17 Lakehead System Enbridge Athabasca System Gas Transmission Pipelines Enbridge NW System Under the ITS, tolls are determined based on a starting point revenue requirement adjusted for 75% of the change in the Gross Domestic Product Implicit Price Index. The ITS continues to protect Enbridge System earnings from fluctuations in volumes and treats facility expansions as non-routine adjustments. It also incorporates incentive mechanisms for power cost savings. The ITS allows the Enbridge System and its customers to  continue to share in cost savings. In 2000, after-tax cost savings amounted to $4.4 million, providing a net benefit of $2.2 million to the Company (1999 — $9.5 million, 1998 — $9.0 million). After-tax cost savings are lower in 2000 since the ITS raised the threshold used to compute Enbridge base earnings by $7.6 million. The increase in base earnings, together with the $2.2 million of cost savings realized under the ITS, provides a benefit to Enbridge comparable with the $9.5 million of savings realized in 1999. Although 2000 sharing amounts appear lower, operating performance actually improved. Since the inception of incentive tolling arrangements in 1995, after-tax benefits of $70.4 million have been shared approximately 55% and 45% by Enbridge  and industry, respectively. In addition, industry has realized an additional cumulative after-tax power cost savings guarantee  of $1.5 million. The decreased contribution from the Lakehead System is a result of throughput reductions and increased operating costs associated with recent expansion programs. Throughput levels continue to be less than in previous years as the timing of the expected recovery in crude oil production levels in Western Canada continues to lag increases in commodity price. Throughput volumes began to improve in the fourth quarter of 2000. Enbridge’s earnings were not materially affected by the results from the Lakehead System due to its level of ownership, which at the end of 2000, was 15.3%. Increased earnings from the Enbridge Athabasca System  reflect a higher average investment base in 2000 as a result  of additional tankage facilities. This pipeline commenced operations in April 1999. AEDC was recorded in 1998 and  early 1999. The Company has entered into a long-term contract with  the major shipper on the Enbridge Athabasca System. The shipper has committed annual volumes at specified tolls over  Equity earnings from Alliance Pipeline are slightly higher than 1999 and significantly higher than 1998, reflecting increases in rate base as construction of the pipeline progressed. Higher AEDC Earnings from the Enbridge NW System have been consistent over the past three years. Based on an agreement with the primary shipper, return on rate base is a product of a deemed equity ratio of 55% and the NEB multi-pipeline rate of return  on common equity. Returns have been reduced as a result of a decline in rate base over the past three years, but incentive cost savings have largely offset the decline. a thirty-year term. Contract terms are similar to a traditional cost-of-service tolling methodology and provide for a return  that approximates the NEB’s multi-pipeline rate of return in effect at the time of the agreement. Earnings are recognized on  a cost-of-service basis with any difference between recorded revenue and cash tolls recorded as deferred transportation revenue. Any deferred amounts will be recovered over the remaining term of the contract. ENBRIDGE 2000 ANNU AL REPORT 1 Includes deliveries by the 15.3% owned Lakehead System By Product Type 1 (thousands of barrels per day) 2000 1999 Light Crude Oil 1,083 1,036 Medium and Heavy Crude Oil 869 774 Refined Products and Natural Gas Liquids 212 213 2,164 2,023 By Destination 1 Prairies 437 447 United States 1,156 1,028 Eastern Canada 571 548 2,164 2,023 96 1,970 97 2,083 98 2,136 99 2,023 00 2,164 Deliveries 1 (thousands of barrels per day)