SHARED SERVICES PRODUCTS AND SERVICES PURCHASED FROM THE TOWN OF MARKHAM. Leased premises

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1 Page 1 of SHARED SERVICES PowerStream has two affiliates: the City of Vaughan and its wholly-owned subsidiary, Vaughan Holdings Inc. The latter is one of PowerStream s two shareholders. Nevertheless, for the purpose of the Affiliate Relationships Code for Electricity Distributors and Transmitters (the ARC ), PowerStream treats its minority shareholder, Markham Enterprises Corporation, and its parent, the Town of Markham, as affiliates as well. PowerStream has accordingly proposed that Shared Service Agreements govern the terms and conditions of the provision of services to and the purchase of services from the City of Vaughan and the Town of Markham. These agreements have been drafted by PowerStream and await signatures from PowerStream's shareholders. Copies of the Shared Services Agreements between PowerStream and the City of Vaughan, and PowerStream and the Town of Markham, covering the period 2008 to 2010 are included at,, Schedule 7 and,, Schedule 8, respectively. It was hoped to have these Shared Services Agreements executed by the time of the filing of this Application, but this was not possible. Note that these agreements replace those that covered the period 2005 to The purpose of this written evidence is to describe the goods and services that PowerStream purchases from and provides to the Town of Markham and the City of Vaughan and explain how the prices that PowerStream pays and receives for these have been determined 1. PRODUCTS AND SERVICES PURCHASED FROM THE TOWN OF MARKHAM Leased premises PowerStream (and, previously, Markham Hydro Distribution Inc.) leased land and a building located at 8100 Warden Avenue to accommodate administrative staff, operations staff, warehousing and fleet services under a lease with the Town of Markham. 1 As the revenue that PowerStream receives for services provided to "affiliates" is offset against the costs of providing such services, it is appropriate to include evidence regarding the provision of such revenuegenerating services in the OM&A section of PowerStream's Application.

2 Page 2 of PowerStream s rationale for relocating administrative staff to a new corporate head office is outlined in Exhibit B1, Tab 5, Schedule 3. In 2007, senior staff at the Town of Markham asked that PowerStream vacate the 8100 Warden Avenue location so that they could lease the property to a company in the information technology industry. As a result, PowerStream vacated the Warden Avenue facility in February, 2008, and relocated to temporary leased space. The Town of Markham charged 1/12 of the annual rent (or $70,410.84) for Also, since PowerStream would continue to need outdoor storage space at 8100 Warden Avenue, a fee of $10,000 per month was negotiated starting September 1, The lease payments for 2008 therefore total $110,411 ($70,410 plus four months at $10,000). Lease payments for 2009 are $120,000 (twelve months at $10,000). There are no payments in 2010 since PowerStream anticipates relocating to a new operations centre early in Cashier services The Town of Markham provides cashier services to PowerStream at Markham Town Hall. Customers may pay their electricity and water bills and get responses to basic questions about their bills and account history at this location. PowerStream pays a market price for these services based on the cost to have a customer service agent in place and have the cost to have a connection to PowerStream s Customer Information System. For 2009 and 2010, a 2 percent inflation factor is applied to the 2008 rate. The annual cost of the facilities leased from and the cashier services purchased from the Town of Markham are summarized in Table 1 below.

3 Page 3 of 6 49 Table 1: Facilities Leased and Services Purchased from the Town of Markham ($) facilities 602, , , ,000 Nil cashier Nil Nil 56,227 57,296 59, PRODUCTS AND SERVICES PROVIDED TO THE TOWN OF MARKHAM Water and sewer PowerStream provides certain services to water and sewer customers in the Town of Markham. These include billing, collection, revenue management, customer account management, responses to telephone and written enquiries and the reporting of certain statistics. The price that is charged by PowerStream for these services is based on fully-allocated costs and includes an amount that is equal to PowerStream's weighted average cost of capital (7.3%). Revenues are netted against these fully-allocated costs, to PowerStream, of providing these services. Street lighting maintenance PowerStream also provides street lighting maintenance services to the Town of Markham. These comprise managing a third-party contract for streetlight maintenance, re-lamping program, accident and vandalism repair, streetlight fault repairs and pole replacement. The third party was selected through a tendering process, therefore the street lighting costs are market-based. PowerStream charges a 20% contract management fee for overseeing the contract. All revenues including the 20% service fee, from the provision of these services, are netted against PowerStream OM&A expenses. The annual amount is not fixed, but rather depends on the volume of activity, as evident in the amounts for 2006 and Table 2 summarizes the water and sewer and street lighting maintenance services that PowerStream provides to the Town of Markham.

4 Page 4 of 6 71 Table 2: Services Provided to the Town of Markham ($) water and sewer 1,038,000 1,160,165 1,363,337 1,401,200 1,426,190 street lighting 785, , , , , SERVICES AND PRODUCTS PURCHASED BY POWERSTREAM FROM THE CITY OF VAUGHAN Leased facilities PowerStream leases facilities from the City of Vaughan at 2800 Rutherford Road. In February, 2008 administrative staff were relocated from this facility to the new corporate head office. Operations staff, warehousing and fleet services remained at Rutherford Road. Also some operations staff from the vacated 8100 Warden Avenue site were moved to Rutherford Road. Annual lease charges are based on a review comparable rates conducted by the City of Vaughan and reviewed with PowerStream. Lease payments will end in 2010 when PowerStream occupies a new operations centre. Although there is a lease amount for 2010 in the draft agreement, PowerStream has provided the City of Vaughan with official notice that the Rutherford Road facility will be vacated. Software maintenance The City of Vaughan and PowerStream share licensing fees for JDE Enterprise Software that each uses independently to manage their financial systems. The combined, higher volume of licenses results in lower costs per license. The City managed this process and charges PowerStream an annual software fee which is less than what it would pay was PowerStream to obtain the licenses on its own. Fuel service charges The City of Vaughan purchases gasoline and diesel fuel for its fleet at bulk, discounted rates. The City includes PowerStream s requirements in its purchases and charges PowerStream an annual fee for managing the procurement, maintenance and billing

5 Page 5 of services related to PowerStream fueling its vehicles at 2800 Rutherford Road. PowerStream pays for the fuel at the City s cost. Mail and records Prior to PowerStream relocating to the new corporate head office in February, 2008, the City of Vaughan provided mail delivery and records management services to PowerStream. Table 3 summarizes the services purchased by PowerStream from the City of Vaughan. Table 3: Services Purchased by PowerStream from the City of Vaughan facilities 789, , , , ,520 information technology 107,400 89,400 37,000 37,740 38,495 fuel services In facilities In facilities 10,919 11,158 11,404 Mail/records 20,000 20,600 Nil Nil Nil SERVICES PROVIDED BY POWERSTREAM TO THE CITY OF VAUGHAN Water and sewer PowerStream provides billing and collection of services to the City of Vaughan. These services include billing of all water and sewer services, revenue management and collections, customer account management, telephone and written inquiry handling and certain reporting statistics. Payroll services PowerStream provides payroll services to the City of Vaughan including payroll administration (including taxes, benefits and deductions), Statistics Canada reporting, OMERS remittance and reporting and WSIB payments, as well as coordinating payroll audits and testing.

6 Page 6 of Cashier services PowerStream provides cashier services to the City of Vaughan. These include services to process payments for electricity and water bills, municipal taxes, parking permits, licensing fees, opening and sorting night box payments and responding to simple customer enquires. The increased cost starting in 2008 reflects the addition of a second staff member to the work volume. Table 4 summarizes the services provided by PowerStream to the City of Vaughan. Table 4: Services Provided by PowerStream to City of Vaughan ($) payroll 250, , , , ,253 cashier 103, , , , ,972 water and sewer 1,044,000 1,136,380 1,376,148 1,414,367 1,439, The prices charged to the City of Vaughan for the provision of the services enumerated in Table 4 reflect fully allocated costs and include a 7.3% mark up to reflect PowerStream s weighted average cost of capital. The revenues that PowerStream receives in this regard are netted against PowerStream s operating expenditures.