London Property Management Association (LPMA) INTERROGATORY #29 List 1. Issue 18 Is the forecast of long term debt for appropriate?

Transcription

1 Exhibit I Tab 18 Schedule 2.01 LPMA 29 Page 1 of London Property Management Association (LPMA) INTERROGATORY #29 List 1 Issue 18 Is the forecast of long term debt for appropriate? Interrogatory Ref: Exhibit B1, Tab 2, Schedule 1 a) Please update Table 4 to reflect the most recent forecasts available. b) Please confirm that the treasury OM&A costs are included in the cost of debt, and not in OM&A. c) Please confirm that the treasury OM&A costs of $1.6 million for 2013 and $1.7 million for 2014 are the transmission share of the total treasury OM&A costs only. If confirmed, please explain how the transmission share is determined on an annual basis. Response a) Table 4 Forecast Yield for Issuance Terms year 10-year 30-year Government of Canada Hydro One Spread Forecast Hydro One Yield Government of Canada Hydro One Spread Forecast Hydro One Yield 1.37% 1.80% 2.35% 0.81% 1.10% 1.47% 2.18% 2.90% 3.82% year 10-year 30-year 1.62% 2.05% 2.60% 0.81% 1.10% 1.47% 2.43% 3.15% 4.07%

2 Exhibit I Tab 18 Schedule 2.01 LPMA 29 Page 2 of year 10-year 30-year Government of Canada Hydro One Spread Forecast Hydro One Yield 3.17% 3.60% 4.15% 0.81% 1.10% 1.47% 3.98% 4.70% 5.62% b) Treasury OM&A costs are included in the cost of debt, and not in OM&A, as discussed on page 6 and 7 of Exhibit B1, Tab 2, Schedule 1. c) The treasury OM&A costs of $1.6 million for 2013 and $1.7 million for 2014 are only the transmission share of the total treasury OM&A costs. The transmission share of the costs is determined on an annual basis, based on the Transmission Business proportionate share of Hydro One Network s total debt outstanding.

3 Exhibit I Tab 18 Schedule 2.02 LPMA 30 Page 1 of London Property Management Association (LPMA) INTERROGATORY #30 List 1 Issue 18 Is the forecast of long term debt for appropriate? Interrogatory Ref: Exhibit B2, Tab 1, Schedule 1 a) Please explain why Hydro One shows no preference shares in 2013 or 2014 despite having $239 million in preference shares in 2009 through b) What is the forecasted rate for 2013 and 2014 associated with the preference shares? c) If the Board determined that the preference shares should be used in the calculation of the cost of capital, what other components of the capital structure would Hydro One propose to be adjusted? Response a) Preference shares are shown in 2009 through 2012 in Exhibit B2, Tab 1, Schedule 1 based on the actual capital structure for historic years and the projected capital structure for the bridge year. Hydro One uses the deemed capital structure of 60% debt and 40% common equity for rate making purposed for the test years 2013 and This capital structure was approved by the Board as part of its December 23, 2010 Decision on Hydro One s Transmission Rate Application (EB ) and is also consistent with the Board s December 11, 2009 Report on the Cost of Capital for Ontario s Regulated Utilities (EB ) ( the Cost of Capital Report ). b) The Board s cost of capital parameters do not include a rate for preference shares. c) Hydro One would apply the approved cost of capital structure on its rate base in a manner consistent with the Board s guidelines.

4 Exhibit I Tab 18 Schedule 2.03 LPMA 31 Page 1 of London Property Management Association (LPMA) INTERROGATORY #31 List 1 Issue 18 Is the forecast of long term debt for appropriate? Interrogatory Ref: Exhibit B2, Tab 1, Schedule 2 a) Please explain the increase in Treasury OM&A costs in 2012 to $1.6 million given these costs were maintained at $1.2 million in 2009 through b) Please update the bridge year table (page 4) to reflect actual debt issues in 2012, along with the most recent forecasts of the amount and rate associated with debt issues to be completed in c) Please update the test year schedules (pages 5 and 6) to reflect the response to part (b), along with the most recent forecast of rates available. Response a) The increase in Treasury OM&A costs in 2012 are attributable to the upgrading of Treasury s back office systems as well as increased resource requirements to maintain broad based access to debt markets. Treasury s back office systems are used for daily cash flow forecasting, transaction recording, tracking payment of interest and principal, monitoring counterparty credit risk, and accounting journal entries and reporting. Hydro One s debt is forecast to increase over the next 3 years as rate base grows. In order to ensure continued access to capital markets Hydro One feels it would be prudent to increase its efforts to maintain relationships with existing investors and reach out to new potential investors going forward. b) Please see. c) Please see Attachment 2.

5 HYDRO ONE NETWORKS INC. TRANSMISSION Cost of Long-Term Debt Capital Exhibit I LPMA 31 Page 1 of 1 Bridge Year (2012) Year ending December 31 b) Premium Net Capital Employed Principal Discount Per $100 Total Amount Outstanding Projected Amount and Total Principal at at Avg. Monthly Carrying Average Line Offering Coupon Maturity Offered Expenses Amount Amount Effective 12/31/11 12/31/12 Averages Cost Embedded No. Date Rate Date ($Millions) ($Millions) ($Millions) (Dollars) Cost Rate ($Millions) ($Millions) ($Millions) ($Millions) Cost Rates (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) (l) (m) 1 3-Jun % 3-Jun % Jun % 1-Jun % Sep % 15-Nov % Sep % 1-Jun (2.2) % Jan % 15-Nov (0.9) % Jan % 31-Jan % Apr % 22-Apr % Jun % 31-Jan (0.2) % Aug % 22-Apr (3.1) % Aug % 31-Jan (1.4) % May % 20-May % Mar % 3-Mar % Apr % 20-May % Aug % 3-Mar % Oct % 19-Oct % Mar % 13-Mar % Oct % 18-Oct % Mar % 18-Oct (3.1) % Nov % 12-Nov % Jan % 12-Nov (3.7) % Mar % 3-Mar % Jul % 16-Jul % Nov % 19-Nov % Mar % 24-Jul (0.7) % Mar % 4-Jun % Sep % 11-Sep % Sep % 19-Oct (0.4) % Sep % 26-Sep % Dec % 22-Dec % Jan % 13-Jan % May % 13-Jan (1.6) % May % 22-Dec % Jul % 31-Jul % Aug % 31-Jul % Sep % 16-Mar % Subtotal Treasury OM&A costs Other financing-related fees Total %

6 HYDRO ONE NETWORKS INC. TRANSMISSION Cost of Long-Term Debt Capital Exhibit I LPMA 31 Attachment 2 Page 1 of 2 Test Year (2013) Year ending December 31 c) Premium Net Capital Employed Principal Discount Per $100 Total Amount Outstanding Projected Amount and Total Principal at at Avg. Monthly Carrying Average Line Offering Coupon Maturity Offered Expenses Amount Amount Effective 12/31/12 12/31/13 Averages Cost Embedded No. Date Rate Date ($Millions) ($Millions) ($Millions) (Dollars) Cost Rate ($Millions) ($Millions) ($Millions) ($Millions) Cost Rates (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) (l) (m) 1 3-Jun % 3-Jun % Jun % 1-Jun % Sep % 1-Jun (2.2) % Jan % 31-Jan % Apr % 22-Apr % Jun % 31-Jan (0.2) % Aug % 22-Apr (3.1) % Aug % 31-Jan (1.4) % May % 20-May % Mar % 3-Mar % Apr % 20-May % Aug % 3-Mar % Oct % 19-Oct % Mar % 13-Mar % Oct % 18-Oct % Mar % 18-Oct (3.1) % Nov % 12-Nov % Jan % 12-Nov (3.7) % Mar % 3-Mar % Jul % 16-Jul % Nov % 19-Nov % Mar % 24-Jul (0.7) % Mar % 4-Jun % Sep % 11-Sep % Sep % 19-Oct (0.4) % Sep % 26-Sep % Dec % 22-Dec % Jan % 13-Jan % May % 13-Jan (1.6) % May % 22-Dec % Jul % 31-Jul % Aug % 31-Jul % Sep % 16-Mar % Mar % 15-Mar % Jun % 15-Jun % Sep % 15-Sep % Subtotal Treasury OM&A costs Other financing-related fees Total %

7 Exhibit I LPMA 31 Attachment 2 Page 2 of 2 HYDRO ONE NETWORKS INC. TRANSMISSION Cost of Long-Term Debt Capital Test Year (2014) Year ending December 31 Premium Net Capital Employed Principal Discount Per $100 Total Amount Outstanding Projected Amount and Total Principal at at Avg. Monthly Carrying Average Line Offering Coupon Maturity Offered Expenses Amount Amount Effective 12/31/13 12/31/14 Averages Cost Embedded No. Date Rate Date ($Millions) ($Millions) ($Millions) (Dollars) Cost Rate ($Millions) ($Millions) ($Millions) ($Millions) Cost Rates (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) (l) (m) 1 3-Jun % 3-Jun % Jun % 1-Jun % Sep % 1-Jun (2.2) % Jan % 31-Jan % Apr % 22-Apr % Jun % 31-Jan (0.2) % Aug % 22-Apr (3.1) % Aug % 31-Jan (1.4) % May % 20-May % Mar % 3-Mar % Apr % 20-May % Aug % 3-Mar % Oct % 19-Oct % Mar % 13-Mar % Oct % 18-Oct % Mar % 18-Oct (3.1) % Mar % 3-Mar % Jul % 16-Jul % Nov % 19-Nov % Mar % 24-Jul (0.7) % Mar % 4-Jun % Sep % 11-Sep % Sep % 19-Oct (0.4) % Sep % 26-Sep % Dec % 22-Dec % Jan % 13-Jan % May % 13-Jan (1.6) % May % 22-Dec % Jul % 31-Jul % Aug % 31-Jul % Sep % 16-Mar % Mar % 15-Mar % Jun % 15-Jun % Sep % 15-Sep % Mar % 15-Mar % Jun % 15-Jun % Sep % 15-Sep % Subtotal Treasury OM&A costs Other financing-related fees Total %

8 Exhibit I Tab 18 Schedule 3.01 EP 58 Page 1 of Energy Probe (EP) INTERROGATORY #58 List 1 Issue 18 Is the forecast of long term debt for appropriate? Interrogatory Ref: Exhibit B1, Tab 2, Schedule 1, Page 3 & Exhibit B2, Tab 1,Schedule 2, Page 4 a) For historical 2011 and bridge year 2012 debt (B2/1/2 page 4 at lines 28-29) please provide a schedule that shows for each issue, the difference between the Board Approved forecast and actual (or if not yet issued, current forecast): i) Amount of issue per EB ; ii) Coupon rate forecast actual and approved by the Board; iii) The premium discount and expenses; iv) The total principal amount, and v) The annual carrying cost. b) For material differences in the schedule please provide an explanation, including in particular: i) The external forecasts relied upon; ii) Timing differences, and iii) Bond premiums. Response a) The schedules in provide the requested issue details: the amount per issue, coupon rate, premium discount and expenses, total principal amounts and carrying costs. Board approved 2011 issue details are shown on lines 29 to 31 of page 1, Exhibit 1.4.1, EB Rate Order. Actual issue details for 2011 are shown on lines 29 to 30 of page 3 Exhibit B2, Tab 1, Schedule 2,. Board approved 2012 issue details are shown on lines 28 to 32 of page 1, Exhibit 1.4.1, EB Rate Order. Actual and current assumption issue details for 2012 are shown on lines 28 to 33 of page 4 Exhibit B2, Tab 1, Schedule 2, EB Updated bridge year 2012 to reflect actual debt issues in 2012 and most recent forecasts is provided in part b of Exhibit I, Tab 18, Schedule 2.03 LPMA 31. b) The overall rate for 2011 of 5.52% contained in Exhibit 1.4.1, EB Rate Order was 0.05% lower than the 5.57% historical rate in Exhibit B2, Tab 1, Schedule 2.

9 Exhibit I Tab 18 Schedule 3.01 EP 58 Page 2 of The overall rate for 2012 of 5.37% contained in Exhibit 1.4.1, EB Rate Order was 0.14% higher than the 5.23% rate contained in Exhibit B2, Tab 1, Schedule 2, due to lowering of forecast interest rates for The overall rate for 2012 updated to reflect actual debt issues in 2012 and most recent forecasts as provided on page 2 or part b of Exhibit I, Tab 18, Schedule 2.03 LPMA 31 is 5.24%.

10 EB Draft Rate Order Exhibit EB Rate Order Exhibit Exhibit I EP 58 Page 1 of 5 Exhibit B2, Tab 1, Schedule 2, Page 3-4

11 2

12 3

13 4

14 5

15 Exhibit I Tab 18 Schedule 3.02 EP 59 Page 1 of Energy Probe (EP) INTERROGATORY #59 List 1 Issue 18 Is the forecast of long term debt for appropriate? Interrogatory Ref: Exhibit B1, Tab 2, Schedule 1, Page 5, Table 4 & Exhibit B2, Tab 1, Schedule 2, Pages 5 and 6 a) Please provide a schedule that sets out the basis of the proposed coupon rates, other financing costs and annual carrying costs for all proposed 2013/14 debt issues: i) Sources and dates of forecasts of LC Bonds; ii) Sources and dates of forecast of Hydro One Spread and details of calculation, and iii) Sources and dates of forecast(s) of other financing costs. b) Reconcile the answer with Tables 3 and 4 of B1/2/1. c) When will Hydro One please provide an update of the forecast 2013/14 debt costs? d) Explain in detail how the 2013/14 debt issues and costs are mapped to Hydro One Networks and to Hydro One Transmission. e) Based on the 2013 and 2014 financing plan, please provide an estimate of the revenue requirement impact to Hydro One Transmission of a 10 basis point change in the average effective coupon rate. Response a) Table 4 of Exhibit B1, Tab 2, Schedule 1 provides basis of the proposed coupon rates. i) The basis for the Government of Canada Bond yields is discussed on lines 10 to 17 on page 5 of Exhibit Exhibit B1, Tab 2, Schedule 1. ii) The basis for the forecast of Hydro One Spreads is discussed on lines 1 to 4 on page 6 of Exhibit B1, Tab 2, Schedule 1. Please refer to Hydro One s response in Exhibit I, Tab 18, Schedule 9.02 SEC 37 for more details on the source documents and dates of forecast used. iii) The basis for the forecast of other financing charges is discussed in on lines 13 to 16 of page 7 Exhibit B1, Tab 2, Schedule 1.

16 Exhibit I Tab 18 Schedule 3.02 EP 59 Page 2 of Carrying Costs for all forecast 2013 and 2014 debt issues discussed in Exhibit B2, Tab 1, Schedule 2, Pages 5 and 6 is the product of columns (h) and columns (k) b) The Forecast Hydro One Yields in tables 3 and 4 are equivalent to the coupon rates found in Exhibit B2, Tab 1, Schedule 2, Page 6 lines column (a), rounded to 2 decimal places. c) Hydro One will update the forecast debt rates in the final rate orders in accordance with the Board s approved methodology. For rates effective January 1, 2013, Hydro One will update the forecast interest rate using the September 2012 Consensus Forecasts and the average of indicative new issue spreads for September For rates effective January 1, 2014, Hydro One will update the forecast interest rate using the September 2013 Consensus Forecasts and the average of indicative new issue spreads for September The latest long-term debt forecast has been provided at Exhibit I, Tab 18, Schedule 2.03 LPMA 31. d) The mapping of debt to Hydro One Networks is discussed on lines 7 to 9 on page 1 of Exhibit B1, Tab 2, Schedule 1. The allocation of debt to the Transmission business is discussed on lines 17 to 20 on page 2 of Exhibit B1, Tab 2, Schedule 1. e) Please see response to Exhibit I, Tab 17, Schedule 2.01 LPMA 28.

17 Exhibit I Tab 18 Schedule 3.03 EP 60 Page 1 of Energy Probe (EP) INTERROGATORY #60 List 1 Issue 18 Is the forecast of long term debt for appropriate? Interrogatory Ref. Exhibit B1, Tab 2, Schedule 1, Page 6 a) Please provide a schedule that shows Treasury OM&A costs by issue and year 2011A, 2012E and F. b) What drives the cost per issue? c) Given the Shelf Prospectus, will costs be lower in ? If so, show how much. If not, why not? Response a) Treasury OM&A costs are not allocated to individual issues but are allocated to the entire debt portfolio as indicated on line 36, page 5 and line 37, page 6 of Exhibit B2, Tab 1, Schedule 2. b) The cost per issue is driven by the Column (b) of Exhibit B2, Tab1, Schedule 2 (the coupon rate) and column (e) of Exhibit B2, Tab1, Schedule 2 (Premium, discount and expenses) which are discussed on lines 8 to 11, page 7 of Exhibit B1, Tab 2, Schedule 1. c) Costs will not be lower in , given the shelf prospectus. Hydro One has issued debt using a Shelf Prospectus for its Medium Term Notes Program since 2001 and is expecting to continue issuing debt off of this same platform through to 2014 and beyond.

18 Exhibit I Tab 18 Schedule 9.01 SEC 36 Page 1 of School Energy Coalition (SEC) INTERROGATORY #36 List 1 Issue 18 Is the forecast of long term debt for appropriate? Interrogatory [B1-1-1/p.3] Please provide a copy of all outstanding debt instruments issued since Response Please see attachments for the pricing supplements of the outstanding debt instruments issued since On January 22, 2010 Hydro One Inc. issued $500 million of notes maturing on November 19, 2014 of which $150 million was mapped to Hydro One Transmission. At the time of the issue Hydro One entered into a $500 million notional principal amount fixed to floating interest rate swap to convert this note into variable or floating rate debt. This variable rate debt has been included as part of the deemed short-term debt amount equal to 4% of rate base. On March 15, 2010 Hydro One Inc. issued $200 million of notes maturing on July 16, 2040 of which $120 million was mapped to Hydro One Transmission, as shown on line 24 of Exhibit B2, Tab 1, Schedule 2, page 4. Also on March 15, 2010 Hydro One Inc. issued $300 million of notes maturing on June 1, 2020 with a 4.40% coupon rate of which $180 million was mapped to Hydro One Transmission, as shown on line 25 of Exhibit B2, Tab 1, Schedule 2, page 4. On September 13, 2010 Hydro One Inc. issued $250 million of notes maturing on September 11, 2015 with a 2.95% coupon rate, of which $150 million was mapped to Hydro One Transmission, as shown on line 26 of Exhibit B2, Tab 1, Schedule 2, page 4. Also on September 13, 2010 Hydro One Inc. issued $250 million of notes maturing on October 19, 2046 of which $150 million was mapped to Hydro One Transmission as shown on line 27 of Exhibit B2, Tab 1, Schedule 2, page 4. On January 19, 2011 Hydro One Inc. issued $250 million of notes maturing on September 11, 2015 of which $150 million was mapped to Hydro One Transmission. At the time of the issue Hydro One entered into a $250 million notional principal amount fixed to floating interest rate swap to convert this note into variable or floating rate debt. This variable rate debt has been included as part of the deemed short-term debt amount equal to 4% of rate base.

19 Exhibit I Tab 18 Schedule 9.01 SEC 36 Page 2 of On January 24, 2011 Hydro One Inc. issued $50 million of floating rate notes maturing on July 24, 2015 with a floating rate coupon of three month Canadian Dollar Offered Rate (CDOR) plus 40 basis points, of which $30 million was mapped to Hydro One Transmission. This variable rate debt has been included as part of the deemed short-term debt amount equal to 4% of rate base. On September 26, 2011 Hydro One Inc. issued $300 million of notes maturing on September 26, 2041 with a coupon rate of 4.39% of which $205 million was mapped to Hydro One Transmission, as shown on line 28 of Exhibit B2, Tab 1, Schedule 2, page 4. On December 22, 2011 Hydro One Inc. issued $100 million of notes maturing on December 22, 2051 with a coupon rate of 4.00% of which $70 million was mapped to Hydro One Transmission, as shown on line 29 of Exhibit B2, Tab 1, Schedule 2, page 4. On January 13, 2012 Hydro One Inc. issued $300 million of notes maturing on January 13, 2022 with a coupon rate of 3.20% of which $154 million was mapped to Hydro One Transmission, as shown on line 30 of Exhibit B2, Tab 1, Schedule 2, page 4. On May 22, 2012 Hydro One Inc. issued $300 million of notes maturing on January 13, 2022, of which $165 million was mapped to Hydro One Transmission as shown on line 31 of Exhibit I, Tab 18, Schedule 2.03 LPMA 31, page 2. Also on May 22, 2012 Hydro One Inc. issued $125 million of notes maturing on December 22, 2051, of which $68.75 million was mapped to Hydro One Transmission as shown on line 32 of Exhibit I, Tab 18, Schedule 2.03 LPMA 31, page 2. On July 31, 2012 Hydro One Inc. issued $75 million of notes maturing on July 31, 2062 with a coupon rate of 3.79% of which $52.5 million was mapped to Hydro One Transmission, as shown on line 33 of Exhibit I, Tab 18, Schedule 2.03 LPMA 31, page 2. On August 16, 2012 Hydro One Inc. issued $235 million of notes maturing on July 31, 2062, of which $141 million was mapped to Hydro One Transmission as shown on line 34 of Exhibit I, Tab 18, Schedule 2.03 LPMA 31, page 2.

20 Page 1 of 42 This pricing supplement, together with the short form base shelf prospectus dated July 27, 2009, as amended or supplemented, and each document incorporated by reference into the short form base shelf prospectus (collectively, the Prospectus ) constitutes a public offering of these securities pursuant to the Prospectus only in the jurisdictions where they may be lawfully offered for sale and therein only by persons permitted to sell such securities. No securities regulatory authority has expressed an opinion about these securities and it is an offence to claim otherwise. These securities have not been and will not be registered under the United States Securities Act of 1933, as amended and may not be offered, sold or delivered within the United States of America and its territories and possessions or to, or for the account or benefit of, United States persons except in certain transactions exempt from the registration requirements of such Act. PRICING SUPPLEMENT NO. 2 DATED JANUARY 19, 2010 (to short form base shelf prospectus dated July 27, 2009) HYDRO ONE INC. SERIES 19 MEDIUM-TERM NOTES (ADDITIONAL ISSUE) (unsecured) ISIN No. CA 44810ZAZ32 CUSIP No ZAZ3 PRINCIPAL AMOUNT: $500,000, (five hundred million dollars) DENOMINATIONS (if other than Cdn dollars or Cdn. dollar denominations of Cdn. $1,000): N/A ISSUE PRICE: ACCRUED INTEREST: $2,744, to be paid to the Company on the settlement of the Notes $ per $ principal amount AGENTS COMPENSATION: $0.30 per $ principal amount NET PROCEEDS TO HYDRO ONE INC. (the Company ) EXCLUDING ACCRUED INTEREST: $500,650, ISSUE DATE: January 22, 2010 STATED MATURITY: November 19, 2014 INTEREST RATE: 3.13% OFFERING YIELD: 3.033% INTEREST PAYMENT DATE(S): Equal semi-annual payments on each November 19 and May 19, commencing May 19, RECORD DATE(S): The second Business Day prior to such Interest Payment Date TOR_P2Z: SPECIFIED CURRENCY: Canadian Dollars [ ] Yes [ ] No Foreign Currency: Exchange Rate Agent: PAYMENT OF PRINCIPAL AND ANY PREMIUM AND INTEREST: [ ] Canadian Dollars [ ] Specified Currency DAY COUNT CONVENTION: [ ] 30/360 for the period from to [ ] Actual /360 for the period from to [ ] Actual/Actual for the period from November 19, 2009 to November 19, 2014 [ ] Other

21 Page 2 of 42 OTHER PROVISIONS: 2 See Redemption below. ADDENDUM ATTACHED: [ ] Yes [ ] No REDEMPTION: Under the Trust Indenture, as supplemented by the Eighteenth Supplemental Trust Indenture dated as of November 19, 2009, the Notes may be redeemed in whole or in part at the option of the Company at any time, upon not less than 15 days and not more than 60 days notice to the holders of the Notes to be redeemed, and upon deposit with the Trustee, on the date fixed for redemption, of the Redemption Price. Redemption Price means, with respect to a Note to be redeemed, the greater of (i) the Series 19 Note Canada Yield Price and (ii) par, together in each case with accrued and unpaid interest to the date fixed for redemption. Government of Canada Yield on any date means the yield to maturity on such date, compounded semi-annually and calculated in accordance with generally accepted Canadian financial practice, which a non-callable Government of Canada bond would carry if issued in dollars in Canada, at 100% of its principal amount on such date with a term to maturity equal to, or if no Government of Canada bond having an equal term to maturity exists, as close as possible to, the remaining term to maturity (calculated from the redemption date) of, in the case of the Series 19 Notes, the Series 19 Notes, such yield to maturity being the average of the yields provided by two Canadian investment dealers specified by the Company. Series 19 Note Canada Yield Price means a price equal to the price of the Series 19 Notes calculated to provide a yield to maturity, compounded semi-annually and calculated in accordance with generally accepted Canadian financial practice, equal to the Government of Canada Yield calculated at 10:00 a.m. (Toronto time) on the Business Day preceding the day on which the Company gives notice of redemption pursuant to section 5.3 of the Trust Indenture, plus 0.13%. Terms used in this Pricing Supplement and not defined herein have the meaning given to such terms in the short form base shelf prospectus of the Company dated July 27, RATINGS: The Notes will be rated A+ by Standard & Poor s Rating Services, A (high) by DBRS Limited and Aa3 by Moody s Investors Services, Inc. AGENTS: TD Securities Inc., CIBC World Markets Inc., RBC Dominion Securities Inc., BMO Nesbitt Burns Inc., National Bank Financial Inc., Scotia Capital Inc., Casgrain & Company Limited, HSBC Securities (Canada) Inc. and Laurentian Bank Securities Inc. FORM: ( ) Fully Registered ( ) Book Entry Only METHOD OF DISTRIBUTION: ( ) Agency ( ) Principal for Resale ( ) Direct DOCUMENTS INCORPORATED BY REFERENCE The following documents (some of which are not specifically listed in the Prospectus or any amendment or supplement thereto) which have been filed by the Company with the various securities commissions or similar authorities in all of the provinces of Canada, are specifically incorporated by reference in and form an integral part of the Prospectus, as amended or supplemented: (a) the Company s renewal annual information form dated March 31, 2009; (b) the Company s comparative audited consolidated financial statements, and the notes thereto, as at and for the fiscal years ended December 31, 2008 and December 31, 2007, together with the report of the auditors dated February 11, 2009 on the financial statements as at and for the year ended December 31, 2008; TOR_P2Z:

22 Page 3 of 42 3 (c) management s discussion and analysis of the Company s financial results for the year ended December 31, 2008; (d) the Company s comparative unaudited consolidated financial statements, and the notes thereto, as at September 30, 2009 and for the three and nine months ended September 30, 2009 and September 30, 2008, together with management s discussion and analysis of the Company s financial results for those periods; and (e) the Company s comparative audited consolidated financial statements, and the notes thereto, as at and for the fiscal years ended December 31, 2007 and December 31, 2006, together with the report of the auditors thereon dated February 13, TOR_P2Z:

23 Page 4 of 42 supplement, together with the short form base shelf prospectus dated July 27, 2009, as amended or supplemented, and each This pricing document incorporated by reference into the short form base shelf prospectus (collectively, the Prospectus ) constitutes a public offering of these securities pursuant to the Prospectus only in the jurisdictions where they may be lawfully offered for sale and therein only by persons permitted to sell such securities. No securities regulatory authority has expressed an opinion about these securities and it is an offence to claim otherwise. These securities have not been and will not be registered under the United States Securities Act of 1933, as amended and may not be offered, sold or delivered within the United States of America and its territories and possessions or to, or for the account or benefit of, United States persons except in certain transactions exempt from the registration requirements of such Act. PRICING SUPPLEMENT NO. 3 DATED MARCH 10, 2010 (to short form base shelf prospectus dated July 27, 2009, as amended by amendment no. 1 dated March 2, 2010) HYDRO ONE INC. SERIES 18 MEDIUM-TERM NOTES (ADDITIONAL ISSUE) (unsecured) ISIN No. CA 44810ZAY66 CUSIP No ZAY6 PRINCIPAL AMOUNT: $200,000, (two hundred million dollars) DENOMINATIONS (if other than Cdn dollars or Cdn. dollar denominations of Cdn. $1,000): N/A ISSUE PRICE: ACCRUED INTEREST: $1,744, to be paid to the Company on the settlement of the Notes $ per $ principal amount AGENTS COMPENSATION: $0.50 per $ principal amount NET PROCEEDS TO HYDRO ONE INC. (the Company ) EXCLUDING ACCRUED INTEREST: $201,176, ISSUE DATE: March 15, 2010 STATED MATURITY: July 16, 2040 INTEREST RATE: 5.490% OFFERING YIELD: 5.416% INTEREST PAYMENT DATE(S): Equal semi-annual payments on each July 16 and January 16, commencing July 16, RECORD DATE(S): The second Business Day prior to such Interest Payment Date TOR_H2O: SPECIFIED CURRENCY: Canadian Dollars [ ] Yes [ ] No Foreign Currency: Exchange Rate Agent: PAYMENT OF PRINCIPAL AND ANY PREMIUM AND INTEREST: [ ] Canadian Dollars [ ] Specified Currency DAY COUNT CONVENTION: [ ] 30/360 for the period from to [ ] Actual /360 for the period from to [ ] Actual/Actual for the period from July 16, 2009 to July 16, 2040 [ ] Other

24 Page 5 of 42 2 OTHER PROVISIONS: See Redemption below. ADDENDUM ATTACHED: [ ] Yes [ ] No REDEMPTION: Under the Trust Indenture, as supplemented by the Seventeenth Supplemental Trust Indenture dated as of July 16, 2009, the Notes may be redeemed in whole or in part at the option of the Company at any time, upon not less than 15 days and not more than 60 days notice to the holders of the Notes to be redeemed, and upon deposit with the Trustee, on the date fixed for redemption, of the Redemption Price. Redemption Price means, with respect to a Note to be redeemed, the greater of (i) the Series 18 Note Canada Yield Price and (ii) par, together in each case with accrued and unpaid interest to the date fixed for redemption. Government of Canada Yield on any date means the yield to maturity on such date, compounded semi-annually and calculated in accordance with generally accepted Canadian financial practice, which a non-callable Government of Canada bond would carry if issued in dollars in Canada, at 100% of its principal amount on such date with a term to maturity equal to, or if no Government of Canada bond having an equal term to maturity exists, as close as possible to, the remaining term to maturity (calculated from the redemption date) of, in the case of the Series 18 Notes, the Series 18 Notes, such yield to maturity being the average of the yields provided by two Canadian investment dealers specified by the Company. Series 18 Note Canada Yield Price means a price equal to the price of the Series 18 Notes calculated to provide a yield to maturity, compounded semi-annually and calculated in accordance with generally accepted Canadian financial practice, equal to the Government of Canada Yield calculated at 10:00 a.m. (Toronto time) on the Business Day preceding the day on which the Company gives notice of redemption pursuant to section 5.3 of the Trust Indenture, plus 0.405%. Terms used in this Pricing Supplement and not defined herein have the meaning given to such terms in the short form base shelf prospectus of the Company dated July 27, 2009, as amended by amendment no. 1 dated March 2, RATINGS: The Notes will be rated A+ by Standard & Poor s Rating Services, A (high) by DBRS Limited and Aa3 by Moody s Investors Services, Inc. AGENTS: National Bank Financial Inc., RBC Dominion Securities Inc., BMO Nesbitt Burns Inc., CIBC World Markets Inc., Merrill Lynch Canada Inc., Scotia Capital Inc., TD Securities Inc., Casgrain & Company Limited, Desjardins Securities Inc., HSBC Securities (Canada) Inc. and Laurentian Bank Securities Inc. FORM: ( ) Fully Registered ( ) Book Entry Only METHOD OF DISTRIBUTION: ( ) Agency ( ) Principal for Resale ( ) Direct DOCUMENTS INCORPORATED BY REFERENCE The following documents (some of which are not specifically listed in the Prospectus or any amendment or supplement thereto) which have been filed by the Company with the various securities commissions or similar authorities in all of the provinces of Canada, are specifically incorporated by reference in and form an integral part of the Prospectus, as amended or supplemented: (a) TOR_H2O: the Company s renewal annual information form dated March 31, 2009;

25 Page 6 of 42 3 (b) the Company s comparative audited consolidated financial statements, and the notes thereto, as at and for the fiscal years ended December 31, 2009 and December 31, 2008, together with the report of the auditors thereon dated February 11, 2010; and (c) management s discussion and analysis of the Company s financial results for the year ended December 31, TOR_H2O:

26 Page 7 of 42 This pricing supplement, together with the short form base shelf prospectus dated July 27, 2009, as amended or supplemented, and each document incorporated by reference into the short form base shelf prospectus (collectively, the Prospectus ) constitutes a public offering of these securities pursuant to the Prospectus only in the jurisdictions where they may be lawfully offered for sale and therein only by persons permitted to sell such securities. No securities regulatory authority has expressed an opinion about these securities and it is an offence to claim otherwise. These securities have not been and will not be registered under the United States Securities Act of 1933, as amended and may not be offered, sold or delivered within the United States of America and its territories and possessions or to, or for the account or benefit of, United States persons except in certain transactions exempt from the registration requirements of such Act. PRICING SUPPLEMENT NO. 4 DATED MARCH 10, 2010 (to short form base shelf prospectus dated July 27, 2009, as amended by amendment no. 1 dated March 2, 2010) HYDRO ONE INC. SERIES 20 MEDIUM-TERM NOTES (unsecured) ISIN No. CA 44810ZBA71 CUSIP No ZBA7 PRINCIPAL AMOUNT: $300,000, (three hundred million dollars) ISSUE PRICE: $ per $ principal amount AGENTS COMPENSATION: $0.40 per $ principal amount NET PROCEEDS TO HYDRO ONE INC. (the Company ): $298,671, ORIGINAL ISSUE DATE: March 15, 2010 STATED MATURITY: June 1, 2020 INTEREST RATE: 4.400% OFFERING YIELD: 4.406% INTEREST PAYMENT DATE(S): Each June 1 and December 1, commencing June 1, Payment of interest on June 1, 2010 will be in an amount equal to $ per $1,000 principal amount (short first coupon) and interest payments will be in equal semiannual amounts on each Interest Payment Date thereafter. RECORD DATE(S): The second Business Day prior to such Interest Payment Date TOR_H2O: DENOMINATIONS (if other than Cdn dollars or Cdn. dollar denominations of Cdn. $1,000): N/A SPECIFIED CURRENCY: Canadian Dollars [ ] Yes [ ] No Foreign Currency: Exchange Rate Agent: PAYMENT OF PRINCIPAL AND ANY PREMIUM AND INTEREST: [ ] Canadian Dollars [ ] Specified Currency DAY COUNT CONVENTION: [ ] 30/360 for the period from to [ ] Actual /360 for the period from to [ ] Actual/Actual for the period from March 15, 2010 to June 1, 2020 [ ] Other

27 Page 8 of 42 OTHER PROVISIONS: 2 See Redemption below. ADDENDUM ATTACHED: [ ] Yes [ ] No REDEMPTION: Under the Trust Indenture, as supplemented by the Nineteenth Supplemental Trust Indenture to be dated as of March 15, 2010, the Notes may be redeemed in whole or in part at the option of the Company at any time, upon not less than 15 days and not more than 60 days notice to the holders of the Notes to be redeemed, and upon deposit with the Trustee, on the date fixed for redemption, of the Redemption Price. Redemption Price means, with respect to a Note to be redeemed, the greater of (i) the Series 20 Note Canada Yield Price and (ii) par, together in each case with accrued and unpaid interest to the date fixed for redemption. Government of Canada Yield on any date means the yield to maturity on such date, compounded semi-annually and calculated in accordance with generally accepted Canadian financial practice, which a non-callable Government of Canada bond would carry if issued in dollars in Canada, at 100% of its principal amount on such date with a term to maturity equal to, or if no Government of Canada bond having an equal term to maturity exists, as close as possible to, the remaining term to maturity (calculated from the redemption date) of, in the case of the Series 20 Notes, the Series 20 Notes, such yield to maturity being the average of the yields provided by two Canadian investment dealers specified by the Company. Series 20 Note Canada Yield Price means a price equal to the price of the Series 20 Notes calculated to provide a yield to maturity, compounded semi-annually and calculated in accordance with generally accepted Canadian financial practice, equal to the Government of Canada Yield calculated at 10:00 a.m. (Toronto time) on the Business Day preceding the day on which the Company gives notice of redemption pursuant to section 5.3 of the Trust Indenture, plus 0.18%. Terms used in this Pricing Supplement and not defined herein have the meaning given to such terms in the short form base shelf prospectus of the Company dated July 27, 2009, as amended by amendment no. 1 dated March 2, RATINGS: The Notes will be rated A+ by Standard & Poor s Rating Services, A (high) by DBRS Limited and Aa3 by Moody s Investors Services, Inc. AGENTS: National Bank Financial Inc., RBC Dominion Securities Inc., BMO Nesbitt Burns Inc., CIBC World Markets Inc., Merrill Lynch Canada Inc., Scotia Capital Inc., TD Securities Inc., Casgrain & Company Limited, Desjardins Securities Inc., HSBC Securities (Canada) Inc. and Laurentian Bank Securities Inc. FORM: ( ) Fully Registered ( ) Book Entry Only METHOD OF DISTRIBUTION: ( ) Agency ( ) Principal for Resale ( ) Direct DOCUMENTS INCORPORATED BY REFERENCE The following documents (some of which are not specifically listed in the Prospectus or any amendment or supplement thereto) which have been filed by the Company with the various securities commissions or similar authorities in all of the provinces of Canada, are specifically incorporated by reference in and form an integral part of the Prospectus, as amended or supplemented: (a) TOR_H2O: the Company s renewal annual information form dated March 31, 2009;

28 Page 9 of 42 3 (b) the Company s comparative audited consolidated financial statements, and the notes thereto, as at and for the fiscal years ended December 31, 2009 and December 31, 2008, together with the report of the auditors thereon dated February 11, 2010; and (c) management s discussion and analysis of the Company s financial results for the year ended December 31, TOR_H2O:

29 Page 10 of 42 This pricing supplement, together with the short form base shelf prospectus dated July 27, 2009, as amended or supplemented, and each document incorporated by reference into the short form base shelf prospectus (collectively, the Prospectus ) constitutes a public offering of these securities pursuant to the Prospectus only in the jurisdictions where they may be lawfully offered for sale and therein only by persons permitted to sell such securities. No securities regulatory authority has expressed an opinion about these securities and it is an offence to claim otherwise. These securities have not been and will not be registered under the United States Securities Act of 1933, as amended and may not be offered, sold or delivered within the United States of America and its territories and possessions or to, or for the account or benefit of, United States persons except in certain transactions exempt from the registration requirements of such Act. PRICING SUPPLEMENT NO. 6 DATED SEPTEMBER 8, 2010 (to short form base shelf prospectus dated July 27, 2009, as amended by amendment no. 1 dated March 2, 2010) HYDRO ONE INC. SERIES 21 MEDIUM-TERM NOTES (unsecured) ISIN No. CA 44810ZBB54 CUSIP No ZBB5 PRINCIPAL AMOUNT: $250,000, (two hundred and fifty million dollars) ISSUE PRICE: $ per $ principal amount AGENTS COMPENSATION: $0.35 per $ principal amount NET PROCEEDS TO HYDRO ONE INC. (the Company ): $249,102, ORIGINAL ISSUE DATE: September 13, 2010 STATED MATURITY: September 11, 2015 INTEREST RATE: 2.95% OFFERING YIELD: 2.952% INTEREST PAYMENT DATE(S): Each March 11 and September 11, commencing March 11, Payment of interest on March 11, 2011 will be in an amount equal to $ per $100 principal amount (short first coupon) and interest payments will be in equal semi-annual amounts on each Interest Payment Date thereafter. RECORD DATE(S): The second Business Day prior to such Interest Payment Date TOR_P2Z: DENOMINATIONS (if other than Cdn dollars or Cdn. dollar denominations of Cdn. $1,000): N/A SPECIFIED CURRENCY: Canadian Dollars [ ] Yes [ ] No Foreign Currency: Exchange Rate Agent: PAYMENT OF PRINCIPAL AND ANY PREMIUM AND INTEREST: [ ] Canadian Dollars [ ] Specified Currency DAY COUNT CONVENTION: [ ] 30/360 for the period from to [ ] Actual /360 for the period from to [ ] Actual/Actual for the period from September 13, 2010 to September 11, 2015 [ ] Other

30 Page 11 of 42 2 OTHER PROVISIONS: See Redemption below. ADDENDUM ATTACHED: [ ] Yes [ ] No REDEMPTION: Under the Trust Indenture, as supplemented by the Twentieth Supplemental Trust Indenture to be dated as of September 13, 2010, the Notes may be redeemed in whole or in part at the option of the Company at any time, upon not less than 15 days and not more than 60 days notice to the holders of the Notes to be redeemed, and upon deposit with the Trustee, on the date fixed for redemption, of the Redemption Price. Redemption Price means, with respect to a Note to be redeemed, the greater of (i) the Series 21 Note Canada Yield Price and (ii) par, together in each case with accrued and unpaid interest to the date fixed for redemption. Government of Canada Yield on any date means the yield to maturity on such date, compounded semi-annually and calculated in accordance with generally accepted Canadian financial practice, which a non-callable Government of Canada bond would carry if issued in dollars in Canada, at 100% of its principal amount on such date with a term to maturity equal to, or if no Government of Canada bond having an equal term to maturity exists, as close as possible to, the remaining term to maturity (calculated from the redemption date) of, in the case of the Series 21 Notes, the Series 21 Notes, such yield to maturity being the average of the yields provided by two Canadian investment dealers specified by the Company. Series 21 Note Canada Yield Price means a price equal to the price of the Series 21 Notes calculated to provide a yield to maturity, compounded semi-annually and calculated in accordance with generally accepted Canadian financial practice, equal to the Government of Canada Yield calculated at 10:00 a.m. (Toronto time) on the Business Day preceding the day on which the Company gives notice of redemption pursuant to section 5.3 of the Trust Indenture, plus 0.20%. Terms used in this Pricing Supplement and not defined herein have the meaning given to such terms in the short form base shelf prospectus of the Company dated July 27, 2009, as amended by amendment no. 1 dated March 2, RATINGS: The Notes will be rated A+ by Standard & Poor s Rating Services, A (high) by DBRS Limited and Aa3 by Moody s Investors Services, Inc. AGENTS: BMO Nesbitt Burns Inc., CIBC World Markets Inc., Merrill Lynch Canada Inc., National Bank Financial Inc., RBC Dominion Securities Inc., Scotia Capital Inc., TD Securities Inc., Casgrain & Company Limited, Desjardins Securities Inc., HSBC Securities (Canada) Inc. and Laurentian Bank Securities Inc. FORM: ( ) Fully Registered ( ) Book Entry Only METHOD OF DISTRIBUTION: ( ) Agency ( ) Principal for Resale ( ) Direct DOCUMENTS INCORPORATED BY REFERENCE The following documents (some of which are not specifically listed in the Prospectus or any amendment or supplement thereto) which have been filed by the Company with the various securities commissions or similar authorities in all of the provinces of Canada, are specifically incorporated by reference in and form an integral part of the Prospectus, as amended or supplemented: (a) TOR_P2Z: the Company s renewal annual information form dated March 31, 2010;