INTRODUCTION The purpose of this evidence is to present THESL s Revenue Offsets.

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1 EB-0-0 Schedule Page of REVENUE OFFSETS INTRODUCTION The purpose of this evidence is to present THESL s Revenue Offsets. THESL earns revenue from its distribution tariff. THESL also earns other revenues from non-distribution related services, property and facility rentals and short-term investment income. These other revenues offset the revenue requirement to be collected through the distribution tariff. THESL divides Other Revenue into the following categories: Revenue from Specific Service Charges including Pole Attachment; Late Payment Charges; Other Distribution Revenue; and Other Income and Deduction. A breakdown of the Other Revenue accounts is shown in,, Schedule and is summarized as follows:

2 EB-0-0 Schedule Page of Table : Other Revenue ($ millions) 00 Historical 0 Bridge 0 Test Specific Service Charges (including Pole Attachment Rental)..0. Late Payment Charges... Other Distribution Revenue..0. Other Income Total Revenue Offset... Revenue from Specific Service Charges including Pole Attachment THESL charges user fees for certain services. Some of these services, such as Account Setup, are provided at customers request. Others result from THESL s business operations, such as collection fees resulting from customers non-payment of bills. Since 00, THESL has adopted the OEB standard charges for services for which a fee is applicable. THESL has also adopted the OEB s formula to determine a standard, province-wide pole attachment rate. THESL proposes to maintain the Specific Service Charges and Pole Attachment Rates as shown in,, Schedule. Based on historical trend, THESL expects Specific Service Charges and Pole Attachment Revenue to decrease from 00 to 0 primarily due to reduced Collection and Account Set Up Charges. THESL expects the increase from 0 to 0 to be primarily due to Pole Rentals as a result of increasing attachment requests both from traditional customers

3 EB-0-0 Schedule Page of and from new entrants into the telecom industry. A detailed breakdown is shown in,, Schedule. Late Payment Charges Based on historical trends, annual Late Payment Charges are expected to be stable and remain at $. million per year in 0 and $. million per year in 0. Other Distribution Revenue Other Distribution Revenue includes revenues from SSS Administration Charges, Retail Service Charges and rental incomes derived from THESL properties such as Ducts. Detailed breakdown is shown in,, Schedule. Other Distribution Revenue is forecast to decrease in 0 by $0. million, mainly due to a decrease in Stale-Dated Cheques and Duct Rental. The 0, Other Distribution Revenue is expected to increase by $0. million, mainly due to an increase in Duct Rentals partially offset by a decrease in SSS Administration Charges. 0 Other Income THESL earns revenue by providing services to customers and third parties, gains on the sale of scrap metal and gains on the disposal of utility property, and earns interest income from short-term investments of its idle cash balances. Merchandise and Jobbing Some THESL business units provide services to customers and third parties for a fee. The main services include: Customer requests for isolation, protection and temporary removals of lines;

4 EB-0-0 Schedule Page of Costs incurred by THESL to repair damaged distribution plant to be reimbursed by third parties; and Maintenance of third party facilities located within THESL property. Details of the Merchandise and Jobbing revenues and expenses are shown in,, Schedule. The revenues and expenses from Merchandise and Jobbing vary significantly from year to year, depending on the number and type of activities requested by customers. Business units forecast the activities, revenues and expenses in 0 based on historical experience and any known work. Since the charges recover the cost of providing the services and are based on fully burdened labour, material and vehicle rates and do not normally generate a net profit, negligible net revenue is projected for 0. 0 THESL also generates income from the sale of scrap metal materials. However, scrap metals are sold in the market and any profit would depend on the strength of the market, the US dollar exchange rate, and on how much scrap is available for processing. There is no certainty in net profit and therefore no net revenue is projected for scrap metal sales in 0. The total net revenue in 00 of $. million is primarily due to profit on scrap metal sales, the 00 research and development tax credit and the 00 Ontario tax credit THESL received in 00. The difference in net revenue in each activity category is mainly due to a timing difference between the booking of revenue versus actual expenses incurred.

5 EB-0-0 Schedule Page of Gains from Sale of Utility Properties THESL disposes of obsolete facilities and real estate on a periodic basis. In 0, gains of $. million result from the unplanned disposal of THESL idle properties such as Godard, Combermer and Rivalsa. Interest Income from Short-Term Investment THESL actively manages idle working capital cash balances by investing excess cash in low risk Canadian and U.S. money market instruments. This activity provides a dual benefit. First, the interest earned from cash management offsets THESL s long-term and short-term interest expense, thereby increasing its interest coverage ratios. This helps to maintain THC s investment-grade credit rating, which in turn has the pecuniary benefit of allowing THESL to post lower prudentials with the IESO, and to arrange short-term borrowings at more favourable rates, as necessary. Secondly, since the interest earned from investments is an offset to overall distribution revenue, other things being equal, ratepayers benefit from lower overall rates than in the absence of such a revenue offset.