BRITISH COLUMBIA HYDRO AND POWER AUTHORITY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016 AND 2015
British Columbia Hydro and Power Authority
NON-HERITAGE DEFERRAL ACCOUNT
Under a Special Direction issued by the Province, the BCUC approved the establishment of the Non-
Heritage Deferral Account, which is intended to mitigate the impact of certain cost variances between the
forecast costs in a revenue requirements application and actual costs related to items including all nonheritage
energy costs (e.g. costs related to power acquisitions from Independent Power Producers), load
(i.e. customer demand), and certain unplanned major capital and maintenance expenditures. These deferred
variances are recovered in rates through the DARR.
TRADE INCOME DEFERRAL ACCOUNT
Established under a Special Directive issued by the Province, this account is intended to mitigate the
uncertainty associated with forecasting the net income of the Company’s trade activities. The impact is to
defer the difference between the Trade Income forecast in the revenue requirements application and actual
Trade Income. These deferred variances are recovered in rates through the DARR.
Trade Income is defined as the greater of (a) the amount that is equal to BC Hydro’s consolidated net
income, less BC Hydro’s non-consolidated net income, less the net income of the BC Hydro’s subsidiaries
except Powerex, less the amount that BC Hydro’s consolidated net income changes due to foreign currency
translation gains and losses on intercompany balances between BC Hydro and Powerex; and (b) zero. The
difference between the Trade Income forecast and actual Trade Income is deferred except for amounts
arising from a net loss in Trade Income.
DEMAND-SIDE MANAGEMENT
Amounts incurred for Demand-Side Management are deferred and amortized on a straight-line basis over
the anticipated 15 year period of benefit of the program. Demand-Side Management programs are designed
to reduce the energy requirements on the Company’s system. Demand-Side Management costs include
materials, direct labour and applicable portions of support costs, equipment costs, and incentives, the
majority of which are not eligible for capitalization. Costs relating to identifiable tangible assets that meet
the capitalization criteria are recorded as property, plant and equipment.
FIRST NATIONS PROVISIONS & COSTS
The First Nations Costs regulatory account includes the present value of future payments related to
agreements reached with various First Nations groups. These agreements address settlements related to the
construction and operation of the Company’s existing facilities and provide compensation for associated
impacts. Annual settlement costs paid pursuant to these settlements are transferred to the First Nations
Costs regulatory account. In addition, annual negotiation costs and current year interest costs are deferred
to the First Nations Costs regulatory account.
Also, pursuant to the Company’s fiscal 2015-2016 Revenue Requirements Rate Application, lump sum
settlement payments are to be amortized over 10 years and, in fiscal 2015 and fiscal 2016, annual
negotiation costs, annual settlement payments, and current year interest will be expensed from the First
Nations Costs regulatory account in the year incurred.
NON-CURRENT PENSION COST
Variances that arise between forecast and actual non-current pension and other post-employment benefit
costs are deferred. In addition, actuarial gains and losses related to post employment benefit plans are also