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B.C. utility agrees to pay $750-million in California power-rate dispute

The skyline of downtown Los Angeles in March 2009.

Mario Anzuoni/Reuters

Powerex, a B.C. Hydro subsidiary involved in wholesale power sales, has agreed to a $750-million (U.S.) settlement to resolve legal claims that the company unfairly drove up power prices in sales to California through market manipulation.

Amid criticisms from the B.C. NDP opposition of failing to defend B.C. interests, Energy Minister Bill Bennett quickly cast the move, announced Friday, as a difficult but necessary bid to avert $50-million in legal fees as well as up to $3.2-billion in possible legal liability to California.

Mr. Bennett noted the $750-million includes $477-million in credit for monies that California parties owe Powerex, as well as $273-million in outright payment. He denied it would lead to increases in hydro rates for B.C. consumers.

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"Somebody asked me this morning if I was happy about this. I can't say that I am happy about it," the minister told a news conference in Vancouver.

But he said the move was the right decision because it was too risky for the province's taxpayers to continue fighting given the price of possible defeat.

"We could duke this out," he said, suggesting the action would pay for a "lifetime's work" for lawyers handling the file. "At the end of the day, there's at least a 50-per-cent chance that B.C. would he on the hook for $3.2-billion."

The decision was only announced Friday because of the lifting of a confidentiality order among the parties, Mr. Bennett said.

The trouble began around 2000 after Powerex, among other electricity sellers, entered the bustling California energy market after it was deregulated. But Powerex and other companies eventually came to face allegations they had inflated energy prices, leading to legal action. Forty-seven other sellers have settled with California.

Despite the dispute, Powerex has continued to sell to California. Since 2003, the company has sold over $3.5-billion in electricity to the state, and Mr. Bennett and Powerex president and CEO Teresa Conway said there are hopes of continued sales.

"The settlement allows us to move forward and focus on our mandate to market B.C.'s clean-energy resources," Ms. Conway told the news conference. "We have chosen legal and financial certainty over continuing and protracted and costly dispute."

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She noted that Powerex, established in 1988, admits to no wrongdoing and did nothing wrong.

In February of this year, the governing B.C. Liberals and opposition New Democrats made a point of jointly defending Powerex after a U.S. Federal Energy Regulatory Commission judge said in an initial decision that Powerex owed more than $27-million in refunds for the sale of electricity to San Diego.

But there was no such unity on Friday.

NDP energy critic John Horgan slammed the Liberals, accusing them of "a complete capitulation" ahead of a reasonable fight.

"Now we find ourselves out $750-million in revenues and expenditures that can only come from one place and that is from ratepayers," he said. "For Mr. Bennett to suggest this is without impact is absolute lunacy."

Mr. Horgan said the NDP would have continued the fight. "Why [the B.C. Liberal government] would back away from defending our right to be traders in a free, open market is a surprise to me and not in the interest of Powerex going forward."

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About the Author
B.C. reporter

Ian Bailey is a Vancouver-based reporter for The Globe and Mail.  He covers politics and general news. Prior to arriving at The Globe and Mail, he reported from Toronto and St. John’s for The Canadian Press.  He has also covered British Columbia for CP, The National Post and The Province. More

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