Corporate Report 2016 We’re working to meet the evolving energy needs of our customers and B.C.— safely, reliably and at the lowest reasonable cost. Contents Performance .............................. 2 Safety ............................................8 Aboriginal relations ................18 Leadership team .....................26 Area of operations ................... 3 Employees ................................. 10 Climate action ......................... 20 Board of directors ................. 28 A message from Reliability and innovation ....12 Optimizing energy use .........22 the President and CEO ...........4 Major projects ..........................14 Looking ahead .........................24 Customer service .....................6 Community investment ........16 FortisBC Corporate Report 2016 1 Performance FortisBC Inc. and FortisBC Financial highlights (in millions of dollars) Looking back at 2016 Energy Inc. do business as FortisBC. We deliver approximately 21 per cent We are indirectly wholly owned FortisBC FortisBC Inc. of the total energy consumed in by our parent company, Fortis Inc., 2015 2016 Energy Inc. 2015 2016 Electricity British Columbia, which is the most a leader in the North American electric Natural gas & energy delivered by any utility in and gas utility business. Through piped propane Net earnings $46 $49 the province. Whether delivering its subsidiaries, Fortis Inc. serves Revenues $346 $360 electricity, natural gas or propane, more than 3 million natural gas and Net earnings $151 $171 our more than 2,200 employees serve electricity customers. Revenues $1,353 $1,151 Operating approximately 1.1 million customers expenses $80 $79 in 135 communities. Performance Operating expenses $292 $295 Capital $104 $74 FortisBC owns and operates FortisBC expenditures1 Capital approximately 48,700 kilometres Energy Inc. 2015 2016 expenditures1 $460 $333 of natural gas transmission Natural gas & piped propane and distribution pipelines and 1Capital expenditures before contributions in aid of construction and including cost of removal. approximately 7,200 kilometres of electric transmission and distribution Peak day demand FortisBC gas customers2,3 FortisBC electricity customers4 (TJ) 1,074 1,334 power lines. Our energy infrastructure (Approximately 994,000 in 2016) (Approximately 169,600 in 2016) assets also include B.C.’s largest Gas volumes (PJ) 186 197 underground natural gas storage facility, two liquefied natural gas Customer satisfaction index 8.6 8.8 (LNG) storage facilities, and four 975,000 165,000 hydroelectric generating plants. 950,000 FortisBC Inc. 2015 2016 160,000 Electricity Generating 925,000 155,000 capacity (MW) 225 225 Peak demand 624 712 each year (MW) 900,000 150,000 Energy Walden (GWh) 37 2 875,000 145,000 Regulated (GWh) 3,116 3,119 Customer 850,000 140,000 satisfaction index 8.1 8.2 015 016 014 2013 2012 2012 2013 2014 2015 2016 2 2 2 2Includes piped propane customers. 3With the implementation of the Customer Care Enhancement Project on January 1, 2012, the definition of customer changed, thereby reducing gas customers by approximately 18,000 customers effective January 1, 2012. All comparative periods have been restated to reflect this change. 4Includes direct and indirect customers. FortisBC Corporate Report 2016 2 Northwest Area of operations Yukon Territories Natural gas service area Electric service area Fort Nelson Combined natural gas & electric service area Propane service area FortisBC pipeline Spectra Energy pipeline FortisBC electric transmission lines Aitken Creek Hudson’s Hope British Mackenzie Columbia Alberta Prince George Williams Lake Revelstoke PA C Kamloops Enderby Campbell River IF Whistler Lumby I Powell River Elkford C Kaslo O Kelowna C Princeton Port Alberni Nanaimo Hope Cranbrook E Vancouver A Trail N Osoyoos Victoria nited States FortisBC Corporate Report 2016 3 For years, FortisBC has been active in allowed ROE and common equity ratio assisting customers with optimizing approved in this decision will serve A message from their energy use and reducing their as the benchmark cost of capital for environmental footprint. Both natural similar utilities in British Columbia to gas and electricity customers benefit set rates. This positive decision ensured the President and CEO from energy-saving rebates that result there was no impact to FortisBC's rates in smaller bills while ensuring the and earnings and provides long-term continual improvement of efficient stability to the company. employee safety awareness and moved energy technology in their homes We made significant headway us further toward an interdependent and businesses. with many of our major projects in working environment and zero We also provide locally produced, 2016. The company broke ground preventable incidents. Renewable Natural Gas to more than on a 30,000-square-foot Kootenay We constantly strive to maintain a 7,000 customers, and natural gas Operations Centre outside of Castlegar. high level of service for our customers. for transportation incentives have Developed to replace aging facilities, Last year, FortisBC was proud to resulted in almost 1,300 natural gas the new building and warehouse accept a Surrey Innovation Award vehicles operating in B.C. However, space will bring our employees closer from the Surrey Board of Trade for the Zero Emissions Building Plan to our customers. It is set to open our Renewable Natural Gas program. introduced by the City of Vancouver its doors in 2017. The award recognizes companies in 2016 would effectively remove The $170 million Coastal Transmission for new and improved technologies energy choice for 107,000 Vancouver System project, which involves and services for Surrey residents. natural gas customers, including 100 the installation of approximately FortisBC was also recognized with schools and three major hospitals. 11 kilometres of new 36- and 42-inch a second-place E Source Utility Ad We believe customers should be able natural gas pipeline from Surrey to Award in the Best Social Media Ad to choose the energy solutions that Coquitlam, is progressing on schedule. category for our 2015 social media work for them. The right way forward Construction began this past February. contest What keeps you warm? that is through continual innovation to Our project team continues to consult encouraged customers to save energy. reduce emissions, cost-effective energy Michael Mulcahy with impacted property owners, We also accepted the 2016 Rix Award delivery, and incentives that result in Aboriginal communities, businesses for Engaged Corporate Citizenship improved efficiency standards. With the hard work, dedication and and stakeholders. The pre-construction from the Greater Vancouver Board commitment of our employees, 2016 In 2016, FortisBC received approval of fieldwork and awareness program of Trade, reflecting the dedication of was another successful and safe year our 2015 application to the BC Utilities has kicked off with project signage our employees to the communities in for FortisBC. Our business continued to Commission (BCUC) for changes to and awareness messages promoted which they live and work. show strong financial results over those the system extension policies for our through the media. of 2015. FortisBC’s electric division In 2016, the provincial government natural gas division. This means that reported a net income of $49 million The $255 million Lower Mainland approved amendments to the it will now be more affordable for new and the natural gas division reported System Upgrades, which includes Greenhouse Gas Reduction Regulation customers to connect to the system. a net income of $171 million. Capital the installation of approximately (GGRR) that increases our allowed This allows for more efficient use of spending totalled $333 million for 20 kilometres of new 30-inch natural investment by $67 million in incentives the system for all gas customers. gas operations and $74 million for gas pipeline from Coquitlam to to support the use of natural gas in electric operations. This past August the BCUC reaffirmed Vancouver, is currently on track with markets such as mine haul trucks, that our natural gas division, Fortis detailed engineering plans. There asphalt paving, marine and rail. This In 2016, we maintained a strong Energy Inc.’s, return on equity (ROE) are multiple and ongoing external increase is in addition to the previous emphasis on public safety while and common equity component stakeholder consultations with regard to total of $104.5 million allocated for continuing efforts to improve our in capital structure will remain construction impacts as a result of the incentives and stations in the GGRR. internal safety culture. We conducted unchanged. The BCUC also determined project. A limited scope of construction The amendments confirmed the B.C. our second annual employee safety that the natural gas utility will remain began in February, with the remaining government’s support for expanding the survey, where results showed that the benchmark utility for cost of construction to begin in early 2018. use of natural gas in the transportation the launch of our employee safety capital determination. Accordingly, the initiative increased the overall level of and regional LNG sectors. FortisBC Corporate Report 2016 4 Other community events included The first of BC Ferries’ new dual-fuel LNG Salish-class vessels, the Salish Orca, will enter service on the Comox-Powell River route in 2017. planting trees with Evergreen in FortisBC will provide this