The Corporation is subject to regulation by federal, provincial and local authorities with regard to air, land and water quality and other environmental matters. The generation, transmission and distribution of electricity results in and requires disposal of certain hazardous materials, which are subject to these laws and regulations. In addition to imposing continuing compliance obligations, these laws and regulations authorize the imposition of substantial penalties for non-compliance,including fines, injunctive relief and other sanctions. New environmental laws and regulations affecting the Corporation’s operations may be adopted, and new interpretations of existing laws and regulations could be adopted or become applicable to the Corporation or its facilities, which may substantially increase its environmental expenditures in the future. New facilities or modifications of existing facilities may require new environmental permits or amendments to existing permits. Delays in the environmental permitting process, denials of permit applications and conditions imposed in permits may materially affect the cost and timing of projects.

In 2007, the Government of Alberta passed the Climate Change and Emissions Management Act (Alberta) and Alberta’s Specified Gas Emitters Regulation to address the regulation of greenhouse gas (GHG) emissions from certain facilities located in the province. Effective July 1, 2007, facilities emitting more than 100,000 tonnes of GHG per year are required to reduce their emissions intensity from an emissions intensity baseline. The companies responsible for these facilities will be given a number of options to allow them to comply with this requirement, including making operational improvements to the facilities, buying eligible offsets to apply against their emissions, and contributing to a fund established for the purpose of investing in technology to reduce GHG emissions in the province. Management is assessing the impact these regulations may have on the business as a result of its generation interests in Alberta, including the offsets that may be available to mitigate this exposure through owned wind projects. Non-compliance with environmental laws and regulations or incurrence of new costs or liabilities could adversely affect the business, results of operations, financial condition or prospects of the Corporation.

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Commitments and Contingencies
 
In June 2005, ENMAX Energy received a Notice of Reassessment from Alberta Finance in respect of the 2001 taxation year, claiming an amount owing for income taxes of $16.9 million, including $3.2 million of interest. In July and November 2006, ENMAX Energy received additional Notices of Reassessment relating to the 2002 and 2003 taxation years, in the amount of $23.7 million, including $5.0 million of interest, and $58.0 million, including $10.4 million of interest, respectively. Subsequently, in July 2007, ENMAX Energy received an amended Notice of Reassessment for the 2003 taxation year for an additional $1.8 million relating to items not previously assessed. The reassessments relate primarily to the value of certain power purchase arrangement assets established for the purpose of the PILOT Regulation and the allocation of costs and benefits of the energy supply portfolio between taxable and non-taxable operations for those years.

The Corporation does not agree with the assessments and has commenced the necessary steps to defend its position through the formal appeals process. However, ENMAX Energy voluntarily remitted certain amounts to minimize interest and penalties until the issues are resolved, which are recorded as income taxes receivable as at December 31, 2007 and 2006. The Corporation expects this process to be successful and will vigorously pursue all options available should the appeals process result in an unfavourable outcome. The amount of possible adjustment, which could have a material impact on net earnings, cannot be reasonably estimated at this time and no provision has been made in the consolidated financial statements for any additional income tax expense that may be payable relating to these assessments.

Environmental

The Alberta government announced new regulations aimed at reducing the levels of greenhouse gas emissions which took effect July 2007. The direct costs to comply with the terms of the legislation will total approximately $18.7 million for 2008. The Corporation has taken steps to substantially mitigate these risks including price increases to new customers, as well as aquiring qualified credits from both its wind generation assets and purchases on the wholesale market. The change in law provisions in the PPA contracts has the potential to expose ENMAX to a significant portion of these compliance costs. For the year ended December 31, 2007, the financial statements include a charge to earnings in the amount of $9.5 million, included in costs of electricity services provided, relating to estimated compliance costs under the provincial regulations, associated with ENMAX’s ownership interests in coal-fired generation facilities through its PPAs and the tolling agreement under the Calgary Energy Centre. As the regulations and applicable compliance details have not yet been finalized, the total amount of these costs, could change from the currently estimated amounts. The Corporation continues to assess and monitor the implications these changes in legislation may have on its business.

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ENMAX Estimated Compliance Cost

	2007 6 months	2008	2009
Compliance Cost ($/t)	$15.00	$15.00	$15.00
Total Compliance Cost ($)	$9.5 million	$18.7 million	$20 million