IESO Presentation to OEB September 15, 2006

1. Setting Payment Amounts for Output of OPG’s Prescribed Assets: The Regulated Contract for Differences Concept IESO Presentation to OEB September 15, 2006

2. Overview • Key Elements of Proposal • Determining Output Quantities/Prices • Additional investments by OPG • Variance and Deferral accounts • Type/detail of filing information • Issues for first proceeding

3. Key Elements • Regulated Contract For Difference (CfD) • A regulatory construct whereby, ratepayers are provided a guaranteed price for a prescribed amount of their consumption and OPG is assured of receiving this price if it produces the output. • OPG manages the risk of not producing the prescribed output and is rewarded (a payment at real-time prices) for producing more. • Provides an incentive mechanism for the efficient use of the assets • The role of regulatory hearing is to determine the prescribed price and prescribed quantity to balance public policy goals • IESO suggests that Regulated CfD achieves stated objectives with lowest regulatory burden relative to other approaches

4. Key Elements • Proposal is presented at a conceptual level • Consistent with OPG’s agreement with its shareholder: further incents operation of “generating assets as efficiently and cost-effectively as possible” • If concept deemed to have merit, details to be fleshed out through regulatory process

5. Determining Output Quantities/Prices • Prescribed quantities set according to Board’s weighting of policy objectives: • Higher percentage – more ratepayer price stability, greater degree of mitigation of potential market power • However, higher percentage implies greater financial risk to OPG in event of unplanned outages • Suggestion for Nuclear • Percentage based on combined capacities • Percentage of capacity chosen could reflect historic availability factors • Percentage factor and Force Majeure would address financial risk to OPG • Suggestion for Hydro • Set equal to the hourly minimum “run of river” level for combined facilities • Based on historic water inflow • Prescribed Prices • Consistent with current regulatory arrangement but adjusted by input cost inflation factor • If costs have materially changed, Board review to reset prices

6. Additional investments by OPG • Additional investment cost to increase the output of, refurbish or add operating capacity of facilities could be recovered through adjustment in prescribed price • investment cost apportioned over projected output of the facilities • Revenue requirement for the additional investments determined through OEB hearing (perhaps a cost-of-service review) • OPG to recover cost only if meet requirement of section 6(2) 3 (i) and (ii) of current regulation

7. Variance and Deferral Accounts • Under CfD approach, if and as required, OPG may make application to adjust prescribed prices to address Variance and Deferral accounts • Initial submission envisioned that many of the costs described in Section 5. (1) would be addressed through Force Majeure

8. Type/detail of filing information • Input cost inflation factors • Hydroelectric “run-of-river” water flow levels and output levels • Historic outage rates and availability factors • Additional information, if and as necessary, to support limited COS to establish appropriate prescribed prices

9. Issues for first proceeding • Determination of historic outage rates and availability factors • Determination of Prescribed quantities based on policy goals • Determination of input cost inflation factors • Defining Force Majeure • Regulatory time-frame