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on the Enbridge and Lakehead Systems but any volume loss is expected to be more than offset by increasing demand in the United States Midwest. 

## Regulation 

The Company’s earnings from liquids pipelines are determined, in part, by the actions of various regulators, including the NEB. The NEB prescribes a benchmark multi-pipeline rate of return on common equity. Accordingly, to the extent the NEB rate of return fluctuates, a portion of the earnings of the Enbridge System are impacted. The Company believes that regulatory and business risks have been reduced by the negotiation of operating agreements with its customers. 

## Competition 

The Enbridge System transported approximately 65% of total Western Canadian crude oil production in 2000 and provides approximately 70% of capacity for the transportation of Western Canadian crude oil out of Canada. Competition among common carrier pipelines is based primarily on transportation charges, access to producing areas and proximity to end users. Express Pipeline, which is capable of transporting up to 170,000 barrels per day, transports Western Canadian crude oil to the U.S. Rocky Mountain region and the Patoka/Wood River area of Illinois. The Company believes that the Enbridge System is more attractive to Western Canadian producers shipping to the same market areas because it offers competitive tolls and shorter transit times and does not require shipper volume commitments. 

Increased competition could arise from new feeder systems that compete directly with the Company’s feeder pipelines. Alternative pipeline competition has increased in the Alberta oil sands regions by companies negotiating to provide supply to Hardisty. 

## Environment and Safety 

Enbridge is committed to ensuring the safety of the public and protecting the environment. Pipeline failures or ruptures are an inherent risk of operations, which could result in environmental damage or personal injury. Enbridge has an extensive program to test system integrity, which includes the development and use of predictive and detective in-line inspection tools. Maintenance, excavation and repair programs direct resources to the areas of greatest benefit and pipe replacement and repair programs are used when required. 

## ENERGY DISTRIBUTION 

## 2000 Financial Results 

<img src='content_image/76851.jpg'>

Energy Distribution includes the gas distribution operations of Enbridge Consumers Gas, other gas distribution activities in other franchise areas, as well as electricity distribution activities in the City of Cornwall. 

Enbridge Consumers Gas (ECG) is Canada’s largest natural gas distribution company and has been distributing natural gas to customers for more than 150 years. ECG serves over 1.5 million customers in central and eastern Ontario, southwestern Quebec and parts of northern New York State. Its principal regulator is the Ontario Energy Board (OEB). 

In the rate-making process, the OEB determines the cost of providing service and approves a rate structure designed to collect that cost in total revenue from the Company’s various classes of customers. The cost of providing service includes the cost of gas commodity purchases and transportation costs, operation and maintenance costs, depreciation, income taxes, and the cost of capital used to finance all assets used in gas distribution, storage, transmission, and other activities or programs within the ambit of regulation (i.e., rate base). The cost of capital, which is expressed as an allowable rate of return on rate base, is designed principally to meet the cost of interest on long- and short-term debt, satisfy the dividend requirements of preference shareholders, and provide the common shareholder with the opportunity to earn a return on investment. ECG does not profit from the sale of the natural gas commodity. 

As customers are billed based on actual volumes, ECG’s ability to recover the allowed rate of return depends upon achieving forecast distribution volumes under “normal” weather conditions. Other differences in realized returns may result from variances between OEB-approved and actual capital expenditures, operating expenses, interest expense, and income taxes. 

