TSE:FTS manufacturing and processing output and new development in the retail sector. Residential energy sales increased 1.7 per cent. Energy sales for the four plants owned by FortisUS Energy were 68 GWh compared to  67 GWh for the two plants owned throughout 2000. The Company purchased two plants, with a total capacity of 6.9 MW, in December 2000. These plants produced  18 GWh of energy in 2001. The lower overall production  in 2001 was due to lower rainfall and a production shutdown in one of the plants for five months.  Regulation: Under the terms of the Regulation Act, electricity rates on Prince Edward Island can be no greater than 110 per cent of New Brunswick electricity rates for equivalent service in New Brunswick. Legislative change proclaimed in May 2001 now provides the Company with the ability to defer and recover from customers 90 per cent of energy-related costs above $0.05 per kWh. In addition, the legislation provides for a further adjustment to rates to bring Maritime Electric’s return on average common equity 75 per cent of the way toward a target return of 11.0 per cent on average common equity. These adjustments will help reduce the Company’s exposure to increases in energy-related costs and provide earnings stability. Revenue: Revenue for 2001 was $97.5 million, a $3.0 million or 3.2 per cent increase over 2000 revenue. Increased revenue was a direct result of higher energy sales.  The Regulation Act also prescribes minimum reliability standards and requires Maritime Electric to maintain at least 40 per cent of its capital structure associated with its operations in Prince Edward Island in the form of common equity. At year-end 2001, the common equity component of Maritime Electric’s Prince Edward Island capital structure was approximately 38 per cent. This result is temporarily below the prescribed limit due to the transition to the revised regulatory framework.  Expenses: Maritime Electric purchases the majority of its annual energy requirements from New Brunswick Power (“NB Power”) and Emera Inc. (“Emera”) through several energy purchase agreements. Energy supply costs in 2001 were $53.5 million, an $11.8 million or 18.0 per cent decrease over 2000. The decrease from 2000 is a result of the deferral, pursuant to regulatory changes, of 90 per cent of all energy costs on Prince Edward Island above $0.05 per kilowatt hour (“kWh”) in accordance with the Energy Cost Adjustment Mechanism of the Regulation Act. A total of $13.2 million in energy-related costs have been deferred with collection from customers to begin on  April 1, 2002. This amount is primarily the result of premiums paid for replacement energy during the unscheduled shutdowns at the NB Power Point Lepreau Nuclear Generating Station (“Point Lepreau”) and periods of curtailment in supply from NB Power. Outlook: Energy sales are forecast to remain strong in 2002, primarily due to new customer growth and expansion in the aerospace and tourism industries. The Prince Edward Island economy is forecast to grow by approximately 3.0 per cent in 2002.  During the year, the Company entered into energy purchase agreements with NB Power and Emera to replace the Energy Purchase Agreement which expired on October 31, 2001. These agreements provide for the purchase of up to 80 MW of firm energy at fixed prices. These new contracts have significantly reduced the Company’s exposure to premiums associated with the interruption of its energy supply by replacing a majority of the interruptible energy with firm energy. The new agreements will also reduce the Company’s exposure to oil prices. Under the old agreement, approximately 35 per cent of Maritime Electric’s  Other operating expenses in 2001 were $13.3 million, a $3.1 million or 30.4 per cent increase over 2000 operating expenses. Approximately $1.4 million of the increase represented several one-time costs primarily associated with energy supply planning, an early retirement program and regulatory proceedings. As well, the two additional plants acquired by FortisUS Energy in December 2000 resulted in a $0.6 million increase in operating expenses.  32 FORTIS Inc. 2OO1 Annual Report