2001 Triple Bottom Line Report - BC Hydro

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S Y S T E M F L E X I B I L I T Y The flexibility of the BC Hydro electric system allows us to change the level of our generation output to meet differing supply and demand conditions. This flexibility is of considerable benefit because it enables us to respond quickly to changing market conditions. For example, BC Hydro is able to buy electricity from outside hydro systems in lower-priced periods, and sell into the electricity marketplace when prices are higher. These actions earn additional revenue for BC Hydro and the province. BC Hydro’s energy system is designed and managed to meet domestic power needs even in low-water years. Sufficient volume is retained in reservoirs to meet customer demand over successive low-water years, and the hydro system is further augmented by thermal generating resources that can be brought on-line as required. Energy can also be imported from other utilities in the region. SOURCES OF REVENUE Other 2% Large industrial 7% Light industrial and commercial 11% Residential 11% Electricity trade 69% ALLOCATION OF REVENUE E C O N O M I C B O T T O M L I N E | 5 9 > The Board of Directors, President and Chief Executive Officer, and the Chief Financial Officer of BC Hydro are responsible and accountable for the financial integrity of the corporation and all our business units and subsidiaries. The Board has delegated authority to senior management for financial decision-making. Our hydro-based system depends on plentiful snowpacks and rainfall to fill reservoirs with power in waiting. Reservoir inflows are projected to be 86 per cent of normal this year, and indications are that 2001/2002 may be one of our driest years on record. BC Hydro’s ability to provide electricity to British Columbians will not be put in jeopardy as a result of low water levels. However, they may affect our operating flexibility and the level of profits earned from energy exports. A combination of increased thermal generation operations, more electricity imports and fewer electricity exports is also expected, which could mean an overall weaker financial picture for the company in 2002. Rate Stabilization Account 1% Retained earnings 1% Taxes 2% Customer profit sharing 4% Depreciation 5% Payment to the province 5% Finance charges 7% Operations, maintenance & administration 10% Energy costs 65%
E L E C T R I C I T Y T R A D E T H R O U G H P O W E R E X BC Hydro’s electricity trade throughout Western Canada and the Western U.S. is conducted by Powerex, our wholly owned subsidiary. Electricity trade through Powerex allows BC Hydro to return a dividend to our shareholder, and keep rates lower than they would otherwise be, by buying electricity from other jurisdictions when prices are low, and selling energy in export markets when prices are higher. Powerex is authorized by the B.C. government and the National Energy Board to sell electricity from B.C. and other Canadian provinces in markets outside B.C. Powerex is also authorized by the U.S. Federal Energy Regulatory Commission (FERC) to buy wholesale electricity in one U.S. location to sell in another U.S. location, and to deliver electricity from B.C. directly to its U.S. wholesale customers. In fiscal 2001 we bought more energy than we sold: 25 754 gigawatt-hours (GW . h) purchased versus 23 901 GW . h sold, for a net of 1853 GW . h purchased on the year. Staff at Powerex and our Power Supply unit worked together to produce record electricity trade results last year. Powerex staff contributed market knowledge, and Power Supply staff optimized our electricity system to capitalize on the unique conditions in California and elsewhere that produced an unusually high demand for power in the state, and therefore high market prices for electricity. This heightened trade activity resulted in Powerex’s staff being expanded from 87 to 114 employees. E C O N O M I C B O T T O M L I N E | 6 0 6000 5000 4000 3000 2000 1000 0 POWEREX SALES INFORMATION CDN$ (millions) GW-h 97 98 99 00 01 25 000 22 500 20 000 17 500 15 000 12 500 10 000 7500 5000 2500 Canadian $ (millions) GW.h The volume of electricity trade with other jurisdictions continues to be subject to the uncertainties of market conditions, financial considerations, regulatory and legislative developments, and weather. We do not anticipate last year’s level of electricity trade to be repeated this year. Extraordinary events in California resulted from an unusual combination of increased energy demand, lack of new generating capacity, higher natural gas prices and lower-than-normal precipitation across western North America. Water inflows to our reservoirs are projected to be much lower this year. Low inflows increase the need for market purchases to help support our reservoirs, and therefore reduce the amount of power available for sale to other markets. As well, an increase in the price of light-load-hour energy is expected to decrease margins on electricity trade transactions.
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2001 Triple Bottom Line Report - BC Hydro

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