Toronto Hydro-Electric System Limited (“THESL”), one of the largest electricity distribution companies in Canada, distributes power to customers in Toronto and delivers approximately 18 per cent of the electricity consumed in Ontario. Our Annual Report focuses primarily on the financial performance of the Corporation and its principal affiliates. A separate Corporate Responsibility Report documents our sustainability strategies and progress. We have provided a link to our 2009 Corporate Responsibility Report from each web page of this Annual Report, and we invite our readers to access that link. To be environmentally friendly, the reports are not produced in printed form; however, they may be easily downloaded from our website.

To drive sustainability into our organization and business operations, we have set environmental footprint reduction targets that are contained in our Corporate Responsibility Report. Our goal is to substantially reduce our carbon footprint over the next decade.

We continue to be a strong supporter of the United Way of Greater Toronto; the Winter Warmth Fund, in collaboration with the United Way, which provides hydro bill assistance to low-income Torontonians; Toronto Science Fairs in primary and secondary schools city-wide; our mentorship program targetted to at-risk children in downtown elementary schools; the White Ribbon Campaign, which advocates against violence against women by men; Run for the Cure; YMCA 5 km Corporate Challenge; and we financially support our many employees who spend personal time volunteering in their own communities. We continued our support for the City of Toronto’s urban forest renewal efforts; Ontario Forestry Association, which is a not-for-profit organization providing forestry education programs targetted to elementary and high school students; and Local Enhancement and Appreciation of Forests (“LEAF”), a not-for-profit group which promotes tree planting on private property in Toronto. All of the Corporation’s business units contributed significantly to our community involvement and volunteer programs.

The Corporation is part of the Coalition of Large Distributors (“CLD”), which includes Enersource Hydro Mississauga, Horizon Utilities Corporation, Hydro Ottawa Limited, PowerStream Inc. and Veridian Connections. The CLD jointly continued efforts to bring CDM programs to residential and commercial customers in our combined service territories.

THESL continued the installation of smart meters in support of the province’s intention to move to time-of-use (“TOU”) rates to encourage the shifting of electricity use to off-peak time periods. THESL has installed approximately 631,000 smart meters at homes and commercial buildings across the city, making Toronto one of the most densely “smart metered” cities in North America. Smart meter installations will remain a priority through 2010. We have also developed information management support systems that will enable us to interface with the Independent Electricity System Operator, which will be sending TOU billing data to Local Distribution Companies.

In June 2009, THESL commenced the introduction of TOU rates to our residential customers. As of December 31, 2009, approximately 500,000 residential customers were transitioned to these rates. THESL is the first major urban centre in Canada to implement these rates on this scale. Extensive customer outreach, and the development of online tools to assist customers in understanding and adapting to the rates, has resulted in a relatively smooth transition to this new rate structure.

The Ontario Energy Board (“OEB”) tentatively accepted a proposal from THESL, which provides for a significant increase in the capital budget allowing the utility to spend up to $350 million in 2010 for the renewal of its infrastructure.

On November 12, 2009, Toronto Hydro Corporation completed a successful $250 million, 10-year debt issue filed under its Medium Term Notes program. The net proceeds of this issuance were used principally to repay $245.1 million of indebtedness outstanding to the City of Toronto.

Net income from ongoing operations for Toronto Hydro Corporation in 2009 was $42.8 million, compared to $46 million in 2008. The reduction was mainly related to the impact of the general economic downturn in 2009. It should be noted that, in 2008, the Corporation also posted a one-time net income contribution of $123 million in relation to the sale of its Telecom business. This one-time gain allowed the Corporation to pay a special dividend of $75 million to its Shareholder, the City of Toronto.

As at December 31, 2009, Toronto Hydro Corporation and the Corporation’s debentures were rated ‘A’ (High) by DBRS and ‘A’ by Standard & Poor’s. Accordingly, we remain a strong investment-grade company.

Toronto Hydro Energy Services Inc. continued to focus on serving the energy needs of the City of Toronto mainly in the areas of energy management services, renewable generation development and street lighting services. In 2009, the company played an integral role in the research and the development of the Power to Live Green strategy paper which became the City of Toronto’s Sustainable Energy Climate Change Plan.

On August 17, 2009, David O’Brien announced his retirement as President and Chief Executive Officer of the Corporation effective September 30, 2009. The Board of Directors appointed Anthony Haines as President and Chief Executive Officer of the Corporation effective October 1, 2009. We thank David O’Brien for his leadership and exceptional contribution to Toronto Hydro Corporation.

The organization is well-positioned to continue to build upon the successes that we have achieved in 2009. We look forward to a productive 2010.

Clare R. Copeland Chairman	Anthony M. Haines     President and     Chief Executive Officer