2011 Sustainability Report by eSolutionsGroup Ltd

2011 Sustainability Report

COMMITTED TO POWERING COMMUNITY WELL-BEING

Corporate Profile Guelph Hydro Inc.* is a holding company, 100 per cent owned by Guelph Municipal Holdings Inc. which is, in turn, 100 per cent owned by the City of Guelph. The organization consists of two subsidiary operating companies: • Guelph Hydro Electric Systems Inc., a regulated electricity distribution company that delivers electricity safely and reliably to more than 50,000 homes and businesses in the City of Guelph and the Village of Rockwood, Ontario. Guelph Hydro Electric Systems Inc. provides essential infrastructure for the communities served to grow and prosper and promotes energy conservation to customers. • Envida Community Energy Inc. (formerly Ecotricity Guelph Inc.), a non-regulated renewable and alternative energy company that generates electricity from landfill gas at the City of Guelph’s Eastview Landfill site and operates a 100-kilowatt solar facility on the Guelph Hydro head office. Envida is the primary implementer and key developer of high-efficiency, low-carbon, energy projects that will assist the City of Guelph in achieving targets set out in the Guelph Community Energy Initiative and facilitating economic development in the community.

Strategic Imperatives Guelph Hydro’s key strategic imperatives are aligned with the objectives of both our Shareholder, Guelph Municipal Holdings Inc., and the City of Guelph, and uphold the public trust invested in the company as the owner and operator of a local electricity distribution company. These imperatives provide direction for our day-to-day activities and are as follows:

CITY OF GUELPH

GUELPH MUNICIPAL HOLDINGS INC.

GUELPH HYDRO INC. Non-Regulated Holding Company

GUELPH HYDRO ELECTRIC SYSTEMS INC. Regulated Company

ENVIDA COMMUNITY ENERGY INC.

Non-Regulated Company

1. Deliver balanced financial and societal returns by investing in quality energy production and distribution infrastructure. 2. Be a leader in the provision and implementation of an energy conservation and sustainable energy culture to our customers and employees that is consistent with the energy initiatives of our Shareholder and Province. 3. Be a leader in efficient, safe, reliable and economic distribution of energy. 4. Be a great place to work and communicate this fact in order to attract and retain employees to meet future business challenges. 5. Ensure we enhance our position as an asset to our Shareholder and the communities we serve by engaging all stakeholders in our key initiatives and objectives.

* Throughout this document, the use of the name Guelph Hydro refers to the holding company, Guelph Hydro Inc., which incorporates two subsidiary companies: a regulated utility, Guelph Hydro Electric Systems Inc., and a non-regulated company, Envida Community Energy Inc. (formerly Ecotricity Guelph Inc.). The name Guelph Hydro Electric Systems Inc. is written out in full when referring specifically to the regulated utility.

Table of Contents A Message to Our Stakeholders

2011 Achievements

Awards

2011 Fast Facts

Vision, Mission and Values

Our Approach To Sustainability

Guelph Community Energy Initiative Developing Community Energy Projects

10 11

Solar Energy District Energy

Environmental Stewardship

Our Strategic Approach Environmental Compliance Audit 2011 Environmental Milestones Helping Customers Save Energy, Save Money Protecting the Environment — Air, Water, Wildlife Preventing Pollution Green Transportation

Economic Success

Barry Chuddy Chief Executive Officer Guelph Hydro Inc.

Our Strategic Approach Reliability of the Distribution Network Investing in Capital Projects to Accommodate Growth Investing in a Smarter Grid A Smarter Grid for a Sustainable Energy Future Guelph Hydro’s Smart Grid

Social Responsibility

Our Strategic Approach Stakeholder Engagement Valuing Customers Easy Online Access to Electricity Consumption Data Valuing Employees Ensuring Safety, Health and Wellness Giving Back to the Community

Corporate Governance

“Guelph Hydro is promoting energy conservation and developing efficient, low-carbon sources of energy to help cut greenhouse gas emissions and reduce Guelph’s carbon footprint for a healthier community.”

Board Members Senior Management Team

About This Report

Global Reporting Initiative

A MESSAGE TO OUR STAKEHOLDERS Glancing down the list of achievements on the opposite page, it is easy to see that 2011 was an extraordinarily successful year for Guelph Hydro Inc. In addition to providing customers with safe, reliable and cost-effective electricity distribution services, the company constructed its first transformer station to support growth in the community; completed approximately $28 million worth of projects to upgrade, maintain and expand the distribution network; laid the foundation for a smarter grid; migrated the majority of our customers to Time-of-Use billing; entered the field of renewable generation; published an award-winning, inaugural Sustainability Report; filed a comprehensive rate rebasing application with the Ontario Energy Board; converted to International Financial Reporting Standards (IFRS); achieved net income targets that were ahead of expectation and filed more than 20 applications with the Ontario Power Authority for new sustainable energy projects to enable us to fulfill our commitments to the City of Guelph.

Jasmine Urisk Board Chair

These accomplishments were the result of the dedication of the company’s 113 employees who work hard every day to provide superior customer service, drive operational excellence and help create a sustainable energy future for the communities we serve. Clearly, our employees’ efforts are making a difference for, in 2011, Guelph Hydro was proud to be named Large Company of the Year by the Ontario Energy Association (OEA). This award acknowledged Guelph Hydro’s performance excellence and demonstrated leadership in the field of sustainability, firmly establishing the company as a leader in the Ontario utility sector.

Steady Growth and a Stable Dividend In 2011, the City of Guelph transferred its direct ownership of Guelph Hydro Inc. shares to the newly incorporated Guelph Municipal Holdings Inc. which is 100 per cent owned by the City. This restructuring is part of a broader plan the City is implementing to change the way it governs certain corporate assets. Guelph Hydro has always prided itself on providing its Shareholder with steady growth and a stable dividend and customers with safe, reliable, cost-effective services. The year 2011 was no exception. Thanks to disciplined financial management and careful planning, Guelph Hydro paid a dividend to its Shareholder of $1.5 million in 2011. This was despite investing $16.7 million in building the company’s first transformer substation to provide critical capacity for growth in the south end of the City of Guelph as well as $9.0 million to install 48,000 smart meters and associated back office systems. The total amount of Shareholder dividends paid out over the last five years is $8.5 million, making Guelph Hydro Inc. an extremely valuable asset to the community. Guelph Hydro’s financial strength is reflected in the company’s Standard & Poor’s “A” credit rating which is among the strongest in the industry.

Barry Chuddy Chief Executive Officer

2011 Achievements Operational Excellence • Achieved over 750,000 hours without a lost-time injury • Completed the company’s first municipal transformer station directly connected to the provincial transmission grid • Invested $1.6 million to replace aged distribution system assets • Spent $26.5 million in capital projects to upgrade or expand the electricity distribution network • Connected 2 Feed-in-Tariff (FIT) and 59 microFIT installations to the company’s distribution system • Achieved record-setting customer satisfaction ratings on a bi-annual Customer Satisfaction Survey, surpassing the provincial average for utility companies by 7% • Migrated customers to Time-of-Use billing • Connected 551 new residential and commercial customers • Achieved a system reliability index of 99.97% • One of the first utilities in Ontario to conduct an Electric Vehicle Market Research Study

Financial Excellence • Earned a net income of $1.9 million • Paid a dividend of $1.5 million to the City of Guelph • Reported financial performance for the first time using International Financial Reporting Standards (IFRS) • Filed a comprehensive rate rebasing application with the Ontario Energy Board

Environmental Excellence • Commissioned the company’s first 100 kilowatt rooftop solar installation on the roof of Guelph Hydro’s head office. By year-end, 90.86 megawatt hours of solar energy had been fed into the Ontario grid • Promoted energy conservation programs that achieved energy savings of more than 22 million kilowatt hours of electricity, enough energy to power more than 2,500 homes for one year • Removed and recycled 687 old, inefficient refrigerators • Paid out more than $1.5 million in energy efficiency rebates to businesses • Filed more than 20 applications with the Ontario Power Authority for new sustainable energy projects to allow us to fulfill our commitments to the City of Guelph

Social Responsibility • Together, employees and the company donated $48,985 to the United Way • Employees provided $7,000 worth of Christmas gifts for 35 children and their families through The Children’s Foundation of Guelph and Wellington

A MESSAGE TO OUR STAKEHOLDERS continued A Sustainable Energy Vision for Guelph According to experts, a reliable, affordable, sustainable energy supply is, and will continue to be, a key ingredient in the long-term competitiveness, economic growth and prosperity of cities. As a result, city planning is changing. It used to be that city planners focused on ensuring that new developments would be served by sewers, water, roads and transportation. A supply of electricity was taken as a given. Today, forward-thinking, growing communities like Guelph, are ensuring that energy infrastructure—electricity and thermal energy—is planned alongside other amenities. With this thought in mind, Guelph Hydro’s non-regulated subsidiary company, Envida Community Energy Inc. (formerly Ecotricity Guelph Inc.) and the City of Guelph are pioneering a collaborative approach to municipal energy infrastructure planning and management designed to move the community towards a sustainable energy future with a reduced carbon footprint.

A Smarter Grid to Benefit Communities Meanwhile, the regulated electricity distribution company, Guelph Hydro Electric Systems Inc., successfully deployed approximately 48,000 smart meters, the basic foundation of a smart grid and migrated residential and small commercial customers in Guelph to Time-of-Use rates for electricity. These customers can now conveniently view charts of their hourly, daily, weekly or monthly electricity consumption online. This high level of detail will enable consumers to make wiser choices about how and when they use energy in order to reduce consumption and save money. Customers in Rockwood will be shifted over to Time-of-Use rates in mid-2012. Local sources of power generation are also components of a smart grid. Ontario’s Green Energy and Economy Act requires that local electricity distribution companies provide connection services for customers who install renewable energy projects under the Ontario Power Authority’s Feed-inTariff (FIT) or microFIT programs. In 2011, Guelph Hydro Electric Systems Inc. engineering and technical staff connected 61 customer-owned rooftop solar installations, including one on the roof the Guelph Hydro’s facility. Together these systems generate 470 kilowatts of clean, renewable power for the Ontario grid. Looking forward, Guelph Hydro Electric Systems Inc. will continue to invest in capital to upgrade the network to accommodate more and more sources of renewable energy in the community.

Championing Energy Conservation As a condition of license, by the end of 2014, all electricity distributors in Ontario are required by the Ontario Energy Board to achieve reductions in electricity consumption and peak provincial electricity demand through the delivery of conservation and demand management programs. (See page 6.) Guelph Hydro Electric Systems Inc. is diligently promoting Ontario Power Authority saveONenergyOM programs and working to encourage all customers to reduce electricity consumption and peak demand.

Photo courtesy of Canadian Solar Inc.

The Guelph Community Energy Initiative has a target of 1,000 solar roofs. The 61 rooftop solar installations connected by Guelph Hydro Electric Systems Inc. in 2011 generate 470 kilowatts of electricity. Envida Community Energy submitted 18 applications for an additional 11.7 megawatts of solar energy to the Ontario Power Authority.

Awards

• Large Company of the Year – Ontario Energy Association • Two awards for the company’s first Sustainability Report -- Canadian Public Relations Society Pinnacle Award -- Corporate Register Corporate Responsibility Reporting Award – Runner Up in the Small and Medium Enterprise Category • Third ZeroQuest® Gold (Outcomes) Award – Infrastructure Health and Safety Association • Electrical Safety Authority Powerline Safety Award • LEED® (Leadership in Energy and Environmental Design) certification from the Canada Green Building Council

A MESSAGE TO OUR STAKEHOLDERS continued Reductions in Electricity – 2014 Targets 2014 Target

Achieved to Date****

Province

6,000 gigawatt hours

1,389 gigawatt hours

Guelph Hydro Electric Systems Inc.

79.53 gigawatt hours***

31.5 gigawatt hours***

Reductions in Peak Demand – 2014 Targets 2014 Target

Achieved to Date****

Province

1,330 megawatts

78.9 megawatts

Guelph Hydro Electric Systems Inc.

16.7 megawatts**

5.58 megawatts*

* Equivalent to removing the demand load of the University of Guelph ** 2014 net annual peak demand savings *** Net cumulative energy savings **** Estimated unverified results

Looking Ahead The passing of Ontario’s landmark Green Energy and Economy Act in 2009 ushered in a new era for Ontario’s utility industry. Challenges for our company and the industry in terms of regulatory complexity, political uncertainty, smart grid development, renewable energy, a looming shortage of skilled workers and an eroding tolerance by customers for rising electricity costs were not even on the radar a few years ago. Recognizing the need for significant investment in the sector and consumer concerns regarding bill increases, our regulator, the Ontario Energy Board, with input from stakeholders, is now designing a renewed regulatory framework for electricity that will govern how we do business in the future. Included is a review of the need for and value of distribution utility consolidation in Ontario. Together, these efforts could result in some dramatic changes in the industry. Meanwhile, shifting social norms are impacting the ways in which we are interacting with our customers. Customer preferences are shifting from traditional counter or telephone service to online or mobile services offered 24-hours-a-day, seven-days-a-week. Utilities in North America are also seeing an increasing demand from consumers for faster, more detailed information, particularly during outages, using web-based or social media platforms. As a recognized industry leader with a reputation for innovation, Guelph Hydro has an important role to play participating in candid, ongoing discussions with regulators and government officials to help shape the utility industry of tomorrow. We believe that in order to survive, utilities need to be open to change, innovative in their thinking, nimble and continuously focused on adding value—for customers, for the Shareholder and the communities we serve. Recognizing this, we are engaging our employees and developing strategic plans that will position us well to take on whatever challenges lie ahead.

Jasmine Urisk Barry Chuddy Chair Chief Executive Officer Guelph Hydro Inc. Board of Directors Guelph Hydro Inc.

2011 Fast Facts Service Territory Population – Guelph and Rockwood

136,466

Total Service Area

93 square kilometres

Total Assets

$193.5 million

Overhead wires (Primary overhead conductor)

Guelph Hydro Inc. Financial Highlights 2010

2011

Service Revenues

$146.5

$153.2

Net Operating Revenue

$29.1

$28.1

430 kilometres

Net Income (Loss)

Underground cable (Primary underground cable)

Total Assets

$181.4

$193.5

654 kilometres

Capital Expenditures

$18.2

$26.5

Municipal transformer stations

1 owned by Guelph Hydro 3 owned by Hydro One

Dividends Paid

Municipal substations

Transformers

5,711

Poles

11,045

Total Customers

50,867

Electricity Consumption 2011

1,677 gigawatt hours

Residential Number of customer accounts

46,519

Total electricity consumption

365 gigawatt hours

Average monthly consumption

655 kilowatt hours

Commercial (includes scattered loads and sentinel lighting) Number of customer accounts

4,344

Total electricity consumption

1,040 gigawatt hours

Large industrial users >5000 kW Number of customer accounts

Total electricity consumption

261 gigawatt hours

System Peak Load 2011 peak demand – summer/winter

297 megawatts / 253 megawatts

Reliability of the Guelph Hydro Electricity Distribution Network Reliability performance

99.97%

Average amount of time customers were without power in the event of a power outage

50 minutes

Response to emergency calls – Per cent of time crews were on-site within 60 minutes

96.1%

Per cent of new connection requests completed within five days

99.9 %

(in millions of dollars)

$4.8

$1.5

$1.9

$1.5

Effective January 1, 2011, Guelph Hydro began preparing its financial statements in accordance with International Financial Reporting Standards (IFRS). In prior years, financial statements were prepared using Canadian Generally Accepted Accounting Principles (Canadian GAAP). The opening balance sheet has been restated at January 1, 2010, the IFRS transition date, by applying IFRS retrospectively so that 2011 results can be compared against 2010 results on a consistent IFRS basis. Guelph Hydro Inc. 2011 Financial Statements are available at: www.guelphhydroinc.com, www.guelphhydro.com and www.envida.ca. Printed copies may be requested by sending a note to: sustainability@guelphhydro.com.

Vision, Mission and Values OUR VISION To lead Ontario in powering community well-being and environmental stewardship with sustainable energy solutions.

OUR MISSION To invest in energy-related initiatives for the benefit of the communities in which we operate, that fit the energy-related objectives of the Province and our Shareholder, and enable Guelph Hydro Inc. and its family of companies to grow into industry leaders.

OUR CORE VALUES Safety, Reliability and Efficiency We believe we earn employee and customer respect by operating safely, reliably and efficiently.

Caring We care about our people. We foster and respect their talents and value the contribution they make to the companyâ&#x20AC;&#x2122;s ongoing success.

Relationships We are proud of the solid, long-term relationships we are forging with our employees, customers, the communities in which we operate, and the energy industry, built on a platform of integrity, partnership and respect.

Innovation and Leadership We believe innovative thinking, leadership skills and adaptability drive our business success.

Environmental Stewardship We are committed to environmental stewardship, contributing to building sustainable communities and helping to create a culture of energy conservation in Ontario.

OUR APPROACH TO SUSTAINABILITY At Guelph Hydro, our vision is to lead Ontario in powering community well-being and environmental stewardship with sustainable energy solutions. Our regulated electricity distribution company, Guelph Hydro Electric Systems Inc., is accountable for providing a safe, reliable and cost-effective supply of electricity to the Guelph and Rockwood communities. Guelph Hydro Inc. and its affiliate companies are working together to help move the communities we serve towards a sustainable energy future and a cleaner environment. Our Sustainability Policy sets forth Guelph Hydro’s commitment to make decisions and operate our businesses in a sustainable manner— in a way that will deliver balanced economic, social and environmental returns that will ensure the success and future viability of our company for the benefit and well-being of all our stakeholders. Guelph Hydro has made sustainability an integral part of planning and decision making and has adopted best practices for managing operational and environmental risks.

“At Guelph Hydro, we are taking action—through our energy conservation programs and our sustainable energy projects—to help create a sustainable energy future for the communities we serve.” Barry Chuddy Chief Executive Officer Guelph Hydro Inc.

Environmental stewardship is evaluated by our success in championing energy conservation, investing in sustainable forms of energy, managing waste and the environmental impacts of our operations. Social responsibility is evaluated by how we ensure the safety and wellness of people—our employees, our contractors, our customers and the general public—and how we give back to our communities. Our performance is also evaluated on the ethical business practices and effective systems of corporate governance that are in place. We are committed to providing a safe and respectful workplace where employees are highly valued, treated fairly, provided with challenging and meaningful work and benefit from opportunities for knowledge growth and career development. Economic success is evaluated by the value we create for our stakeholders while facilitating the economic growth of the communities we serve.

Performance Measured Against Global Reporting Initiative™ We measure our performance using the Global Reporting Initiative™ (GRI), an internationally recognized standardized framework and indicators for disclosing an organization’s environmental, social and economic performance. Additional information regarding the Global Reporting Initiative™ can be found on page 37. A detailed Global Reporting Initiative™ Content Index is included on pages 39 - 48.

We welcome your feedback on this report and our sustainability efforts. Comments may be addressed to: sustainability@guelphhydro.com.

Guelph Community Energy Initiative

The City of Guelph is one of Canada’s fastest growing communities with a population that is expected to reach 175,000 residents by 2031. In keeping with Ontario’s Places to Grow Act, growth will be within current boundaries with a focus on increased urban density. With a desire to ensure the long-term competitiveness and environmental performance of the City, in 2007, Guelph distinguished itself by being one of the first communities in Canada to publish a Community Energy Plan. The goals of the Guelph Community Energy Initiative (as it is called today) to be achieved by 2031 are ambitious: • Use 50 per cent less energy per capita (electricity, gas, water and transportation) • Produce 60 per cent less greenhouse gas emissions per capita (5 tonnes versus 12 tonnes)

“The Community Energy Plan is not just about energy, it is about building resilience. When the goals are achieved, Guelph will be positioned among the top energy performers in the world, making it one of the most competitive and attractive communities in which to invest.” Karen Farbridge, Mayor of Guelph

• Encourage and facilitate community-based renewable and alternative energy systems. When these goals are achieved, Guelph will be positioned among the top energy performers in the world, making it one of the most competitive and attractive communities in which to invest.

PARTNERING TO ACHIEVE Community Energy Initiative Goals As the owner and operator of the local electricity distribution company serving Guelph, Guelph Hydro’s primary obligation to the community is to provide a safe, reliable, affordable supply of energy. Next in importance, is the company’s commitment to work with the City of Guelph to help reduce energy consumption and greenhouse gases to achieve the environmental goals of the Community Energy Initiative. These objectives dovetail nicely with the energy conservation targets set for Guelph Hydro by the Ontario Energy Board. (See page 6.) In 2011, the company worked diligently to make progress by concentrating on four areas of focus:

• Implementing solar power • Developing district energy projects • Developing a smart grid • Championing energy conservation

Energy Density Mapping Ahead of the curve on community energy planning, Guelph Hydro participated in a Canadian Urban Institute project in 2010 to produce an energy density map for Guelph. Using actual electricity and natural gas data from utilities, the map shows where energy use is concentrated in the community.

“Today, forwardthinking, growing communities Guelph Hydro has used this map to assist like Guelph, are with planning energy infrastructure, particularly in areas are expected ensuring thatthat energy to increase in density. infrastructure— electricity and thermal energy—is planned alongside other amenities.” Barry Chuddy Chief Executive Officer Guelph Hydro Inc.

Developing Community Energy Projects In 2010, the City of Guelph named Guelph Hydro Inc. as its primary developer and implementer of energyrelated projects in support of the Guelph Community Energy Initiative. Since that time, Guelph Hydro and its subsidiary company, Envida Community Energy Inc., have been working to develop sustainable energy projects within city-owned assets. This includes leasing roofs of municipal buildings for solar installations and developing district energy and other clean power projects. These projects are the foundation for a cleaner, highly efficient energy infrastructure, underpinning the overarching energy plan of the City.

Solar Energy Guelph Hydro Southgate Solar Project In 2010/2011, Guelph Hydro installed 60 arrays of photovoltaic solar panels on the roof of its facility at 395 Southgate Drive in Guelph. The facility was commissioned and started generating 100 kilowatts of clean, renewable electricity for the Ontario grid in June 2011. Guelph Hydroâ&#x20AC;&#x2122;s 20-year Feed-in Tariff (FIT) contract with the Ontario Power Authority (OPA) under Ontarioâ&#x20AC;&#x2122;s Green Energy and Economy Act pays the company 71.3 cents per kilowatt hour for the electricity generated. The system is expected to generate approximately 115,000 kilowatt hours of electricity in a year which will result in an annual income of about $82,000. By year end, with only seven months of operation, the system had already fed more than 90,000 kilowatt hours of electricity into the Ontario grid.

Solar Energy in the Community Under the Community Energy Initiative, Guelph has set a goal of 1,000 solar roofs in the community. In support of this goal, Envida Community Energy has been actively pursuing opportunities to establish rooftop and ground-mounted solar facilities throughout the community. In total, the company submitted applications to the Ontario Power Authority for 11.7 megawatts of solar power which includes a partnership and community co-op application for the largest brownfield ground mount solar installation in Ontario. These applications are currently awaiting approval. Meanwhile, Guelph Hydro Electric Systems Inc. has provided connections for 61 customer-owned solar installations.

District Energy A Catalyst for Economic Development Although common in other parts of the world for over a century, North American communities are only now beginning to view the clean, economical, reliable energy that can be provided by a district heating grid as a method of attracting development. Envida Community Energy is working with the City of Guelph on two major district energy projects with others under consideration: • Greenfield Site - Hanlon Creek Business Park -- 675-acre, mixed use business park -- Expected to attract 10,000 new jobs by 2031 -- District energy system »» Electricity - 11.4 megawatts cogeneration »» Hot and chilled fluids for heating and cooling »» Steam and chilled fluids for process »» Fuel: Natural gas

“An ‘eco-business zone’ with a district energy system at its heart, encourages economic development by providing an infrastructure that is attractive to investors and businesses looking to locate in the community.” Karen Farbridge Mayor of Guelph

• Brownfield Site - High-Density Infill Site in Downtown Core -- New condominium and residential neighbourhood -- New commercial developments -- Increased electrical capacity in downtown core -- District energy system »» Heating and cooling for condominium, residential neighbourhood and two City-owned facilities

What is District Energy? A district energy system delivers thermal energy (hot water/steam or chilled fluid) from a central plant via underground pipes to heat and cool buildings.

Benefits of District Energy

Illustration courtesy of the International District Energy Association

• Reduced fuel costs • Relief from volatile electricity and gas prices and lower building operating costs • Avoidance of capital costs • Improved life cycle costs • Reduced space requirements • Reduced greenhouse gas emissions • Dependable, high-quality thermal energy • Higher reliability than conventional heating and cooling systems

Unobtrusive, Highly Efficient Community Energy Facilities Supply Electricity and Thermal Energy When electricity is generated at large, centralized power stations, about 60 per cent of the primary energy in fuel is wasted as heat that is generally exhausted to the atmosphere. By generating electricity in unobtrusive, community energy plants in urban centres, heat that would otherwise be wasted can be harnessed and distributed to buildings as hot water or steam through underground district heating pipes. In the summer, using absorption chillers, chilled fluids can be fed through the underground pipes for district cooling.

Photo courtesy of Hamilton Community Energy.

Hamilton Community Energy, located adjacent to a high school in downtown Hamilton, supplies heating and cooling for buildings in the city core. Envida Community Energy is developing plans to site similar highly efficient community energy plants in Guelph to help reduce the communityâ&#x20AC;&#x2122;s carbon footprint.

When the Hanlon Creek Business Park was in the concept stage, City Planners allowed for dedicated corridors that could include district energy piping. Meanwhile, Guelph Hydro ensured the electricity system could easily accept energy generated by local renewable energy facilities such as rooftop solar and could also accommodate parking lots equipped with electric vehicle charging stations.

Illustration courtesy of the City of Guelph.

ENVIRONMENTAL STEWARDSHIP Our Strategic Approach Developing Sustainable Energy Solutions, Championing Energy Conservation and Protecting the Environment At Guelph Hydro, our goal is to minimize our environmental footprint and safeguard the environment now and for future generations. We believe that responsible environmental management is essential to our success and we seek to continually improve our performance. Our vision is to lead Ontario in powering community well-being and environmental stewardship with sustainable energy solutions. This includes supporting the goals of the City of Guelph’s Community Energy Initiative by promoting energy conservation and developing combined heat and power, district energy, solar and bioenergy projects to reduce the community’s carbon footprint. On a day-to-day basis, our environmental strategy is focused on meeting or exceeding compliance requirements with all laws, regulations and company policies. We have made environmental management an integral part of planning and decision-making, and adopted best practices for managing operational and environmental risks.

Environmental Compliance Audit Guelph Hydro conducted its first formal Environmental Compliance Audit in 2011 and is pleased to report that only two minor non-compliance issues were revealed and quickly rectified. The audit reviewed a wide variety of operational processes that have environmental impacts including: • General environmental management • Air emissions • Noise emissions • Water management • Non-hazardous materials waste management • Hazardous and toxic materials waste management • Storage tanks, spill control and countermeasure plans • Emergency response and preparedness

“Guelph Hydro’s focus on environmental excellence is evidenced by the list of significant environmental milestones achieved during 2011.” Barry Chuddy Chief Executive Officer Guelph Hydro Inc.

Environmental Milestones 2011 Milestones Published an Environmental Policy Statement. First formal Environmental Compliance Audit conducted. 100-kilowatt rooftop solar facility commissioned and operational. Green transportation initiatives – Addition of a plug-in electric service vehicle to the company fleet that already includes a hybrid car and hybrid bucket truck. Environmental Impact Assessments conducted and Certificates of Approval obtained for a new transformer station.

Energy conservation programs achieved savings of more than 22 million kilowatt hours of electricity in 2011.

LEED® certification of the Guelph Hydro building. Preferential parking spots created for hybrid or all-electric vehicles.

Guelph Hydro Electric Systems Inc. continues to champion energy conservation and demand management by promoting Ontario Power Authority saveONenergyOM programs to residential and business customers. These programs help customers conserve energy, save money and improve the environment by reducing greenhouse gas emissions.

2011 Energy Conservation Achievements 687 old, inefficient refrigerators were picked up and recycled in an environmentally friendly manner, for free, as part of the saveONenergyOM FRIDGE AND FREEZER PICKUP program. 719 customers received up to $650 for installing an ENERGY STAR® qualified central heating or cooling system under the saveONenergyOM HEATING AND COOLING INCENTIVE. 226 local businesses received up to $1,000 in free energy-efficient lighting upgrades under the saveONenergyOM SMALL BUSINESS LIGHTING program. saveONenergyOM DEMAND RESPONSE compensate industrial and commercial businesses for reducing their energy demand at specific times. In 2011, five commercial / industrial customers enrolled in the DEMAND RESPONSE program. During periods of high demand, these companies will be able to take action to reduce the load on the system by 410 kilowatts. 49 local businesses received $1.3 million in saveONenergyOM RETROFIT PROGRAM rebates for retrofitting their operations with energy-efficient lighting, heating and air conditioning equipment, controls and motors to improve the energy efficiency of their facilities and their bottom line.

In 2011, energy conservation programs diverted almost 4,500 tonnes of CO2 emissions from the atmosphere.

Helping Customers Save Energy, Save Money Sleeman Breweries received $126,000 in energy efficiency rebates Sleeman Breweries Limited took advantage of the Ontario Power Authorityâ&#x20AC;&#x2122;s RETROFIT PROGRAM to replace an oversized, back-up air compressor with two smaller 75-horsepower compressors. A new 3,000-gallon tank, flow control valve and cycling refrigerant dryer were also installed. Total capital costs came to $249,000 after a $10,500 rebate from Guelph Hydro. Annual savings as a result of the upgraded compressed air system are estimated at $42,000 with estimated energy savings of 420,000 kilowatt hours per year. For its second retrofit project, Sleeman Breweries replaced close to 1,000 old lighting fixtures in its facility with energy-efficient bulbs. The company received a $115,978 rebate for completing this lighting upgrade, bringing the cost to replace the lighting down to $173,967. With annual savings estimated at more than $139,000 in electricity costs, this lighting retrofit project has a very attractive 18-month payback.

University of Guelph McLaughlin Library is saving more than $180,000 annually on electricity With a facility that encompasses more than 23,225 square metres (250,000 square feet) including more than six floors of study space and book collections, the McLaughlin Library is one of the biggest electricity consumers on the University of Guelph campus. With financing provided by the Ontario Power Authorityâ&#x20AC;&#x2122;s Electricity Retrofit Incentive Program (ERIP), the University replaced its lighting with energy-efficient lighting. The University estimates its peak electricity demand will fall by 246 kilowatts and achieve a consumption savings of over 2.1 million kilowatt hours annually, which will save about $187,000. The reduced electricity consumption will also mean a carbon-dioxide reduction of about 628 tons annually.

Guelph motorcycle shop reduced electricity costs and improved bottom line Motorcycle customizer RNR Custom Cycle Ltd. used a $1,000 Power Savings Blitz grant from the Ontario Power Authority and Guelph Hydro to upgrade its workshop lighting and cut its electricity bill by more than 10 per cent a month.

Protecting the Environment — Air, Water, Wildlife Guelph Hydro is committed to reducing air emissions, conserving water and managing waste responsibly.

Air By promoting energy conservation in our community and in our own operations, Guelph Hydro is contributing to reducing greenhouse gases. In addition, the use of a hybrid car, hybrid bucket truck and all-electric service van in the company fleet are reducing air emissions from exhaust.

Water In an effort to keep our water use to a minimum, our LEED®-certified building features high-efficiency plumbing fixtures including low-flow faucets and toilets. In addition, drought tolerant and native plant species eliminate the need for landscape irrigation. As a result, water use in our building is 20 per cent lower than LEED® baseline measurements.

Wildlife Out in the field, animal guards have been installed to prevent wildlife from climbing on hazardous equipment. If an animal’s nest or burrow will be disturbed by the activities of the company, the Humane Society is called in to relocate any potentially impacted animals.

Guelph Hydro’s LEED®-certified facility features a ground-source geothermal heating and cooling system, high-efficiency plumbing and lighting, and droughtresistant landscaping.

Preventing Pollution At Guelph Hydro, pollution prevention is defined as the use of processes, operational practices, materials, products, substances or energy that avoid or minimize the creation of pollutants and waste and reduce the overall risk to the environment or human health. The company has a variety of programs in place that eliminate or minimize pollutants: • Environmentally friendly transformer oil used in Rockwood Municipal Substation #2 • Environmentally friendly hydraulic oil used in trucks and tools • Use of water-based paints • Renewable energy usage – geothermal heating/cooling and solar energy

Recycling Recycling efforts in our operations include metal, paper, wood, bottles, cans, oil, batteries, toner cartridges, computer equipment and plastics.

4,895 Lighting Fixtures Recycled As part of our energy conservation efforts, 226 small business customers had old, inefficient lighting fixtures replaced with up to $1,000 worth of high-efficiency lighting under the saveONenergyOM SMALL BUSINESS LIGHTING PROGRAM. The lighting that normally might have gone to landfill was removed and recycled in an environmentally friendly manner. Lamps

4,895

PCB ballasts

401

Glass

1,677 kilograms

Metal

18 kilograms

Phosphor

26 kilograms

Mercury

0.18 kilograms

Green Transportation Guelph Hydro’s fleet currently includes one hybrid passenger vehicle, a hybrid bucket truck and an all-electric service vehicle. Use of the hybrid bucket truck alone saved 1,387 litres of diesel fuel in 2011, resulting in a reduction in greenhouse gases of 3,705 kilograms. In addition, all new fleet vehicles are required to use environmentally friendly hydraulic oil, motor oil and fuel. In 2011, Guelph Hydro completed a telephone market research survey of 200 residents and 25 fleet managers regarding electric vehicles in the Guelph community. The purpose was to measure the community’s interest in electric vehicles and obtain information that will be useful in planning for demands electric vehicles may put on the local electricity grid. Results of the survey indicate that Guelph is an ideal community in which to conduct a pilot program on electric vehicles.

“Guelph Hydro’s hybrid bucket truck is a great example of an asset that helps us protect the environment and provides an economic benefit while our line crews carry out their day-to-day activities on the streets.” Kazi Marouf Chief Operating Officer Guelph Hydro Electric Systems Inc.

ECONOMIC SUCCESS Our Strategic Approach Creating Value and Fostering Economic Growth At Guelph Hydro, our economic performance is a careful balancing act of creating value for our stakeholders while facilitating the economic growth of the communities we serve. Guelph Hydro Inc. is committed to maintaining the Corporationâ&#x20AC;&#x2122;s solid financial standing and providing our Shareholder, Guelph Municipal Holdings Inc., with an appropriate return on investment while growing the balance sheet. We deliver superior economic results through disciplined financial administration, careful management of risks, and strategic growth of our non-regulated businesses. Maintaining a strong balance sheet and credit profile gives us the ability to support significant capital investment programs that enable us to ensure reliability, expand the network to support community growth and invest in sustainable energy solutions to benefit the community. We believe being a strong, financially viable company enables us to deliver on our social and environmental commitments. Conversely, we believe focusing efforts on sustainability helps us increase our financial strength. Guelph Hydro Inc. 2011 Financial Statements are available at: www.guelphhydroinc.com, www.guelphhydro.com and www.envida.ca. Printed copies of the Guelph Hydro Inc. 2011 Financial Statements may be requested by sending a note to: sustainability@guelphhydro.com.

Reliability of the Distribution Network Safety, reliability and the ability to meet an increasing demand for electricity in our growing community are critical issues for our regulated utility, Guelph Hydro Electric Systems Inc. The robustness of the electrical distribution system is a direct result of well-planned capital replacement and expansion programs, diligent preventative maintenance and investments in smart grid and other advanced “self-healing” technologies that can detect problems on our network and fix them automatically.

Investing in Reliability Spent $1.6 million to replace aged distribution system assets Inspected over 3,400 poles for strength and health, treating them for termites as required and replacing them as needed Trimmed trees encroaching on overhead lines in one-third of our service area Conducted on-going maintenance of switches, transformers and underground equipment Performed infra-red scans that enable the early detection of degrading equipment, prevent power outages caused by equipment failure and prolong service life The resilience of our distribution network was tested in the summer of 2011 first by an increase in wildlife interference, then by fierce lightning and wind storms and finally by extreme heat. Power system demand hit an all-time record high of 297 megawatts during the worst of the July heat wave as residents and businesses cranked up air conditioners to keep cool. Although the Guelph Hydro distribution network performed extremely well during these demanding periods, the duration and frequency of power outages increased due to the adverse conditions. Many outages that are affected by circuit trips can be rectified using remotely operated switches. If this is not possible, Guelph Hydro emergency crews are deployed rapidly to make repairs and restore power to customers as swiftly as possible. During 2011, emergency crews responded to 462 after-hours calls to restore service.

“At Guelph Hydro, our job is to deliver electricity safely and reliably. Each year we invest millions of dollars in projects designed to prevent outages and shorten restoration times.” Kazi Marouf Chief Operating Officer Guelph Hydro Electric Systems Inc.

Investing in Capital Projects to Accommodate Growth Guelph is one of Ontarioâ&#x20AC;&#x2122;s fastest growing communities with a population expected to grow from the current 120,000 to 175,000 residents by 2031. During this period, the area is also expected to attract significant commercial and industrial investments, particularly in business parks located in the south end of the City.

New 115-kilovolt transformer station In anticipation of an increase in electricity demand from commercial enterprises that will locate in the New Hanlon Creek Business Park and new residential developments, in 2011, Guelph Hydro completed construction of the new 115-kilovolt Arlen Municipal Transformer Station and added and upgraded associated feeder circuits. This new transformer station will provide sufficient capacity for 20 years of growth and will serve as contingency backup for the communityâ&#x20AC;&#x2122;s other transformer stations. It was built to contain the latest in technology, can incorporate embedded generators easily and will operate using smart grid applications.

2011 Capital Projects Highlights Continued construction of new distribution facilities in the New Hanlon Creek Business Park Commencement of work on the relocation of distribution system facilities to accommodate the Hanlon Expressway and Laird Road interchange Upgraded overhead distribution circuits on Alice Street, Edinburgh Road and Balmoral Drive to improve reliability Provided new service to approximately 15 new residential subdivision and townhouse complexes totaling more than 900 units

Investing in a Smarter Grid Whenever you power up your computer or flip on a light switch, you have plugged into Ontario’s electricity grid. The Ontario grid is a network of transmission and distribution lines, substations and transformers, overhead and underground lines that deliver electricity from power plants across the province (or outside of Ontario in times of peak demand) to your home or business. Ontario’s provincial power grid is moving towards a digital future—often described as the Smart Grid—that supplants the traditional one-way flow of electricity with a two-way flow of both electricity and information that will enhance communication with consumers and improve the reliability, efficiency, security and environmental impact of the electricity system. Guelph Hydro Electric Systems Inc. is investing in smart grid technologies, including 48,000 smart meters that have been installed as part of its commitment to building a stronger, smarter, cleaner and more efficient electricity distribution network in the communities we serve. (See illustration on next page.) Our goals in implementing a smarter grid are to: • Continue to provide a high level of service reliability • Enhance the capability of the network to incorporate cleaner, local sources of power • Provide customers with detailed information so they can better manage their energy use and costs.

A Smarter Grid for a Sustainable Energy Future Guelph Hydro is developing a smarter grid to increase reliability, reduce restoration times, optimize efficiency, provide more customer interaction, accommodate local power generation from renewable sources, mitigate CO2 emissions, and handle the anticipated influx of electric vehicles.

DEMAND RESPONSE CUSTOMER

2 3

6 5

REMOTELY OPERABLE SWITCHES

2 5

INTELLIGENT MONITORING DEVICE

1 GUELPH HYDRO SYSTEM CONTROL CENTRE

THERMAL FARM SOURCE

COMMUNITY ENERGY PLANT

BUSINESS PARK

COMMUNITY ENERGY SYSTEM

RESIDENTIAL NEIGHBOURHOOD

A highly efficient energy system generates electricity and delivers thermal energy (hot water/steam or chilled fluid) from a central community energy plant via underground pipes to heat and cool buildings. Benefits of District Energy · · · ·

Reduced fuel costs Relief from volatile electricity and gas prices Lower building operating costs Avoidance of capital costs

· · · ·

Reduced space requirements Reduced greenhouse gas emissions Dependable, high-quality thermal energy Higher reliability than conventional heating and cooling systems

GUELPH HYDRO SMART GRID 1

SYSTEM CONTROL CENTRE Guelph Hydro monitors the network from a centralized control centre, pinpointing problems, responding quickly to outages, and deploying emergency repair crews.

REMOTELY OPERABLE SWITCHES Remotely operable switches provide System Control Operators with the ability to restore power remotely.

INTELLIGENT MONITORING DEVICES Intelligent monitoring devices installed on lines provide System Control Operators with immediate notification of power disturbances so problems can be isolated and power rerouted.

ACCESS POINTS Convey data gathered from 48,000 smart meters to a computer system at Guelph Hydro.

LOCAL GENERATION / SOLAR PANELS Clean, renewable sources of power feed electricity into the grid. Payment for the electricity generated is received under contract from the Ontario Power Authority.

DEMAND RESPONSE To reduce consumption during peak times, residential air conditioners can be cycled automatically and industrial customers can be signaled to turn equipment down or off.

Guelph Hydro’s Smart Grid consists of: • 48,000 smart meters • Approximately 100 remotely operable switches • Approximately 30 intelligent monitoring devices To request a poster or electronic version of this illustration, please email: sustainability@guelphhydro.com For more information, visit: www.guelphhydroinc.com

TRANSMISSION LINES ELECTRICITY FROM POWER GENERATING STATIONS

4 ACCESS POINT

5 5

5 2

SMART HOME

GUELPH HYDRO 100% ELECTRIC SERVICE VAN

7 SMART METERS ZigBee® chip-enabled smart meters track hourly electricity usage in homes and small businesses.

IN-HOME DISPLAY UNIT Using data collected by the smart meter, these units will display real-time energy consumption and estimated costs for use by consumers.

HOUSEHOLD ENERGY CONSUMPTION DATA By viewing hourly, weekly or monthly smart meter data online, consumers can make more informed decisions about how to manage energy usage.

9 SOLAR PANELS

SMART HOME Smart meters are only the first step towards a smart home. On the horizon are smart appliances that will think for themselves and electric vehicle charging systems that will respond to price signals.

HOME ENERGY MANAGEMENT SYSTEM

11 DRYER

PROGRAMMABLE THERMOSTAT

WASHER

CHARGING STATION ELECTRIC CAR

11 STOVE REFRIGERATOR

7 ZIGBEE CHIP-ENABLED SMART METER

10 HOME AREA NETWORK Inside the smart home a home area network will connect smart appliances, programmable thermostats, outlets and other electric devices to an energy management system.

11 SMART APPLIANCES Smart appliances will monitor electricity prices and adjust their run schedules to take advantage of lower electricity price periods.

12 ELECTRIC VEHICLES Electric vehicle charging stations will communicate with the grid to automatically charge during the lowest price periods when possible.

Guelph Hydro’s Smart Grid Self-Healing Switches Result in Enhanced Reliability For many years, Guelph Hydro has been quietly upgrading its distribution network to incorporate intelligent monitoring devices and automated switches that have the ability to detect a fault, isolate it and reroute power to restore service automatically. As a result, some parts of the Guelph electricity network are already “smart” and can be said to be “self-healing”—one of the hallmarks of a smart grid.

Integrating Renewable Energy As Ontario’s electricity system becomes greener, it is also becoming more diverse, with smaller-scale generation being built within communities. Through the Ontario Power Authority’s microFIT program, homeowners, community groups, faith communities and businesses are installing solar panels and other forms of renewable generation. By the end of 2011, Guelph Hydro had provided the connection for 61 customer-owned solar facilities to feed electricity into the Ontario grid.

Smart Meters Provide Hourly Data Smart meters, the backbone of a smart grid, provide the communications gateway that connects the grid with the consumer. Thanks to smart meters, Guelph Hydro residential and small business customers can now access their hourly, daily and monthly energy consumption data online. By analyzing usage, customers can make choices about how and when they use energy to save money and improve the environment.

SOCIAL RESPONSIBILITY Our Strategic Approach Ensuring Safety, Valuing Employees and Customers and Giving Back to the Community At Guelph Hydro Inc., we are committed to managing our operations in a way that protects the safety of our employees, our contractors, our customers and the general public, while providing exceptional customer service and contributing to building a sustainable community. This commitment is underpinned by a strict adherence to all regulatory requirements, policies, procedures and standards. We live our commitment in our offices, in our service vehicles and on work sites in our service territory. We demonstrate it in the decisions and actions taken by our employees in carrying out their work every day.

Stakeholder Engagement The ability of Guelph Hydro to succeed and provide maximum value to our stakeholders is tied directly to the strength of the relationships we forge with our employees, our customers, our Shareholder, the communities in which we operate and the energy industry. We provide a critically important service to residents and businesses in Guelph and Rockwood that requires that our relationships be built on a platform of integrity, partnership and respect. We must be accountable, transparent and trustworthy. And never before has customer communication been so important. Around us, the energy industry is changing dramatically. Time-of-Use rates for electricity, renewable energy technologies, rapidly increasing electricity prices, a smart grid, online communications and social media are transforming the industry at a fast pace. We are committed to working closely with all our stakeholders to help make sense of the complex changes facing us all as the electricity industry evolves. To this end, in 2011, Guelph Hydro formally surveyed a variety of stakeholdersâ&#x20AC;&#x201D;customers, employees and our Shareholderâ&#x20AC;&#x201D;to gain insight into company performance and input to better identify areas in need of improvement. Recognizing the importance of government, industry and community stakeholders, company representatives meet regularly with municipal and provincial government officials and serve on a variety of committees and working groups within the community and the industry.

Valuing Customers The company’s 13th annual Customer Satisfaction Survey revealed that customer satisfaction continues to rise with a record 93 per cent of customers surveyed reporting satisfaction with the services provided by Guelph Hydro Electric Systems Inc. Of note, this result was seven per cent higher than the Ontario average. At Guelph Hydro, we understand that customer satisfaction ratings are a result of the actions that each of our 113 employees takes every day to serve our customers. We are proud of the dedication and professionalism of our highly skilled engineering and operations staff who design, construct, maintain and repair our electrical network. Behind the scenes, our back-office staff does an admirable job handling all the administrative tasks associated with processing more than 300,000 bills a year and, in 2011, migrating the majority of our residential and small commercial customers to Time-of-Use rates. In keeping with our focus on customer service, we believe it is important for us to maintain an in-house call centre staffed with customer service representatives who are well trained and have an in-depth understanding of our business and the needs of our customers. Our Customer Service Team created a positive experience for the customers who made more than 51,000 calls to our offices during 2011, including nearly 12,000 customers who required move-in or move-out service. Our Community Outreach Team and other members of our staff interacted with customers in retail stores, community centres, seniors’ centres, Chamber of Commerce meetings, public information sessions and workshops. Information was provided on Time-of-Use rates for electricity, energy conservation programs and rebates and solar power. In 2012, Guelph Hydro will be launching a modern, fully accessible website that will provide customers and other stakeholders with enhanced functionality and detailed information about the company and its services.

Customer Satisfaction Levels Indicators

Guelph Hydro

National

Ontario

Very or somewhat satisfied

93%

90%

86%

Provides consistent, reliable energy

93%

90%

89%

Quickly handles outages and restores power

92%

88%

87%

A trusted and trustworthy company

87%

83%

79%

Keeps promises to customers and the community

85%

80%

77%

Courtesy of staff

89%

82%

78%

Source: SIMUL Corporation. 13th Annual Electric Utility Customer Satisfaction Survey

“92 per cent of the 51,000 calls made to our local call centre in 2011 were answered within 30 seconds.” Ian Miles Chief Financial Officer Guelph Hydro Inc.

Easy Online Access to Electricity Consumption Data In 2011, the majority of Guelph Hydro customers were migrated to Time-of-Use billing. With the ability to view their daily, weekly or monthly, off-peak, mid-peak and on-peak electricity consumption online (in kilowatt hours or cost), Guelph Hydro customers have the detailed information necessary to best manage their energy use. Visit www.guelphhydro.com for more information about Time-of-Use rates for electricity.

View daily, weekly or monthly Time-of-Use data as bar charts or pie charts.

Charts showing usage (kilowatt hours) or cost (dollars) are available for various time periods.

Valuing Employees At Guelph Hydro, we respect and care about each and every one of the 113 people who work for our three companies In an effort to define and measure our corporate culture, Guelph Hydro conducted an Employee Organizational Culture Survey in 2011 that was completed by 87 per cent of our employees. Results indicated that over the past three years, progress towards building better and stronger employee relations and a constructive culture have been substantive. By providing employees with challenging and meaningful work, fostering talents and providing opportunities for knowledge growth and advancement, we have created a high-performance team environment renowned in the industry for excellence and innovation. Being honoured with the 2011 Large Company of the Year award by the Ontario Energy Association is a testament to our success in creating a performanceoriented culture on which to build our future. Our reputation as an employer of choice will become a critical success factor as the labour market gets tighter and the competition for talent in the energy industry becomes stiffer.

Ensuring Safety, Health and Wellness Safety At Guelph Hydro, the safety of our employees, our contractors and the general public is our top priority. Working with electricity can be hazardous so implementation of an effective safety management system, extensive training and stringent adherence by our employees to all safety rules and regulations are essential. We are very proud that in 2011, employees received a third ZeroQuest® Gold (Outcomes) award from the Infrastructure Health & Safety Association (IHSA). Through our participation in the Infrastructure Health and Safety Association/Workplace Safety and Insurance Board (WSIB) sponsored Safety Groups program, the company received the maximum allowable rebate (six per cent) on WSIB premiums for our contributions to reducing lost time injuries within our WSIB Rate Group. Our safety efforts are not limited to our own employees. In September, Guelph Hydro and three neighbouring utilities received the Powerline Safety Award from the Electrical Safety Authority (ESA). This award recognized our collaborative work to bring the message of electrical safety to contractors, first responders and elementary school children in the communities we serve.

“In 2011, the electricity and renewable energy industry is experiencing a major investment boom… These conditions create the most severe skills shortages and labour market challenges that the industry may have ever faced. Between 2011 and 2016, electricity industry employers (in Canada) will need to recruit over 45,000 new workers—over 40 per cent of the current workforce.” Power in Motion 2011 Labour Market Information Study – Electricity Sector Council www.brightfutures.ca

Health and Wellness Skylights, windows that can be opened for fresh air, a quiet area with water feature and the use of low emission furnishings, paints, coatings and adhesives in the company’s LEED®-certified building all contribute to a pleasant and healthy working environment for employees. Guelph Hydro’s commitment to the health and well-being of our employees is further demonstrated by the fact that the company offers employees annual flu vaccinations, reimbursement for fitness memberships up to $200 and an on-site fitness centre with twice-a-week fitness classes lead by a YMCA/YWCA coach. To help prevent muscular skeletal injuries that account for 42 per cent of all Workplace Safety Insurance Board claims in Ontario, Guelph Hydro has an Ergonomics Change Team made up of employees. In 2011, the Team worked on 10 projects that involved performing assessments of employees’ workstations, making recommendations and correcting or purchasing the items necessary to correct any identified problems.

2011 Safety Training Underground and Overhead Proficiency Confined Space Entry and Evacuation Procedures Bucket Evacuation Pole Top Rescue and Fall Arrest Underground Reel Trailer Orientation Elastimold Padswitch Orientation Defensive Driving On-Road Evaluations Safety Health Environment and Quality Leadership Ontario Occupational Health and Safety Act and Regulations Review

Giving Back to the Community Corporate Donations Guelph Hydro is committed to enhancing the quality of life in the communities we serve by supporting programs that align with the company’s core values and business goals. In 2011, Guelph Hydro proudly supported community organizations and events including the St. Joseph’s Health Care Foundation, the Rotary Club, Habitat for Humanity, The Children’s Foundation of Guelph and Wellington and the Guelph and Wellington United Way.

Employee Giving Guelph Hydro takes great pride in the time and effort our employees contribute to help make our communities better places to live, work and play. In 2011, employees hosted fund-raising events including bake sales, raffles and a Summer Fun-Day. They also participated in Live-Free Day and the annual United Way Campaign. As a result, the employee group raised over $34,000 for a number of worthy causes including: Guelph & Wellington United Way, Canadian Cancer Society and Food and Friends.

The 113 employees of Guelph Hydro generously donated $27,153 via payroll deductions to the United Way to help those less fortunate in our society. Guelph Hydro contributed $21,832 to match employee donations in the prior year for a total donation in 2011 of $48,985.

Employees also generously provided $7,000 worth of Christmas gifts for 35 children and their families through The Children’s Foundation of Guelph and Wellington annual Adopt-a-Family campaign.

Scholarships The Guelph Hydro Electric Systems Inc. Rick Lane/Corrie Bridgman Memorial Academic Grant provides two $1,000 bursaries annually for full-time students in Year Two of the Powerline Technician program at Conestoga College, one of Canada’s premier polytechnic institutes with campuses in Guelph, Kitchener and Waterloo. To be eligible for the bursaries, students must achieve a minimum average of 70 per cent in Year One of the Powerline Technician program and demonstrate financial need.

A first-annual Summer Fun Day organized by employees raised $3,230 for the Canadian Cancer Society.

CORPORATE GOVERNANCE Guelph Hydro Inc., its Board and its management are committed to the highest standards of corporate governance and business ethics. The Board, through its Governance Committee, continually evaluates and enhances the Corporationâ&#x20AC;&#x2122;s governance and business practices through a process of self-evaluation and continuous improvement. The Corporation fully complies with the applicable requirements concerning corporate governance. While we are not a publicly traded company, we target compliance with the corporate governance guidelines of Canadian securities regulators. Each year, our corporate governance practices are reviewed to ensure alignment with our Corporate Governance Guidelines. A report on the Boardâ&#x20AC;&#x2122;s activities in compliance with our Corporate Governance Guidelines is posted on our websites at: www.guelphhydroinc.com, www.guelphhydro.com and www.envida.ca.

Board Members

Jasmine Urisk

Jane Armstrong

Jan Carr

Brian Cowan

Rob Fennell

Judy Fountain

Bob Huggard

Margaret Kelch

Bill Koornstra

Barbara Leslie

Rick Thompson

Board Members (as at December 31, 2011)

Guelph Hydro Inc. Board Member

Title

Jane Armstrong

Governance Committee (Chair) Human Resources and Compensation Committee Nominating Committee

Jan Carr

Finance and Audit Committee

Brian Cowan

Board Vice-Chair Finance and Audit Committee Governance Committee

Judy Fountain

Finance and Audit Committee (Chair)

William Koornstra

Finance and Audit Committee (Vice-Chair)

Rick Thompson

Human Resources and Compensation Committee (Chair) Governance Committee

Jasmine Urisk

Board Chair Nominating Committee (Chair)

Guelph Hydro Electric Systems Inc. Jane Armstrong

Governance Committee (Chair) Human Resources and Compensation Committee Nominating Committee

Brian Cowan

Board Vice-Chair Finance and Audit Committee Governance Committee

Rob Fennell

Human Resources and Compensation Committee

Judy Fountain

Finance and Audit Committee (Chair)

Bob Huggard

Finance and Audit Committee Nominating Committee

Margaret Kelch

Human Resources and Compensation Committee

Barbara Leslie

Governance Committee (Vice-Chair)

Rick Thompson

Human Resources and Compensation Committee (Chair) Governance Committee

Jasmine Urisk

Board Chair, Nominating Committee (Chair)

Envida Community Energy Inc. (formerly Ecotricity Guelph Inc.) Brian Cowan

Board Vice-Chair Finance and Audit Committee (Vice Chair) Governance Committee

Judy Fountain

Finance and Audit Committee (Chair)

Rick Thompson

Human Resources and Compensation Committee (Chair) Governance Committee

Jasmine Urisk

Board Chair, Nominating Committee (Chair)

Note: Biographies of Board members are available at: www.guelphhydroinc.com, www.guelphhydro.com and www.envida.ca.

Senior Management Team

Kazi Marouf Chief Operating Officer Guelph Hydro Inc.

Dan Amyot Director, Information Systems Guelph Hydro Electric Systems Inc.

Barry Chuddy* Chief Executive Officer Guelph Hydro Inc.

Ian Miles* Chief Financial Officer Guelph Hydro Inc.

Seymour Trachimovsky* Corporate Secretary Guelph Hydro Inc.

Ron Collins*** Vice-President, Business Development and Partnerships, Guelph Hydro Inc.

Nicole Mailloux** Vice-President, Human Resources Guelph Hydro Electric Systems Inc.

Sandy Manners Director, Corporate Communications Guelph Hydro Inc.

Arlen Molyneaux Director of Engineering Guelph Hydro Electric Systems Inc.

Erik Veneman Director, Operations Guelph Hydro Electric Systems Inc.

Matt Weninger Director, Metering and Conservation Guelph Hydro Electric Systems Inc.

Note: Biographies of Senior Management Team members are available at: www.guelphhydroinc.com, www.guelphhydro.com and www.envida.ca. * Corporate Officer of Guelph Hydro Inc., Guelph Hydro Electric Systems Inc. and Envida Community Energy Inc. ** Corporate Officer of Guelph Hydro Inc. and Guelph Hydro Electric Systems Inc. *** Corporate Officer of Envida Community Energy Inc.

About this Report Sustainability reporting is the practice of measuring, disclosing and being accountable to internal and external stakeholders for organizational performance while working towards the goal of sustainable development. Guelph Hydro’s goals in publishing this report are to provide our stakeholders with information about: • Actions taken in 2011 to ensure a safe, reliable supply of electricity, promote energy conservation and integrate sustainable business practices into our company operations • Plans to develop sustainable energy solutions in support of the City of Guelph’s Community Energy Initiative and Ontario’s Green Energy and Economy Act, and the potential impact these plans may have on the economic growth of the community • Company performance on key environmental, social and economic elements using the Global Reporting Initiative™ (GRI), an internationally recognized standardized framework and indicators for sustainability reporting

Global Reporting Initiative (GRI) The Global Reporting Initiative (GRI) produces the world’s most comprehensive Sustainability Reporting Framework to enable greater organizational transparency and encourage sustainability reporting by all organizations. The framework, including the reporting guidelines, sets out the principles and indicators organizations can use to measure and report their economic, environmental and social performance. GRI’s approach has three objectives: comparability of data, transparency of information and accountability to stakeholders. GRI is committed to continuously improving and increasing the use of the Guidelines, which are freely available to the public at: www.globalreporting.org. Guelph Hydro Inc. has used the Global Reporting Initiative (GRI) G3.1 Sustainability Reporting Guidelines and the GRI Electric Utilities Sector Supplement to benchmark its performance in the area of sustainability. GRI has confirmed this report meets the requirements of GRI G3.1 Application Level C.

Report Scope The range of sustainability topics reported are those that may reasonably be considered important for reflecting Guelph Hydro’s economic, environmental and social impacts or influencing the decisions of stakeholders.

Reporting Principles Applied to Ensure Report Quality • Balance • Comparability

• Accuracy • Timeliness

• Reliability • Clarity

Reporting Principles for Defining Report Content In order to ensure a balanced and reasonable presentation of Guelph Hydro’s performance, a determination was made regarding what content the report should cover taking into consideration the organization’s purpose and experience, and the reasonable expectations and interests of stakeholders. The following four principles were applied in determining content: • Materiality – Topics and indicators that reflect Guelph Hydro’s significant economic, environmental and social impacts or would substantively influence the assessments and decisions of stakeholders. • Stakeholder inclusiveness – Identification of stakeholders and an explanation of how Guelph Hydro has responded to their reasonable expectations and interests. • Sustainability context – Presentation of information about the organization’s performance in a wider sustainability context. • Completeness – Coverage of material topics and indicators is sufficient enough to reflect significant economic, environmental and social impacts and enable stakeholders to assess the organization’s performance.

Report Boundaries The reporting boundaries for this report encompass the operations of: • Guelph Hydro Inc., a non-regulated holding company • Guelph Hydro Electric Systems Inc., the regulated electricity distribution utility serving the City of Guelph and the Village of Rockwood • Envida Community Energy Inc., a non-regulated alternative and renewable energy company formerly named Ecotricity Guelph Inc. All companies are headquartered in Guelph, Ontario, Canada.

GLOBAL REPORTING INITIATIVE CONTENT INDEX The Global Reporting Initiative (GRI) is an international initiative with the goal to develop and distribute guidelines for voluntary reporting on sustainable development. The guidelines are designed for organizations of any size that wish to report on their economic, environmental and social performance from a sustainable development perspective. The GRI Content Index provides an overview of all the disclosures in the GRI Report. The Index functions as a communication tool by detailing what has been reported or why certain data has not been reported. At the same time, the Index is a navigation mechanism for report usersâ&#x20AC;&#x201D;directing them to the GRI data of interest.

The Global Reporting Initiative G3.1 Content Index for Application LevelÂ C along with the Electric Utilities Sector Supplement Content Index are included at the end of this document and are posted on our websites at: www.guelphhydroinc.com, www.guelphhydro.com and www.envida.ca. More information on the GRI and application levels is available at www.globalreporting.org. We welcome your feedback on our Sustainability Report. Comments may be addressed to: sustainability@guelphhydro.com.

G3 Content Index - GRI Application Level C STANDARD DISCLOSURES PART I: Profile Disclosures 1. Strategy and Analysis Profile Disclosure

Description

1.1

Statement from the most senior decision-maker of the organization.

Reported Cross-Reference/Direct Answer Fully

Sustainability Report - A Message to Our Stakeholders – p. 2

2. Organizational Profile 2.1

Name of the organization.

Fully

Guelph Hydro Inc.

2.2

Primary brands, products, and/or services.

Fully