Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed in reports filed with, or submitted to, securities regulatory authorities is recorded, processed, summarized and reported within the time periods specified under Canadian and U.S. securities laws. The information is accumulated and communicated to management, including the President and Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosure.

As of December 31, 2006, an evaluation was carried out, under the supervision of and with the participation of management, including the President and Chief Executive Officer and Chief Financial Officer, of the effectiveness of TransCanada's disclosure controls and procedures as defined under the rules adopted by the Canadian securities regulatory authorities and by the U.S. Securities and Exchange Commission (SEC). Based on that evaluation, the President and Chief Executive Officer and Chief Financial Officer concluded that the design and operation of TransCanada's disclosure controls and procedures were effective as at December 31, 2006.

Management's Annual Report on Internal Control over Financial Reporting

Internal control over financial reporting is a process designed by, or under the supervision of, senior management, and effected by the Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and preparation of consolidated financial statements for external purposes in accordance with Canadian GAAP, including a reconciliation to U.S. GAAP.

Management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting, no matter how well designed, has inherent limitations and can only provide reasonable assurance with respect to the preparation and fair presentation of published financial statements. Under the supervision of, and with the participation of, management, including the President and Chief Executive Officer and Chief Financial Officer, management conducted an evaluation of the effectiveness of its internal control over financial reporting based on the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, according to these criteria, management concluded that internal control over financial reporting is effective as of December 31, 2006 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes.

During the year ended December 31, 2006, there has been no change in TransCanada's internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, TransCanada's internal control over financial reporting.

CEO and CFO Certifications

With respect to the year ending December 31, 2006, TransCanada's President and Chief Executive Officer has provided the New York Stock Exchange with the annual CEO certification regarding TransCanada's compliance with the New York Stock Exchange's corporate governance listing standards applicable to foreign issuers. In addition, TransCanada's President and Chief Executive Officer and Chief Financial Officer have filed with the SEC and the Canadian securities regulators certifications regarding the quality of TransCanada's public disclosures relating to its fiscal 2006 reports filed with the SEC and the Canadian securities regulators.

Compliance Expenditures

The total cost incurred by TransCanada to comply with the requirements of the SEC and Canadian securities regulatory authorities arising out of the Sarbanes-Oxley Act of 2002 for the period January 1, 2002 to December 31, 2006, was estimated to be $14 million, including third party charges of $4 million.