DE LAS AUTORIZACIONES ESTABLECIDAS PARA EFECTUAR EL TRANSPORTE INTERNACIONAL DE MERCANCÍAS POR CARRETERA COMO

Advantages:

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1. A theoretical exercise with Insurers identified potential cost savings of approximately $786,923 (Scenario A – if full T- lines insurance was not procured) or $157,344 (Scenario B – assumes SNC maintains consequences of contractor negligence insurance coverage). Please refer to Exhibit 1. 2. Given past experience, there is a low probability of an insurable event occurring in respect of T-

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lines under construction;

3. Consistent treatment of all T- lines exposure during both operations and construction phase through the use of the SIR;

4. Complete and full control of claims management by AltaLink.

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Disadvantages:

1. The cost saving is negligible, assuming SNC maintains consequences of contractor negligence insurance coverage, relative to the additional risk exposure that would be assumed;

2. The pricing indication for insuring consequences of contractor negligence without natural

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catastrophe coverage is theoretical. To the best of our knowledge, it has not been done before and there is no guarantee that insurers would write this policy.

3. Insurers currently do not have policies that insure for natural catastrophes and negligence separately. A manuscript policy would need to be written and accepted by Insurers.

4. Although the loss history has been excellent (no losses relating to T- lines under construction),

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AltaLink is embarking on an extensive capital program with larger and more complex projects, which may prove to be riskier;

5. Customers are exposed to rate volatility should the SIR experience a large loss related to T-lines under construction.

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Option3: AltaLink to procure and maintain the COC insurance coverage, including T-lines coverage. Advantages:

1. No risk of loss to the SIR account for all T- line damages below $10M, as it is covered by third

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party insurers;

2. Consequences of contractor negligence coverage would be provided under the COC insurance policy;

3. No need to hold harmless or provide a waiver of contractual liability to the Contractor (SNC-ATP) and all subcontractors for T- lines exposure (during construction);

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with third party insurers and AltaLink;

6. Provides cost stability to ratepayers, as insurance will cover T- lines losses up to the stated sublimit. This provides ratepayers with protection from potentially large unforeseeable losses.

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Disadvantages:

1. An insurance premium is paid for COC insurance on T-lines. This cost would be passed along to ratepayers. AltaLink has discussed pricing with both its insurance broker, Aon Reed Stenhouse Inc. and its property insurer. AltaLink was advised that SNC-ATP’s COC policy coverage and

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pricing is extremely competitive. SNC-ATP’s construction program is attractive because of the low deductible, high sublimits, and the fact that T- lines coverage is included in the policy. At this time, AltaLink’s insurance broker and Insurer indicated that they likely would not be able to achieve similar pricing for AltaLink directly.

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2012-2013 COC Insurance Cost Summary

COC Insurance including: T- lines coverage for consequences of negligence & natural catastrophes etc, substations/ transformers full coverage

$1,269,231 (estimate) COC Insurance including: T- lines coverage for

consequences of contractor negligence only, substations/ transformers full coverage

$1,111,887 (estimate) COC Insurance including: No T- line coverage,

substations/ transformers full coverage

$482,308 (estimate)

Conclusion

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Based on AML’s construction insurance analysis, we believe that the best option is to maintain the current COC policy carried by SNC-ATP. This includes substations, transformers and full T-lines coverage for consequences of negligence (including contractor negligence) and natural catastrophes. At this time, AltaLink is unable to obtain this same coverage at rates as favorable as that of SNC-ATP. Since the

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regulator in Decision 2011-172 indicated it was inappropriate for ATCO’s SIR to assume third party contractor negligence, the potential cost savings for self-insuring T-lines for natural catastrophes is insignificant ($157,344). In addition, the pricing indication for insuring consequences of contractor negligence without natural catastrophe coverage is theoretical. To the best of our knowledge, it has not been done before and there is no guarantee that insurers would write this policy.

Possible scenarios should T- lines coverage be removed from the current COC policy procured by SNC- ATP

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In the event that T- lines coverage was to be removed from the current COC policy carried by

SNC-ATP, the third party insurers have proposed the following tentative scenarios (these scenarios are for discussion purposes only, not to be considered as preliminary or binding premium indications and subject to manuscript policy wording approval from the Insurers):

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• Reduction of 62% of covered estimated project values (attributable to estimated T- lines activity).

Scenario A: Complete removal of all T- line coverage and exposure

• Coverage would continue to remain in place for all assets except T- lines. For example, substations and transformers would continue to be insured.

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• SNC maintains coverage for consequences of contractor negligence related to T- lines.

Scenario B: Complete removal of all T- line coverage and exposure except SNC-ATP maintains coverage for consequences of contractor negligence

• Removal of T- line coverage for natural catastrophes, non-negligence related events.

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• Estimated covered project values remain the same, however SNC –ATP would be charged a lower rate.

Actual 2012-2013 Scenario A Scenario B

Estimated Project Value $1,007,326,420 $382,784,040 $1,007,326,420

Insurance Premium $1,269,231 $482,308 $1,111,887

Potential Cost Savings $ - $786,923 $157,344

Construction Insurance Program, Burns & McDonnell Canada Ltd.

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As of May 1, 2012 AltaLink entered into a relationship agreement with a second EPC vendor, Burns & McDonnell Canada Ltd. It is AltaLink’s intention to provide a full analysis of the insurance for assets under construction with the new vendor. However, at the present time, Burns & McDonnell has not been able to confirm insurance pricing. An update will be provided prior to the hearing.

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Construction Insurance Premiums

Based on the forecast Direct Assign Gross Capital Expenditures, estimated total construction insurance premiums are as follows. Construction insurance premiums are adjusted at the end of the policy term based on the actual capital expenditures.

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Calendar Year 2012 2013 2014

Having made this finding, however, the Commission is concerned that any costs charged to third parties for capital work are completely accounted for in any forecasts of costs AltaLink generates for its own internal requirements when preparing future GTA forecasts. To this end, the Commission directs AltaLink to

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provide, for each uniform system account where costs have been charged to third parties, a complete reconciliation of these charges at the time of its next GTA. The purpose of the reconciliation is to ensure that any actual amounts reported by AltaLink and used as a baseline for forward test period forecasts do not inadvertently build in an allowance for amounts for which AltaLink received offsetting revenues.

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Response:

Please find below the reconciliation as requested. Please note the MFR framework does not define revenue within the USA accounts – as such the revenue received cannot be classified as requested.

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