Ancillary Services: 2008 Preliminary Cost Forecast

1. Ancillary Services: 2008 Preliminary Cost Forecast 2007 Budget Review Process August 28, 2007 Commercial Services

2. GTA Forecasting – Ancillary Services • Ancillary Services (AS) • $130 - $260 Million portfolio • Operating reserves • Transmission must-run (TMR) • Invitation to bid on credit (IBOC) contract • Location based standing offer (LBC SO) contracts • Poplar Hill • Other (blackstart and frequency mitigation services)

3. Operating Reserves • Majority of operating reserve costs are indexed to pool price • Month to month costs are extremely volatile

4. GTA Forecasting – Operating Reserves • Operating reserve costs make up approx 60-80% of total AS costs • Operating reserve cost forecasts are determined using: • Recent months of recorded costs; multiplied by • forecasted volumes • 2007 YTD Forecast = $70 Million • 2007 YTD Actual = $128 Million • 2007 Forecast = $121 Million • 2008 Forecast = ~$200 Million

5. GTA Forecasting – Transmission Must Run (TMR) • TMR costs (excld IBOC, LBC SO, Poplar Hill) make up approx 15-30% of total AS costs • TMR cost forecasts are determined using: • Most recent EDC pool price and gas price forecast; • forecasted volumes; and • TMR contracts. • 2007 YTD Forecast = $30 Million • 2007 YTD Actual = $28 Million • 2007 Forecast = $51 Million • 2008 Forecast = ~$40 Million

6. Transmission Must Run (TMR) • Higher market heat rates = lower TMR costs • Actual YTD market heat rate = 10.8 GJ/MWh • 2006 forecasted market heat rate = 7.1 GJ/MWh • 2007 forecasted market heat rate = 7.8 GJ/MWh • 2008 forecasted market heat rate = 11.5 GJ/MWh

7. Transmission Must Run (TMR) TMR Costs vary inversely with market heat rates

8. Invitation to Bid on Credits (IBOC) One of the three IBOC contracts remain • Forecast YTD = $1.0 Million • Actual YTD = $0.9 Million • 2007 Forecast = $1.7 Million • 2008 Forecast = $1.6 Million

9. Location Based Standing Offer (LBC SO) • Costs have a fixed and variable component • Forecast YTD = $3.5 Million • Actual YTD = $3.7 Million • 2007 Forecast = $7.8 Million • 2008 Forecast = $5.9 Million

10. Poplar Hill • Forecast YTD = $1.1 Million • Actual YTD = $1.2 Million • 2007 Forecast = $1.9 million • 2008 Forecast = $2.0 Million • Other Ancillary Services • Includes remedial action schemes and black start service • Forecast YTD = $6.1 Million • Actual YTD = $4.3 Million • 2007 Forecast = $10.6 Million • 2008 Forecast = >$8.0 Million

11. Finalizing Forecast • A recent EDC Forecast will be used to finalize the AS forecast- currently the pool price and gas price forecast for 2008 is $84/MWh and $7.50/GJ, respectively • The most current volume forecast will be used • It has not been determined at this time how much historical pricing data will be used to calculate the operating reserve forecast • Further assessment is required on what Remedial Action Schemes and Blackstart services will likely be contracted for in 2008 and how much will they cost • The methodology being used for the 2008 Forecast is the same as the 2007 Forecast