Hydro's net income off 90% in 2006 first quarter

Scott Simpson
Vancouver Sun
09-Sep-2005

BC Hydro's net income fell 90 per cent in the first quarter of fiscal 2006, despite significantly higher trade revenues, the crown corporation reported on Thursday.

In a statement accompanying the first quarter report for 2005-2006, Hydro said it recorded net income of $5 million after regulatory transfers, compared to $52 million in the same period a year earlier.

"Key drivers for the lower net income this quarter were increased costs related to energy purchases to help meet domestic needs and increased finance charges," reported Hydro chief financial officer Alister Cowan.

Hydro also reduced its forecast for annual net income by $20 million, to $376 million, adding that its fiscal payment to the British Columbia government for 2006 would be $302 million.

Revenues from domestic electricity sales moved up by $1 million to $633 million compared to the first quarter of the 2005 fiscal year that ended March 31.

Electricity trade revenues, derived principally from sales to the United States, were up $92 million -- but those gains were effectively wiped out by a $106 million increase in electricity purchases on behalf of customers in B.C.

"Total sales volumes increased by three per cent as a result of an additional 18,996 residential customers compared with the same period last year, as well as an increase in activity in the light industrial and commercial sector as a result of improving economic conditions," Hydro said.

About $30 million of that amount was "due to higher volumes of electricity purchases from Independent Power Producers and other long-term commitments at higher unit prices to meet an increase in domestic load requirements."

Hydro traditionally uses a buy and sell strategy to take advantage of short term differences between electricity prices here and in the U.S., buying comparatively cheap U.S. power during off-peak hours, and opening up its dams to generate power when prices are at premium levels south of the border.

However, Hydro spokeswoman Elisha Moreno said in an interview, the crown corporation put more focus on buying electricity from other sources during the quarter -- with the objective of refilling its reservoirs that were somewhat depleted after two years of comparative drought.

"At June 30, 2005," Hydro reported, "the combined storage in BC Hydro's reservoirs was 119 per cent of average, compared with 91 per cent of average last year.

"Faster-than-normal runoff in the quarter resulted in water inflows into BC Hydro's reservoirs which were 16 per cent higher at June 30, 2005."

"We are coming off a couple of successive lower water years. If we have an opportunity to rebuild our reservoir levels without having significantly negative impact on our financial results then we are definitely going to take advantage of that," Moreno said.

Cowan said Hydro has enough total generating capacity to meet domestic needs but added that the system's flexibility "enables us to look at the most economic way to meet customer demand. In the past quarter, it was cheaper for us to import some electricity from the market than it was to use more expensive resources like Burrard Generating station."

Over the longer term, he said, the result will be lower costs "and better financial performance for our customers in B.C."

ssimpson@png.canwest.com