6-K - HRNNF - Equibles

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

Pursuant to Rule 13a-16 or 15d-16 under

the Securities Exchange Act of 1934

For the month of: May 2022

Commission File Number: 333-225519-01

HYDRO ONE LIMITED

(Translation of Registrant’s name into English)

483 Bay Street, South Tower, 8th Floor, Toronto Ontario M5G 2P5 Canada

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F ☐ Form 40-F ☒

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐

EXHIBIT INDEX

99.1	Unaudited interim consolidated financial statements of the Registrant as at and for the three months ended March 31, 2022 and 2021
99.2	Management’s Discussion and Analysis of the Registrant as at and for the three months ended March 31, 2022 and 2021
99.3	Certification of President and Chief Executive Officer
99.4	Certification of Chief Financial Officer

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

HYDRO ONE LIMITED
/s/ Christopher Lopez
Name: Christopher Lopez
Title: Chief Financial Officer
Date:	May 5, 2022

Document

HYDRO ONE LIMITED

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (unaudited)

For the three months ended March 31, 2022 and 2021

Three months ended March 31 (millions of Canadian dollars, except per share amounts)	2022	2021
Revenues
Distribution (includes $72 related party revenues; 2021 - $73) (Note 22)	1,517	1,354
Transmission (includes $516 related party revenues; 2021 - $442) (Note 22)	519	448
Other	11	9
	2,047	1,811
Costs
Purchased power (includes $785 related party costs; 2021 - $643) (Note 22)	1,014	894
Operation, maintenance and administration (Note 22)	288	282
Depreciation, amortization and asset removal costs (Note 4)	237	223
	1,539	1,399
Income before financing charges and income tax expense	508	412
Financing charges (Note 5)	117	116
Income before income tax expense	391	296
Income tax expense (Note 6)	79	26
Net income	312	270
Other comprehensive income (Note 7)	7	3
Comprehensive income	319	273
Net income attributable to:
Noncontrolling interest	2	2
Common shareholders	310	268
	312	270
Comprehensive income attributable to:
Noncontrolling interest	2	2
Common shareholders	317	271
	319	273
Earnings per common share (Note 20)
Basic	$0.52	$0.45
Diluted	$0.52	$0.45
Dividends per common share declared (Note 19)	$0.27	$0.25

See accompanying notes to Condensed Interim Consolidated Financial Statements (unaudited).

HYDRO ONE LIMITED

CONDENSED INTERIM CONSOLIDATED BALANCE SHEETS (unaudited)

At March 31, 2022 and December 31, 2021

As at (millions of Canadian dollars)	March 31,<br>2022	December 31,<br>2021
Assets
Current assets:
Cash and cash equivalents	35	540
Accounts receivable (Note 8)	755	699
Due from related parties (Note 22)	309	284
Other current assets (Note 9)	301	303
	1,400	1,826
Property, plant and equipment (Note 10)	24,072	23,842
Other long-term assets:
Regulatory assets (Note 11)	3,592	3,561
Deferred income tax assets	116	118
Intangible assets (net of accumulated amortization - $682; 2021 - $662)	576	570
Goodwill	373	373
Other assets (Note 12)	93	93
	4,750	4,715
Total assets	30,222	30,383
Liabilities
Current liabilities:
Short-term notes payable (Note 15)	1,329	1,045
Long-term debt payable within one year (includes $nil measured at fair value) (Notes 15, 16)	603	603
Accounts payable and other current liabilities (Note 13)	963	1,064
Due to related parties (Note 22)	220	266
	3,115	2,978
Long-term liabilities:
Long-term debt (Notes 15, 16)	12,417	13,017
Regulatory liabilities (Note 11)	384	362
Deferred income tax liabilities	470	367
Other long-term liabilities (Note 14)	2,700	2,683
	15,971	16,429
Total liabilities	19,086	19,407
Contingencies and Commitments (Notes 24, 25)
Subsequent Events (Note 27)
Noncontrolling interest subject to redemption	20	20
Equity
Common shares (Note 18)	5,691	5,688
Additional paid-in capital (Note 21)	39	38
Retained earnings	5,325	5,174
Accumulated other comprehensive loss	(5)	(12)
Hydro One shareholders’ equity	11,050	10,888
Noncontrolling interest	66	68
Total equity	11,116	10,956
	30,222	30,383

See accompanying notes to Condensed Interim Consolidated Financial Statements (unaudited).

HYDRO ONE LIMITED

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (unaudited)

For the three months ended March 31, 2022 and 2021

Three months ended March 31, 2022<br><br>(millions of Canadian dollars)	Common<br>Shares	Additional Paid-in <br>Capital	Retained Earnings	Accumulated<br>Other<br>Comprehensive <br>Loss	Hydro One Shareholders’ Equity	Non-controlling Interest	Total<br>Equity
January 1, 2022	5,688	38	5,174	(12)	10,888	68	10,956
Net income	—	—	310	—	310	2	312
Other comprehensive income (Note 7)	—	—	—	7	7	—	7
Distributions to noncontrolling interest	—	—	—	—	—	(4)	(4)
Dividends on common shares	—	—	(159)	—	(159)	—	(159)
Common shares issued	3	—	—	—	3	—	3
Stock-based compensation	—	1	—	—	1	—	1
March 31, 2022	5,691	39	5,325	(5)	11,050	66	11,116
Three months ended March 31, 2021<br><br>(millions of Canadian dollars)	Common<br>Shares	Additional Paid-in <br>Capital	Retained Earnings	Accumulated<br>Other<br>Comprehensive <br>Loss	Hydro One Shareholders’ Equity	Non-controlling Interest	Total<br>Equity
---	---	---	---	---	---	---	---
January 1, 2021	5,678	47	4,838	(29)	10,534	72	10,606
Net income	—	—	268	—	268	2	270
Other comprehensive income (Note 7)	—	—	—	3	3	—	3
Distributions to noncontrolling interest	—	—	—	—	—	(5)	(5)
Dividends on common shares	—	—	(152)	—	(152)	—	(152)
Common shares issued	2	(2)	—	—	—	—	—
Stock-based compensation	—	(2)	—	—	(2)	—	(2)
March 31, 2021	5,680	43	4,954	(26)	10,651	69	10,720

See accompanying notes to Condensed Interim Consolidated Financial Statements (unaudited).

HYDRO ONE LIMITED

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

For the three months ended March 31, 2022 and 2021

Three months ended March 31 (millions of Canadian dollars)	2022	2021
Operating activities
Net income	312	270
Environmental expenditures	(8)	(8)
Adjustments for non-cash items:
Depreciation and amortization (Note 4)	211	198
Regulatory assets and liabilities	29	60
Deferred income tax expense	73	19
Other	16	30
Changes in non-cash balances related to operations (Note 23)	(190)	(52)
Net cash from operating activities	443	517
Financing activities
Long-term debt repaid	(600)	(500)
Short-term notes issued	1,390	815
Short-term notes repaid	(1,106)	(800)
Dividends paid	(159)	(152)
Distributions paid to noncontrolling interest	(4)	(2)
Common shares issued	3	—
Net cash used in financing activities	(476)	(639)
Investing activities
Capital expenditures (Note 23)
Property, plant and equipment	(438)	(479)
Intangible assets	(26)	(37)
Capital contributions received	—	2
Other	(8)	—
Net cash used in investing activities	(472)	(514)
Net change in cash and cash equivalents	(505)	(636)
Cash and cash equivalents, beginning of period	540	757
Cash and cash equivalents, end of period	35	121

See accompanying notes to Condensed Interim Consolidated Financial Statements (unaudited).

HYDRO ONE LIMITED

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

For the three months ended March 31, 2022 and 2021

1. DESCRIPTION OF THE BUSINESS

Hydro One Limited (Hydro One or the Company) was incorporated on August 31, 2015, under the Business Corporations Act (Ontario). On October 31, 2015, the Company acquired Hydro One Inc., a company previously wholly-owned by the Province of Ontario (Province). At March 31, 2022, the Province held approximately 47.2% (December 31, 2021 - 47.2%) of the common shares of Hydro One. The principal businesses of Hydro One are the transmission and distribution of electricity to customers within Ontario.

Earnings for interim periods may not be indicative of results for the year due to the impact of seasonal weather conditions on customer demand and market pricing.

Rate Setting

The Company's transmission business consists of the transmission system operated by Hydro One Inc.’s subsidiaries, Hydro One Networks Inc. (Hydro One Networks) and Hydro One Sault Ste. Marie LP (HOSSM), as well as an approximately 66% interest in B2M Limited Partnership, a limited partnership between Hydro One and the Saugeen Ojibway Nation, and an approximately 55% interest in Niagara Reinforcement Limited Partnership, a limited partnership between Hydro One and Six Nations of the Grand River Development Corporation and the Mississaugas of the Credit First Nation (collectively, the First Nations Partners).

Hydro One’s distribution business consists of the distribution system operated by Hydro One Inc.'s subsidiaries, Hydro One Networks and Hydro One Remote Communities Inc. (Hydro One Remote Communities).

Deferred Tax Asset (DTA)

On March 7, 2019, the Ontario Energy Board (OEB) issued its reconsideration decision (DTA Decision) with respect to Hydro One's rate-setting treatment of the benefits of the DTA resulting from the transition from the payments in lieu of tax regime to tax payments under the federal and provincial tax regimes. On July 16, 2020, the Ontario Divisional Court rendered its decision on the Company's appeal of the OEB's DTA Decision. On April 8, 2021, the OEB rendered its decision and order regarding the recovery of the DTA amounts allocated to ratepayers for the 2017 to 2022 period (DTA Implementation Decision). See Note 11 - Regulatory Assets and Liabilities for additional details.

Hydro One Remote Communities

On November 3, 2021, Hydro One Remote Communities filed an application with the OEB seeking approval for a 2.2% increase to 2021 base rates, effective May 1, 2022. The application was subsequently updated to request a 3.3% increase to 2021 base rates to reflect the OEB’s annually updated inflation parameters for electricity distributors for 2022. On March 24, 2022, the OEB approved the application for rates and other charges to be effective May 1, 2022.

2. SIGNIFICANT ACCOUNTING POLICIES

Basis of Consolidation and Presentation

These unaudited condensed interim consolidated financial statements (Consolidated Financial Statements) include the accounts of the Company and its subsidiaries. Inter-company transactions and balances have been eliminated.

Basis of Accounting

These Consolidated Financial Statements are prepared and presented in accordance with United States (US) Generally Accepted Accounting Principles (GAAP) for interim financial statements and in Canadian dollars.

The accounting policies applied are consistent with those outlined in Hydro One's annual audited consolidated financial statements for the year ended December 31, 2021, with the exception of the adoption of new accounting standards as described in Note 3. These Consolidated Financial Statements reflect adjustments, that are, in the opinion of management, necessary to reflect fairly the financial position and results of operations for the respective periods. These Consolidated Financial Statements do not include all disclosures required in the annual financial statements and should be read in conjunction with the annual audited consolidated financial statements for the year ended December 31, 2021.

HYDRO ONE LIMITED

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

For the three months ended March 31, 2022 and 2021

3. NEW ACCOUNTING PRONOUNCEMENTS

The following tables present Accounting Standard Updates (ASUs) issued by the Financial Accounting Standards Board that are applicable to Hydro One:

Recently Adopted Accounting Guidance

Guidance	Date issued	Description	Effective date	Impact on Hydro One
ASU 2020-06	August 2020	The update addresses the complexity associated with<br>applying US GAAP for certain financial instruments with<br>characteristics of liabilities and equity. The amendments<br>reduce the number of accounting models for convertible<br>debt instruments and convertible preferred stock.	January 1 2022	No impact upon adoption
ASU <br>2021-05	July 2021	The amendments are intended to align lease classification requirements for lessors under Topic 842 with Topic 840's practice.	January 1, 2022	No impact upon adoption
ASU 2021-10	November 2021	The update addresses diversity on the recognition, measurement, presentation and disclosure of government assistance received by business entities.	January 1, 2022	No impact upon adoption

Recently Issued Accounting Guidance Not Yet Adopted

Guidance	Date issued	Description	Effective date	Anticipated Impact on Hydro One
ASU <br>2021-08	October 2021	The amendments address how to determine whether a contractual obligation represents a liability to be recognized by the acquirer in a business combination.	January 1, 2023	Under assessment
ASU 2022-02	March 2022	The amendments eliminate the troubled debt restructuring (TDR) accounting model for entities that have adopted Topic 326 Financial Instrument – Credit Losses and modifies the guidance on vintage disclosure requirements to require disclosure of current-period gross write-offs by year of origination.	January 1, 2023	Upon adoption, the Company will disclose the current period gross write-offs by year of origination relating to its accounts receivable

4. DEPRECIATION, AMORTIZATION AND ASSET REMOVAL COSTS

Three months ended March 31 (millions of dollars)	2022	2021
Depreciation of property, plant and equipment	183	171
Amortization of intangible assets	20	19
Amortization of regulatory assets	8	8
Depreciation and amortization	211	198
Asset removal costs	26	25
	237	223

5. FINANCING CHARGES

Three months ended March 31 (millions of dollars)	2022	2021
Interest on long-term debt	123	124
Realized loss on cash flow hedges (interest-rate swap agreements) (Notes 7, 16)	3	3
Interest on short-term notes	1	—
Interest on regulatory accounts	1	—
Other	4	3
Less: Interest capitalized on construction and development in progress	(15)	(13)
Interest earned on cash and cash equivalents	—	(1)
	117	116

HYDRO ONE LIMITED

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

For the three months ended March 31, 2022 and 2021

6. INCOME TAXES

As a rate regulated utility company, the Company recovers income taxes from its ratepayers based on estimated current income tax expense in respect of its regulated business. The amounts of deferred income taxes related to regulated operations which are considered to be more likely-than-not to be recoverable from, or refundable to, ratepayers in future periods are recognized as deferred income tax regulatory assets or liabilities, with an offset to deferred income tax recovery or expense, respectively. The Company’s consolidated tax expense or recovery for the period includes all current and deferred income tax expenses for the period net of the regulated accounting offset to deferred income tax expense arising from temporary differences to be recovered from, or refunded to, customers in future rates. Thus, the Company’s income tax expense or recovery differs from the amount that would have been recorded using the combined Canadian federal and Ontario statutory income tax rate.

The reconciliation between the statutory and the effective tax rates is provided as follows:

Three months ended March 31 (millions of dollars)	2022	2021
Income before income tax expense	391	296
Income tax expense at statutory rate of 26.5% (2021 - 26.5%)	104	78
Increase (decrease) resulting from:
Net temporary differences recoverable in future rates charged to customers:
Capital cost allowance in excess of depreciation and amortization	(28)	(25)
Impact of DTA Implementation Decision1	24	(12)
Overheads capitalized for accounting but deducted for tax purposes	(7)	(7)
Pension and post-retirement benefit contributions in excess of pension expense	(6)	(4)
Interest capitalized for accounting but deducted for tax purposes	(5)	(4)
Environmental expenditures	(3)	(2)
Other	(1)	1
Net temporary differences attributable to regulated business	(26)	(53)
Net permanent differences	1	1
Total income tax expense	79	26		Effective income tax rate	20.2	%	8.8	%
---	---	---	---	---

1 Pursuant to the DTA Implementation Decision, the 2021 impact represents the sharing of tax deductions from deferred asset tax (DTA Sharing) given to ratepayers, offset by the recovery of DTA amounts previously shared effective July 1, 2021. For 2022, the impact represents the recovery of DTA amounts previously shared from ratepayers. See Note 11 - Regulatory Assets and Liabilities.

7. OTHER COMPREHENSIVE INCOME

Three months ended March 31 (millions of dollars)	2022	2021
Gain on cash flow hedges (interest-rate swap agreements) (Notes 5, 16)1	6	3
Gain on transfer of other post-employment benefits (OPEB) (Note 17)	1	—
	7	3

1 Includes $2 million after-tax realized loss (2021 - $2 million), $3 million before-tax realized loss (2021 - $3 million), on cash flow hedges reclassified to financing charges.

8. ACCOUNTS RECEIVABLE

As at (millions of dollars)	March 31,<br>2022	December 31,<br>2021
Accounts receivable - billed	415	346
Accounts receivable - unbilled	402	409
Accounts receivable, gross	817	755
Allowance for doubtful accounts	(62)	(56)
Accounts receivable, net	755	699

The following table shows the movements in the allowance for doubtful accounts for the three months ended March 31, 2022 and the year ended December 31, 2021:

(millions of dollars)		Year ended <br>December 31, <br>2021
Allowance for doubtful accounts – beginning	(56)	(46)
Write-offs	6	15
Additions to allowance for doubtful accounts	(12)	(25)
Allowance for doubtful accounts – ending	(62)	(56)

HYDRO ONE LIMITED

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

For the three months ended March 31, 2022 and 2021

9. OTHER CURRENT ASSETS

As at (millions of dollars)	March 31,<br>2022	December 31,<br>2021
Regulatory assets (Note 11)	210	226
Prepaid expenses and other assets	68	55
Materials and supplies	23	22
	301	303

10. PROPERTY, PLANT AND EQUIPMENT

As at (millions of dollars)	March 31,<br>2022	December 31,<br>2021
Property, plant and equipment	35,137	34,943
Less: accumulated depreciation	(12,859)	(12,698)
	22,278	22,245
Construction in progress	1,609	1,417
Future use land, components and spares	185	180
	24,072	23,842

11. REGULATORY ASSETS AND LIABILITIES

Regulatory assets and liabilities arise as a result of the rate-setting process. Hydro One has recorded the following regulatory assets and liabilities:

As at (millions of dollars)	March 31,<br>2022	December 31,<br>2021
Regulatory assets:
Deferred income tax regulatory asset	2,576	2,509
Pension benefit regulatory asset	705	713
Deferred tax asset sharing	171	204
Post-retirement and post-employment benefits - non-service cost	129	125
Environmental	114	122
Stock-based compensation	39	38
Foregone revenue deferral	19	25
Conservation and Demand Management variance	6	8
Debt premium	6	7
Other	37	36
Total regulatory assets	3,802	3,787
Less: current portion	(210)	(226)
	3,592	3,561
Regulatory liabilities:
Tax rule changes variance	90	86
Retail settlement variance account	77	58
External revenue variance	56	52
Earnings sharing mechanism deferral	42	42
Asset removal costs cumulative variance	36	36
Post-retirement and post-employment benefits	33	33
Pension cost differential	30	30
Green energy expenditure variance	11	13
Deferred income tax regulatory liability	4	4
Other	16	18
Total regulatory liabilities	395	372
Less: current portion	(11)	(10)
	384	362

HYDRO ONE LIMITED

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

For the three months ended March 31, 2022 and 2021

Deferred Tax Asset Sharing

At March 31, 2022, Hydro One has a net regulatory asset of $171 million representing the cumulative DTA amounts shared with ratepayers since 2017 to 2021, net of the amount recovered from ratepayers since July 1, 2021 pursuant to the DTA Implementation Decision. The regulatory asset of $171 million (December 31, 2021 - $204 million) consists of $60 million (December 31, 2021 - $72 million) and $111 million (December 31, 2021 - $132 million) for Hydro One Networks’ distribution and transmission segments, respectively. The balance of this regulatory account will continue to decrease as amounts are recovered over the next 15 months.

12. OTHER LONG-TERM ASSETS

As at (millions of dollars)	March 31,<br>2022	December 31,<br>2021
Right-of-Use assets	55	57
Investments	25	22
Other long-term assets	13	14
	93	93

13. ACCOUNTS PAYABLE AND OTHER CURRENT LIABILITIES

As at (millions of dollars)	March 31,<br>2022	December 31,<br>2021
Accrued liabilities	586	619
Accounts payable	190	255
Accrued interest	132	124
Environmental liabilities	31	34
Lease obligations	12	14
Regulatory liabilities (Note 11)	11	10
Derivative liabilities (Note 16)	1	8
	963	1,064

14. OTHER LONG-TERM LIABILITIES

As at (millions of dollars)	March 31,<br>2022	December 31,<br>2021
Post-retirement and post-employment benefit liability (Note 17)	1,828	1,800
Pension benefit liability (Note 17)	705	713
Environmental liabilities	83	88
Lease obligations	44	46
Asset retirement obligations	14	14
Long-term accounts payable	3	3
Other long-term liabilities	23	19
	2,700	2,683

HYDRO ONE LIMITED

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

For the three months ended March 31, 2022 and 2021

15. DEBT AND CREDIT AGREEMENTS

Short-Term Notes and Credit Facilities

Hydro One meets its short-term liquidity requirements in part through the issuance of commercial paper under Hydro One Inc.’s Commercial Paper Program which has a maximum authorized amount of $2,300 million. These short-term notes are denominated in Canadian dollars with varying maturities up to 365 days. The Commercial Paper Program is supported by Hydro One Inc.’s revolving standby credit facilities totaling $2,300 million.

At March 31, 2022, Hydro One’s consolidated committed and unsecured credit facilities (Operating Credit Facilities) totaling $2,550 million included Hydro One's credit facilities of $250 million and Hydro One Inc.'s credit facilities of $2,300 million. On June 1, 2021, the maturity date for the Operating Credit Facilities was extended from 2024 to 2026. In January 2022, Hydro One successfully amended its Operating Credit Facilities to incorporate environmental, social and governance targets. At March 31, 2022, no amounts have been drawn on the Operating Credit Facilities.

The Company may use the Operating Credit Facilities for working capital and general corporate purposes. If used, interest on the Operating Credit Facilities would apply based on Canadian benchmark rates. The obligation of each lender to make any credit extension under its credit facility is subject to various conditions including that no event of default has occurred or would result from such credit extension.

Subsidiary Debt Guarantee

Hydro One Holdings Limited (HOHL) is an indirect wholly-owned subsidiary of Hydro One that may offer and sell debt securities. Any debt securities issued by HOHL are fully and unconditionally guaranteed by the Company. At March 31, 2022, no debt securities have been issued by HOHL.

Long-Term Debt

The following table presents long-term debt outstanding at March 31, 2022 and December 31, 2021:

As at (millions of dollars)	March 31,<br>2022	December 31,<br>2021
Hydro One Inc. long-term debt (a)	12,495	13,095
Hydro One long-term debt (b)	425	425
HOSSM long-term debt (c)	141	142
	13,061	13,662
Add: Net unamortized debt premiums	9	9
Less: Unamortized deferred debt issuance costs	(50)	(51)
Total long-term debt	13,020	13,620
Less: Long-term debt payable within one year	(603)	(603)
	12,417	13,017

(a) Hydro One Inc. long-term debt

At March 31, 2022, long-term debt of $12,495 million (December 31, 2021 - $13,095 million) was outstanding, the majority of which was issued under Hydro One Inc.’s Medium Term Note (MTN) Program. In April 2020, Hydro One Inc. filed a short form base shelf prospectus in connection with its MTN Program, which has a maximum authorized principal amount of notes issuable of $4,000 million, and expires in May 2022. At March 31, 2022, $1,900 million remained available for issuance under the MTN Program prospectus. During the three months ended March 31, 2022 and 2021, no long-term debt was issued and long-term debt of $600 million (2021 - $500 million) was repaid.

(b) Hydro One long-term debt

At March 31, 2022, long-term debt of $425 million (December 31, 2021 - $425 million) was outstanding under Hydro One's short form base shelf prospectus (Universal Base Shelf Prospectus). In August 2020, Hydro One filed the Universal Base Shelf Prospectus with securities regulatory authorities in Canada. The Universal Base Shelf Prospectus allows Hydro One to offer, from time to time in one or more public offerings, up to $2,000 million of debt, equity or other securities, or any combination thereof, and expires in September 2022. At March 31, 2022, $1,575 million remained available for issuance under the Universal Base Shelf Prospectus. During the three months ended March 31, 2022 and 2021, no long-term debt was issued or repaid.

At March 31, 2022, HOSSM long-term debt of $141 million (December 31, 2021 - $142 million) with a principal amount of $134 million (December 31, 2021 - $134 million) was outstanding. During the three months ended March 31, 2022 and 2021, no long-term debt was issued or repaid.

HYDRO ONE LIMITED

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

For the three months ended March 31, 2022 and 2021

Principal and Interest Payments

At March 31, 2022, future principal repayments, interest payments, and related weighted-average interest rates were as follows:

	Long-Term Debt<br>Principal Repayments	Interest<br>Payments	Weighted-Average<br>Interest Rate
	(millions of dollars)	(millions of dollars)	(%)
Year 1	603	497	0.7
Year 2	131	488	6.1
Year 3	1,100	476	2.3
Year 4	850	455	2.9
Year 5	—	436	—
	2,684	2,352	2.3
Years 6-10	2,625	2,040	3.0
Thereafter	7,745	3,925	4.6
	13,054	8,317	3.8

16. FAIR VALUE OF FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

Non-Derivative Financial Assets and Liabilities

At March 31, 2022 and December 31, 2021, the Company’s carrying amounts of cash and cash equivalents, accounts receivable, due from related parties, short-term notes payable, accounts payable, and due to related parties are representative of fair value due to the short-term nature of these instruments.

Fair Value Measurements of Long-Term Debt

The fair values and carrying values of the Company’s long-term debt at March 31, 2022 and December 31, 2021 are as follows:

	March 31, 2022		December 31, 2021
As at (millions of dollars)	Carrying Value	Fair Value	Carrying Value	Fair Value
Long-term debt, including current portion	13,020	13,510	13,620	15,573

Fair Value Measurements of Derivative Instruments

Fair Value Hedges

At March 31, 2022 and December 31, 2021, Hydro One Inc. had no fair value hedges.

Cash Flow Hedges

At March 31, 2022 and December 31, 2021, Hydro One Inc. had a total of $800 million in pay-fixed, receive-floating interest-rate swap agreements designated as cash flow hedges. These cash flow hedges are intended to offset the variability of interest rates on the issuances of short-term commercial paper between January 9, 2020 and March 9, 2023.

At March 31, 2022 and December 31, 2021, the Company had no derivative instruments classified as undesignated contracts.

Fair Value Hierarchy

The fair value hierarchy of financial assets and liabilities at March 31, 2022 and December 31, 2021 is as follows:

As at March 31, 2022 (millions of dollars)	Carrying<br>Value	Fair<br> Value	Level 1	Level 2	Level 3
Liabilities:
Long-term debt, including current portion	13,020	13,510	—	13,510	—
Derivative instruments (Note 13)
Cash flow hedges, including current portion	1	1	—	1	—
	13,021	13,511	—	13,511	—	As at December 31, 2021 (millions of dollars)	Carrying<br>Value	Fair<br> Value	Level 1	Level 2	Level 3
---	---	---	---	---	---
Liabilities:
Long-term debt, including current portion	13,620	15,573	—	15,573	—
Derivative instruments (Note 13)
Cash flow hedges, including current portion	8	8	—	8	—
	13,628	15,581	—	15,581	—

HYDRO ONE LIMITED

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

For the three months ended March 31, 2022 and 2021

The fair value of the hedged portion of the long-term debt is primarily based on the present value of future cash flows using a swap yield curve to determine the assumption for interest rates. The fair value of the unhedged portion of the long-term debt is based on unadjusted period-end market prices for the same or similar debt of the same remaining maturities.

There were no transfers between any of the fair value levels during the three months ended March 31, 2022 or the year ended December 31, 2021.

Risk Management

Exposure to market risk, credit risk and liquidity risk arises in the normal course of the Company’s business.

Market Risk

Market risk refers primarily to the risk of loss which results from changes in values, foreign exchange rates and interest rates. The Company is exposed to fluctuations in interest rates, as its regulated return on equity is derived using a formulaic approach that takes anticipated interest rates into account. The Company is not currently exposed to material commodity price risk or material foreign exchange risk.

The Company uses a combination of fixed and variable-rate debt to manage the mix of its debt portfolio. The Company also uses derivative financial instruments to manage interest-rate risk. The Company may utilize interest-rate swaps designated as fair value hedges as a means to manage its interest rate exposure to achieve a lower cost of debt. The Company may also utilize interest-rate derivative instruments, such as cash flow hedges, to manage its exposure to short-term interest rates or to lock in interest-rate levels on forecasted financing.

A hypothetical 100 basis points increase in interest rates associated with variable-rate debt would not have resulted in a significant decrease in Hydro One’s net income for the three months ended March 31, 2022 and 2021.

For derivative instruments that are designated and qualify as fair value hedges, the gain or loss on the derivative instrument as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in the consolidated statements of operations and comprehensive income. The net unrealized losses (gains) on the hedged debt and the related interest-rate swaps for the three months ended March 31, 2022 and 2021 were not material.

For derivative instruments that are designated and qualify as cash flow hedges, the unrealized gain or loss, after tax, on the derivative instrument is recorded as other comprehensive income (OCI) or other comprehensive loss (OCL) and is reclassified to results of operations in the same period during which the hedged transaction affects results of operations. During the three months ended March 31, 2022, a $4 million after-tax unrealized gain (2021 - $1 million), $5 million before-tax (2021 - $1 million), was recorded in OCI, and a $2 million after-tax realized loss (2021 - $2 million), $3 million before-tax (2021 - $3 million), was reclassified to financing charges. This resulted in an accumulated other comprehensive loss (AOCL) of $nil related to cash flow hedges at March 31, 2022 (December 31, 2021 - $6 million). The Company estimates that the amount of AOCL, after tax, related to cash flow hedges to be reclassified to results of operations in the next 12 months is $nil. Actual amounts reclassified to results of operations depend on the interest rate risk in effect until the derivative contracts mature. For all forecasted transactions, at March 31, 2022, the maximum term over which the Company is hedging exposures to the variability of cash flows is approximately one year.

The Pension Plan manages market risk by diversifying investments in accordance with the Pension Plan’s Statement of Investment Policies and Procedures. Interest rate risk arises from the possibility that changes in interest rates will affect the fair value of the Pension Plan’s financial instruments. In addition, changes in interest rates can also impact discount rates which impact the valuation of the pension and post-retirement and post-employment liabilities. Currency risk is the risk that the value of the Pension Plan’s financial instruments will fluctuate due to changes in foreign currencies relative to the Canadian dollar. Other price risk is the risk that the value of the Pension Plan’s investments in equity securities will fluctuate as a result of changes in market prices, other than those arising from interest rate risk or currency risk. All three factors may contribute to changes in values of the Pension Plan investments. See Note 17 - Pension and Post-Retirement and Post-Employment Benefits for further details.

Credit Risk

Financial assets create a risk that a counterparty will fail to discharge an obligation, causing a financial loss. At March 31, 2022 and December 31, 2021, there were no significant concentrations of credit risk with respect to any class of financial assets. The Company’s revenue is earned from a broad base of customers. As a result, Hydro One did not earn a material amount of revenue from any single customer. At March 31, 2022 and December 31, 2021, there was no material accounts receivable balance due from any single customer.

At March 31, 2022, the Company’s allowance for doubtful accounts was $62 million (December 31, 2021 - $56 million). The allowance for doubtful accounts reflects the Company's current lifetime expected credit losses (CECL) for all accounts receivable balances, which are based on historical overdue balances, customer payments and write-offs. At March 31, 2022, approximately 5% (December 31, 2021 - 5%) of the Company’s net accounts receivable were outstanding for more than 60 days.

HYDRO ONE LIMITED

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

For the three months ended March 31, 2022 and 2021

Hydro One manages its counterparty credit risk through various techniques including (i) entering into transactions with highly rated counterparties, (ii) limiting total exposure levels with individual counterparties, (iii) entering into master agreements which enable net settlement and the contractual right of offset, and (iv) monitoring the financial condition of counterparties. The Company monitors current credit exposure to counterparties on both an individual and an aggregate basis. The Company’s credit risk for accounts receivable is limited to the carrying amounts on the consolidated balance sheets.

Derivative financial instruments result in exposure to credit risk since there is a risk of counterparty default. The maximum credit exposure of derivative contracts, before collateral, is represented by the fair value of contracts in an asset position at the reporting date. At March 31, 2022 and December 31, 2021, the counterparty credit risk exposure on the fair value of these interest-rate swap contracts was not material. At March 31, 2022, Hydro One’s credit exposure for all derivative instruments, and applicable payables and receivables, was with two financial institutions with investment grade credit ratings as counterparties.

The Pension Plan manages its counterparty credit risk with respect to bonds by investing in investment-grade corporate and government bonds and with respect to derivative instruments by transacting only with highly rated financial institutions and by ensuring that exposure is diversified across counterparties.

Liquidity Risk

Liquidity risk refers to the Company’s ability to meet its financial obligations as they come due. Hydro One meets its short-term operating liquidity requirements using cash and cash equivalents on hand, funds from operations, the issuance of commercial paper, and the Operating Credit Facilities. The short-term liquidity under the commercial paper program, the Operating Credit Facilities, and anticipated levels of funds from operations are expected to be sufficient to fund the Company’s operating requirements. The Company's currently available liquidity is also expected to be sufficient to address any reasonably foreseeable impacts that the COVID-19 pandemic may have on the Company’s cash requirements.

In April 2020, Hydro One Inc. filed a short form base shelf prospectus in connection with its MTN Program, which has a maximum authorized principal amount of notes issuable of $4,000 million, expiring in May 2022. At March 31, 2022, $1,900 million remained available for issuance under the MTN Program prospectus. A new MTN Program prospectus is expected to be filed in the first half of 2022.

In August 2020, Hydro One filed the Universal Base Shelf Prospectus with securities regulatory authorities in Canada. The Universal Base Shelf Prospectus allows Hydro One to offer, from time to time in one or more public offerings, up to $2,000 million of debt, equity or other securities, or any combination thereof, and expires in September 2022. At March 31, 2022, $1,575 million remained available for issuance under the Universal Base Shelf Prospectus.

In December 2020, HOHL filed a short form base shelf prospectus (US Debt Shelf Prospectus) with securities regulatory authorities in Canada and the US to replace a previous prospectus that expired in December 2020. The US Debt Shelf Prospectus allows HOHL to offer, from time to time in one or more public offerings, up to US$3,000 million of debt securities, unconditionally guaranteed by Hydro One, expiring in January 2023. At March 31, 2022, no securities have been issued under the US Debt Shelf Prospectus.

The Pension Plan’s short-term liquidity is provided through cash and cash equivalents, contributions, investment income and proceeds from investment transactions. In the event that investments must be sold quickly to meet current obligations, the majority of the Pension Plan’s assets are invested in securities that are traded in an active market and can be readily disposed of as liquidity needs arise.

HYDRO ONE LIMITED

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

For the three months ended March 31, 2022 and 2021

17. PENSION AND POST-RETIREMENT AND POST-EMPLOYMENT BENEFITS

The following table provides the components of the net periodic benefit costs for the three months ended March 31, 2022 and 2021:

	Pension Benefits		Post-Retirement and<br>Post-Employment Benefits
Three months ended March 31 (millions of dollars)	2022	2021	2022	2021
Current service cost	54	60	16	16
Interest cost	71	64	15	12
Expected return on plan assets, net of expenses1	(127)	(108)	—	—
Prior service cost amortization	1	1	5	1
Amortization of actuarial losses	15	31	1	1
Net periodic benefit costs	14	48	37	30
Charged to results of operations2,3	7	6	19	18

1 The expected long-term rate of return on pension plan assets for the year ending December 31, 2022 is 6.00% (2021 - 5.40%).

2 The Company accounts for pension costs consistent with their inclusion in OEB-approved rates. During the three months ended March 31, 2022, pension costs of $18 million (2021 - $17 million) were attributed to labour, of which $7 million (2021 - $6 million) was charged to operations, and $11 million (2021 - $11 million) was capitalized as part of the cost of property, plant and equipment and intangible assets.

3 In the 2020-2022 Transmission Decision, the OEB confirmed the recovery of the non-service cost component of post-retirement and post-employment benefits as part of operation, maintenance and administration costs for the Company's transmission business. Prior to the decision, these costs were tracked in a regulatory asset. As a result, during the three months ended March 31, 2022, additional other post-retirement and post-employment costs of $4 million (2021 - $4 million) attributed to labour were charged to operations.

Future Transfers from Other Plans

In January 2021, Hydro One and Inergi LP (Inergi) executed a letter of understanding (LOU) for the transfer of certain Inergi employees (Transferred Employees) to Hydro One Networks over a period of time. Employees related to the Information Technology Operations, Finance and Accounting, Payroll and certain Shared Services functions transferred over a period ending January 1, 2022. The Transferred Employees who are participants in the Inergi LP Pension Plan (Inergi Plan) became participants in the Hydro One Pension Plan upon transfer to Hydro One. Subject to all necessary regulatory approvals, the assets and liabilities of the Inergi Plan will transfer to the Plan. The values of assets and liabilities of the Inergi Plan to be transferred to the Plan will be determined at the date of transfer, which is expected to occur sometime in 2023. In accordance with the LOU, Inergi and Hydro One Networks also agreed to transfer OPEB liabilities related to the Transferred Employees to Hydro One’s post-retirement and post-employment benefit plans.

On March 1, 2021, Transferred Employees associated with information technology operations (ITO Employees) transferred to Hydro One Networks, and the transfer of the OPEB liability of $28 million related to the ITO Employees was completed. The liability was recorded as a post-retirement and post-employment benefit liability with an offset to OCL, and cash totaling $27 million was transferred to Hydro One and recorded as an asset with an offset to OCI. Both the OCI resulting from the transfer of the cash asset and the OCL resulting from the transfer of the other post-retirement benefit liability are being recognized in net income over the expected average remaining service lifetime (EARSL) of the ITO Employees.

On November 1, 2021, Transferred Employees associated with source to pay operations (S2P Employees) transferred to Hydro One Networks, and the transfer of the OPEB liability of $6 million related to the S2P Employees was completed. The liability was recorded as a post-retirement and post-employment benefit liability with an offset to OCL, and cash totaling $6 million was transferred to Hydro One and recorded as an asset with an offset to OCI. Both the OCI resulting from the transfer of the cash asset and the OCL resulting from the transfer of the other post-retirement benefit liability are being recognized in net income over the EARSL of the S2P Employees.

The transfer of Finance and Accounting, Payroll and certain Shared Services functions occurred on January 1, 2022 and the transfer of the OPEB liability of $9 million related to these Employees was completed in the first quarter. The liability was recorded as a post-retirement and post-employment benefit liability with an offset to OCL, and cash totaling $10 million was transferred to Hydro One and recorded as an asset with an offset to OCI. Both the OCI resulting from the transfer of the cash asset and the OCL resulting from the transfer of the other post-retirement benefit liability are being recognized in net income over the EARSL of the Finance and Accounting, Payroll and certain Shared Services employees.

HYDRO ONE LIMITED

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

For the three months ended March 31, 2022 and 2021

18. SHARE CAPITAL

Common Shares

The Company is authorized to issue an unlimited number of common shares. At March 31, 2022, the Company had 598,326,259 (December 31, 2021 - 598,217,549) common shares issued and outstanding.

The following table presents the changes to common shares during the three months ended March 31, 2022:

(number of shares)
Common shares - December 31, 2021	598,217,549
Common shares issued - LTIP1	108,710
Common shares - March 31, 20222	598,326,259

1 During the three months ended March 31, 2022, Hydro One issued from treasury 108,710 common shares in accordance with provisions of the Long-term Incentive Plan (LTIP), related to stock options exercised on December 30, 2021.

2 See Note 27 - Subsequent Events for common shares issued subsequent to March 31, 2022.

Preferred Shares

The Company is authorized to issue an unlimited number of preferred shares, issuable in series. At March 31, 2022 and December 31, 2021, the Company had no preferred shares issued and outstanding.

19. DIVIDENDS

During the three months ended March 31, 2022, common share dividends in the amount of $159 million (2021 - $152 million) were declared and paid and no preferred share dividends (2021 - $nil) were paid. See Note 27 - Subsequent Events for dividends declared subsequent to March 31, 2022.

20. EARNINGS PER COMMON SHARE

Basic earnings per common share (EPS) is calculated by dividing net income attributable to common shareholders of Hydro One by the weighted-average number of common shares outstanding.

Diluted EPS is calculated by dividing net income attributable to common shareholders of Hydro One by the weighted-average number of common shares outstanding adjusted for the effects of potentially dilutive stock-based compensation plans, including the share grant plans and the LTIP, which are calculated using the treasury stock method.

Three months ended March 31	2022	2021
Net income attributable to common shareholders (millions of dollars)	310	268
Weighted-average number of shares
Basic	598,321,427	597,665,695
Effect of dilutive stock-based compensation plans	2,179,229	2,491,520
Diluted	600,500,656	600,157,215
EPS
Basic	$0.52	$0.45
Diluted	$0.52	$0.45

HYDRO ONE LIMITED

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

For the three months ended March 31, 2022 and 2021

21. STOCK-BASED COMPENSATION

Share Grant Plans

There were no changes in share grants under the Share Grant Plans during the three months ended March 31, 2022 and 2021. See Note 27 - Subsequent Events for common shares issued in April 2022.

Directors' Deferred Share Unit (DSU) Plan

A summary of DSU awards activity under the Directors' DSU Plan during the three months ended March 31, 2022 and 2021 is presented below:

Three months ended March 31 (number of DSUs)	2022	2021
DSUs outstanding - beginning	80,813	65,240
Granted	5,160	5,349
DSUs outstanding - ending	85,973	70,589

At March 31, 2022, a liability of $3 million (December 31, 2021 - $3 million) related to Directors' DSUs has been recorded at the closing price of the Company's common shares of $33.68 (December 31, 2021 - $32.91). This liability is included in other long-term liabilities on the consolidated balance sheets.

Management DSU Plan

A summary of DSU awards activity under the Management DSU Plan during the three months ended March 31, 2022 and 2021 is presented below:

Three months ended March 31 (number of DSUs)	2022	2021
DSUs outstanding - beginning	90,240	61,880
Granted	34,609	26,076
DSUs outstanding - ending	124,849	87,956

At March 31, 2022, a liability of $4 million (December 31, 2021 - $3 million) related to Management DSUs has been recorded at the closing price of the Company's common shares of $33.68 (December 31, 2021 - $32.91). This liability is included in other long-term liabilities on the consolidated balance sheets.

Long-term Incentive Plan (LTIP)

Performance Share Units (PSU) and Restricted Share Units (RSU)

A summary of PSU and RSU awards activity under the LTIP during the three months ended March 31, 2022 and 2021 is presented below:

	PSUs		RSUs
Three months ended March 31 (number of units)	2022	2021	2022	2021
Units outstanding - beginning	—	111,920	—	139,730
Vested and issued	—	(111,920)	—	(104,970)
Settled	—	—	—	(34,760)
Units outstanding - ending	—	—	—	—

No awards were granted during the three months ended March 31, 2022 and 2021. The compensation expense related to the PSU and RSU awards recognized by the Company during the three months ended March 31, 2022 was $nil (2021 - less than $1 million).

Society RSU Plan

A summary of RSU awards activity under the Society RSU Plan during the three months ended March 31, 2022 and 2021 is presented below:

Three months ended March 31 (number of RSUs)	2022	2021
RSUs outstanding - beginning	71,053	—
Granted	1,667	—
Vested and issued	(34,346)	—
Settled	(1,106)	—
Forfeited	(712)	—
RSUs outstanding - ending	36,556	—

HYDRO ONE LIMITED

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

For the three months ended March 31, 2022 and 2021

Stock Options

A summary of stock options activity during the three months ended March 31, 2022 and 2021 is presented below:

Three months ended March 31 (number of stock options)	2022	2021
Stock options outstanding - beginning	—	108,710
Stock options outstanding - ending	—	108,710

22. RELATED PARTY TRANSACTIONS

The Province is a shareholder of Hydro One with approximately 47.2% ownership at March 31, 2022. The Independent Electricity System Operator (IESO), Ontario Power Generation Inc. (OPG), OEFC, and the OEB are related parties to Hydro One because they are controlled or significantly influenced by the Ministry of Energy. The following is a summary of the Company’s related party transactions during the three months ended March 31, 2022 and 2021:

Three months ended March 31 (millions of dollars)
Related Party	Transaction	2022	2021
Province	Dividends paid	75	72
IESO	Power purchased	778	639
	Revenues for transmission services	516	442
	Amounts related to electricity rebates	301	306
	Distribution revenues related to rural rate protection	61	62
	Distribution revenues related to supply of electricity to remote northern communities	9	9
OPG1	Power purchased	6	4
	Revenues related to provision of services and supply of electricity	2	2
	Capital contribution received from OPG	2	2
OEFC	Power purchased from power contracts administered by the OEFC	1	—
OEB	OEB fees	2	2

1 OPG has provided a $2.5 million guarantee to Hydro One related to the OCN Guarantee. See Note 25 - Commitments for details related to the OCN Guarantee.

Sales to and purchases from related parties are based on the requirements of the OEB’s Affiliate Relationships Code. Outstanding balances at period end are interest-free and settled in cash. Invoices are issued monthly, and amounts are due and paid on a monthly basis.

23. CONSOLIDATED STATEMENTS OF CASH FLOWS

The changes in non-cash balances related to operations consist of the following:

Three months ended March 31 (millions of dollars)	2022	2021
Accounts receivable	(56)	(1)
Due from related parties	(25)	29
Materials and supplies (Note 9)	(1)	—
Prepaid expenses and other assets (Note 9)	(13)	(6)
Other long-term assets (Note 12)	(1)	1
Accounts payable	(42)	(20)
Accrued liabilities (Note 13)	(33)	80
Due to related parties	(46)	(176)
Accrued interest (Note 13)	8	20
Long-term accounts payable and other long-term liabilities (Note 14)	4	—
Post-retirement and post-employment benefit liability	15	21
	(190)	(52)

HYDRO ONE LIMITED

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

For the three months ended March 31, 2022 and 2021

Capital Expenditures

The following tables reconcile investments in property, plant and equipment and intangible assets and the amounts presented in the consolidated statements of cash flows for the three months ended March 31, 2022 and 2021. The reconciling items include net change in accruals and capitalized depreciation.

Three months ended March 31, 2022 (millions of dollars)	Property, Plant and Equipment	Intangible Assets	Total
Capital investments	(422)	(27)	(449)
Reconciling items	(16)	1	(15)
Cash outflow for capital expenditures	(438)	(26)	(464)	Three months ended March 31, 2021 (millions of dollars)	Property, Plant and Equipment	Intangible Assets	Total
---	---	---	---
Capital investments	(493)	(34)	(527)
Reconciling items	14	(3)	11
Cash outflow for capital expenditures	(479)	(37)	(516)

Supplementary Information

Three months ended March 31 (millions of dollars)	2022	2021
Net interest paid	117	106
Income taxes paid	14	6

24. CONTINGENCIES

Hydro One is involved in various lawsuits and claims in the normal course of business. In the opinion of management, the outcome of such matters will not have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.

25. COMMITMENTS

The following table presents a summary of Hydro One’s commitments under outsourcing and other agreements due in the next five years and thereafter:

As at March 31, 2022 (millions of dollars)	Year 1	Year 2	Year 3	Year 4	Year 5	Thereafter
Outsourcing and other agreements	108	53	10	2	3	14
Long-term software/meter agreement	12	11	9	3	2	4

Outsourcing and Other Agreements

In February 2021, Hydro One entered into a three-year agreement for information technology services with Capgemini Canada Inc., which expires on February 29, 2024, and includes an option to extend for two additional one-year terms at Hydro One’s discretion. This agreement resulted in commitments of $143 million over the initial three-year term of the agreement.

The following table presents a summary of Hydro One’s other commercial commitments by year of expiry in the next five years and thereafter:

As at March 31, 2022 (millions of dollars)	Year 1	Year 2	Year 3	Year 4	Year 5	Thereafter
Operating Credit Facilities	—	—	—	—	2,550	—
Letters of credit1	179	—	—	—	—	—
Guarantees2	517	—	—	—	—	—

1 Letters of credit consist of $160 million letters of credit related to retirement compensation arrangements, a $12 million letter of credit provided to the IESO for prudential support, $4 million in letters of credit to satisfy debt service reserve requirements, and $3 million in letters of credit for various operating purposes.

2 Guarantees consist of $475 million prudential support provided to the IESO by Hydro One Inc. on behalf of its subsidiaries, as well as guarantees provided by Hydro One to the Minister of Natural Resources (Canada) and ONroute of $7 million and $30 million, respectively, relating to OCN LP (OCN Guarantee) and $5 million relating to Aux Energy Inc., the Company's indirect subsidiary. OPG has provided a $2.5 million guarantee to Hydro One related to the OCN Guarantee.

HYDRO ONE LIMITED

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

For the three months ended March 31, 2022 and 2021

26. SEGMENTED REPORTING

Hydro One has three reportable segments:

•The Transmission Segment, which comprises the transmission of high voltage electricity across the province, interconnecting local distribution companies and certain large directly connected industrial customers throughout the Ontario electricity grid;

•The Distribution Segment, which comprises the delivery of electricity to end customers and certain other municipal electricity distributors; and

•Other Segment, which includes certain corporate activities, investments including a joint venture that owns and operates electric vehicle fast charging stations across Ontario under the Ivy Charging Network brand, and the operations of the Company’s telecommunications business. The Other Segment includes a portion of the DTA which arose from the revaluation of the tax bases of Hydro One’s assets to fair market value when the Company transitioned from the provincial payments in lieu of tax regime to the federal tax regime at the time of Hydro One’s initial public offering in 2015. This DTA is not required to be shared with ratepayers, the Company considers it to not be part of the regulated transmission and distribution segment assets, and it is included in the other segment.

The designation of segments has been based on a combination of regulatory status and the nature of the services provided. Operating segments of the Company are determined based on information used by the chief operating decision-maker in deciding how to allocate resources and evaluate the performance of each of the segments. The Company evaluates segment performance based on income before financing charges and income tax expense from continuing operations (excluding certain allocated corporate governance costs).

Three months ended March 31, 2022 (millions of dollars)	Transmission	Distribution	Other	Consolidated
Revenues	519	1,517	11	2,047
Purchased power	—	1,014	—	1,014
Operation, maintenance and administration	99	171	18	288
Depreciation, amortization and asset removal costs	125	110	2	237
Income (loss) before financing charges and income tax expense	295	222	(9)	508
Capital investments	277	167	5	449	Three months ended March 31, 2021 (millions of dollars)	Transmission	Distribution	Other	Consolidated
---	---	---	---	---
Revenues	448	1,354	9	1,811
Purchased power	—	894	—	894
Operation, maintenance and administration	98	167	17	282
Depreciation, amortization and asset removal costs	121	100	2	223
Income (loss) before financing charges and income tax expense	229	193	(10)	412
Capital investments	348	176	3	527

Total Assets by Segment:

As at (millions of dollars)	March 31,<br>2022	December 31,<br>2021
Transmission	18,311	18,138
Distribution	11,651	11,487
Other	260	758
Total assets	30,222	30,383

Total Goodwill by Segment:

As at (millions of dollars)	March 31,<br>2022	December 31,<br>2021
Transmission	157	157
Distribution	216	216
Total goodwill	373	373

All revenues, assets and substantially all costs, as the case may be, are earned, held or incurred in Canada.

HYDRO ONE LIMITED

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

For the three months ended March 31, 2022 and 2021

27. SUBSEQUENT EVENTS

Dividends

On May 4, 2022, common share dividends of $168 million ($0.2796 per common share) were declared.

Share Grant Plans

On April 1, 2022, Hydro One issued from treasury 388,129 common shares to eligible employees in accordance with provisions of the Share Grant Plans.

20

Document

HYDRO ONE LIMITED

MANAGEMENT’S DISCUSSION AND ANALYSIS

For the three months ended March 31, 2022 and 2021

The following Management’s Discussion and Analysis (MD&A) of the financial condition and results of operations should be read together with the unaudited condensed interim consolidated financial statements and accompanying notes thereto (Consolidated Financial Statements) of Hydro One Limited (Hydro One or the Company) for the three months ended March 31, 2022, as well as the Company’s audited consolidated financial statements and MD&A for the year ended December 31, 2021. The Consolidated Financial Statements have been prepared in accordance with United States (US) Generally Accepted Accounting Principles (GAAP). All financial information in this MD&A is presented in Canadian dollars, unless otherwise indicated.

The Company has prepared this MD&A in accordance with National Instrument 51-102 - Continuous Disclosure Obligations of the Canadian Securities Administrators. Under the US/Canada Multijurisdictional Disclosure System, the Company is permitted to prepare this MD&A in accordance with the disclosure requirements of Canadian securities laws and regulations, which can vary from those of the US. This MD&A provides information as at and for the three months ended March 31, 2022, based on information available to management as of May 4, 2022.

CONSOLIDATED FINANCIAL HIGHLIGHTS AND STATISTICS

Three months ended March 31 (millions of dollars, except as otherwise noted)	2022	2021	Change
Revenues	2,047	1,811	13.0	%
Purchased power	1,014	894	13.4	%
Revenues, net of purchased power1	1,033	917	12.6	%
Operation, maintenance and administration (OM&A) costs	288	282	2.1	%
Depreciation, amortization and asset removal costs	237	223	6.3	%
Financing charges	117	116	0.9	%
Income tax expense	79	26	203.8	%
Net income to common shareholders of Hydro One	310	268	15.7	%
Basic earnings per common share (EPS)	$0.52	$0.45	15.6	%
Diluted EPS	$0.52	$0.45	15.6	%
Net cash from operating activities	443	517	(14.3	%)
Funds from operations (FFO)1	629	567	10.9	%
Capital investments	449	527	(14.8	%)
Assets placed in-service	229	157	45.9	%
Transmission: Average monthly Ontario 60-minute peak demand (MW)	20,677	19,937	3.7	%
Distribution: Electricity distributed to Hydro One customers (GWh)	8,895	8,156	9.1	%	As at	March 31,<br>2022	December 31,<br>2021
---	---	---	---	---
Debt to capitalization ratio2	56.4	%	56.5	%

1 The Company prepares and presents its financial statements in accordance with US GAAP. The Company also utilizes non-GAAP financial measures to assess its business and measure overall underlying business performance. FFO and Revenues, net of purchased power are non-GAAP financial measures. Non-GAAP financial measures do not have a standardized meaning under GAAP, which is used to prepare the Company’s financial statements and might not be comparable to similar financial measures presented by other entities. See the section “Non-GAAP Financial Measures” for a discussion of these non-GAAP financial measures and a reconciliation of such measures to the most directly comparable GAAP measure.

2 Debt to capitalization ratio is a non-GAAP ratio. Non-GAAP ratios do not have a standardized meaning under GAAP, which is used to prepare the Company’s financial statements and might not be comparable to similar financial measures presented by other entities. See the section “Non-GAAP Financial Measures” for a discussion of this non-GAAP ratio and its component elements.

OVERVIEW

The Company's transmission business consists of the transmission system operated by subsidiaries of Hydro One Inc. (a wholly-owned subsidiary of the Company), Hydro One Networks Inc. (Hydro One Networks) and Hydro One Sault Ste. Marie LP (HOSSM), as well as an approximately 66% interest in B2M Limited Partnership, a limited partnership between Hydro One and the Saugeen Ojibway Nation, and an approximately 55% interest in Niagara Reinforcement Limited Partnership, a limited partnership between Hydro One and Six Nations of the Grand River Development Corporation and the Mississaugas of the Credit First Nation (collectively, the First Nations Partners).

The other segment consists principally of Hydro One's subsidiary, Acronym Solutions Inc., which provides telecommunications support for the Company’s transmission and distribution businesses, a comprehensive suite of Information Communications Technology solutions, investments including a joint venture that owns and operates electric vehicle fast charging stations across Ontario under the Ivy Charging Network brand, as well as certain corporate activities, and is not rate-regulated.

HYDRO ONE LIMITED

MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)

For the three months ended March 31, 2022 and 2021

For the three months ended March 31, 2022 and 2021, Hydro One’s segments accounted for the Company’s total revenues, net of purchased power1, as follows:

Three months ended March 31	2022		2021
Transmission	50	%	49	%
Distribution	49	%	50	%
Other	1	%	1	%

At March 31, 2022 and December 31, 2021, Hydro One’s segments accounted for the Company’s total assets as follows:

As at	March 31,<br>2022		December 31,<br>2021
Transmission	61	%	60	%
Distribution	38	%	38	%
Other	1	%	2	%

RESULTS OF OPERATIONS

Net Income

Net income attributable to common shareholders of Hydro One for the quarter ended March 31, 2022 of $310 million is an increase of $42 million, or 15.7%, from the prior year. Significant influences on net income attributable to common shareholders of Hydro One included:

•higher revenues, net of purchased power,1 resulting from:

•an increase in transmission revenues due to higher peak demand and Ontario Energy Board (OEB)-approved 2022 transmission rates; and

•an increase in distribution revenues, net of purchased power,1 due to OEB-approved 2022 distribution rates and higher energy consumption.

•higher OM&A costs primarily resulting from an increase in the allowance for doubtful accounts.

•higher depreciation, amortization and asset removal costs due to growth in capital assets as the Company continues to place new assets in-service, consistent with its ongoing capital investment program.

•higher income tax expense primarily attributable to:

•higher pre-tax earnings adjusted for the collection of deferred tax asset (DTA) amounts previously shared with ratepayers; partially offset by

•higher deductible timing differences compared to the prior year.

Revenue was also positively impacted by the OEB’s decision in April 2021 (DTA Implementation Decision) regarding the recovery of the DTA amounts allocated to ratepayers for the 2017 to 2022 period. In its DTA Implementation Decision, the OEB approved recovery of the DTA amounts allocated to ratepayers and included in customer rates for the 2017 to 2021 period plus carrying charges over a two-year recovery period commencing on July 1, 2021. In addition, the DTA Implementation Decision required that Hydro One adjust the transmission revenue requirement and the base distribution rates effective January 1, 2022 to eliminate any further tax savings flowing to customers. These impacts are offset by a higher tax expense and are therefore net income neutral in the period. Please see the section "Regulation" for additional details.

EPS

EPS was $0.52 for the three months ended March 31, 2022, compared to EPS of $0.45 in 2021. The increase in EPS was primarily driven by the impact of higher earnings year over year, as noted above.

1 Revenues, net of purchased power, is a non-GAAP financial measure. See the section “Non-GAAP Financial Measures”.

HYDRO ONE LIMITED

MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)

For the three months ended March 31, 2022 and 2021

Revenues

Three months ended March 31 (millions of dollars, except as otherwise noted)	2022	2021	Change
Transmission	519	448	15.8	%
Distribution	1,517	1,354	12.0	%
Other	11	9	22.2	%
Total revenues	2,047	1,811	13.0	%
Transmission	519	448	15.8	%
Distribution revenues, net of purchased power1	503	460	9.3	%
Other	11	9	22.2	%
Total revenues, net of purchased power1	1,033	917	12.6	%
Transmission: Average monthly Ontario 60-minute peak demand (MW)	20,677	19,937	3.7	%
Distribution: Electricity distributed to Hydro One customers (GWh)	8,895	8,156	9.1	%

1 Revenues, net of purchased power, is a non-GAAP financial measure. See the section “Non-GAAP Financial Measures”.

Transmission Revenues

Transmission revenues increased by 15.8% during the quarter ended March 31, 2022, primarily due to the following:

•recovery of DTA amounts previously shared with ratepayers (DTA Recovery Amounts) and the adjustment to transmission rates effective January 1, 2022 to cease sharing of DTA amounts going forward, pursuant to the DTA Implementation Decision;

•higher peak demand; and

•higher revenues resulting from OEB-approved 2022 rates.

Distribution Revenues, Net of Purchased Power

Distribution revenues, net of purchased power,2 increased by 9.3% during the quarter ended March 31, 2022, primarily due to the following:

•higher revenues resulting from OEB-approved 2022 rates;

•DTA Recovery Amounts and the adjustment to distribution rates effective January 1, 2022 to cease sharing of DTA amounts going forward, pursuant to the DTA Implementation Decision; and

•higher energy consumption.

OM&A Costs

Three months ended March 31 (millions of dollars)	2022	2021	Change
Transmission	99	98	1.0	%
Distribution	171	167	2.4	%
Other	18	17	5.9	%
	288	282	2.1	%

Transmission OM&A Costs

Transmission OM&A costs of $99 million for the quarter ended March 31, 2022, were in-line with the prior year.

Distribution OM&A Costs

Distribution OM&A costs increased by 2.4% for the quarter ended March 31, 2022, primarily due to:

•higher allowance for doubtful accounts; and

•higher asset write-offs; partially offset by

•lower spend on lines maintenance work.

Depreciation, Amortization and Asset Removal Costs

Depreciation, amortization and asset removal costs increased by $14 million, or 6.3%, for the quarter ended March 31, 2022, primarily due to growth in capital assets as the Company continues to place new assets in-service, consistent with its ongoing capital investment program.

2 Revenues, net of purchased power, is a non-GAAP financial measure. See the section “Non-GAAP Financial Measures”

HYDRO ONE LIMITED

MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)

For the three months ended March 31, 2022 and 2021

Income Tax Expense

Income tax expense was $79 million for the three months ended March 31, 2022, compared to $26 million for the comparable period last year. The $53 million increase in income tax expense for the three months ended March 31, 2022, was primarily attributable to:

•tax expense resulting from the DTA Implementation Decision; and

•higher pre-tax earnings; partially offset by

•higher deductible timing differences.

The Company realized an effective tax rate (ETR) of approximately 20.2% for the three months ended March 31, 2022 compared to approximately 8.8% realized in 2021, with the increase primarily attributable to the impacts of the DTA Implementation Decision.

Common Share Dividends

In 2022, the Company declared and paid cash dividends to common shareholders as follows:

Date Declared	Record Date	Payment Date	Amount per Share	Total Amount<br><br>(millions of dollars)
February 24, 2022	March 16, 2022	March 31, 2022	$0.2663	159

Following the conclusion of the first quarter of 2022, the Company declared a cash dividend to common shareholders as follows:

Date Declared	Record Date	Payment Date	Amount per Share	Total Amount<br><br>(millions of dollars)
May 4, 2022	June 8, 2022	June 30, 2022	$0.2796	168

QUARTERLY RESULTS OF OPERATIONS

Quarter ended (millions of dollars, except EPS and ratio)		Dec 31, 2021	Sep 30, 2021	Jun 30, 2021	Mar 31, 2021	Dec 31, 2020	Sep 30, 2020	Jun 30, 2020
Revenues	2,047	1,779	1,913	1,722	1,811	1,867	1,903	1,670
Purchased power	1,014	914	933	838	894	1,046	993	808
Revenues, net of purchased power1	1,033	865	980	884	917	821	910	862
Net income to common shareholders	310	159	300	238	268	161	281	1,103
Adjusted net income to common shareholders1	310	159	300	238	268	161	281	236
Basic EPS	$0.52	$0.27	$0.50	$0.40	$0.45	$0.27	$0.47	$1.84
Diluted EPS	$0.52	$0.26	$0.50	$0.40	$0.45	$0.27	$0.47	$1.84
Basic Adjusted EPS1	$0.52	$0.27	$0.50	$0.40	$0.45	$0.27	$0.47	$0.39
Diluted Adjusted EPS1	$0.52	$0.26	$0.50	$0.40	$0.45	$0.27	$0.47	$0.39
Earnings coverage ratio2	3.2	3.1	3.1	3.0	2.9	2.8	2.9	n/a

1 Revenues, net of purchased power, Adjusted Net Income and Adjusted EPS (basic and diluted) are non-GAAP financial measures. See the section “Non-GAAP Financial Measures”.

2 Earnings coverage ratio is a non-GAAP ratio. Non-GAAP ratios do not have a standardized meaning under GAAP, which is used to prepare the Company’s financial statements and might not be comparable to similar financial measures presented by other entities. See the section “Non-GAAP Financial Measures” for a discussion of this non-GAAP ratio and its component elements.

Variations in revenues and net income over the quarters are primarily due to the impact of seasonal weather conditions on customer demand and market pricing, as well as timing of regulatory decisions.

CAPITAL INVESTMENTS

The Company makes capital investments to maintain the safety, reliability and integrity of its transmission and distribution system assets and to provide for the ongoing growth and modernization required to meet the expanding and evolving needs of its customers and the electricity market. This is achieved through a combination of sustaining capital investments, which are required to support the continued operation of Hydro One’s existing assets, and development capital investments, which involve additions to both existing assets and large-scale projects such as new transmission lines and transmission stations.

HYDRO ONE LIMITED

MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)

For the three months ended March 31, 2022 and 2021

Assets Placed In-Service

The following table presents Hydro One’s assets placed in-service during the three months ended March 31, 2022 and 2021:

Three months ended March 31 (millions of dollars)	2022	2021	Change
Transmission	120	48	150.0	%
Distribution	105	106	(0.9	%)
Other	4	3	33.3	%
Total assets placed in-service	229	157	45.9	%

Transmission Assets Placed In-Service

Transmission assets placed in-service increased by $72 million, or 150.0%, in the first quarter of 2022, primarily due to the following:

•investment placed in-service for the East-West Tie connection project;

•timing of assets placed in-service for station refurbishments and replacements work;

•higher volume of assets placed in-service to adhere to the North American Electric Reliability Corporation Critical Infrastructure Protection standards; and

•higher spend on spare transformer purchases.

Distribution Assets Placed In-Service

Distribution assets placed in-service decreased by $1 million, or 0.9%, in the first quarter of 2022, primarily due to the following:

•lower volume of wood pole replacements; partially offset by

•higher volume of work on customer connections.

Capital Investments

The following table presents Hydro One’s capital investments during the three months ended March 31, 2022 and 2021:

Three months ended March 31 (millions of dollars)	2022	2021	Change
Transmission
Sustaining	206	244	(15.6	%)
Development	45	72	(37.5	%)
Other	26	32	(18.8	%)
	277	348	(20.4	%)
Distribution
Sustaining	67	77	(13.0	%)
Development	83	67	23.9	%
Other	17	32	(46.9	%)
	167	176	(5.1	%)
Other	5	3	66.7	%
Total capital investments	449	527	(14.8	%)

Transmission Capital Investments

Transmission capital investments decreased by $71 million, or 20.4%, in the first quarter of 2022 compared to the first quarter of 2021. Principal impacts on the levels of capital investments included:

•investment in the new Ontario grid control centre in the City of Orillia and the new Lakeshore transmission station which were placed in service in 2021;

•lower volume of station refurbishments and replacements; and

•lower volume of wood pole replacements.

Distribution Capital Investments

Distribution capital investments decreased by $9 million, or 5.1%, in the first quarter of 2022 compared to the first quarter of 2021. Principal impacts on the levels of capital investments included:

•investment in the new Ontario grid control centre in the City of Orillia which was placed in service in 2021;

•lower volume of wood pole replacements; and

•lower spend on information technology (IT) initiatives; partially offset by

•higher spend on system capability reinforcement projects; and

•higher volume of work on customer connections.

HYDRO ONE LIMITED

MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)

For the three months ended March 31, 2022 and 2021

Major Transmission Capital Investment Projects

The following table summarizes the status of significant transmission projects at March 31, 2022:

Project Name	Location	Type	Anticipated <br>In-Service Date	Estimated<br>Cost	Capital Cost <br>To Date
			(year)	(millions of dollars)
Development Projects:
Wataynikaneyap Power LP Line <br> Connection	Pickle Lake<br> Northwestern Ontario	New stations and <br> transmission connection	2022	33	14
East-West Tie Station Expansion1	Northern Ontario	New transmission connection <br> and station expansion	2023	181	175
Waasigan Transmission Line2	Thunder Bay-Atikokan-Dryden<br> Northwestern Ontario	New transmission line	2024	68	19
Leamington Area Transmission<br> Reinforcement3	Leamington<br> Southwestern Ontario	New transmission line <br> and stations	2026	525	194
Sustainment Projects:
Beck #2 Transmission Station<br> Circuit Breaker Replacement	Niagara area<br> Southwestern Ontario	Station sustainment	2023	135	104
Cherrywood Transmission Station<br> Circuit Breaker Replacement	Pickering<br> Central Ontario	Station sustainment	2023	115	83
Bruce B Switching Station<br> Circuit Breaker Replacement	Tiverton<br> Southwestern Ontario	Station sustainment	2024	185	147
Middleport Transmission Station <br> Circuit Breaker Replacement	Middleport<br> Southwestern Ontario	Station sustainment	2025	113	99
Lennox Transmission Station<br> Circuit Breaker Replacement	Napanee<br> Southeastern Ontario	Station sustainment	2026	152	105
Esplanade x Terauley <br> Underground Cable Replacement	Toronto<br> Southwestern Ontario	Line sustainment	2026	117	7

1 Due to a revised timeline of project activities, the East-West Tie Station Expansion project is being placed in-service in phases, with the first phase placed in-service in 2021. Hydro One expects that a significant portion of the project will be placed in-service in 2022, with final project in-service expected in 2023.

2 The estimated cost of the Waasigan Transmission Line relates to the development phase of the project and the anticipated in-service date reflects the anticipated completion date of the development phase only. On May 4, 2022, Hydro One entered into an agreement with First Nations communities that provides them the opportunity to acquire 50% ownership in the project. Completion of the line remains subject to stakeholder consultation and regulatory approvals.

3 The Leamington Area Transmission Reinforcement project consists of the construction of a new double-circuit line between Chatham and Lakeshore and associated transmission stations and connections. The project is in various stages of development and construction, and as such the estimated cost is subject to change. The anticipated in-service dates for the line and stations are between 2022 and 2026.

HYDRO ONE LIMITED

MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)

For the three months ended March 31, 2022 and 2021

Future Capital Investments

The Company estimates future capital investments based on management’s expectations of the amount of capital expenditures that will be required to provide transmission and distribution services that are efficient, reliable, and provide value for customers, consistent with the OEB’s Renewed Regulatory Framework.

The 2023 to 2027 transmission and distribution capital estimates differ from prior disclosures, reflecting the impacts of the update to Hydro One's evidence supporting the Joint Rate Application (JRAP) filed with the OEB on March 31, 2022 (See the section "Regulation" for further details). The projections and timing of transmission and distribution expenditures included in Hydro One's rate application for years 2023 to 2027 are subject to approval of the OEB.

The following tables summarize Hydro One’s annual projected capital investments for 2022 to 2027, by business segment and by category:

By business segment: (millions of dollars)	2022	2023	2024	2025	2026	2027
Transmission1	1,172	1,590	1,654	1,672	1,645	1,549
Distribution	677	1,079	1,103	1,197	1,145	1,141
Other	24	17	13	11	11	14
Total capital investments3	1,873	2,686	2,770	2,880	2,801	2,704	By category: (millions of dollars)	2022	2023	2024	2025	2026	2027
---	---	---	---	---	---	---
Sustainment	1,203	1,842	1,892	1,922	1,926	1,893
Development1	483	556	637	717	626	585
Other2	187	288	241	241	249	226
Total capital investments3	1,873	2,686	2,770	2,880	2,801	2,704

1 Figures include investments in certain development projects of Hydro One Networks not included in the investment plan filed with the JRAP.

2 "Other" capital expenditures include investments in fleet, real estate, IT, and operations technology and related functions.

3 On March 29, 2021, the Independent Electricity System Operator (IESO) requested Hydro One initiate work to develop and construct a new transmission line between Chatham and Lambton (the St Clair Line) to support agricultural growth in Southwestern Ontario. On March 31, 2022, the Minister of Energy directed the OEB to amend Hydro One Networks' transmission licence to require it to develop and seek approvals for this and three other priority transmission lines to meet growing demand in Southwestern Ontario (see the section “Other Developments”). The future capital investments presented do not include capital expenditures of the three additional lines, as Hydro One is currently evaluating the scope and timing of this work.

SUMMARY OF SOURCES AND USES OF CASH

Hydro One’s primary sources of cash flows are funds generated from operations, capital market debt issuances and bank credit facilities that are used to satisfy Hydro One’s capital resource requirements, including the Company’s capital expenditures, servicing and repayment of debt, and dividend payments.

Three months ended March 31 (millions of dollars)	2022	2021
Cash provided by operating activities	443	517
Cash used in financing activities	(476)	(639)
Cash used in investing activities	(472)	(514)
Decrease in cash and cash equivalents	(505)	(636)

Cash provided by operating activities

Cash from operating activities decreased by $74 million for the first quarter of 2022 compared to the first quarter of 2021. The decrease was impacted by various factors, including the following:

•decrease in net working capital primarily attributable to higher receivables from the IESO associated with provincial funding programs and timing of cash deposits, partially offset by lower payables to the IESO in 2021 due to the lower Global Adjustment rate and higher rebates for green energy purchases; partially offset by

•higher pre-tax earnings; and

•the impacts of the DTA Implementation Decision recognized in the quarter.

Cash used in financing activities

Cash used in financing activities decreased by $163 million for the three months ended March 31, 2022 compared to 2021. This was impacted by various factors, including the following:

Sources of cash

•the Company received proceeds of $1,390 million from the issuance of short-term notes in the first quarter of 2022, compared to $815 million received in the same period last year.

HYDRO ONE LIMITED

MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)

For the three months ended March 31, 2022 and 2021

Uses of cash

•the Company repaid $1,106 million of short-term notes in the first quarter of 2022, compared to $800 million repaid in the same period last year.

•the Company repaid $600 million of long-term debt in the first quarter of 2022, compared to $500 million repaid in the same period last year.

•common share dividends paid in the first quarter of 2022 were $159 million, compared to dividends of $152 million paid in the same period last year.

Cash used in investing activities

Cash used in investing activities decreased by $42 million for the three months ended March 31, 2022, compared to 2021 as a result of lower capital investments in the current year. Please see section "Capital Investments" for comparability of capital investments made by the Company during the three months ended March 31, 2022 compared to the prior year.

LIQUIDITY AND FINANCING STRATEGY

Short-term liquidity is provided through FFO,3 Hydro One Inc.’s commercial paper program, and the Company’s consolidated bank credit facilities. Under the commercial paper program, Hydro One Inc. is authorized to issue up to $2,300 million in short-term notes with a term to maturity of up to 365 days.

At March 31, 2022, Hydro One Inc. had $1,329 million in commercial paper borrowings outstanding, compared to $1,045 million outstanding at December 31, 2021. The Company also has revolving bank credit facilities (Operating Credit Facilities) with a total available balance of $2,550 million at March 31, 2022. On June 1, 2021, the maturity date for the Operating Credit Facilities was extended from 2024 to 2026. No amounts were drawn on the Operating Credit Facilities at March 31, 2022 or December 31, 2021. In January 2022, Hydro One successfully amended its Operating Credit Facilities to incorporate environmental, social and governance targets. The facilities now include a pricing adjustment which can increase or decrease Hydro One’s cost of funding based on its performance on certain Sustainability Performance Measures, which are related to Hydro One's sustainability goals. The Company may use the Operating Credit Facilities for working capital and general corporate purposes. The short-term liquidity under the commercial paper program, the Operating Credit Facilities, available cash on hand and anticipated levels of FFO3 are expected to be sufficient to fund the Company’s operating requirements.

At March 31, 2022, the Company had long-term debt outstanding in the principal amount of $13,054 million, which included $425 million of long-term debt issued by Hydro One, $12,495 million of long-term debt issued by Hydro One Inc., and long-term debt in the principal amount of $134 million issued by HOSSM. The long-term debt issued by Hydro One was issued under its short form base shelf prospectus (Universal Base Shelf Prospectus), as further described below. The majority of long-term debt issued by Hydro One Inc. has been issued under its Medium Term Note (MTN) Program, as further described below. The Company's total long-term debt consists of notes and debentures that mature between 2023 and 2064, and at March 31, 2022, had a weighted-average term to maturity of approximately 15.2 years (December 31, 2021 - 14.8 years) and a weighted-average coupon rate of 3.8% (December 31, 2021 - 3.8%).

In April 2020, Hydro One Inc. filed a short form base shelf prospectus in connection with its MTN Program, which has a maximum authorized principal amount of notes issuable of $4,000 million, and expires in May 2022. At March 31, 2022, $1,900 million remained available for issuance under the MTN Program prospectus. A new MTN Program prospectus is expected to be filed in the first half of 2022.

In December 2020, Hydro One Holdings Limited (HOHL) filed a short form base shelf prospectus (US Debt Shelf Prospectus) with securities regulatory authorities in Canada and the US to replace a previous prospectus that expired in December 2020. The US Debt Shelf Prospectus allows HOHL to offer, from time to time in one or more public offerings, up to US$3,000 million of debt securities, unconditionally guaranteed by Hydro One, expiring in January 2023. At March 31, 2022, no securities have been issued under the US Debt Shelf Prospectus.

Compliance

At March 31, 2022, the Company was in compliance with all financial covenants and limitations associated with the outstanding borrowings and credit facilities.

3 FFO is a non-GAAP financial measure. See the section “Non-GAAP Financial Measures”.

HYDRO ONE LIMITED

MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)

For the three months ended March 31, 2022 and 2021

OTHER OBLIGATIONS

Off-Balance Sheet Arrangements

There are no off-balance sheet arrangements that have, or are reasonably likely to have, a material current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Summary of Contractual Obligations and Other Commercial Commitments

The following table presents a summary of Hydro One’s debt and other major contractual obligations and commercial commitments:

As at March 31, 2022 (millions of dollars)	Total	Less than<br>1 year	1-3 years	3-5 years	More than <br>5 years
Contractual obligations (due by year)
Long-term debt - principal repayments	13,054	603	1,231	850	10,370
Long-term debt - interest payments	8,317	497	964	891	5,965
Short-term notes payable	1,329	1,329	—	—	—
Pension contributions	632	98	219	226	89
Environmental and asset retirement obligations	139	32	41	19	47
Outsourcing and other agreements	190	108	63	5	14
Lease obligations	60	14	19	15	12
Long-term software/meter agreement	41	12	20	5	4
Total contractual obligations	23,762	2,693	2,557	2,011	16,501
Other commercial commitments (by year of expiry)
Operating Credit Facilities	2,550	—	—	2,550	—
Letters of credit1	179	179	—	—	—
Guarantees2	517	517	—	—	—
Total other commercial commitments	3,246	696	—	2,550	—

2 Guarantees consist of $475 million prudential support provided to the IESO by Hydro One Inc. on behalf of its subsidiaries, and guarantees provided by Hydro One to the Minister of Natural Resources (Canada) and ONroute of $7 million and $30 million respectively, relating to OCN LP (OCN Guarantee) and $5 million relating to Aux Energy Inc., the Company's indirect subsidiary. Ontario Power Generation Inc. (OPG) has provided a $2.5 million guarantee to Hydro One related to the OCN Guarantee.

SHARE CAPITAL

The common shares of Hydro One are publicly traded on the Toronto Stock Exchange (TSX) under the trading symbol "H". Hydro One is authorized to issue an unlimited number of common shares. The amount and timing of any dividends payable by Hydro One is at the discretion of the Hydro One Board of Directors (Board) and is established on the basis of Hydro One’s results of operations, maintenance of its deemed regulatory capital structure, financial condition, cash requirements, the satisfaction of solvency tests imposed by corporate laws for the declaration and payment of dividends and other factors that the Board may consider relevant. At May 4, 2022, Hydro One had 598,714,388 issued and outstanding common shares.

The Company is authorized to issue an unlimited number of preferred shares, issuable in series. At May 4, 2022, the Company had no preferred shares issued and outstanding.

The number of additional common shares of Hydro One that would be issued if all outstanding awards under the share grant plans and Long-term Incentive Plan (LTIP) were vested and exercised at May 4, 2022 was 2,310,427.

HYDRO ONE LIMITED

MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)

For the three months ended March 31, 2022 and 2021

REGULATION

Electricity Rates - Joint Rate Application

In March 2018, the OEB issued a letter (OEB Letter) requesting Hydro One file a single application for distribution rates and transmission revenue requirement for the period from 2023 to 2027. The OEB Letter had indicated that Hydro One Remote Communities should be included in the single application, however, this requirement was later removed by the OEB.

On August 5, 2021, Hydro One Networks filed a custom JRAP for 2023-2027. The JRAP includes a proposed investment plan supporting the transmission and distribution revenue requirements. On March 31, 2022, Hydro One Networks filed updated evidence reflecting the impacts of updated inflation assumptions on the proposed investment plan as well as updated load forecasts. A decision is anticipated in the first quarter of 2023. The following table summarizes the key elements of Hydro One Networks' updated JRAP evidence filed with the OEB:

	Hydro One Networks - Transmission		Hydro One Networks - Distribution
Year	Rate Base<br> (Forecast)	Revenue<br><br>Requirement1	Rate Base<br> (Forecast)	Revenue<br><br>Requirement1
2023	$14,612 million	$1,849 million	$9,395 million	$1,669 million
2024	$15,517 million	$1,968 million	$10,031 million	$1,753 million
2025	$16,585 million	$2,063 million	$10,764 million	$1,832 million
2026	$17,603 million	$2,182 million	$11,478 million	$1,935 million
2027	$18,534 million	$2,267 million	$12,105 million	$2,025 million

1 Revenue requirement for 2023 to 2027 represents filing estimates utilizing the OEB's 2021 Allowed ROE of 8.34%. The ROE is calculated based on the Cost of Capital Parameters released by the OEB on November 9, 2020. ROE will be finalized towards the end of 2022.

Deferred Tax Asset

On March 7, 2019, the OEB issued its reconsideration decision (DTA Decision) with respect to Hydro One's rate-setting treatment of the benefits of the DTA resulting from the transition from the payments in lieu of tax regime to tax payments under the federal and provincial tax regimes. On April 5, 2019, the Company filed an appeal with the Ontario Divisional Court (ODC) with respect to the DTA Decision.

On July 16, 2020, the ODC rendered its decision (ODC Decision) in which it agreed with the submissions of Hydro One that the DTA should be allocated to shareholders in its entirety.

On April 8, 2021, the OEB rendered its DTA Implementation Decision regarding the recovery of the DTA amounts allocated to ratepayers for the 2017 to 2022 period. In its DTA Implementation Decision, the OEB approved recovery of the DTA amounts allocated to ratepayers and included in customer rates for the 2017 to 2021 period, plus carrying charges, over a two-year recovery period commencing on July 1, 2021. The recovery of the previously shared DTA amounts plus carrying charges is expected to result in FFO4 of approximately $135 million and $65 million in 2022 and 2023, respectively. In addition, the DTA Implementation Decision required that Hydro One adjust the transmission revenue requirement and the base distribution rates beginning January 1, 2022 to remove any further allocation of DTA amounts flowing to customers. This is expected to result in additional FFO4 of approximately $50 million in 2022, but will decline over time. The DTA Implementation Decision is also expected to result in an increase in the Company’s ETR to approximately 14% to 22% over the next five years, with the most significant impacts expected over the recovery period.

Hydro One Remote Communities

4 FFO is a non-GAAP financial measure. See the section “Non-GAAP Financial Measures”.

HYDRO ONE LIMITED

MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)

For the three months ended March 31, 2022 and 2021

OTHER DEVELOPMENTS

Collective Agreements

In March 2022, Hydro One and the Canadian Union of Skilled Workers (CUSW) commenced collective bargaining with the official exchange of bargaining agendas. In-person negotiations for a renewal agreement remain ongoing at this time. The current Hydro One – CUSW collective agreement expired on April 30, 2022; this collective agreement will remain in place as negotiations continue.

In addition, Hydro One’s collective agreement with the Power Workers’ Union for Customer Service Operations expires on September 30, 2022. Planning for collective bargaining to renew this agreement is currently underway.

Supporting Broadband and Infrastructure Expansion Act, 2021

On March 4, 2021, the Province introduced Bill 257 (Supporting Broadband and Infrastructure Expansion Act, 2021) to create a new act entitled the Building Broadband Faster Act, 2021 that is aimed at supporting the timely deployment of broadband infrastructure within unserved and underserved rural Ontario communities. Bill 257 received Royal Assent on April 12, 2021. Bill 257 amends the Ontario Energy Board Act, 1998 (OEB Act) to provide the Province with regulation-making authority regarding the development of, access to, or use of electricity infrastructure for non-electricity purposes, including to reduce or fix the annual rental charge that telecommunications service providers must pay to attach their wireline broadband telecommunications attachments to utility poles, establish performance standards and timelines for how utilities must respond to attachment requests and require utilities to consider joint use of poles during planning processes. The Building Broadband Faster Act (BBFA) Guideline and regulations informing the legislative changes were published on November 30, 2021. The regulation regarding electricity infrastructure and designated broadband projects under the OEB Act came into force on April 21, 2022. The Company continues to be engaged with the Province on implementing an appropriate regulatory framework to support the published BBFA Guideline and regulations, including arrangements to sustain the Company’s revenues and recovery of reasonable associated costs. On December 16, 2021, the OEB issued a decision and order that lowered the annual wireline attachment rate for telecommunications carriers from $44.50 per attacher per pole to $34.76 per attacher per pole. On March 7, 2022, the Province introduced Bill 93 (Getting Ontario Connected Act, 2022). Bill 93 received Royal Assent on April 14, 2022. Bill 93 amends the BBFA to ensure that organizations that own underground utility infrastructure near a designated high-speed internet project provide timely access to their infrastructure data, which would allow internet service providers to quickly start work on laying down underground high-speed internet infrastructure. The Company will continue to assess the impact as more details become available.

Supporting Critical Transmission Infrastructure in Southwestern Ontario

On March 31, 2022, the Minister of Energy directed the OEB to amend Hydro One Networks' licence to require it to develop and seek approvals for four priority transmission line projects to meet growing electricity demand in Southwestern Ontario: the St. Clair Line (a 230kV line from Lambton Transformer Station (TS) to Chatham Switching Station (SS)); two 500 kV lines from Longwood TS to Lakeshore TS; and a 230kV line connecting the Windsor area to the Lakeshore TS.

NON-GAAP FINANCIAL MEASURES

Hydro One uses a number of financial measures to assess its performance. Adjusted measures, which include Adjusted EPS (basic and diluted), Adjusted net income, Adjusted income tax expense and Adjusted ETR (collectively, adjusted measures) remove items from reported results for EPS (basic and diluted), net income, income tax expense and ETR to calculate the adjusted measures. The Company also presents FFO or “funds from operations” to reflect a measure of the Company’s cash flow and revenues, net of purchased power to reflect revenues net of the cost of purchased power. FFO, revenues, net of purchased power, and adjusted measures are non-GAAP financial measures which do not have a standardized meaning prescribed by GAAP and might not be comparable to similar measures presented by other entities. They should not be considered in isolation nor as a substitute for analysis of the Company’s financial information reported under GAAP.

Hydro One also uses financial ratios that are non-GAAP ratios such as debt to capitalization ratio and earnings coverage ratio. Non-GAAP ratios do not have a standardized meaning prescribed by GAAP and might not be comparable to similar measures presented by other entities. They should not be considered in isolation nor as a substitute for analysis of the Company’s financial information reported under GAAP.

HYDRO ONE LIMITED

MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)

For the three months ended March 31, 2022 and 2021

FFO

FFO is defined as net cash from operating activities, adjusted for (i) changes in non-cash balances related to operations, (ii) dividends paid on preferred shares, and (iii) distributions to noncontrolling interest. Management believes that FFO is helpful as a supplemental measure of the Company’s operating cash flows as it excludes timing-related fluctuations in non-cash operating working capital and cash flows not attributable to common shareholders. As such, management believes that FFO provides a consistent measure of the cash generating performance of the Company’s assets.

The following table provides a reconciliation of GAAP (reported) results to non-GAAP (adjusted) results on a consolidated basis.

Three months ended March 31 (millions of dollars)	2022	2021
Net cash from operating activities	443	517
Changes in non-cash balances related to operations	190	52
Distributions to noncontrolling interest	(4)	(2)
FFO	629	567

Adjusted Net Income and Adjusted EPS

The following Adjusted net income, and Adjusted EPS (basic and diluted) have been calculated by management on a supplementary basis which adjusts net income under US GAAP for impacts related to the ODC Decision on Hydro One Networks' distribution and transmission businesses. Adjusted net income and Adjusted EPS are used internally by management to assess the Company’s performance and are considered useful because they exclude the impacts of the ODC Decision as noted above. Adjusted net income and Adjusted EPS provide users with a comparative basis to evaluate the current ongoing operations of the Company compared to prior year.

The following tables provide a reconciliation of GAAP (reported) results to non-GAAP (adjusted) results on a consolidated basis.

Quarter ended (millions of dollars, except number of shares and EPS)	Mar 31, 2022	Dec 31, 2021	Sep 30, 2021	Jun 30, 2021
Net income attributable to common shareholders	310	159	300	238
Impacts related to the ODC Decision	—	—	—	—
Adjusted net income attributable to common shareholders	310	159	300	238
Weighted-average number of shares
Basic	598,321,427	598,217,317	598,217,261	598,212,600
Effect of dilutive stock-based compensation plans	2,179,229	2,154,076	2,135,732	2,276,575
Diluted	600,500,656	600,371,393	600,352,993	600,489,175
Adjusted EPS
Basic	$0.52	$0.27	$0.50	$0.40
Diluted	$0.52	$0.26	$0.50	$0.40	Quarter ended (millions of dollars, except number of shares and EPS)	Mar 31, 2021	Dec 31, 2020	Sep 30, 2020	Jun 30, 2020
---	---	---	---	---
Net income attributable to common shareholders	268	161	281	1,103
Impacts related to the ODC Decision	—	—	—	(867)
Adjusted net income attributable to common shareholders	268	161	281	236
Weighted-average number of shares
Basic	597,665,695	597,588,309	597,557,787	597,551,514
Effect of dilutive stock-based compensation plans	2,491,520	2,586,310	2,362,569	2,423,441
Diluted	600,157,215	600,174,619	599,920,356	599,974,955
Adjusted EPS
Basic	$0.45	$0.27	$0.47	$0.39
Diluted	$0.45	$0.27	$0.47	$0.39

Revenues, Net of Purchased Power

Revenues, net of purchased power is defined as revenues less the cost of purchased power; distribution revenues, net of purchased power is defined as distribution revenues less the cost of purchased power. These measures are used internally by management to assess the impacts of revenue on net income and are considered useful because they exclude the cost of power that is fully recovered through revenues and therefore net income neutral.

The following tables provide a reconciliation of GAAP (reported) revenues to non-GAAP (adjusted) revenues, net of purchased power on a consolidated basis.

HYDRO ONE LIMITED

MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)

For the three months ended March 31, 2022 and 2021

Quarter ended (millions of dollars)	Mar 31, 2022	Dec 31, 2021	Sep 30, 2021	Jun 30, 2021	Mar 31, 2021	Dec 31, 2020	Sep 30, 2020	Jun 30, 2020
Revenues	2,047	1,779	1,913	1,722	1,811	1,867	1,903	1,670
Less: Purchased power	1,014	914	933	838	894	1,046	993	808
Revenues, net of purchased power	1,033	865	980	884	917	821	910	862	Quarter ended (millions of dollars)	Mar 31, 2022	Dec 31, 2021	Sep 30, 2021	Jun 30, 2021	Mar 31, 2021	Dec 31, 2020	Sep 30, 2020	Jun 30, 2020
---	---	---	---	---	---	---	---	---
Distribution revenues	1,517	1,347	1,395	1,263	1,354	1,457	1,410	1,201
Less: Purchased power	1,014	914	933	838	894	1,046	993	808
Distribution revenues, net of purchased power	503	433	462	425	460	411	417	393

Debt to Capitalization Ratio

The Company believes that the debt to capitalization ratio is an important non-GAAP ratio in the management of its debt levels. This non-GAAP ratio does not have a standardized meaning under US GAAP and may not be comparable to similar measures presented by other entities. Debt to capitalization ratio has been calculated as total debt (including total long-term debt and short-term borrowings, net of cash and cash equivalents) divided by total debt plus total shareholders’ equity, but excluding any amounts related to noncontrolling interest. Management believes that the debt to capitalization ratio is helpful as a measure of the proportion of debt in the Company's capital structure.

As at (millions of dollars)	March 31,<br>2022	December 31,<br>2021
Short-term notes payable	1,329	1,045
Less: cash and cash equivalents	(35)	(540)
Long-term debt (current portion)	603	603
Long-term debt (long-term portion)	12,417	13,017
Total debt (A)	14,314	14,125
Shareholders' equity (excluding noncontrolling interest)	11,050	10,888
Total debt plus shareholders' equity (B)	25,364	25,013		Debt-to-capitalization ratio (A/B)	56.4	%	56.5	%
---	---	---	---	---

Earnings Coverage Ratio

Earnings coverage ratio is defined as earnings before income taxes and financing charges attributable to shareholders, divided by the sum of financing charges and capitalized interest, and is calculated on a rolling twelve-month basis. The Company believes that the earnings coverage ratio is an important non-GAAP measure in the management of its liquidity. This non-GAAP ratio does not have a standardized meaning under US GAAP and may not be comparable to similar measures presented by other entities.

HYDRO ONE LIMITED

MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)

For the three months ended March 31, 2022 and 2021

Quarter ended (millions of dollars)	Mar 31, 2022	Dec 31, 2021	Sep 30, 2021	Jun 30, 2021	Mar 31, 2021	Dec 31, 2020	Sep 30, 2020	Jun 30, 2020
Year-to-date net income to preferred shareholder	—	—	—	—	—	18	18	9
Year-to-date net income to common shareholder	310	965	806	506	268	1,770	1,609	1,328
	310	965	806	506	268	1,788	1,627	1,337
Year-to-date income tax expense	79	178	123	52	26	(785)	(812)	(834)
Year-to-date financing charges	117	461	338	220	116	471	352	238
Earnings before income taxes and financing charges attributable to common shareholders and preferred shareholder	506	1,604	1,267	778	410	1,474	1,167	741
Twelve months ended (millions of dollars)	Mar 31, 2022	Dec 31, 2021	Sep 30, 2021	Jun 30, 2021	Mar 31, 2021	Dec 31, 2020	Sep 30, 2020	Jun 30, 2020
Earnings before income taxes and financing charges attributable to common shareholders and preferred shareholder (A)	1,700	1,604	1,574	1,511	1,520	1,474	1,501	1,452
Quarter ended (millions of dollars)	Mar 31, 2022	Dec 31, 2021	Sep 30, 2021	Jun 30, 2021	Mar 31, 2021	Dec 31, 2020	Sep 30, 2020	Jun 30, 2020
Financing charges	117	461	338	220	116	471	352	238
Capitalized interest	15	60	44	29	13	49	36	22
Financing charges and capitalized interest	132	521	382	249	129	520	388	260
Twelve months ended (millions of dollars)	Mar 31, 2022	Dec 31, 2021	Sep 30, 2021	Jun 30, 2021	Mar 31, 2021	Dec 31, 2020	Sep 30, 2020	Jun 30, 2020
Financing charges and capitalized interest (B)	524	521	514	509	520	520	516	518
Earnings coverage ratio = A/B	3.2	3.1	3.1	3.0	2.9	2.8	2.9	2.8

RELATED PARTY TRANSACTIONS

The Province is a shareholder of Hydro One with approximately 47.2% ownership at March 31, 2022. The IESO, OPG, Ontario Electricity Financial Corporation (OEFC), and the OEB are related parties to Hydro One because they are controlled or significantly influenced by the Ministry of Energy. The following is a summary of the Company’s related party transactions during the three months ended March 31, 2022 and 2021:

Three months ended March 31 (millions of dollars)
Related Party	Transaction	2022	2021
Province	Dividends paid	75	72
IESO	Power purchased	778	639
	Revenues for transmission services	516	442
	Amounts related to electricity rebates	301	306
	Distribution revenues related to rural rate protection	61	62
	Distribution revenues related to supply of electricity to remote northern communities	9	9
OPG1	Power purchased	6	4
	Revenues related to provision of services and supply of electricity	2	2
	Capital contribution received from OPG	2	2
OEFC	Power purchased from power contracts administered by the OEFC	1	—
OEB	OEB fees	2	2

1 OPG has provided a $2.5 million guarantee to Hydro One related to the OCN Guarantee. See the section "Other Obligations - Summary of Contractual Obligations and Other Commercial Commitments" for details related to the OCN Guarantee.

RISK MANAGEMENT AND RISK FACTORS

Hydro One is subject to numerous risks and uncertainties. Critical to Hydro One’s success is the identification, management, and to the extent possible, mitigation of these risks. Hydro One’s Enterprise Risk Management program assists decision-makers throughout the organization with the management of key business risks, including new and emerging risks and opportunities.

A discussion of the material risks relating to Hydro One and its business that the Company believes would be the most likely to influence an investor’s decision to purchase Hydro One’s securities can be found under the heading “Risk Management and Risk Factors” in the 2021 MD&A.

HYDRO ONE LIMITED

MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)

For the three months ended March 31, 2022 and 2021

DISCLOSURE CONTROLS AND PROCEDURES AND INTERNAL CONTROL OVER FINANCIAL REPORTING

Management is responsible for establishing and maintaining adequate disclosure controls and procedures and internal control over financial reporting as defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings. Internal control, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives and due to its inherent limitations, may not prevent or detect all misrepresentations.

There were no changes in the Company’s internal control over financial reporting during the three months ended March 31, 2022 that materially affected, or are reasonably likely to materially affect, the Company’s disclosure controls and procedures and internal control over financial reporting.

NEW ACCOUNTING PRONOUNCEMENTS

The following tables present Accounting Standards Updates (ASUs) issued by the Financial Accounting Standards Board (FASB) that are applicable to Hydro One:

Recently Adopted Accounting Guidance

Guidance	Date issued	Description	Effective date	Impact on Hydro One
ASU 2020-06	August 2020	The update addresses the complexity associated with<br>applying US GAAP for certain financial instruments with<br>characteristics of liabilities and equity. The amendments<br>reduce the number of accounting models for convertible<br>debt instruments and convertible preferred stock.	January 1 2022	No impact upon adoption
ASU <br>2021-05	July 2021	The amendments are intended to align lease classification requirements for lessors under Topic 842 with Topic 840's practice.	January 1, 2022	No impact upon adoption
ASU 2021-10	November 2021	The update addresses diversity on the recognition, measurement, presentation and disclosure of government assistance received by business entities.	January 1, 2022	No impact upon adoption

Recently Issued Accounting Guidance Not Yet Adopted

Guidance	Date issued	Description	Effective date	Anticipated Impact on Hydro One
ASU <br>2021-08	October 2021	The amendments address how to determine whether a contractual obligation represents a liability to be recognized by the acquirer in a business combination.	January 1, 2023	Under assessment
ASU 2022-02	March 2022	The amendments eliminate the troubled debt restructuring (TDR) accounting model for entities that have adopted Topic 326 Financial Instrument – Credit Losses and modifies the guidance on vintage disclosure requirements to require disclosure of current-period gross write-offs by year of origination.	January 1, 2023	Upon adoption, the Company will disclose the current period gross write-offs by year of origination relating to its accounts receivable

HYDRO ONE HOLDINGS LIMITED - CONSOLIDATING SUMMARY FINANCIAL INFORMATION

Hydro One Limited fully and unconditionally guarantees the payment obligations of its wholly-owned subsidiary, HOHL, issuable under the short form base shelf prospectus dated December 17, 2020. Accordingly, the following consolidating summary financial information is provided in compliance with the requirements of section 13.4 of National Instrument 51-102 - Continuous Disclosure Obligations providing for an exemption for certain credit support issuers. The tables below contain consolidating summary financial information at March 31, 2022 and December 31, 2021 and for the three months ended March 31, 2022 and March 31, 2021 for: (i) Hydro One Limited; (ii) HOHL; (iii) the subsidiaries of Hydro One Limited, other than HOHL, on a combined basis, (iv) consolidating adjustments, and (v) Hydro One Limited and all of its subsidiaries on a consolidated basis, in each case for the periods indicated. Such summary financial information is intended to provide investors with meaningful and comparable financial information about Hydro One Limited and its subsidiaries. This summary financial information should be

HYDRO ONE LIMITED

MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)

For the three months ended March 31, 2022 and 2021

read in conjunction with Hydro One Limited's most recently issued annual and interim financial statements. This summary financial information has been prepared in accordance with US GAAP, as issued by the FASB.

Three months ended March 31<br><br>(millions of dollars)	Hydro One Limited		HOHL		Subsidiaries of <br>Hydro One Limited, <br>other than HOHL		Consolidating Adjustments		Total Consolidated <br>Amounts of Hydro <br>One Limited
	2022	2021	2022	2021	2022	2021	2022	2021	2022	2021
Revenue	159	151	—	—	2,238	2,004	(350)	(344)	2,047	1,811
Net Income (Loss) Attributable to Common Shareholders	159	151	—	—	486	444	(335)	(327)	310	268	As at March 31, 2022 and<br><br>December 31 , 2021<br><br>(millions of dollars)	Hydro One <br>Limited	HOHL	Subsidiaries of <br>Hydro One Limited, <br>other than HOHL	Consolidating <br>Adjustments	Total Consolidated <br>Amounts of Hydro <br>One Limited
---	---	---	---	---	---	---	---	---	---	---
	Mar. 2022	Dec.2021	Mar. 2022	Dec.2021	Mar. 2022	Dec.2021	Mar. 2022	Dec.2021	Mar. 2022	Dec.2021
Current Assets	108	97	—	—	2,348	2,742	(1,056)	(1,013)	1,400	1,826
Non-Current Assets	3,451	3,450	—	—	44,685	45,019	(19,314)	(19,912)	28,822	28,557
Current Liabilities	483	475	—	—	3,680	3,507	(1,048)	(1,004)	3,115	2,978
Non-Current Liabilities	425	425	—	—	27,837	28,892	(12,291)	(12,888)	15,971	16,429

FORWARD-LOOKING STATEMENTS AND INFORMATION

The Company’s oral and written public communications, including this document, often contain forward-looking statements that are based on current expectations, estimates, forecasts and projections about the Company’s business, the industry, regulatory and economic environments in which it operates, and includes beliefs and assumptions made by the management of the Company. Such statements include, but are not limited to, statements regarding: the Company’s transmission and distribution rate applications including the JRAP and its proposed investment plan, resulting and related decisions including the DTA Implementation Decision, as well as resulting rates, recovery and expected impacts and timing; expectations about the Company’s liquidity and capital resources and operational requirements; the Operating Credit Facilities; expectations regarding the Company’s financing activities; the Company’s maturing debt; the Company’s ongoing and planned projects, initiatives and expected capital investments, including expected results, costs and in-service and completion dates; contractual obligations and other commercial commitments; the number of Hydro One common shares issuable in connection with outstanding awards under the share grant plans and the LTIP; collective bargaining and agreements, including the renewal and expiry thereof; Bill 257 and Bill 93, related regulations and the expected timing and impacts; future pension contributions; dividends; non-GAAP financial measures; internal controls over financial reporting and disclosure; recent accounting-related guidance and anticipated impacts; the MTN Program, including the expected timing for filing of a new prospectus; the Universal Base Shelf Prospectus; and the US Debt Shelf Prospectus. Words such as “expect”, “anticipate”, “intend”, “attempt”, “may”, “plan”, “will”, “would”, “believe”, “seek”, “estimate”, “goal”, “aim”, “target”, and variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve assumptions and risks and uncertainties that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed, implied or forecasted in such forward-looking statements. Hydro One does not intend, and it disclaims any obligation, to update any forward-looking statements, except as required by law.

These forward-looking statements are based on a variety of factors and assumptions including, but not limited to, the following: the scope of the COVID-19 pandemic and duration thereof as well as the effect and severity of corporate and other mitigation measures on the Company’s operations, supply chain or employees; no unforeseen changes in the legislative and operating framework for Ontario’s electricity market or for Hydro One specifically; favourable decisions from the OEB and other regulatory bodies concerning outstanding and future rate and other applications; no unexpected delays in obtaining the required approvals; no unforeseen changes in rate orders or rate setting methodologies for the Company’s distribution and transmission businesses; continued use of US GAAP; a stable regulatory environment; no unfavourable changes in environmental regulation; no significant changes to the Company's current credit ratings; no unforeseen impacts of new accounting pronouncements; no changes to expectations regarding electricity consumption; no unforeseen changes to economic and market conditions; recoverability of costs and expenses related to the COVID-19 pandemic, including the costs of customer defaults resulting from the pandemic; completion of operating and capital projects that have been deferred; and no significant event occurring outside the ordinary course of business. These assumptions are based on information currently available to the Company, including information obtained from third-party sources. Actual results may differ materially from those predicted by such forward-looking statements. While Hydro One does not know what impact any of these differences may have, the Company’s business, results of operations, financial condition and credit stability may be materially adversely affected. Factors that could cause actual results or outcomes to differ materially from the results expressed or implied by forward-looking statements include, among other things:

•a significant expansion in length or severity of the COVID-19 pandemic, including the spread of its variants, restricting or prohibiting the Company’s operations or significantly impacting the Company’s supply chain or workforce;

HYDRO ONE LIMITED

MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)

For the three months ended March 31, 2022 and 2021

•severity of mitigation measures related to the COVID-19 pandemic;

•delays in completion of and increases in costs of operating and capital projects;

•regulatory risks and risks relating to Hydro One’s revenues, including risks relating to rate orders and the rate-setting models for transmission and distribution, actual performance against forecasts and capital expenditures, competition with other transmitters and other applications to the OEB, the recoverability of total compensation costs or denials of applications;

•risks associated with the Province’s share ownership of Hydro One and other relationships with the Province, including potential conflicts of interest that may arise between Hydro One, the Province and related parties, risks associated with the Province’s exercise of further legislative and regulatory powers in the implementation of the Hydro One Accountability Act, risks relating to the ability of the Company to attract and retain qualified executive talent or the risk of a credit rating downgrade for the Company and its impact on the Company’s funding and liquidity;

•risks relating to the location of the Company’s assets on reserve (as defined in the Indian Act (Canada)) (Reserve) lands and the risk that Hydro One may incur significant costs associated with transferring assets located on Reserves;

•the risk that the Company may be unable to comply with regulatory and legislative requirements or that the Company may incur additional costs for compliance that are not recoverable through rates;

•the risk of exposure of the Company’s facilities to the effects of severe weather conditions, natural disasters, man-made events or other unexpected occurrences for which the Company is uninsured or for which the Company could be subject to claims for damage;

•the risk of non-compliance with environmental regulations and inability to recover environmental expenditures in rate applications and the risk that assumptions that form the basis of the Company’s recorded environmental liabilities and related regulatory assets may change;

•risks associated with information system security and maintaining complex information technology (IT) and operational technology (OT) system infrastructure, including system failures or risks of cyber-attacks or unauthorized access to corporate IT and OT systems;

•the risk of labour disputes and inability to negotiate or renew appropriate collective agreements on acceptable terms consistent with the Company’s rate decisions;

•risks related to the Company’s work force demographic and its potential inability to attract and retain qualified personnel;

•the risk that the Company is not able to arrange sufficient cost-effective financing to repay maturing debt and to fund capital expenditures;

•risks associated with fluctuations in interest rates and failure to manage exposure to credit and financial instrument risk;

•risks associated with economic uncertainty and financial market volatility;

•the risk that the Company may not be able to execute plans for capital projects necessary to maintain the performance of the Company’s assets or to carry out projects in a timely manner or the risk of increased competition for the development of large transmission projects or legislative changes affecting the selection of transmitters;

•risks associated with asset condition, capital projects and innovation, including public opposition to or delays or denials of the requisite approvals and accommodations for the Company’s planned projects;

•the risk of failure to mitigate significant health and safety risks;

•the risk of not being able to recover the Company’s pension expenditures in future rates and uncertainty regarding the future regulatory treatment of pension, other post-employment benefits and post-retirement benefits costs;

•the impact of the ownership by the Province of lands underlying the Company’s transmission system;

•the risk associated with legal proceedings that could be costly, time-consuming or divert the attention of management and key personnel from the Company’s business operations;

•the impact if the Company does not have valid occupational rights on third-party owned or controlled lands and the risks associated with occupational rights of the Company that may be subject to expiry;

•risks relating to adverse reputational events or political actions;

•the potential that Hydro One may incur significant expenses to replace functions currently outsourced if agreements are terminated or expire before a new service provider is selected;

•risks relating to acquisitions, including the failure to realize anticipated benefits of such transaction at all, or within the time periods anticipated, and unexpected costs incurred in relation thereto;

•the inability to prepare financial statements using US GAAP; and

•the risk related to the impact of any new accounting pronouncements.

Hydro One cautions the reader that the above list of factors is not exhaustive. Some of these and other factors are discussed in more detail in the section entitled “Risk Management and Risk Factors” in the 2021 MD&A.

In addition, Hydro One cautions the reader that information provided in this MD&A regarding the Company’s outlook on certain matters, including potential future investments, is provided in order to give context to the nature of some of the Company’s future plans and may not be appropriate for other purposes.

Additional information about Hydro One, including the Company’s Annual Information Form, is available on SEDAR at www.sedar.com, the US Securities and Exchange Commission’s EDGAR website at www.sec.gov/edgar.shtml, and the Company’s website at www.HydroOne.com/Investors.

17

Document

FORM 52-109F2

CERTIFICATION OF INTERIM FILINGS – FULL CERTIFICATE

I, Mark Poweska, President and Chief Executive Officer, Hydro One Limited, certify the following:

1.Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of Hydro One Limited (the “issuer”) for the interim period ended March 31, 2022.

2.No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.

3.Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.

4.Responsibility: The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer.

5.Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer(s) and I have, as at the end of the period covered by the interim filings

(a)designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that

(i)material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and

(ii)information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and

(b) designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP.

5.1 Control framework: The control framework the issuer’s other certifying officer(s) and I used to design the issuer’s ICFR is the Internal Control – Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission.

5.2 N/A

5.3 N/A

6.Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on January 1, 2022 and ended on March 31, 2022 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.

Date:	May 5, 2022
	/s/ Mark Poweska
	President and Chief Executive Officer

Document

FORM 52-109F2

CERTIFICATION OF INTERIM FILINGS – FULL CERTIFICATE

I, Christopher Lopez, Chief Financial Officer, Hydro One Limited, certify the following:

1.Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of Hydro One Limited (the “issuer”) for the interim period ended March 31, 2022.

5.Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer(s) and I have, as at the end of the period covered by the interim filings

(a)designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that

(i)material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and

5.2 N/A

5.3 N/A

6. Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on January 1, 2022 and ended on March 31, 2022 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.

Date:	May 5, 2022
	/s/ Christopher Lopez
	Chief Financial Officer