ANNUAL INFORMATION FORM for the YEAR ENDED DECEMBER 31, 2010 March 31, 2011
Total Page:16
File Type:pdf, Size:1020Kb
ANNUAL INFORMATION FORM FOR THE YEAR ENDED DECEMBER 31, 2010 March 31, 2011 HYDRO ONE INC. ANNUAL INFORMATION FORM FOR THE YEAR ENDED DECEMBER 31, 2010 TABLE OF CONTENTS DEFINITIONS ............................................................................................................................... 1 CORPORATE STRUCTURE ....................................................................................................... 2 FORWARD-LOOKING INFORMATION ................................................................................... 3 GENERAL DEVELOPMENT OF THE BUSINESS .................................................................... 6 DESCRIPTION OF THE BUSINESS ......................................................................................... 12 REGULATION ............................................................................................................................ 34 RISK FACTORS ......................................................................................................................... 46 DIVIDENDS ................................................................................................................................ 53 DESCRIPTION OF CAPITAL STRUCTURE ........................................................................... 53 CREDIT RATINGS ..................................................................................................................... 54 MARKET FOR SECURITIES .................................................................................................... 54 DIRECTORS AND OFFICERS .................................................................................................. 55 INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS .......... 64 TRUSTEES AND REGISTRARS ............................................................................................... 67 MATERIAL CONTRACTS ........................................................................................................ 67 INTERESTS OF EXPERTS ........................................................................................................ 70 ADDITIONAL INFORMATION ................................................................................................ 71 STATEMENT OF EXECUTIVE COMPENSATION ................................................................ 71 APPOINTMENT OF AUDITOR ................................................................................................ 92 AUDIT AND FINANCE COMMITTEE INFORMATION ....................................................... 92 CORPORATE GOVERNANCE DISCLOSURE........................................................................ 94 APPENDIX “A” AUDIT AND FINANCE COMMITTEE MANDATE APPENDIX “B” HYDRO ONE INC. BOARD OF DIRECTORS MANDATE - 1 - Except where otherwise indicated, all information presented herein is as at December 31, 2010. DEFINITIONS For convenience, in this Annual Information Form: “CDM” means conservation and demand management; “DS” refers to a distribution station; “DSC” means the Distribution System Code; “EA” means the Environmental Assessment Act (Ontario); “FERC” means the Federal Energy Regulatory Commission; “FIT” means the feed-in-tariff program of the OPA; “GEA” means the Green Energy and Green Economy Act, 2009; “GTA” means the Greater Toronto Area; “Hydro One”, “our company”, “we”, “us”, “our”, and “the company” refer to Hydro One Inc. and its subsidiaries and predecessors, except where the context requires otherwise; “IESO” refers to the Independent Electricity System Operator, previously named the Independent Electricity Market Operator; “IFRS” means International Financial Reporting Standards; “IPSP” means the Integrated Power System Plan developed by the OPA; “LDC” means local distribution company; “LTEP” means the “Ontario’s Long Term Energy Plan, Building Our Clean Energy Future”, announced by the Province on November 23, 2010; “Market Rules” means the rules made under Section 32 of the Electricity Act, 1998 that are administered by the IESO; “Micro FIT” means the micro feed-in-tariff program of the OPA; “NERC” means the North American Electric Reliability Corporation; “NPCC” means the Northeast Power Coordinating Council Inc. “OEB” refers to the Ontario Energy Board; “OEFC” means the Ontario Electricity Financial Corporation; “OGCC” means Hydro One’s Ontario Grid Control Centre located north of Toronto, Ontario; - 2 - “Ontario” refers to the Province of Ontario as a geographical area; “OM&A” means Operations, Maintenance and Administration; “OPA” refers to the Ontario Power Authority; “OPG” refers to Ontario Power Generation Inc.; “Open Access” refers to the opening of Ontario’s wholesale and retail electricity markets to competition which officially occurred on May 1, 2002; “Province” refers to the Government of the Province of Ontario; “PWU” refers to the Power Workers’ Union; “ROE” refers to return on equity; “Society” refers to the Society of Energy Professionals; “TOU” refers to “time-of-use” rates; and “TS” refers to a transformer station. CORPORATE STRUCTURE Hydro One Inc. was incorporated as Ontario Hydro Services Company Inc. by Articles of Incorporation dated December 1, 1998 under the Business Corporations Act (Ontario). On May 1, 2000, we changed our name to Hydro One Inc. Our registered office and head office is located at 483 Bay Street, 15th Floor, North Tower, Toronto, Ontario, M5G 2P5. The following are our principal subsidiaries, each of which is wholly-owned by us and is incorporated under the laws of Ontario: • Hydro One Networks Inc. — carries on all business relating to our ownership, operation and management of electricity transmission and distribution systems and facilities; • Hydro One Brampton Networks Inc. — carries on the business relating to our ownership, operation and management of electricity distribution systems and facilities in Brampton, Ontario; • Hydro One Remote Communities Inc. — carries on all business relating to our ownership, operation, maintenance and construction of generation and distribution assets used in the supply of electricity to remote communities throughout Northern Ontario; and - 3 - • Hydro One Telecom Inc. — carries on all of our business relating to leasing dark fibre and providing lit telecommunications capacity to other telecommunication carriers, large corporations, government, healthcare, and education institutions. FORWARD-LOOKING INFORMATION This Annual Information Form contains, and Hydro One’s oral and written public communications often contain, forward-looking statements that are based on current expectations, estimates, forecasts and projections about the business of Hydro One and the industry in which Hydro One operates and includes beliefs and assumptions made by the management of our company. Such statements include, but are not limited to, statements about the general development of our business; statements related to the OEB’s time of use pricing; statements related to the Green Energy Act and our Green Energy Plan, the Ontario Clean Energy Benefit Act and the Ministry of Energy’s Long Term Energy Plan and Supply Mix Directive including the additional investments arising therefrom, and our ability to recover the costs of such investments; statements about smart meters including their capabilities, costs and cost recovery; statements related to the buildout of an advanced distribution solution for our distribution business; expectations regarding the Cornerstone project; the expected impact of CDM programs and targets including funding expectations; expectations regarding connections of new generation to our transmission and distribution systems, including their cost and impact on our systems; expectations regarding future renewable energy generation, including the possibility of incurring capital expenditures related thereto; statements about our strategy, including our strategic objectives; statements regarding future capital expenditures and our capital and other investment plans; statements regarding the reliability of our distribution and transmission systems including equipment performance; statements about our transmission capacity; expectations regarding load growth and new generation; statements regarding our current and future capital projects including completion dates and our ability to recover the costs related to such projects and to obtain environmental and other regulatory approvals in connection therewith; expectations regarding land expropriations necessary for the Bruce to Milton project; expectations regarding NERC standards, the cost impact of their adoption, and possible recovery of these costs in rates; statements related to the attraction and retention of staff and the maintenance and development of the skills and competence of existing employees; statements about our outsourcing arrangement with Inergi LP; expectations regarding environmental expenditures and other environmental matters including the expected work and costs of compliance with PCB regulations, potential future costs related to asbestos and land remediation, our ability to recover such costs and the need for environmental approvals and assessments; expectations regarding the OEB’s Framework for Transmission Project Development Plans; expectations regarding our operating agreement with the IESO; statements regarding our ability to collect our rates and the expected impact on transmission and distribution rates and customer bills resulting from our rate applications; statements related to our connection