Union Gas 2010 Deferral Account and Earnings Sharing Disposition

May 3, 2012

Union Gas has received Ontario Energy Board (OEB) approval of its 2010 Earnings Sharing & Disposition of Deferral Account and Other Balances.  These adjustments are part of the annual deferral account and earnings sharing processes.  C1, M12, M13, and M16 transportation Shippers will see a one-time adjustment on your April invoice (received in May) relating to the following accounts:

2010 Federal and Provincial Tax Changes:  In its EB-2007-0606 Decision, the OEB directed Union to share the impact of federal and provincial tax changes 50/50 between Union and its Shippers. For 2010 $240,893 will be collected from ex-franchise transportation Shippers relating to 2010 tax changes.  This adjustment applies to C1, M12, M13 and M16 transportation Shippers. For M12, C1 and M16 transportation Shippers, the adjustment is based on contracted quantities.  For M13 transportation Shippers, the adjustment is based on volumes flowed.

IFRS Conversion Costs: Union Gas has converted the accounting methodology used from Canadian Generally Accepted Accounting Principles ("CGAAP") to International Financial Reporting Standards ("IFRS").   A deferral account has been established to recover the cost associated with upgrading Union Gas’ accounting system in order to report results under IFRS. This deferral account will be cleared over multiple years.  For 2010 $11,701 will be collected from ex-franchise transportation Shippers.  For M12, C1 and M16 transportation Shippers, the adjustment is based on contracted quantities.  For M13 transportation Shippers, the adjustment is based on volumes flowed.

2010 Earnings Sharing: During the current Incentive Regulation period, earnings above a specific threshold are subject to sharing with Shippers.  For 2010, Union Gas earned in excess of the threshold and is distributing $685,018 among M12, C1, M16, and M13 transportation Shippers.  For M12, C1 and M16 transportation Shippers, the adjustment is based on contracted quantities.  For M13 transportation Shippers, the adjustment is based on volumes flowed.

Harmonized Sales Tax Adjustment: On July 1, 2010, Harmonized Sales Tax ("HST") came into effect in Ontario, combining provincial and federal taxes. The impact of HST resulted in both savings and additional costs to Union related to the provincial component of the tax.   A Harmonized Sales Tax (HST) deferral account has been established to record the amount of Provincial Sales Tax (PST) previously paid and collected in approved rates now subject to Harmonized Sales Tax (HST) tax credits or the amount of HST paid on taxable items for which no tax credits are received from the Canadian Revenue Agency (CRA). For 2010 $51,958 will be distributed to the ex-franchise transportation Shippers.  For M12, C1 and M16 transportation Shippers, the adjustment is based on contracted quantities.  For M13 transportation Shippers, the adjustment is based on volumes flowed.