BRITISH COLUMBIA HYDRO AND POWER AUTHORITY
financial-information-act-return-march-31-2016
financial-information-act-return-march-31-2016
Create successful ePaper yourself
Turn your PDF publications into a flip-book with our unique Google optimized e-Paper software.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS<br />
FOR THE YEARS ENDED MARCH 31, 2016 <strong>AND</strong> 2015<br />
MARKET RISKS<br />
British Columbia Hydro and Power Authority<br />
(a) Currency Risk<br />
Sensitivity Analysis<br />
A $0.01 strengthening (weakening) of the U.S. dollar against the Canadian dollar at March 31, 2016<br />
would have a negative (positive) impact of $2 million on net income but as a result of regulatory<br />
accounting would have no impact on net income and would have an immaterial impact on other<br />
comprehensive income. The Finance Charges regulatory account that captures all variances from<br />
forecasted finance charges as described in Note 13 eliminates any impact on net income. This analysis<br />
assumes that all other variables, in particular interest rates, remain constant.<br />
This sensitivity analysis has been determined assuming that the change in foreign exchange rates had<br />
occurred at March 31, 2016 and been applied to each of the Company’s exposures to currency risk for<br />
both derivative and non-derivative financial instruments in existence at that date, and that all other<br />
variables remain constant. The stated change represents management’s assessment of reasonably<br />
possible changes in foreign exchange rates over the period until the next statement of financial position<br />
date.<br />
(b) Interest Rate Risk<br />
Sensitivity analysis for variable rate non-derivative instruments<br />
An increase (decrease) of 100-basis points in interest rates at March 31, 2016 would have a negative<br />
(positive) impact on net income of $28 million but as a result of regulatory accounting would have no<br />
impact on net income and would have an immaterial impact on other comprehensive income. The<br />
Finance Charges regulatory account that captures all variances from forecasted finance charges as<br />
described in Note 13 eliminates any impact on net income. This analysis assumes that all other<br />
variables, in particular foreign exchange rates, remain constant.<br />
This sensitivity analysis has been determined assuming that the change in interest rates had occurred at<br />
March 31, 2016 and been applied to each of the Company’s exposure to interest rate risk for nonderivative<br />
financial instruments in existence at that date, and that all other variables remain constant.<br />
The stated change represents management’s assessment of reasonably possible changes in interest rates<br />
over the period until the next statement of financial position date.<br />
(c) Commodity Price Risk<br />
Sensitivity Analysis<br />
Commodity price risk refers to the risk that the fair value or future cash flows of a financial instrument<br />
will fluctuate due to changes in commodity prices.<br />
BC Hydro’s subsidiary Powerex trades and delivers energy and associated products and services<br />
throughout North America. As a result, the Company has exposure to movements in prices for<br />
commodities Powerex trades, including electricity, natural gas and associated derivative<br />
products. Prices for electricity and natural gas commodities fluctuate in response to changes in supply<br />
and demand, market uncertainty, and other factors beyond the Company’s control.<br />
The Company manages these exposures through its Board-approved risk management policies, which<br />
limit components of and overall market risk exposures, pre-define approved products and mandate
Change language