Algonquin Power & Utilities Corp. – Management’s Discussion & Analysis approximately U.S. $52 per MW-hr. The mark-to-market value of these forward energy purchase  contracts at December 31, 2012 was a net liability of U.S. $0.3 million.  Liberty Utilities is exposed to energy price risk in its Liberty Utilities (West) region which is mitigated through  certain regulatory constructs. Liberty Utilities (West) provides electric service to the Lake Tahoe California basin  and surrounding areas at rates approved by the CPUC. The utility purchases the energy, capacity, and related  service requirements for its customers from NV Energy via a purchase power agreement at rates reflecting NV  Energy’s system average costs. The rate structure in California allows for a pass-through of energy costs to rate payers on a dollar for dollar  basis, through the energy cost adjustment clause (“ECAC”) mechanism, which is designed to recoup power  supply costs that are caused by the fluctuations in the price of fuel and purchased power. Actual power supply  costs incurred by the facility are tracked and compared to the base rate power supply costs to ensure the  cumulative variance, including carrying charges, does not exceed 5%. In the event that the cumulative variance  exceeds 5%, the ECAC allows for an adjustment to the Calpeco Electric Utility’s approved rates (including  carrying charges associated therewith), substantially eliminating the commodity risk associated with the  purchase of power. In the 2012 California Utility’s general rate case, a revenue decoupling mechanism and a  vegetation management memorandum account were agreed upon. The revenue decoupling mechanism will  decouple base revenues from fluctuations caused by weather and economic factors reducing volumetric risk for  the utility. The vegetation management memorandum account allows for the tracking and pass through of  vegetation management expenses, one of the largest expenses of the utility, reducing the potential for expenses  to exceed the amounts allowed for in general rates. In the Liberty Utilities (East) region, Granite is an open access electric utility allowing for its customers to procure  commodity services from competitive energy suppliers. For those customers that do not choose their own  competitive energy supplier, GSEC provides a Default Service offering to each class of customers through a  competitive bidding process. This process is undertaken semi-annually for residential and small use customers  and quarterly for large customers. The winning bidder is obligated to provide a full requirements service based  on the actual needs of GSEC’s Default Service customers. Since this is a full requirements service, the winning  bidder(s) take on the risk associated with fluctuating customer usage and commodity prices. The supplier is paid  for the commodity by GSEC which in turns receives pass-through rate recovery through a formal filing and  approval process with the NHPUC each quarter. GSEC is only committed to the winning Default Service  supplier(s) after approval by the NH PUC so that there is no risk of commodity commitment without pass- through rate recovery.  In the Liberty Utilities (East) region, EnergyNorth Gas Utility purchases pipeline capacity, storage and  commodity from a variety of counterparties. EnergyNorth Gas Utility’s portfolio of assets, planning and  forecasting methodology is approved by the NHPUC bi-annually through an Integrated Resource Plan filing. In  addition, EnergyNorth Gas Utility files with the NHPUC for recovery of its transportation and commodity costs  through a semi-annual winter and summer Cost of Gas (COG) filing and approval process. EnergyNorth Gas  Utility establishes rates for its customers within the COG filing and these rates are designed to fully recover its  anticipated transportation and commodity costs. In order to minimize commodity price fluctuations, EnergyNorth  Gas Utility has implemented a NHPUC approved commodity hedging program designed to hedge approximately  60% of its non-storage related commodity purchases. All gains and losses associated with the hedging program  are allowed to be pass-through to customers through the COG filing and the approved rates in said filing.  Should commodity prices increase or decrease relative to the initial semi-annual COG rate filing, EnergyNorth  Gas Utility has the right to automatically adjust its rates going forward in order to minimize any under or over  collection of its gas costs. In addition, any under collections may be carried forward with carrying costs to the  next year’s period COG filing, i.e. winter to winter and summer to summer. Liberty Utilities (Central) region purchases pipeline capacity, storage and commodity from a variety of  counterparties, and files with the three individual State Commissions for recovery of its transportation and  commodity costs through an annual Purchase Gas Adjustment (“PGA”) filing and approval process. Liberty  Utilities (Central) establishes rates for its customers within the PGA filing and these rates are designed to fully  recover its anticipated transportation and commodity costs. In order to minimize commodity price fluctuations,  Liberty Utilities (Central) has implemented a commodity hedging program designed to hedge approximately 25- 50% of its non-storage related commodity purchases. All gains and losses associated with the hedging program  are allowed to be pass-through to customers through the PGA filing and are embedded in the approved rates in  said filing. Liberty Utilities (Central) may adjust its rates on a monthly or quarterly basis in order to account for  any commodity price increase or decrease relative to the initial PGA rate, minimizing any under or over  collection of its gas costs. 2012 Annual Report 61