IN THE MATTER OF AN AUTOMATIC ADJUSTMENT

MECHANISM TO ADJUST THE RATES OF

NEWFOUNDLAND POWER INC. BASED ON VARIATIONS

IN RATE BASE AS ESTABLISHED BY THE BOARD OF

COMMISSIONERS OF PUBLIC UTILITIES (“THE BOARD”)

IN ORDER NO. P.U. 16 (1998-99) AND ORDER NO. P.U. 36

(1998-99).

WHEREAS in Order No. P.U. 36 (1998-99) the Board approved a formula to be used to adjust, where appropriate, the Company’s return on rate base (the “Automatic Adjustment Formula”); and

WHEREAS Order No. P.U. 36 (1998-99) employed the Automatic Adjustment Formula to establish the Company’s allowable rate of return on rate base for the year 1999 as being within the range of 9.63% to 9.99%; and

WHEREAS the Automatic Adjustment Formula contains three variables used to adjust the rate of return on rate base, namely:

1. Rate Base;

2. Invested Capital; and

3. Estimated Cost of Common Equity.

AND WHEREAS as part of the annual approval of the Company’s capital budget, the Board established values for the first two variables; and

WHEREAS the third variable is adjusted based on the average daily closing yields of the long term (30 years) Government of Canada bond rate during the last five trading days in October and the first five trading days of November; and

WHEREAS due to an alteration in all of these variables in 1999, the allowed range rate of return on rate base for the Company for the year 2000 was altered by Order No. P.U. 20 (1999-2000) to a range of 10.10% to 10.46%; and

WHEREAS on 8 November 2000 the Company provided to the Board its calculation of rate of return on rate base for the year 2001 as determined by the Automatic Adjustment Formula; and

WHEREAS these calculations have been confirmed by Grant Thornton LLP, the Board’s financial consultants; and

WHEREAS, according to these calculations, the Company’s expected rate of return on rate base for the year 2001 will be 10.13%; and

WHEREAS Order No. P.U. 36 (1998-99) further ordered that:

“The new rate of return on rate base resulting from the application of the formula will be taken as the midpoint of the range which will be allowed for calculating revised rates, tolls and charges. However, if the new rate falls within the range of allowed rate of return on rate base for the current year, the Board will make no adjustment in rates, tolls and charges and maintain the previously allowed range of rate of return on rate base.” (Page101); and

WHEREAS according to the Automatic Adjustment Formula, the rate of return on rate base for the year 2001 is expected to fall within the range established by Order No. P.U. 20 (1999-2000).

IT IS THEREFORE ORDERED THAT:

1. Pursuant to Order No. P.U. 36 (1998-99) there shall be no change in electrical rates charged by the Company for the year 2001; and

2. The allowable rate of return for the Company for the year 2001 shall remain within the range of 10.10% to 10.46%.

DATED at St. John's, Newfoundland, this 28^th day of November 2000.

Darlene Whalen, P.Eng.,

Vice-Chairperson.

Raymond A. Pollett,

Commissioner

_____________________________

William Crosbie, P. Eng.,

Commissioner

G. Cheryl Blundon,

Board Secretary.

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