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
The following table reconciles the changes in the balance of financial instruments carried at fair value on
the statement of financial position, classified as Level 3, for the years ended March 31, 2016 and 2015:
(in millions)
Balance at March 31, 2014 $ 43
Cumulative impact of net gain recognized 38
New transactions (3)
Existing transactions settled (39)
Balance at March 31, 2015 39
Cumulative impact of net gain recognized 21
New transactions (4)
Balance at March 31, 2016 $ 56
Level 3 fair values for energy derivatives are determined using inputs that are based on unobservable
inputs. Level 3 includes instruments valued using observable prices adjusted for unobservable basis
differentials such as delivery location and product quality, instruments which are valued by extrapolation of
observable market information into periods for which observable market information is not yet available,
and instruments valued using internally developed or non-standard valuation models.
During the year, unrealized gains of $22 million (2015 - $42 million gain) were recognized on Level 3
derivative commodity assets still on hand at year end. During the year, unrealized gains of $3 million (2015
- $8 million loss) were recognized on Level 3 derivative commodity liabilities still on hand at year end.
These gains and losses are recognized in trade revenues.
Methodologies and procedures regarding Powerex’s energy trading Level 3 fair value measurements are
determined by Powerex’s Risk Management group. Level 3 fair values are calculated within Powerex’s
Risk Management policies for trading activities based on underlying contractual data as well as observable
and non-observable inputs. Development of non-observable inputs requires the use of judgment. To ensure
reasonability, Level 3 fair value measurements are reviewed and validated by Powerex’s Risk Management
and Finance departments on a regular basis.