Multi-million dollar out-of-court deal ends high voltage fight with California

VANCOUVER – Powerex, the for-profit arm of BC Hydro, has reached an out-of-court settlement, unplugging a 12-year-old, potentially multi-million dollar lawsuit with California.

Energy Minister Bill Bennett said Friday there was little joy in the decision but it was a measure that was necessary to protect British Columbia taxpayers from potentially skyrocketing costs that could have included a $3.2 billion legal liability.

“Someone asked me this morning if I was happy about this and I can’t say that I am happy about it,” Bennett told a news conference.

“I don’t think it’s one of those kinds of decisions that you’re happy about but I think we’ve probably all made decisions in our lives that we weren’t necessarily happy about but we knew they were the right decision and we were making the decision for the right reasons.”

Powerex has agreed to pay California utilities, the state’s attorney general and several others $750 million in U.S. dollars, but most of it will be paid off using a credit that California owes British Columbia.

It means Powerex will post a roughly $101 million loss this year, but Bennett says taxpayers won’t be shelling out in higher rate premiums.

The settlement stems from the 2000-2001 power crisis in California that sent rolling blackouts throughout the state and prompted record-high electricity prices.

Powerex was one of 60 companies supplying California with electricity at that time, and the state accused many of its providers of price gouging and price fixing.

In announcing the settlement, the B.C. government says Powerex does not admit to any wrongdoing and points to a 2003 review of the utility by a U.S. commission that found Powerex had done nothing wrong and instead was a reliable supplier to California during the energy crisis.

Teresa Conway, Powerex’s chief executive officer, stressed the dispute was one of trade, not illegal activity.

She and Bennett said it is reminiscent of the mammoth trade struggle between Canada’s softwood lumber industry and its trading partners in the U.S.: despite frequent wins at various trade panels, Canadian manufacturers always come out with bruises.

Similarly, Bennett said despite Powerex being found to have done nothing wrong, California remains an extremely important market and he said Powerex is looking forward to putting this dispute behind it to move on with its otherwise positive relationship.

“Powerex since 2003 has generated $3.5 billion in revenue from trading in the U.S., not just from trading in California. The commercial relationship that Powerex has with California and other U.S. jurisdictions is actually very, very positive.