the
principle of continuous use. When customers displace load with generation, the expected revenue
to recover capital, operating, maintenance and administration costs are not realized and the burden
falls on other customers to subsidize those revenue shortfalls.

Due to the nature of Hydro Ottawa‟s distribution system and its embedded generators, site-specific
Standby Charges are not practical. Generators are installed in very dense urban environments and
determining what specific assets are related to each site is simply too difficult to assess. Hydro
Ottawa is proposing to use class-specific charges instead.


Rate Structure

The Standby Charge is composed of a standby monthly service charge for administration and a
standby distribution volumetric rate based on the Contract Backup Demand as determined by the
methodology outlined in section 10.6.4.

Standby Monthly Service Charge – A monthly fixed charge applied to cover the incremental cost of
monitoring, billing and administration related to providing standby facilities.

Standby Distribution Volumetric Rate – A rate per kW (or kVA; see section 10.8) of Billed Backup
Demand. The Billed Backup Demand quantity will be equal to or less than the Contract Backup
Demand depending on whether the reserved capacity was required during the billing period. The
standby distribution volumetric rate would be equal to the class-specific distribution volumetric rate.


Customer Classification

The rate classification of customers with load displacement generators will be net of the connected
generation. The 12-month average demand used to determine customer classifications will be the
demand based on meter readings.


Contract Backup Demand

The Contract Backup Demand can be determined by using the full nameplate value of the
generating plant or a lesser amount as agreed to by the customer and Hydro Ottawa. The customer
can elect to contract for a lesser amount if it intends to shed load when the generation is not
available. This will reduce the customer‟s monthly cost but may expose them to the Backup
Overrun Adjustment if the contracted amount is exceeded. If a customer determines that no backup
capacity is required, it must still sign a Standby Facilities Contract indicating that it has elected not
to contract for backup capacity. Backup Overrun Adjustments will be applied if the customer is


2006 EDR Application
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forced to use standby capacity for which it has not contracted. Hydro Ottawa reserves the right to
impose a Contract Backup Demand if a customer fails to meet its obligations.


Determination of Billed Backup Demand

The Contract Backup Demand establishes a ceiling for Billed Backup Demand (excluding Backup
Overrun Adjustments). The following three examples illustrate how the volumetric component of the
Standby Charge is determined. The examples that follow assume that the regular distribution
volumetric charges apply to the metered peak demand. The Standby Charge is intended to
supplement demand shortfalls introduced by the generation.

Example 1 – Generation ON for entire period

In this case the Billed Backup Demand would be equal to the Contract Backup Demand. The
Contract Backup Demand replaces demand that would have been captured by Hydro Ottawa‟s
interval metering had the generation been off.

Example 2 – Generation OFF for entire period

In this case the Billed Backup Demand would be zero. The customer is billed based on the peak
demand registered on Hydro Ottawa‟s interval meters.

Example 3 – Generation ON and OFF during period (No Backup Overruns)

In this example the Billed Backup Demand is:

         Contract Demand – (Metered Peak generator OFF – Metered Peak generator ON)

This assumes that the difference between the generator OFF peak and the generator ON peak is
less then the contracted amount; if not, the customer is subject to a Backup Overrun Adjustment.


Backup Overrun Adjustment

The Backup Overrun Adjustment is to ensure customers contract for the appropriate amount of
standby capacity. Customers must meet contract requirements by shedding load if they have
contracted for an amount less then the nameplate rating. The Backup Overrun Adjustment is
calculated as follows:

(Generator OFF Peak – Generator ON Peak) – Contract Backup Demand

If the Contract Backup Demand is less than the difference between the two peaks, a charge will
apply.

Backup Overrun Adjustments are determined by reviewing interval data prior to and immediately
after a generator change-of-status. The instantaneous demand difference with the generator on and
off is determinative of the standby capacity used and any overrun used. The Backup Overrun
Adjustments never exceed the nameplate rating of the generating plant; consequently, the Backup


2006 EDR Application
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Overrun Adjustment only applies to customers that have contracted for Backup Demand less then
the generator nameplate rating.

Contract Backup Demand is reviewed on a quarterly basis. If a customer has exceeded the
Contract Backup Demand (Backup Overrun Adjustment) in any of the three preceding billing
periods, the Contract Backup Demand will be increased to the highest monthly level of utilization
that occurred in those three months.

The Backup Overrun Adjustment is assessed at the same rate as the Billed Backup Demand.


Standby Monthly Service Charge

The Standby Monthly Service Charge is intended to cover the cost to determine, bill and monitor
Billed Backup Demands and Backup Overrun Adjustments. The charge is based on time and
material as shown on the following schedule.




2006 EDR Application
                                                                                                                Hydro Ottawa Limited
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Specific Service Charges: Embedded Generation –Standby Monthly Service Charge



 Specific Service Charge Description:                                               $95 Standby Monthly Service Charge
 Used For:
    Standby Monthly Service Charge
                                                                                                                            Calculated
                                                                      Rate/Amount         Hours/Units     O/T Factor           Cost
 L   Direct Labour (inside staff) Straight Time                          95.00               1.0                              $95.00
 A   Direct Labour (inside staff) Overtime
 B   Direct Labour (field staff) Straight Time
 O   Direct Labour (field staff) Overtime
 U   Other Labour (Specify)
 R   Payroll Burden %                                                   Included
                                Total Labour Cost                                                                              $95.00
 O Small Vehicle Time
 T Large Vehicle Time
 H Other:                       Material
 E                              Contract
 R                              Other
                                Total Other
 Total Cost                                                                                                                    $95.00
      Specific Service Charge Value Requested - Round to nearest $5                                                            $95.00

         Reading Generator Meter Data and analyzing peaks
         Producing Shadow report
         Producing Annual Statistical report

Table 10.4 – Standby Monthly Service Charge




2006 EDR Application
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Parallel Generation Data Requirements

Customers will be required to provide generator operating and load information pertaining to parallel
generation with nameplate ratings greater than or equal to 500 kVA. All new generators will be
metered to allow comparison to Hydro Ottawa‟s supply point load profile for determining billing
demands. For existing generators, the Billed Backup Demand will be determined from the
customer‟s generator load data and operating logs.


10.7     Low Voltage (LV) Charges

Hydro Ottawa does not provide LV and related services to any embedded distributors and does not
expect to do so in 2006. Hydro Ottawa has included in its 2006 expenses an estimate for Hydro
One‟s LV charges based on current rates (as published on Hydro One‟s web site). The estimate is
based on historical data and forecasted loads for 2005 and 2006.

                              Total           3-year       Forecasted                        2006
Location               2002   2003    2004   Average     2005      2006        Rate         Expense

Shared DS in kW    235,227 228,541 224,693     229,487   235,148     239,400       1.87 $   447,677.56
Shared Lines in km     223     223     223         223       191          96        465 $    44,528.40

                                                                   Total Expense       $    492,205.96

Table 10.5 – Low Voltage Charges


It is Hydro Ottawa‟s understanding that the difference between Hydro One‟s LV charges calculated
with current rates and Hydro One‟s actual LV charges will be tracked in a variance account for
future disposition.


10.8     Demand Determinants

Hydro Ottawa bills demand customers based on 100% of the kilowatts (kW) or 90% of the kilovolt-
amps (kVA). This practice will continue in 2006.




2006 EDR Application
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                                                                                                                RP-2005-0020
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Chapter 11 – Specific Service Charges

11.0 Introduction

Hydro Ottawa intends to use the Board‟s standard amounts as indicated in Schedule 11-1.

Schedule 11-1: Specific Service Charges: Standard Amounts
Rate
                           Standard Name                         Std Amt              Calculation Method – Check Box
Code
                                                                               Standard      Other           Time &
                                                               Rate
                                                                               Formula       Formula         Materials
  1     Arrears Certificate                                    $15.00
                                                                           
  2     Statement of Account                                   $15.00
  3     Pulling post dated checks                              $15.00
  4     Duplicate invoice for previous billing                 $15.00
                                                                           
  5     Request for other billing information                  $15.00
                                                                           
  6     Easement letter                                        $15.00
  7     Income tax letter                                      $15.00
  8     Notification charge                                    $15.00
  9     Account history                                        $15.00
        Credit reference/credit check (plus credit agency
 10
        cost)
                                                               $15.00
                                                                           
 11     Returned cheque charge (plus bank charges)             $15.00
                                                                           
 12     Charge to certify cheque                               $15.00
 13     Legal letter charge                                    $15.00
        Account set up charge/change of occupancy charge
 14
        (plus credit agency cost if applicable)
                                                               $30.00
                                                                           
 15     Special meter reads                                    $30.00
 16     Collection of account charge – no disconnection        $30.00
                                                                           
        Collection of account charge – no disconnection –
 17                                                           $165.00
        after regular hours
        Disconnect/Reconnect at meter – during regular
 18
        hours
                                                               $65.00
                                                                           
        Install/Remove load control device – during regular
 19                                                            $65.00
        hours
 20     Disconnect/Reconnect at meter – after regular hours   $185.00
                                                                           
        Install/Remove load control device – after regular
 21                                                           $185.00
        hours
 22     Disconnect/Reconnect at pole – during regular hours   $185.00
                                                                           
 23     Disconnect/Reconnect at pole – after regular hours    $415.00
                                                                           
         Meter dispute charge plus Measurement Canada
 24                                                            $30.00
         fees (if meter found correct)
 25      Service call – customer-owned equipment              $30.00
 26      Service call – after regular hours                   $165.00
         Temporary service install & remove – overhead – no
 27
         transformer
                                                              $500.00
                                                                           
         Temporary service install & remove – underground –
 28                                                           $300.00
         no transformer
         Temporary service install & remove – overhead –
 29                                                           $1000.00
         with transformer
         Specific Charge for Access to the Power Poles
 30
         $/pole/year
                                                               $22.35
                                                                           
Additional Charges – Please be Specific – NONE

Regular Hours of Operation: Weekdays (excluding statutory holidays) from 8:00 am to 4:00 pm
Table 11.1 - Specific Service Charges - Summary


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11.1     Methodology

Hydro Ottawa is proposing to use the Board‟s standard amounts for activities that are over
and above its standard level of service.


11.2     Customer Administration

Hydro Ottawa understands and will comply with this section.


11.3     Non-Payment of Account

Late Payment Charge

Hydro Ottawa proposes to continue charging 1.5% per month (19.56% per annum) for late
payments.


Collection of Account Charge

Hydro Ottawa understands and will comply with this section.


Reconnection of Electricity Service Charge

Hydro Ottawa understands and will comply with this section.


11.4     Service Calls

Hydro Ottawa understands and will comply with this section.


11.5     Temporary Electricity Service Charge

Hydro Ottawa is proposing to use the Board‟s basic Temporary Service Installation Charge
for all temporary services not requiring transformers or pole replacement. The service must
be installed during regular working hours. All other temporary services will be provided on a
cost recovery basis.


11.6     Specific Charge for Access to Power Poles

Hydro Ottawa is proposing to use the Board‟s pole attachment charge of $22.35 per pole,
per attacher, per year when applicable in 2006. Hydro Ottawa may in the future decide to
apply for a revised rate.


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11.7     Other Services and Charges

Hydro Ottawa currently has Board approval for the recovery of losses from the installation of
customer owned dry core transformers. Dry core transformers are installed up-stream from
Hydro Ottawa‟s revenue meters and therefore any lost energy and demand is not charged.
The dry core transformer charge is intended to recover this lost energy and demand.

The proposed dry core transformer charges are based on specific transformer sizes that are
common in Hydro Ottawa‟s service territory and have now been separated into cost-of-
power (commodity, wholesale market and transmission) and distribution charges. The
distribution portion has been included as other revenue to reduce the base revenue
requirement. The cost-of-power portion will be part of Hydro Ottawa‟s retail settlement
variance accounts (RSVA).




2006 EDR Application
                                                                                                                                           Hydro Ottawa Limited
                                                                                                                                                  RP-2005-0020
                                                                                                                                                  EB-2005-0381
                                                                                                                                                          Tab B
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11.8      Revenue from Specific Service Charges

Hydro Ottawa has completed Schedule 11-3 and has included revenue from Specific Service Charges in its Application.

Schedule 11-3: Specific Service Charges: Revenue
Rate Code                            Description                              Std Amt            Hydro Ottawa – Historical                Hydro Ottawa - Forecast
                                                                                         2002        2003       2004         3-Year      2005       2006

                                                                              Amount    Volume      Volume     Volume        Average    Volume     Volume         Revenue
     1      Arrears Certificate                                                $15.00    2937        2180        2000        2372.33     2100        2400         $   32,000
     2      Statement of Account                                               $15.00
     3      Pulling post dated checks                                          $15.00
     4      Duplicate invoice for previous billing                             $15.00                            4000                    4000        4000         $   40,000
     5      Request for other billing information                              $15.00                            3000                    3000        3000         $   30,000
     6      Easement letter                                                    $15.00
     7      Income tax letter                                                  $15.00
     8      Notification charge                                                $15.00
     9      Account history                                                    $15.00
     10     Credit reference/credit check (plus credit agency cost)            $15.00                                                    1200        1200         $   18,000
     11     Returned cheque charge (plus bank charges)                         $15.00    3853        3574        3404        3610.33     4000        4000         $   54,667
     12     Charge to certify cheque                                           $15.00
     13     Legal letter charge                                                $15.00
            Account set up charge/change of occupancy charge (plus
     14     credit agency cost if applicable)                                  $30.00   49523        44281      56485        50096.33   53200       54000         $ 1,231,200
     15     Special meter reads                                                $30.00                                                                             $         -
     16     Collection of account charge – no disconnection                    $30.00    2019        1141        1103        1421.00     1400        1400         $   30,333
            Collection of account charge – no disconnection – after regular
     17     hours                                                             $165.00
     18     Disconnect/Reconnect at meter – during regular hours               $65.00    1891        2893        2878        2554.00     1400        1400         $   70,000
     19     Install/Remove load control device – during regular hours          $65.00
     20     Disconnect/Reconnect at meter – after regular hours               $185.00                                                                130          $   18,200
     21     Install/Remove load control device – after regular hours          $185.00


2006 EDR Application
                                                                                                                                          Hydro Ottawa Limited
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Rate Code                             Description                          Std Amt              Hydro Ottawa – Historical                Hydro Ottawa - Forecast
                                                                                        2002        2003       2004         3-Year     2005        2006

                                                                           Amount      Volume      Volume     Volume        Average   Volume      Volume         Revenue
        22   Disconnect/Reconnect at pole – during regular hours           $185.00                                                                   10          $     2,016
        23   Disconnect/Reconnect at pole – after regular hours            $415.00                                                                   2           $       710
             Meter dispute charge plus Measurement Canada fees (if meter
        24   found correct)                                                 $30.00
        25   Service call – customer-owned equipment                        $30.00
        26   Service call – after regular hours                            $165.00
             Temporary service install & remove – overhead – no
        27   transformer                                                   $500.00                                                                   2           $     1,000
             Temporary service install & remove – underground – no
        28   transformer                                                   $300.00
             Temporary service install & remove – overhead – with
        29   transformer                                                   $1,000.00
        30   Specific Charge for Access to the Power Poles $/pole/year      $22.35                             20435                   20435       20435         $ 491,802



Additional Charges – Please be Specific

                                                                             Rate
        31    Drycore Transformer Distribution Charge                      Schedule                           5397 kW                 5397 kW     5397 kW            $ 14,084

        32

        33

        34


Note:        2006 Revenue is pro-rated for 8 months at new rate
             4 months at old rate
                                                                                                 Total SSC Revenue                                               $2,034,012


                                                                                                 Revenue From Late Payment Charges                               $800,000


                                                                                                 Total Revenue                                                   $2,834,012
Table 11.2 - Specific Service Charges - Detail


2006 EDR Application
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                                                                                               RP-2005-0020
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Chapter 12 – Other Regulated Charges

12.0 Introduction
Hydro Ottawa currently applies the Board-approved charges for the administration of the retail
market. The revenue is included in Other Regulated Charges for 2006.


12.1     RPP (formerly SSS) Administration Charge

Hydro Ottawa currently uses the Board-approved $0.25 per month administration charge to each
RPP customer. This charge will remain unchanged for 2006.


12.2     Retail Service Charges

Establishing Service Agreements

Hydro Ottawa currently uses the Board-approved charges for all retailer service agreements as
follows:

                 $100 one-time charge per agreement per retailer
                 $20 per month per retailer to recover the cost of contract administration and
                  monitoring of prudential requirements
                 $0.50 per month per customer to recover the cost of general accounting,
                  administration services and other customer care services.

All of these charges will remain unchanged for 2006.


Distributor-Consolidated Billing

Hydro Ottawa currently charges the Board-approved charge of $0.30 per month per customer to
recover costs associated with producing distributor-consolidated bill-ready services. This charge will
remain unchanged for 2006.


Retailer-Consolidated Billing

Hydro Ottawa currently credits retailers providing billing services an avoided cost of $0.30 per
month per customer. This credit will remain unchanged for 2006.


Service Transaction Requests (STR)

Hydro Ottawa currently charges the Board-approved fees for the processing of STR requests as
follows:



2006 EDR Application
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                 $0.25 for initial STR screening,
                 $0.50 for STR processing,
                 $2.00 for STR exceeding two per year.

All of these fees will remain unchanged for 2006.


Monitoring and Cost Tracking

Hydro Ottawa has established and maintains the appropriate Retail Services Costs Variance
Accounts (RCVA). This practice will continue in 2006.


12.3     Non-Competitive Electricity Charges

Wholesale Market Service Rate

Hydro Ottawa currently uses the Board-approved rate of $0.0052/kWh. This rate will remain the
same for 2006. Hydro Ottawa combines this rate with the Rural and Remote Protection charge of
$0.001/kWh when billing its customers. This practice will continue in 2006.


Retail Transmission Service Rates

Hydro Ottawa is applying separately for an adjustment to its Retail Transmission Service (RTS)
rates. The Board authorized such an application in its letter dated July 5, 2005. The RTS
connection rates would decrease while the RTS network rates would be revenue neutral if the
Board approves the proposed RTS rates.


Charges/Taxes Levied by the Government of Ontario

Hydro Ottawa will continue to use its current RRRP and Debt Retirement Charges in 2006 unless
authorized by the provincial government to make a change.




2006 EDR Application
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Chapter 13 – Mitigation

13.0 Impact Analysis

Hydro Ottawa has identified a number of inconsistencies with the calculation of rate impacts in the
2006 EDR Rate Model. These calculations have been modified to ensure accurate impact
calculations. The calculations are provided in Tab H of the Application Binder.

Hydro Ottawa is choosing to mitigate the rate impact of its Standby Charge by reducing the
volumetric rate by 50%, until such time as a cost allocation study is completed and the rates can be
reviewed. Although the rate affects only a few customers, Hydro Ottawa is aware that the added
charges are significant and customers must be allowed time to factor these cost into their operating
expenses.

Although the rate increase for Sentinel Lights was not above the 10% threshold set by the Board,
Hydro Ottawa has chosen to cap the increase to mirror the average residential customer increase
of 4%, since these lights are predominately rural residential. Since the number of lights is very
small, Hydro Ottawa is not proposing to reallocate the lost revenue.


13.1     Mitigation Methodologies

Other than the mitigation of the Standby Charge and Sentinel Lights, Hydro Ottawa has maintained
rate increases below the prescribed threshold. No mitigation plan is required.


13.2     Rate Harmonization (Amalgamated or Acquired Service Areas)

Hydro Ottawa‟s distribution rates are fully harmonized.




2006 EDR Application
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Chapter 14 – Comparators and Cohorts

14.0 Comparators and Cohorts

Hydro Ottawa is awaiting the release of the Board‟s Comparators and Cohorts analysis later this
summer and will respond as required.




2006 EDR Application
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Chapter 15 – Service Quality Regulation

15.0 Introduction

Hydro Ottawa provides its Service Quality Indicator results in Schedule 15-1. Please note that the
2003 results are exclusive of the August 14th blackout.

Schedule 15-1: Service Quality and Reliability Performance 2002 to 2004

Service Quality Indicators

1a        Connection of New Services – Low Voltage

          Standard: 90% or better
          2002                        2003                     2004
                  96.36%                      95.08%                      90.70%

1b        Connection of New Services – High Voltage

          Standard: 90% or better
          2002                        2003                     2004
                   100%                        100%                        100%

2         Underground Cable Locates

          Standard: 90% or better
          2002                        2003                     2004
                  92.68%                      92.61%                      90.70%

3         Appointments Met

          Standard: 90% or better
          2002                        2003                     2004
                  98.15%                      99.91%                      98.30%

4         Telephone Accessibility (Telephone Service Factor)

          Standard: 65% or better
          2002                        2003                     2004
                  76.00%                      70.14%                      72.20%




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5         Written Responses to Enquiries

          Standard: 80% or better
          2002                      2003                  2004
                  91.36%                    95.14%                 90.70%

6a        Emergency Response - Urban

          Standard: 80% or better
          2002                      2003                  2004
                   98.9%                    99.09%                 98.10%

6b        Emergency Response - Rural

        Standard: 80% or better
        2002                        2003                  2004
                   100%*                     N/A                     N/A
* In 2003, all areas are considered urban

Reliability Indicators

7         SAIDI (System Average Interruption Duration Index)

          Standard: Within the range of performance over the previous 3 years
          2002                        2003                   2004
                    1.321                     1.440                    0.7611

8         SAIFI (System Average Interruption Frequency Index)

          Standard: Within the range of performance over the previous 3 years
          2002                        2003                   2004
                    1.390                     1.460                    0.6616
9         CAIDI (Customer Average Interruption Duration Index)

          Standard: Within the range of performance over the previous 3 years
          2002                        2003                   2004
                    0.951                     0.980                    1.1504
Table 15.1 – Performance Indicators




2006 EDR Application
                                                                                     Hydro Ottawa Limited
                                                                                            RP-2005-0020
                                                                                            EB-2005-0381
                                                                                                    Tab B
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                                                 Exhibit A
                       Proposed Schedule of Distribution Rates and Charges
                                       Effective May 1, 2006

APPLICATION

Application of rates and charges shall be in accordance with the Electricity Distribution Rate
handbook and amendments thereto or any other Codes or Guidelines, including the Standard
Application of Rates as approved by the former Ontario Hydro, which may be applicable to the
administration of this rate schedule as approved by the Board.


MONTHLY RATES AND CHARGES

         RESIDENTIAL SERVICE:

                  Monthly Service Charge              (per customer)     $7.78
                  Variable Distribution Charge        (per kWh)          $0.0189

         GENERAL SERVICE < 50 kW:

                  Monthly Service Charge              (per customer)     $8.86
                  Distribution Volumetric Rate        (per kWh)          $0.0186

         GENERAL SERVICE > 50 kW < 1500 kW:

                  Monthly Service Charge              (per customer)     $256.49
                  Distribution Volumetric Rate        (per kW)           $2.6357

                  Standby Monthly Service Charge      (per customer)     $95.00
                  Standby Distribution Volumetric Rate (per kW)          $1.3179

         GENERAL SERVICE > 1500 kW < 5000 kW:

                  Monthly Service Charge              (per customer)     $4,124.11
                  Distribution Volumetric Rate        (per kW)           $2.4172

                  Standby Monthly Service Charge      (per customer)     $95.00
                  Standby Distribution Volumetric Rate (per kW)          $1.2086

         LARGE USE:

                  Monthly Service Charge              (per customer)     $14,978.28
                  Distribution Volumetric Rate        (per kW)           $2.6822

                  Standby Monthly Service Charge      (per customer)     $95.00
                  Standby Distribution Volumetric Rate (per kW)          $1.3411



2006 EDR Application
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                                                                                               RP-2005-0020
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         SENTINEL LIGHTING

                  Monthly Service Charge              (per connection)        $1.74
                  Distribution Volumetric Rate        (per kW)                $6.3700

         STREET LIGHTING

                  Monthly Service Charge              (per connection)        $0.34
                  Distribution Volumetric Rate        (per kW)                $2.5529

         UN-METERED SCATTERED LOADS

                  Monthly Service Charge              (per customer)          $4.43
                  Distribution Volumetric Rate        (per kWh)               $0.0198



          Specific Service Charges                                     Amount
          Arrears Certificate                                            $15.00
          Duplicate Invoice                                              $15.00
          Request for Other Billing Information                          $15.00
          Credit Reference/Credit Check                                  $15.00
          Return Cheque Charge (plus bank charges)                     $15.00
          Account Setup Charge/Change of Occupancy                     $30.00
          Collection of Account Charge                                 $30.00
          Disconnect/Reconnect at Meter – Regular Hours                $65.00
          Disconnect/Reconnect at Meter – After Hours                  $185.00
          Disconnect/Reconnect at Pole – Regular Hours                 $185.00
          Disconnect/Reconnect at Pole – After Hours                   $415.00
          Temporary Service Install/Remove – No Transformer            $500.00
          Pole Attachments - $/pole/attacher/year                      $22.35
         Table A.1 – Specific Services Charges New

          Other Service Charges                                        Amount
          Late Payment – per month                                        1.5%
          Late Payment – per annum                                       19.56%
          Dry core Transformer Losses                             As per Schedule
         Table A.2 – Other Services Charges New

          Service Allowances                                           Amount
          Transformer Ownership < 115 kW – per kW of Billed
                                                                         $0.45
          Demand
         Table A.3 – Service Allowance New


2006 EDR Application
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Dry Core Transformer Losses

                                                                                                                        Cost of
                                               Monthly       Monthly Monthly Monthly          Monthly                                 Total
                 No Load    Load    Monthly No                                                             Cost of     Energy and                 Cost of
                                               No Load       No Load No Load  Total            Total                                 Monthly
Transformers      Loss      Loss    Load Loss                                                           Transmission   Wholesale                Distribution
                                                 Loss         Loss     Loss   Loss              Loss                                 cost of
                   (W)       (W)      (kW)                                                                 per kW      Market per                 per kW
                                                (kWH)         (kW)    (kWH)   (kW)             (kWH)                                  power
                                                                                                                          kWh
Rates                                                                                                      $2.60         $.0642        na          $2.61
25 KVA 1 PH         150     900        0.113        82        0.480       9         0.161       91         $0.42         $5.84       $6.26         $0.42
37.5 KVA 1 PH       200     1200       0.150        110       0.064       12        0.214      121         $0.56         $7.77       $8.33         $0.56
50 KVA 1 PH         250     1600       0.188        137       0.086       16        0.273      152         $0.71         $9.76       $10.47        $0.71
75 KVA 1 PH         350     1900       0.263        192       0.102       18        0.364      210         $0.95         $13.48      $14.43        $0.95
100 KVA 1 PH        400     2600       0.300        219       0.139       25        0.439      244         $1.15         $15.66      $16.81        $1.15
150 KVA 1 PH        525     3500       0.394        287       0.187       34        0.581      321         $1.52         $20.61      $22.12        $1.52
167 KVA 1 PH        650     4400       0.488        356       0.236       43        0.723      399         $1.89         $25.62      $27.50        $1.89
200 KVA 1 PH        696     4700       0.522        381       0.252       46        0.774      427         $2.02         $27.41      $29.43        $2.02
225 KVA 1 PH        748     5050       0.561        410       0.270       49        0.831      459         $2.17         $29.47      $31.64        $2.17
250 KVA 1 PH        800     5400       0.600        438       0.289       53        0.889      491         $2.32         $31.52      $33.84        $2.32

*15 KVA 3 PH     125        650        0.094        68        0.035       6        0.129        75         $0.34         $4.82        $5.15        $0.34
*45 KVA 3 PH     300        1800       0.225        164       0.096       8        0.321       182         $0.84        $11.68       $12.52        $0.84
*75 KVA 3 PH    400        2400        0.300       219        0.129      23        0.429       242         $1.12        $15.54       $16.66        $1.12
*112.5 KVA 3 PH 600        3400        0.450       329        0.182      33        0.632       362         $1.65        $23.24       $24.89        $1.65
*150 KVA 3 PH   700        4500        0.525       383        0.241      44        0.766       427         $2.00        $27.41       $29.41        $2.00
*225 KVA 3 PH   900        5300        0.675       493        0.284      52        0.959       544         $2.50        $34.92       $37.43        $2.50
*300 KVA 3 PH   1100       6300        0.825       602        0.337      61        1.162       664         $3.03        $42.63       $45.66        $3.03
*500 KVA 3 PH   1500       9700        1.125       821        0.519      94        1.644       916         $4.29        $58.81       $63.10        $4.29
*750 KVA 3 PH   2100       12000       1.575       1150       0.643      117       2.218       1267        $5.79        $81.34       $87.13        $5.79

No Load and load losses from CSA standard C802-94: Maximum losses for distribution, power and dry-type transformers commercial use
Average load factor = 0.46 average loss factor = 0.2489

*For non-preferred KVA ratings no load and load losses are interpolated as per CSA standard



            Table A.4 – Dry Core Transformer Charges




   2006 EDR Application

								
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