MANAGEMENT’S REPORT The Consolidated Financial Statements, Management’s Discussion and Analysis (MD&A) and related financial information have been prepared by the management of Hydro One Inc. (Hydro One or the Company). Management is responsible for the integrity, consistency and reliability of all such information presented. The Consolidated Financial Statements have been prepared in accordance with United States  Generally Accepted Accounting Principles and applicable securities legislation. The MD&A has been prepared in accordance with National Instrument 51-102, Part 5. The preparation of the Consolidated Financial Statements and information in the MD&A involves the use of estimates and assumptions based  on management’s judgement, particularly when transactions affecting the current accounting period cannot be finalized with certainty until  future periods. Estimates and assumptions are based on historical experience, current conditions and various other assumptions believed to be  reasonable in the circumstances, with critical analysis of the significant accounting policies followed by the Company as described in Note 2 to  the Consolidated Financial Statements. The preparation of the Consolidated Financial Statements and the MD&A includes information regarding  the estimated impact of future events and transactions. The MD&A also includes information regarding sources of liquidity and capital resources,  operating trends, risks and uncertainties. Actual results in the future may differ materially from the present assessment of this information because  future events and circumstances may not occur as expected. The Consolidated Financial Statements and MD&A have been properly prepared  within reasonable limits of materiality and in light of information up to February 13, 2014. Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. In meeting  its responsibility for the reliability of financial information, management maintains and relies on a comprehensive system of internal control and  internal audit. The system of internal control includes a written corporate conduct policy; implementation of a risk management framework;  effective segregation of duties and delegation of authorities; and sound and conservative accounting policies that are regularly reviewed. This  structure is designed to provide reasonable assurance that assets are safeguarded and that reliable information is available on a timely basis.  In addition, management has assessed the design and operating effectiveness of the Company’s internal control over financial reporting in  accordance with the criteria set forth in Internal Control – Integrated Framework (1992), issued by the Committee of Sponsoring Organizations  of the Treadway Commission. Based on this assessment, management concluded that the Company maintained effective internal control over  financial reporting as of December 31, 2013. The effectiveness of these internal controls and findings is reported to the Audit and Finance  Committee of the Hydro One Board of Directors, as required. The Consolidated Financial Statements have been examined by KPMG LLP, independent external auditors appointed by the Shareholder. The external auditors’ responsibility is to express their opinion on whether the Consolidated Financial Statements are fairly presented in  accordance with United States Generally Accepted Accounting Principles. The Independent Auditors’ Report outlines the scope of their  examination and their opinion. The Hydro One Board of Directors, through its Audit and Finance Committee, is responsible for ensuring that management fulfills its  responsibilities for financial reporting and internal controls. The Audit and Finance Committee of Hydro One met periodically with management, the internal auditors and the external auditors to satisfy itself that each group had properly discharged its respective responsibility  and to review the Consolidated Financial Statements before recommending approval by the Board of Directors. The external auditors had direct and full access to the Audit and Finance Committee, with and without the presence of management, to discuss their audit findings.  The President and Chief Executive Officer and the Chief Administration Officer and Chief Financial Officer have certified Hydro One’s annual  Consolidated Financial Statements and annual MD&A, related disclosure controls and procedures and the design and effectiveness of related  internal controls over financial reporting. On behalf of Hydro One Inc.’s management: 48 HYDRO ONE ANNUAL REPORT 2013 Sandy Struthers Chief Administration Officer and Chief Financial Officer Carmine Marcello President and Chief Executive Officer 