MOODY’S DAMPENS MOOD OF HYDRO’S COURT WIN

Utility enjoys some good news, then ratings agency issues report

The week began on a positive note for B.C. Hydro, when the government-owned utility came out on the winning side of yet another court challenge to the hydroelectric dam under construction at Site C on the Peace River.

The latest ruling was courtesy of the Federal Court of appeal. A three-member panel upheld a lower court dismissal of a bid by the Prophet River and West Moberly First Nations for a full-blown judicial review of the controversial project.

Several factors of significance stood out in the 38-page judgment handed down Monday by the federal panel.

The joint federal and provincial environmental review of the project was found to have met reasonable standards for consultation of affected First Nations and accommodation of their interests. Some 29 aboriginal groups were engaged during the three-year process — many of them in depth — including the two appellants, both members of the group of Treaty 8 First Nations.

Second, the court found that West Moberly and Prophet River failed in their challenge in part because they chose not to engage fully in the approval process.

While maintaining the project would have severe impacts on their treaty rights, the two First Nations did not present persuasive evidence on that score. Prophet River in particular fell short. The court heard that the area over which the First Nation exercises treaty rights to hunt, fish and trap is more than 200 kilometres north of Site C.

“The evidence on record does not demonstrate that the exercise of (those) rights extends over 200 kilometres to the Site C project,” the court stated.

Instead of discussing ways to mitigate any impacts on their territory, the two First Nations were opposed to the project proceeding on any basis. Not an option in the court’s reading of the situation — there has to be some give and take on the part of First Nations as well as by the Crown.

The court found that environmental review and subsequent approval by the federal cabinet had reached a reasonable conclusion that was “justified under the circumstances” and that met the standards of both the courts and the country’s environmental legislation.

Hence no need to send the project back to square one via the lengthy exercise in second guessing that a judicial review would entail. Still, that is not the end of the legal saga over Site C.

Hydro reckons this latest ruling is the 10th challenge to be dismissed or discontinued. Four legal actions remain, including a pend- ing judgment from the B.C. Court of Appeal.

One or more of the challenges to Site C could eventually end up on the docket of the Supreme Court of Canada, though by then construction (already well advanced) could be approaching the scheduled Sept. 1, 2019 diversion of the river itself.

Hypothetically, a change of government could halt construction as well.

But so far the New Democrats say only that they would send the project to review by the B.C. Utilities Commission, an independent agency not known for rendering verdicts any faster than the courts.

The B.C. Liberals will no doubt cite the latest win in the courts as further evidence that they have got Site C past the point of no return.

But that prospect is far from reassuring to taxpayers, given another piece of news this week regarding B.C. Hydro. Moody’s, the international investor service, weighed in Monday with another warning that Hydro’s soaring debt and over-reliance on deferral accounts poses a major risk to the province’s best-in-thecountry credit rating.

“The anticipated increase in debt continues to pressure the province’s rating since it raises the contingent liability of British Columbia,” wrote the analysts at Moody’s, even as they reaffirmed a Triple A rating for the 12th consecutive year.

B.C. Hydro’s debt is approaching $20 billion this year, up from about $12 billion when Premier Christy Clark took office six years ago.

The running tally of debtloading to date covers only a small fraction of the estimated $9 billion cost for Site C and none of the billions more that Hydro expects to spend over the next decade renovating the existing network of dams and transmission lines.

Nor is Hydro in a strong financial position to service and retire all of that debt, as Rob Shaw noted in a Vancouver Sun story Wednesday on the report from Moody’s.

The investor’s service expressed particular concern about Hydro’s practice of deferring present-day spending to a burgeoning series of regulatory accounts, to be paid back by ratepayers at some future date.

“Once adjusting net income to take into consideration the extensive use of largely debt financed regulatory asset accounts, B.C. Hydro posts some metrics that are among the weakest of Canadian provincial utilities,” Moody’s said.

Metrics, as in sustainable measures of financial position like revenue, operating costs, ability to cover all those deferral accounts, and service the groaning debt load.

All this is being fixed, say the Liberals. But they’ve been saying that for years while Moody’s continues to ring the alarm bells about Hydro finances. That last quote from the latest Moody’s report is especially damaging to the governing party.

The Liberals can’t stop boasting about the vaunted Triple A credit rating they’ve brought to B.C.

You’ll not hear them admit that under their management, B.C. Hydro has descended to one of the weakest financial positions of any provincial utility in Canada.

B.C. Hydro posts some metrics that are among the weakest of Canadian provincial utilities. MOODY ’ S , international investor service