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BC Hydro subsidiary pays $750 million to end California claim

Customers of California's three biggest utility companies are going to get a break on their electricity bills, thanks to British Columbians.

But it will not be a gift.

BC Hydro subsidiary Powerex agreed Friday to pay $750 million to avoid a $3.2 billion court judgment. The State of California and utility companies Pacific Gas and Electric, Southern California Edison and San Diego Gas and Electric accused Powerex of buying power from California, transmitting it to B.C. and then exporting it back to California at inflated rates during the state's 2000-2001 energy crisis.

The settlement, pending approval by the U.S. Federal Energy Regulatory Commission, will see Powerex pay US$273 million cash and $477 million in credit.

The B.C. government said the settlement allows Powerex to avoid "future legal costs estimated at over $50 million" plus $125 million in annual interest costs had the matter dragged on another five years. Under the agreement, Powerex admits no wrongdoing, but it will mean a $101-million net loss in the next fiscal year.

Powerex CEO Teresa Conway dismissed it as a "trade dispute," and Energy Minister Bill Bennett denied it would cause BC Hydro customers a rate increase. Powerex is among 47 power sellers that have settled with California.

"I am very pleased with this settlement, which is the largest one yet," Michael Peevey, president of the California Public Utilities Commission said in a prepared statement. "It's a major advance toward closing the books on the energy crisis."

Powerex has sold $3.5 billion of power to California since 2003, but the history section of its website makes no mention of the company's biggest legal dispute:

"In spring of 2000, rolling blackouts hit California, forcing electricity prices to extreme highs. This resulted in the bankruptcy of certain California utilities, the disbanding of the California Power Exchange, a general credit crisis across the west and the fall of a number of other market participants. At this critical time, the knowledge, experience and commitment of Powerex's people, BC Hydro's solid financial backing, the flexibility of the BC Hydro system and our ability to source and move power across markets enabled us to remain a key power supplier to California. In fact, the U.S. Federal Energy Regulatory Commission staff acknowledged our role in helping to 'keep the lights on' during the crisis.  

"The event marked a turning point in the industry. It was a 'coming of age,' marked by the introduction of more complex rules and regulations and an increased emphasis on accountability for energy trading companies."

BC Hydro set-up Powerex in 1998 under the NDP government of the day. It markets and trades wholesale power and natural gas with 400 producers, consumers and traders throughout Canada and as far south as Mexico. Powerex is chaired by Larry Blain (chair of the PartnershipsBC) and its other two directors are Canaccord Genuity investment banker James Brown and Stephen Bellringer, the BC Hydro chair.

Vancouver journalist Bob Mackin is a frequent contributor to The Tyee.

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