Waiting costs Hydro $120m

By Brian Lewis
The Province,
Page A48
28-May-2004

Uncertainty over whether the proposed natural-gas pipeline under Georgia Strait and a large gas-fired electricity generation plant slated for Duke Point on Vancouver Island will ever be built has led B.C. Hydro to declare a $120 million writedown of planning costs already incurred, the Crown corporation disclosed yesterday.

And it's a cost that ratepayers may have to pay for down the road.

Speaking to a Nanaimo business audience yesterday, Hydro chief executive officer Bob Elton said the utility's board of directors approved the $120-million writedown provision against Hydro's fiscal 2004 financial statements on Wednesday in order to meet accounting rules.

The provision is directly related to the proposed $370-million Vancouver Island Generation Project (VIGP), a natural gas-fired plant that Hydro had planned to build at Duke Point near Nanaimo to meet the increased demand for electricity on Vancouver Island.

Natural gas slated to feed that plant would be delivered via the $340-million Georgia Strait Crossing (GSX) pipeline project that would run from Washington State to Vancouver Island via a 44-kilometre under-sea section.

Both projects were temporarily shelved last year after the B.C. Utilities Commission ordered Hydro to call for tenders from the private sector to build Vancouver Island's additional power generation.

That process is now underway and its success or failure will determine the future of the two Hydro-sponsored projects.

"As we are recording the provision against 2004 net income, this will not have any impact on our current proposal for an 8.9-per-cent rate increase that is before the BC Utilities Commission in our revenue requirements process," Elton said.

"We . . . will seek to recover those costs in future rates when the Vancouver Island Generation Project is brought into service or it is determined that the projects [VIGP and GSX] will not proceed."

Elton cautioned that Hydro has not made a final decision on the projects and won't be able to until the call for tenders from the private sector is completed this fall.

He termed the provision as "good business practice" in order to comply with Generally Accepted Accounting Principles (GAAP), the officially recognized standard for accounting in Canada.

The Hydro CEO also told his Nanaimo audience that the positive feedback Hydro has received from the private sector to build power generation on Vancouver Island "bodes well for the security of future supply" in the region.

blewis@png.canwest.com