Powerex settlement reached

 

VICTORIA – Powerex has reached an out-of-court settlement to protect British Columbia from a potential $3.2 billion legal liability.

The settlement with California utilities, the California Attorney General and other California parties (California Parties) resolves claims related to the 2000 – 2001 California power crisis that resulted in rolling blackouts and record-high electricity prices. Powerex was one of over 60 electricity sellers in the California market during the crisis.

Following the power crisis, numerous lawsuits and regulatory proceedings were launched by the California Parties, demanding refunds and penalties. In 2003, the US Federal Energy Regulatory Commission (FERC) concluded the California market was dysfunctional and ordered refunds from all sellers who sold electricity during the crisis. The majority of the settlement provides refunds to the California Parties as previously mandated by that order.

To-date, 47 sellers have settled separately with the California Parties. Although Powerex has won some lawsuits filed by the California Parties, a recent advisory decision by a FERC judge issued in February 2013 went against Powerex and the 15 other sellers who have not yet settled. With another FERC hearing scheduled for Aug. 27, 2013, court appointed mediators approached Powerex regarding a potential settlement.

In addition to protecting British Columbia from a potential $3.2 billion legal liability, the settlement allows Powerex to avoid future legal costs estimated at over $50 million as well as over $125 million per year in interest costs on the claims made by the California Parties.

The settlement also provides an opportunity for Powerex to move forward and enhance its relationship with California, which continues to generate significant income to the benefit of ratepayers in British Columbia. Since 2003, Powerex has sold over $3.5 billion worth of electricity to California.

The settlement, which is subject to approval by the FERC will be achieved by a payment from Powerex to the California Parties of $273 million (US dollars) and a credit for monies owed by the California Parties to Powerex valued at $477 million (US dollars). As a result of the settlement, Powerex will incur a net loss of about $101 million (Canadian dollars) this year.