Reuters

October 3, 2000

The following statement was released by the ratings agency

New York, Oct. 11, 2002 — Standard & Poor’s Ratings Services today said that the potential for ongoing political intervention could affect its credit ratings on Ontario utilities in the future. Up until recently, political intervention has been restricted to the predominantly government-owned electricity industry. This intervention resulted in the weakening of the financial profiles of all electricity distribution companies, except Hydro One Inc. (A/Negative/A-1), due to the three-year phase-in of the 2001 ROE revenue requirement, and the cancellation of the privatization of Hydro One, which has materially reduced the company’s financial flexibility, as well as significant changes in the executive management team and board of directors of the company.

More recently, Ontario Premier Ernie Eves indicated in public comments that despite Ontario Power Generation Inc.’s (BBB+/Negative/-) (OPG’s) divestiture of about 6,700 MW of generating capacity, the rate cap could remain in place until 2004, contrary to the terms of the Power Mitigation Agreement that stipulated there would be an easing of the applicable rate cap as OPG reduced its market share. Further, Mr. Eves also recently commented on the potential enhancement of the Ontario Energy Board’s (OEB’s) powers to protect consumers against rate increases after an OEB decision involving Union Gas Ltd. (A/Stable/-). Union Gas is one of only two nongovernment-owned utilities in Ontario. Although Standard & Poor’s will not take any immediate ratings actions, ratings assessments in the future will incorporate the effect of a potentially less supportive regulatory environment, the growing risk of political intervention, and a lack of transparency as to the driving forces behind future regulatory decisions or outcomes.