HORSE CREEK WATER SERVICES INC GENERAL RATE APPLICATION

INTRODUCTION COMPANY HISTORY

- Horse Creek Water Services Inc. (Horse Creek) incorporated under the laws of Alberta on May 2, 2014 as Alberta Ltd. -Name Amended to Horse Creek Water Service Inc. on September 1, August 2014, HCWS purchased and acquired the assets of Regional Water Services Ltd. (Regional), which was in receivership - Resulted in Horse Creek becoming the new owner and operator of the existing water system providing utility series to the residential development known as Monterra on Cochrane Lakes (Monterra) - Horse Creek filed an application with the Alberta Utilities Commission (AUC), requesting approval to continue charging the existing approved rates that were in place under Regional Water Services Ltd.

Current Operations

- Horse Creek currently provides treated water supply and distribution services to approximately 156 residential water customers - Day to day operations and maintenance of the water treatment, supply and distribution services are contracted out to a third party, Aquatech Canadian Water Services Inc. (Aquatech) -Aquatech was chosen as the operator as they are able to offer a high quality service with respect to safety, maintenance and ongoing operations of the facility

Purpose Why we are all here today

- As per Decision DOI-2015, dated October 1, 2015, AUC approval was granted to Horse Creek to continue using the existing rate structure, conditional upon Horse Creek filing a General Rate Application on or before February 18, The Commission further approved a continuation of the existing rates on an interim and refundable basis until such time as the General Rate Application is approved - Prior to the filing of the 2016 General Rate Application with the AUC, Horse Creek is holding this information session in order to outline and explain the proposed changes to the existing water rates

2016 General Rate Application Revenue Requirements

Total Revenue Requirements are based on the following: - Operating, maintenance and administration expenses -Net of Depreciation and Amortization of Contribution in Aid of Construction - Return on Rate Base The actual revenue received based on the existing rates is well below the revenue requirement needed The total revenue requirement for the 12 months ended September 30, 2015 was $413,536. The total revenue received was $207,077 Resulting in a deficit of $206,459

- Water Treatment Plant was originally built based on facilities forecasted to service the development of 875 residential units - Currently only 156 customers -No significant increase in customers expected in next 2 years. Forecast based on 2 new homes being developed in each of the next 2 years -Current customer base does not support the revenue required - The forecasted revenue deficiency under the existing rate structure for the 12 month periods ending September 30, 2016 and September 30, 2017 are $165,167 and $137,849, respectively. -A continuing deficit to this degree is not sustainable

Proposed Rate Request

- Horse Creek recognizes that the proposed rate increase will result in higher than average water rates, when compared to Cochrane and Calgary. This is to be expected as the customer base is minuscule in comparison -The proposed rates are still not sufficient in fully funding the revenue requirement of the utility. -Horse Creek is simply trying to shorten the gap between the revenue requirement for the operations of the water treatment facility and the revenue generated from the existing home owners - Horse Creek is not the original developer of Monterra and is simply trying to make the best out of a tough situation

Proposed Changes 1) Changes to the existing Tier Structure: CurrentProposed First Tier Usage 60 m3> 40 m3 This change results in placing 72% of customer usage in Tier One, where as previously 84% fell with in this tier.

Proposed Changes 2) Changes to the existing Rates: Usage Current 2016 (Year One) 2017 (Year Two) Fixed charge $70.00 $ 80.00$88.00 First tier< 20 m3 $1.62/m3 $1.78/m3$1.96/m3 Second tier m3 $2.71/m3 $2.98/m3$3.28/m3 Third tier> 40 m3$3.79/m3$4.17/m3$4.58/m3

- The proposed rate structure increases the fixed monthly charge by $10, from $70 to $80 in Year One and a further 10% increase in Year Two - The proposed rate structure represents a 10% increase in each of the 3 tiers in both Year One and Year Two - Under the current rate structure, the average cost per month per customer is approximately $110 - The proposed rate increase results in an average cost per month per customer of $125 in Year One and $138 in Year Two -Horse Creek will still be facing an estimated deficit under this proposal, but will be reduced by an estimate of approximately $30,000 in Year One and $50,000 in Year Two

What’s Next?

- This meeting is the pre-application consultation -The next step is to file the General Rate Application with the Alberta Utilities Commission -The AUC will establish a public process to review the application and receive feedback and comments from customers on the application - Horse Creek will work with the AUC and respond with any questions or requests for further information, if applicable, on a timely basis.

Questions or Concerns?

-Customers can review AUC Rule 11 on the AUC website, which sets out the guidelines for water applications: -Views and comments can be submitted to the AUC as part of the public process -For more information you can also