PROPERTY TAXES. A summary of taxes other than income and capital taxes is presented below: Table 1 ($ Millions)

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1 Updated: February, 00 EB-00-0 Exhibit C Tab Schedule Page of PROPERTY TAXES A summary of taxes other than income and capital taxes is presented below: Description Property Tax Indemnity Payment Rights Payment Table ($ Millions) Historical Bridge Test Test Total PROPERTY TAX Hydro One is responsible for the payment of property taxes consistent with every other land owner within the province of Ontario. Property taxes for Hydro One are regulated under the Electricity Act, the Municipal Act 00, and the Assessment Act. Property taxes are levied on Hydro One owned transmission land and buildings, including service centre sites, transmission stations, and transmission lines. Property tax payments are paid to about 00 municipalities each year by Hydro One. A summary of annual transmission property taxes is presented in Table, below:

2 Updated: February, 00 EB Exhibit C Tab Schedule Page of Description Stations and buildings, including proxy tax Transmission lines Table Breakdown of Property Tax Expense ($ Millions) Historical Bridge Test Test Other Property Tax Total Transmission Stations & Buildings For municipal property tax purposes, transmission station buildings are assessed at a statutory rate of $. per square metre, per the Assessment Act R.S.O., chapter A, Section. The lands containing the transmission stations are assessed using Current Value Assessment (CVA). Hydro One owned property, other than transmission lines, not classified as a transmission station (e.g. a Service Centre), is completely assessed using the Current Value Assessment the valuation method used for other property owners within the province. Total assessed value is assigned by the Municipal Property Assessment Corporation, and is updated utilizing the same schedule as the rest of the province. Provincial reassessments were issued for the, 00, 00 and 00 tax years. Hydro One initiates appeals on transmission stations and other properties with inequitable and incorrect assessments (eg. improper valuations and/or incorrect property tax classifications). In the 00 fiscal year, Hydro One s position was confirmed by Assessment Review Board decisions which reduced assessed values, and corrected tax classes. In 00, Hydro One received refunds from municipalities for tax years 00 inclusive, resulting from these Assessment Review Board decisions. These incorrect assessments were a result of the province-wide property tax reform process introduced in, and the introduction of the Electricity Act amendments in.

3 Filed: September, 00 EB-00-0 Exhibit C Tab Schedule Page of Notices of Assessment are received and reviewed for accurate valuation and tax classification each year. Any incorrect classes and/or over valuations are appealed through the Municipal Property Assessment Corporation, and/or the Assessment Review Board. Additional property tax payments, called proxy property taxes, for owned transmission stations are levied and paid to the Minister of Finance to be applied against the stranded debt. The details of this additional assessment are contained within Ontario Regulation /00 under the Electricity Act. The additional tax is the difference between the statutory rate for transmission station buildings and the municipal tax that would apply to the buildings if they were taxed at Current Value Assessment. This amount is calculated each year for each transmission station owned by Hydro One. Ontario Power Generation is the owner of various properties within the province of Ontario on which are located Hydro One Networks transmission facilities. Ontario Power Generation and Hydro One Networks entered into Lease and Easement agreements with respect to these properties, effective April,. Under subsection.0 of the easements and subsection (b) of the lease agreements, Hydro One Networks is required to pay realty taxes with respect to its occupancy to Ontario Power Generation. 0 Transmission Lines Hydro One transmission line corridors are assessed, and municipal taxes are calculated at a rate per acre of owned corridor land. These rates were established by Ontario Regulation / made under the Municipal Act and Ontario Regulation / made under the Education Act, titled Tax Matter Taxation of Certain Railway, Power Utility Lands. As payments are made based on an area of land, multiplied by a legislated rate, appeals must be based on corrections to the area of the property, or on the decision to classify a property as being outside the utility corridor tax class. Historically, annual

4 Filed: September, 00 EB Exhibit C Tab Schedule Page of payments for Hydro One transmission lines corridors have averaged $ million per year, paid to just under 00 municipalities. An additional amount is paid annually to various First Nations bands for Payment in Lieu of Taxes (PIL) covering transmission lines and transmission stations on reserves. Since June, Section of the Indian Act has provided for taxation by First Nations, of property interests on their Reserve lands. Hydro One makes payments in lieu of taxes similar to taxes paid to municipalities that have Hydro One Networks facilities contained within them. Other Other municipal property tax costs relate to costs on other sundry properties, such as transmission communication towers, and administrative buildings..0 INDEMNITY PAYMENT TO PROVINCE 0 The Ontario Electricity Financial Corporation (OEFC) has indemnified Hydro One with respect to the failure of the transfer orders (orders used to establish the company as one of the successor companies to the former Ontario Hydro) in. The OEFC indemnification covers any defects in the transfer orders encompassing the following areas: ) the transfer of any asset, right, thing, or any interest related to the business; ) some adverse claims or interests of third parties or based on property title deficiencies arising from the transfer orders, except for some claims and rights of the Crown; and,

5 Filed: September, 00 EB-00-0 Exhibit C Tab Schedule Page of ) claims related to any equity account previously referred to in the financial statements of Ontario Hydro including amounts relating to any judgement, settlement or payment in connection with litigation initiated by certain utilities commissions. The Province has unconditionally and irrevocably guaranteed to Hydro One the payment of all amounts owing by OEFC under its indemnity. Hydro One Networks pays an annual fee of $.0 million to the OEFC. As the transfer order primarily relates to land assets, the amount allocated to Hydro One Transmission is based on the proportion of Hydro One Transmission land assets in relation to the total land assets of Hydro One. This results in $. million of the $.0 million total being allocated to Hydro One Transmission..0 RIGHTS PAYMENT 0 Through agreements or permits, Hydro One Transmission line facilities cross and/or occupy properties owned by railway companies (e.g. Canadian National) and/or governmental bodies (e.g. Federal Government, Rideau Canal). Per the terms of the individual agreements, Hydro One Transmission pays an annual fee to the railway companies and the government entities for the right to cross and/or occupy their properties. These agreements contain rental review provisions allowing for rent increases tied to increased land values, subject to negotiation by both parties. Recent land values have experienced dramatic increases. We anticipate increased costs as the reviews are triggered within the individual agreements. Rights payments associated with the railway companies are being consolidated into master agreements with each individual railway. This type of agreement will result in one annual payment per railway, reducing administrative efforts and should streamline the payment process. Through Agreements or Permits granted by The Department of Indian and Northern Affairs, Canada (INAC), Hydro One has approval for its transmission and distribution

6 Filed: September, 00 EB Exhibit C Tab Schedule Page of facilities (lines and stations i.e. TS and DS s), to cross and/or occupy First Nation Reserves. Some of these permits/agreements require Hydro One to pay annual rental fees. Payments under these agreements / permits on First Nation Reserves, are administered by INAC. 0 The transfer orders by which Hydro One acquired Ontario Hydro s electricity transmission, distribution and energy services businesses as of April, did not transfer title to some assets located on lands held for bands or bodies of Indians under the Indian Act (Canada). The transfer of title to these assets did not occur because authorizations originally granted by the federal Minister of Indian and Northern Affairs for the construction and operation of these assets could not be transferred without the consent of the Minister and the relevant Indian bands or bodies or, in several cases, because the authorizations had either expired or had never been properly issued. These assets represent approximately 0. % of our total assets as at December, 00. The transmission portion consists primarily of approximately kilometres of transmission lines. The Ontario Electricity Financial Corporation holds these assets. Under the terms of the transfer orders, Hydro One is required to manage these assets until it has obtained all consents necessary to complete the transfer of title of these assets to the Company. Hydro One is seeking to obtain from the relevant Indian bands and bodies the consents necessary to complete the transfer of title to these assets. Hydro One cannot predict with accuracy the aggregate amount that it may have to pay to obtain the required consents, however, for planning purposes, the 00 & 00 test year First Nations rights payments are budgeted to be $.M per year. This amount is based ongoing payments and the current status of the ongoing negotiations with various First Nations bands.