RATE DESIGN. The proposed distribution rates for each rate class over the Custom COS period are summarized in Table 1.

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1 Updated: EB-0-0 Exhibit G Schedule Page of RATE DESIGN.0 INTRODUCTION The purpose of this evidence is to present the proposed rates designed to collect the revenue requirement as determined by the CAM discussed in Exhibit G, Tab, Schedule. 0 The proposed distribution rates for each rate class over the Custom COS period are summarized in Table. Table Distribution Rates over the -year Custom COS Period 0 Rate Class* Service ($/month) Volumetric Volumetric Service Volumetric Volumetric Service Volumetric Volumetric Service Volumetric Volumetric Service Volumetric ($/kwh) ($/kw) ($/month) ($/kwh) ($/kw) ($/month) ($/kwh) ($/kw) ($/month) ($/kwh) ($/kw) ($/month) ($/kwh) The proposed rates over the Custom COS period reflect the changes in revenue requirement and load forecast, and the results of applying the OEB s CAM. proposed rates are calculated based on the rate class revenue requirement after adjustments to the R/C ratios as described in Section.0 of Exhibit G, Tab, Schedule. Details of the calculation of the R/C ratio adjustments and derivation of the rates shown in Table are provided in Exhibit G,, Schedule. Volumetric ($/kw) UR R R Seasonal GSe UGe GSd UGd St Lgt Sen Lgt USL DGen * Refer to Table for ST rates. The

2 Updated: EB-0-0 Exhibit G Schedule Page of The Distribution and Total Bill impacts at typical consumption levels for each rate class over the Custom COS period are summarized in Table. Bill impacts over a range of consumption levels are provided in Exhibit G, Tab, Schedule. Table Distribution and Total Bill Impacts at Typical Consumption Levels Rate Class UR R R Seasonal GSe UGe GSd UGd St Lgt Sen Lgt USL DGen ST Monthly Consumption (kwh) Monthly Peak (kw) DX Bill DX Bill ($) 0 Total Bill ($) Total Bill DX Bill DX Bill ($) 0 0 Total Bill ($) Total Bill DX Bill DX Bill ($) Total Bill Total Bill ($) DX Bill DX Bill ($) 0 0 Total Bill ($) Total Bill DX Bill DX Bill ($) Total Bill Total Bill ($) 00 ($.) -.% ($.) -.% $0..% $0. 0.% $0..% $0.0 0.% $0..% $0.0 0.% $0..% $0.0 0.% 00 ($0.) -.% ($.) -.% $..% $..% $.0.% $. 0.% $0..% $0. 0.% $..% $. 0.% 00 $..% $..0% $. 0.% $..% $..% $..% $.00 0.% $..% $.0.% $..% 00 $..% $..% $.0.% $..% $..% $.0.% $..% $..% $..% $..%,000 $0.0.% $..% $..% $..% $..% $..% $..% $..% $0..% $0..%,000 $..% $..% $..% $.0.% $..% $.0.% $.0.% $..% $..% $..%,000 0 $..% $.0.% $..% $.0.% $..% $0..% $.0.% $..% $0. 0.% $..%,000 0 $0..% $.0.% $..% $0.0.% $0..% $..% $..% $..% $. 0.% $..% 00 $..% $..% $..0% $.0.% $..% $..0% $..% $..0% $..% $.0.% 0 $..% $..% $0..% $.0.% $.0.% $..% $.0 0.% $.0.% $0..% $0.0.% 00 $..% $.00.% ($0.) -.0% ($0.) -0.% $..% $..% $0. 0.% $0. 0.% $..% $..0%,000 0 $..% $..% $..% $..% $..% $..% $.0.% $..% $..% $..% 00,000,000 $0.0.% $,..% $.00.% $. 0.% $..% $. 0.% $.0.% $.0 0.% $0..% $. 0.%

3 Filed: 0-- EB-0-0 Exhibit G Schedule Page of The 0 proposed rate schedules reflecting the rates shown in Table are provided in Exhibit G, Tab, Schedule. The currently approved rate schedules are provided in Exhibit G, Tab, Schedule. Rate schedules for subsequent years of the Custom COS period will be produced as part of the annual process for setting rates, taking into account any changes as a result of the annual adjustments discussed in Exhibit A,, Schedule..0 RATE DESIGN PROCESS 0 Generally accepted ratemaking principles guided Hydro One s development of rates for this application. Those principles are best summarized by James Bonbright s, Principles of Public Utility Rates. The OEB Staff s March, 00 discussion paper Rate Design for Recovery of Electricity Distribution Costs (EB-00-00), cited these principles and summarized them as: 0 ) Full Cost Recovery the level and design of rates should be sufficient to provide distributors with a reasonable opportunity to recover its revenue requirement, and for rates to be effective they should be practical, clear and uncontroversial ) Fairness customers should, in general, pay rates for distribution service that reflects the costs they cause as determined by a Board approved cost allocation study ) Efficiency rates should encourage customers to maximize use of existing distribution assets, and encourage existing and new customers to use the system in ways that lead to rational growth The R/C ratios for each rate class per Sheet O of the CAM, as well as information on the monthly customer charge per Sheet O are the key inputs to the development of rates. The O and O output sheets for each year of the Custom COS period are provided in Exhibit G, Tab, Schedules to.

4 Filed: 0-- EB-0-0 Exhibit G Schedule Page of.0 FIXED VERSUS VOLUMETRIC CHARGES 0 Hydro One is proposing to reset the fixed charge for all rate classes in 0 to the minimum system values calculated in Sheet O of the CAM, except as noted otherwise. The Company believes a minimum system-based fixed charge appropriately recovers a utility s costs associated with owning, operating and maintaining the assets required to provide customers even a minimum amount of electricity. A fixed charge based on a minimum system approach ensures consistency with the principles underlying the Board s CAM which allocates the minimum system portion of a utility s costs to a rate class in proportion to the number of customers within the class. Hydro One customers across all rate classes have seen their fixed charges remain essentially flat since 00 due to the fact that the revenue increases over the 00-0 period were largely absorbed by increases to the volumetric charges. Since 0 there have been only small increases to the fixed charges as a result of uniformly applied IRM increases. 0 Given how costs are allocated to rate classes, the currently approved fixed charge levels place a disproportionate emphasis for collection of costs on the volumetric charge, which Hydro One proposes to address in this current application. Table shows the current and proposed 0 fixed and volumetric revenue shares. For 0 to 0 Hydro One will maintain the fixed and volumetric percentage splits established in 0 in order to provide stability in the revenue mix over the period. Hydro One plans to reset the fixed/volumetric split at the start of the next COS period.

5 Updated: EB-0-0 Exhibit G Schedule Page of Table Current and Proposed Fixed and Volumetric Revenue Split Rate Class Current (0 rates) Proposed (0 rates) Fixed Volumetric Fixed Volumetric UR % % % % R % % % % R % % % % Seasonal % % % % GSe % % % % UGe % % % % GSd % % % % UGd % % % % St Lgt % % % % Sen Lgt 0% 0% % % USL % % % % DGen % % % % ST % % % % Table compares the current and 0 proposed monthly fixed charges with the values calculated in Sheet O of the CAM.

6 Updated: EB-0-0 Exhibit G Schedule Page of Table Current and 0 Proposed Monthly Fixed s Rate Class Current (0) Monthly Fixed ($/month)* Proposed 0 Monthly Fixed ($/month)* CAM Scenario: Customer Unit Cost per Month - Avoided Cost CAM Scenario: Customer Unit Cost per Month - Directly Related CAM Scenario: Customer Unit Cost per Month - Min System with PLCC Adjustment UR R R Seasonal..... GSe UGe GSd..... UGd St Lgt Sen Lgt USL DGen ST * Fixed shown for R class is net of RRRP Credit. 0 The R fixed charge has been set based on the currently approved 0 charge escalated to reflect the proposed 0 average increase in rates revenue requirement, as per the factor used to increase revenue at existing rates shown on Sheet O of the Board s CAM. The proposed fixed charge set using this approach results in the collection of % from fixed charges for the R class, which is equal to the currently approved fixed/variable split, but below the.% fixed revenue share that existed in 00. The proposed R fixed charge is within the range of values calculated by the CAM when the RRRP credit

7 Filed: 0-- EB-0-0 Exhibit G Schedule Page of applicable to R customers is taken into consideration. The fixed charge for the Seasonal customer class is set to collect a fixed revenue share equivalent to the average of the R and R fixed revenue share, in recognition that Seasonal customers are located in both medium and low density zones. Hydro One does not propose adopting the minimum system fixed charge for the Seasonal customer class as this would represent a. times increase in the current fixed charge and would result in large rate impacts to the many low consumption customers within the Seasonal rate class. 0 The fixed charges for the Streetlight and Sentinel light classes have been set at the CAM Scenario - Directly Related amount shown in Table. The proposed fixed charges represent a substantial increase in the current value for these classes, but less than the 0 times increase that would result if the minimum system-based charge was adopted. The minimum system fixed charge calculated by the CAM also provides the basis for establishing the fixed charges for the ST rate class, as described in Section.0 of this Exhibit. For all classes, the volumetric rate was set to recover the balance of the revenue to be collected from each rate class. 0.0 CALCULATION OF SUB-TRANSMISSION (ST) RATES. Introduction The charges for the use of Common ST lines, High Voltage Distribution Stations ( HVDS ), Low Voltage Distribution Stations ( LVDS ), Specific ST Line and Specific Primary Line, were derived using the results of the CAM for each year of the Custom COS period.

8 Filed: 0-- EB-0-0 Exhibit G Schedule Page of The methodology used in this application for the allocation of costs to the ST rate class, as discussed in Exhibit G, Tab, Schedule, as well as for the design of ST rates has not changed from the methodology that was used in Hydro One s 00 and 00/ COS applications, EB-00-0 and EB-00-00, respectively. Unlike many other host distributors, Hydro One has had approved ST rates applicable to its embedded distributors since 00. As such, embedded distributors have had the opportunity to review the cost allocation and rate design of the rates applicable to them as part of the regulatory approval process for Hydro One s last two COS applications. 0 The HVDS and Common ST line charges are billed to customers supplied from multiple feeders connected to the same Transmission Station ( TS ) or HVDS based on their aggregated billing demand. The aggregation of billing demand is consistent with the billing of Retail Transmission Service Rates ( RTSR ) and was previously reviewed and approved in Hydro One s 00 and 00/ COS applications, EB-00-0 and EB , respectively. 0 As previously reviewed and approved by the Board in Hydro One s 00 and 00/ COS applications, EB-00-0 and EB-00-00, customers with load displacement generation above MW, or MW for renewable generation, installed after October, are billed ST volumetric charges on a gross load basis. Figure provides a simplified diagram of the basic elements of the distribution system and its connection to the transmission system to assist in understanding the ST charges.

9 Filed: 0-- EB-0-0 Exhibit G Schedule Page of Figure Distribution System

10 Updated: EB-0-0 Exhibit G Schedule Page 0 of. Derivation of ST Rates Table shows the filed 0 ST charges and the proposed 0-0 ST charges. Table Current and Proposed ST s Current Proposed Unit Fixed Service $ Meter Common Line $/meter $/kw Specific ST Line $/km Specific Primary Line $/km HVDS-high HVDS-low LVDS-low.. Fixed Service $/kw $/kw $/kw Hydro One applies a monthly fixed service charge per delivery point where an ST customer uses Common ST lines or HVDS facilities. The fixed service charge is based on the Minimum System with PLCC Adjustment value for the ST class from the O Sheet of the CAM, adjusted to exclude low voltage meter costs allocated to the ST rate class.

11 Filed: 0-- EB-0-0 Exhibit G Schedule Page of.. Meter rate for Hydro One Owned Meter Most of the customers in the ST group provide their own metering facilities. To reflect this, Hydro One has an additional fixed charge, per metering facility, applicable to customers for whom Hydro One provides metering facilities. The meter charge is set to recover Hydro One s low voltage metering facility costs allocated to the ST rate class in the CAM... Common ST Line Rate 0 The CAM and rate design process determine the total rates revenue requirement to be collected from the ST rate class, as shown in Exhibit G,, Schedule. The amount that is not recovered through the other ST charges (i.e. fixed service, meter, HVDS-high, HVDS-low, LVDS-low, Specific ST Line and Specific Primary Line) are recovered through the Common ST Line charge. Common ST Line is a volumetric charge. Details of the derivation of the Common ST Line rates are provided in Exhibit G,, Schedule... HVDS-High Rate 0 Customers in the ST class can obtain transformation from above 0 kv to a voltage between kv and. kv either through the use of an HVDS-high, or through a TS owned by Hydro One Transmission. Customers that obtain supply through a TS are charged RTSR transformation. Therefore, for consistency purposes, the HVDS-high rate is set equivalent to the RTSR transformation rate adjusted for losses. HVDS-high is a volumetric charge.

12 Filed: 0-- EB-0-0 Exhibit G Schedule Page of.. HVDS-low Rate HVDS-low stations transform power from above 0 kv to under. kv. Consistent with the current rate structure, the HVDS-low rate is set to be the sum of the HVDS-high rate and LVDS-low rate. This ensures that the rate for transformation from above 0kV to below.kv is equivalent for all delivery points, regardless of the type of upstream transformation facilities used. HVDS-low is a volumetric charge... LVDS-low Rate 0 LVDS-low stations transform power from above. kv to under. kv. The rate is set to recover the LVDS-low portion of the costs attributable to distribution stations that are allocated to the ST rate class, as determined by the the CAM. The ST LVDS-low portion of the distribution stations costs is based on the gross book value of assets associated with providing ST service from LVDS-low stations as a share of the total LVDS station assets. LVDS-low is a volumetric charge. Details of the derivation of the LVDS-low rate are provided in Exhibit G,, Schedule... Specific ST Line and Specific Primary Line Rates 0 A line section is specific if it supplies solely one LDC and is within that LDC s territory. Specific ST lines are those between kv and. kv, while Specific Primary lines are between. kv and. kv. The Specific ST line rate is set to the average per kilometer cost for all lines on Hydro One s distribution system. The specific Primary line rate is adjusted for the relationship in unit costs between the average distribution line cost and the cost of Primary lines.

13 Updated: EB-0-0 Exhibit G Schedule Page of Details of the derivation of the Specific ST line rates are provided in Exhibit G,, Schedule. Specific ST and Primary line rates are applied to the length of the specific line section (km) rather than to demand (kw)... Updating ST s Over the Custom COS Period 0 As described in Exhibit G, Tab, Schedule, RTSR rates will be updated as a part of the annual draft rate orders prepared over the Custom COS period in the event new Uniform Transmission Rates are approved for the corresponding year. Since the HVDShigh charge is set at the same value as the proposed RTSR-Transformation rate, and the HVDS-low and Common ST line rates are in-turn impacted by the HVDS-high charge, it is anticipated that these three ST rates will be updated as part of the draft rate order associated with future years of the Custom COS period.. Milton Hydro ST s 0 In the Board s Decision on Proceeding EB-00-0, Hydro One was directed to bring forward a rate specific to address Milton s circumstances in case Milton Hydro has not purchased the two feeder connections to Palermo TS. The sale of these assets to Milton Hydro had not been completed at the time of Hydro One s next COS application, EB At that time Hydro One noted that there were 0 other customers that have similar circumstances to Milton s situation; that is, being supplied by feeders located outside the customer s boundaries and supply only one customer. Hydro One noted in EB that if the Board were to approve the use of the Specific ST Line, kilometer-based charge, for all customers in a similar situation to

14 Filed: 0-- EB-0-0 Exhibit G Schedule Page of Milton Hydro, there would be three LDCs and four Direct customers paying substantially more as compared to their current billing determinants. In addition, the revenues collected from all customers would be $. million lower than if they would be charged on a per kw basis. The revenue shortfall would need to be recovered through higher rates for the ST Common Line charge applicable to most ST customers. There were no submissions on this issue and no change in the approach to charging for ST charges was approved by the Board as part of EB The sale of the subject assets to Milton Hydro continues to be explored, but has not been completed. Given the impacts of using the Specific ST Line rate for all customers in Milton Hydro s situation, as described above, Hydro One proposes that no changes be made to the current approach to ST charges described in this exhibit..0 REVENUE RECONCILIATION A reconciliation of the revenue at proposed rates and the revenue requirements by rate class, as per the requirements of Appendix -V of the Board s Filing Requirements, are provided in Exhibit G, Tab, Schedule. 0.0 TRANSFORMER COST ALLOWANCE There are circumstances under which Hydro One does not supply customers with transformation equipment, but rather the customer provides its own equipment. This occurs usually when the customer has unique consumption characteristics that require the use of special equipment not usually provided by Hydro One. Since the rates developed for most customer classes assume that Hydro One provides transformation to the customer, customers in classes that provide their own transformation are entitled to receive a credit equivalent to the costs of transformation included in their rates.

15 Updated: EB-0-0 Exhibit G Schedule Page of The transformation allowance was set previously on a generic basis for LDCs throughout the province. Hydro One is proposing to maintain its currently approved Transformer Ownership Allowance at the previously established rate of $0.0/kW. Some customers that provide their own transformation are energy billed, therefore, in order to be able to provide these customers with a Transformer Ownership Allowance, an equivalent 0. /kwh rate previously approved will be maintained. The proposed Transformer Ownership Allowance will also apply to single-phase customers that provide their own transformation equipment. 0 The projected cost of the Customer Supplied Transformer Allowance ( CSTA ) credit results in the rate adders shown in Table, which are included in the volumetric rates shown on the proposed rate schedules in Exhibit G, Tab, Schedule for the GSd, UGd and DGen rate classes. Table CSTA Rate Adders Year Rate CSTA Credit Adder for Amount to be CSTA Recovered ($) ($/kw) 0,, 0.0 0,, 0.0 0,, ,, 0.0 0,, 0.0

16 Updated: EB-0-0 Exhibit G Schedule Page of.0 HOPPER FOUNDRY RATE ADJUSTMENT In accordance with the Board s Decision in Hydro One s cost-of-service application EB- 00-0, Hydro One continues to levy the General Service Demand rates applicable to Hopper Foundry using monthly kw billing determinants determined on a time-of-use basis. As a result of using this approach, Hydro One will collect less revenue from Hopper Foundry in each year of the Custom COS period. The lost revenue amounts and associated adder to be included in the GSd rate schedules shown in Exhibit G, Tab, Schedule are provided in Table. 0 Table Hopper Foundry Rate Adders Lost Hopper Year Revenue Foundry Rate Amount ($) Adder ($/kw) 0, , 0.0 0, , 0.0 0, BILLING DETERMINANTS Hydro One is not proposing any changes to the type of billing determinants currently approved for its customer classes. Customers will continue to be billed a monthly fixed charge and a kwh or kw volumetric charge. For the Streetlight, Sentinel light and

17 Filed: 0-- EB-0-0 Exhibit G Schedule Page of Unmetered Scattered Load classes, customers will continue to be charged a monthly per account service charge and a volumetric charge based on estimated kwh..0 STANDBY RATES Hydro One s currently approved standby rate consist of a monthly administration charge, as described in Exhibit G, Tab, Schedule, however there are no load displacement generation customers to which the monthly administration charge is applied. 0 The Board is currently undertaking a consultation process on the development of Standby Rates Policy for load displacement generation customers (Proceeding EB-0-000).