IN THE MATTER OF
the Utilities Commission Act, R.S.B.C. 1996, Chapter 473
and
an Application by British Columbia Hydro and Power Authority
for establishment of Regulatory Accounts
in connection with the Divestiture of Arrow Water Systems
BEFORE: L.F. Kelsey, Commissioner
N.E. MacMurchy, Commissioner May 19, 2011
D. Morton, Commissioner
O R D E R
WHEREAS:
A. In the mid-1960s, British Columbia Hydro and Power Authority (BC Hydro) relocated residents affected by the creation of the Hugh L. Keenleyside (Keenleyside) Dam and Arrow Lakes Reservoir to the newly constructed towns of Edgewood, Fauquier, and Burton, and also to West Robson, all now part of the Regional District of Central Kootenay;
B. BC Hydro built the water systems in Burton, Fauquier, and Edgewood when the towns were constructed, and assumed control of the West Robson water system after upgrading it to compensate for impacts related to construction of the Keenleyside Dam;
C. BC Hydro, through four subsidiary companies, owned and operated the drinking water systems in the four communities (collectively referred to as the Arrow Water Systems);
D. On January 4, 2011, BC Hydro divested the Arrow Water Systems to the Regional District of Central Kootenay;
E. BC Hydro filed on March 25, 2011, pursuant to the Utilities Commission Act, an application for approval to establish the Arrow Water Systems Regulatory Account for expenditures in connection with the divestiture of the assets of the Arrow Water Systems to the Regional District of Central Kootenay; and a regulatory asset (Arrow Water Systems Provision) to be recorded on BC Hydro's fiscal year 2011 financial statements in the same amount as a loss provision liability required by Canadian Generally Accepted Accounting Principles (CGAAP) in connection with the divestiture;
F. The estimated amount to be transferred to the regulatory account in F2011 is $7.7 million and the estimated amount of the regulatory asset is approximately $3.9 million;
G. The British Columbia Utilities Commission (Commission) has reviewed the Application and considers that approval is warranted.
NOW THEREFORE pursuant to sections 59 to 61 of the Utilities Commission Act, the Commission approves the following:
1. The establishment of the Arrow Water Systems Regulatory Account in accordance with the Application, to allow for future consideration of recovery for the divestiture costs plus interest at BC Hydro’s weighted average cost of debt for the previous fiscal year.
2. The establishment of the Arrow Water Systems Provision, a non-rate base, non-interest bearing regulatory asset in the amount of the loss provision liability BC Hydro recognizes in respect of certain Arrow Water Systems’ divestiture costs reported in its F2011 financial statements.
3. The periodic adjustment of the amount of the Arrow Water Systems Provision to match the changes required under CGAAP in the loss provision liability.
4. The carrying forward of the Arrow Water Systems Provision, as adjusted from time to time, until the loss provision liability is no longer required under CGAAP.
DATED at the City of Vancouver, in the Province of British Columbia, this 19th day of May 2011.
BY ORDER
Original signed by:
L.F. Kelsey
Commissioner