Notes to the Consolidated Financial Statements (Tabular amounts in millions of Canadian dollars, except share and per share amounts) 

## 33. Commitments and contingencies, continued: 

(f) Capital Power is participating in a proceeding underway before the Alberta Utilities Commission (AUC) regarding factors that form the basis for certain transmission charges paid by Alberta generators including Capital Power. On April 16, 2012, the AUC issued its decision that the factors utilized from 2006 to the present time were non-compliant with the applicable legislation and regulations. Capital Power and other Alberta generators subsequently submitted applications to review and vary that decision. The AUC has advised that a future proceeding will (1) consider whether the decision, or part of the decision, should be reviewed and if so, (2) determine whether the decision should be varied and, if so, how. This includes the potential application of alternative factors on a prospective or retrospective basis. Capital Power may incur additional payments for transmission charges on a retrospective and go- forward basis but a provision has not been recorded in the Company’s financial statements since the outcome of the proceeding is not known. It is anticipated that the AUC’s decision may be issued no sooner than the last half of 2013. 

(g) In July 2012, the Sundance plant owner made a force majeure claim for $39 million with respect to the 2011 third quarter outage of Unit 6 due to a transformer failure. The Company has a 52% interest in the Sundance PPA for Units 5 and 6 and thus is contractually responsible for paying its share of the claimed amount in advance of final determination of whether or not a force majeure situation, as specified in the PPA, occurred. Accordingly, Capital Power paid its share of the claimed amount and, based on the Company’s view that the claim will not meet the PPA specified force majeure tests, recorded it as an amount receivable until final resolution of the claim. The claim currently is under arbitration which is not expected to issue a decision until 2014. The total amount receivable of $20 million is recorded on Capital Power’s December 31, 2012 statement of financial position as a non- current other financial asset and would be reduced by estimated insurance recoveries of $3 million in the event that the arbitration decision resulted in an adverse result for the Company. 

(h) The Company and its subsidiaries are subject to various legal claims that arise in the normal course of business. Management believes that the aggregate contingent liability of the Company arising from these claims is immaterial and therefore no provision has been made. 

## 34. Guarantees: 

The Company, through its subsidiary CPLP, has issued letters of credit of $208 million (December 31, 2011 - $187 million) to meet the credit requirements of energy market participants, to meet conditions of certain service agreements, and to satisfy legislated reclamation requirements. 

