ECONOMIC ASSESSMENT - 3 STAGE METHOD ( EBO 134, 1987)

Stage 1: 30 year Discounted Cash Flow (DCF) Analysis resulted in PI=0.75 and the Net Present Value of $21.3 million. Economic life of the pipeline 55 years. Estimated revenues and expenses calculated under the current approved rates (cost of service EBRO 499).

Incremental cash inflows estimation is based on sales and transportation services made possible as a result of additional facilities. The revenue included in the DCF is based on portion of the in-
franchise and transportation service design day demands that can be served by the proposed facilities. The proposed facilities will serve 22.59% of the incremental W2000/01 demand and 93.32 of the incremental W 2001/2002 demand. Operating and maintenance expenses and taxes are deducted from incremental revenues to get net incremental cash inflows.

Incremental cash outflows are construction costs less overheads but interest during construction is included in capital cost.

Stage 2: This analysis estimates energy cost savings to Ontario customers over 30 years. Estimated benefits to rate payers are positive - net benefit $ 246.6 million based on social discount rate of 10%. The savings are energy cost savings as the consumers will be able to use lower cost natural gas compared to other fuels. This seems to be questionable considering today's high cost of gas. (Ref. Section 5/Sch 7/p1 and 2)

Stage3 : Includes "Other Public Interest Considerations"which are quantified such as employment and utility taxes and qualitative such as enhanced security, competitive market impacts, comparatively positive environmental effects.

LONG TERM ANALYSIS only Stage 1 (Ref. Sect 5/ Appendix A)

37 year DCF which is includes time period of 30 years after the last loop is constructed.. Design day demand is forecast over 10 year horizon. Resulting in PI = 1.16 and NPV of $ 55.9 million. Breaks even after 24 years.

COST

Total (Sect 5/Sch 1-3)

Total pipeline construction cost ~ $84 millions

Construction & labor includes easements, land and damages - $ 6.5 million

Environmental total $ 4.2 millions

pre-constr (EA+hearing); construction $ 3 million ; post-construct (restoration, reforestation, inspection, monitoring) $ 755 thousand

Bright compressor station tie-in : $ 2.3 millions

cost per meter

$2,353 which is in line with the cost per meter of other loops constructed since 1990 (see IR # 27)