How B.C. Hydro pays Grants in Lieu to Municipalities

Your comments concerning the payment of grants-in-lieu of taxes by BC Hydro are essentially correct in regards to the payments we make to municipalities for our land and building assets. The grants we will pay in 2007 are based on municipal tax (mill) rates for 2006 and on property assessed values (prepared by BC Assessment) for 2006.

For your reference, here is a more technical explanation of the three types of grants-in-lieu of taxes paid by BC Hydro to municipalities. Your comments were in regards to Item (1) below.

(1) BC Hydro pays a "general" grant that is equivalent to the previous year's tax levy for general, local improvement and regional district purposes for all fee-owned land and for only those improvements that are not used in the generation, transmission or distribution of electricity. Essentially, BC Hydro pays an amount equivalent to general municipal taxes and regional district taxes on land and on buildings (e.g. offices, warehouses, etc.). This grant is not paid on electric lines, substation switchyards or generating facilities. This grant is paid directly to municipalities and to the Province (for rural areas). This grant is authorized under provincial Order-In-Council 1218/65 and has been in place since 1965.

(2) BC Hydro pays a grant in the amount of one-percent of revenue from electricity sales in the previous fiscal year collected from customers within the boundaries of a municipality. This payment is deemed to be in lieu of taxes for the exempt improvements mentioned above (electric lines, substation switchyards, generating facilities). This grant is paid directly to municipalities and to the Province (for rural areas). This grant is authorized under provincial Order In Council 1218/65 and has been in place since 1965.

(3) BC Hydro pays a grant to those municipalities and regional districts (but not to the Province) that are impacted by BC Hydro dams, reservoirs and powerhouses. The grant payments are based on the power generating capacity of each facility. The recipients and grant payment amounts are set out in Order In Council 663/98. However, we are expecting a revision by the province this year to authorize an increase of these grant payments. BC Hydro has been paying this special grant based on generating capacity since 1989.