Ratepayers may pay more if court forces BC Hydro to ‘insulate’ Indigenous investment from risk
In yet another new case before B.C. courts citing the province’s contentious Declaration Act, an Indigenous community is alleging the Crown failed in its constitutional duty to consult and accommodate them when BC Hydro only offered a standard renewal rate for the privately generated electricity it produces.
Seeking a judicial review before the BC Supreme Court, Lil’wat Nation is demanding a price equal to brand new energy projects with Aboriginal ownership, a precedent the B.C. government argues would force preferential pricing for Indigenous ventures and obligate the province to shield their investments from market risks.
The Lil’wat case is one of an unknown number of cases suing the B.C. government for not complying with its own 2019 law, the Declaration on the Rights of Indigenous Peoples Act (DRIPA), legislation intended to channel the principles of the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP) into provincial law.
Last December, the BC Court of Appeal’s Gitxaala decision found that, thanks to DRIPA, UNDRIP is the law in BC and sets the “minimum standards” for how provincial laws should be measured. The ruling stated Indigenous groups can now use the courts to challenge any provincial legislation they believe is inconsistent with UNDRIP.
This followed the August 2025 Supreme Court of BC Cowichan decision, which concluded Aboriginal title is a “senior Interest” to private property title. Both the Cowichan and Gitxaala judgements invoked DRIPA and the related 2021 amendment to the Interpretation Act, which instructs “every Act and regulation must be construed as being consistent with the Declaration.” Both laws were introduced by David Eby when he was Attorney General and later championed by him as premier. He has since referred to the “toxic” uncertainty caused by the courts, based on the laws he crafted.
Enter into that fray the Lil’wat case, which invokes DRIPA and could generate yet more volatility onto the British Columbia landscape, this time into electricity costs. As with the previous decisions, the Lil’wat case could have wider ramifications for the whole economy.
The Rockford files
Rockford Energy Corporation is an independent power producer which owns and operates a run-of-river hydroelectric facility on Brandywine Creek near Whistler BC. It is one of many companies formed at the turn of the century to sell power to BC Hydro, following government’s call to expand private sector investment in energy.
Rockford’s original contract with BC Hydro was set to expire on October 11, 2025. In the final year of the contract, BC Hydro paid $69.48 per MWh for its energy, according to public court documents.
Many of BC Hydro’s contracts signed with independent power producers in the early 2000’s have been coming up for renewal in recent years. BC Hydro developed a standardized program for renewals in 2022, partly in response to concerns raised by the BC Utilities Commission (BCUC) about the cost of this energy,
Under the scheme, for which Rockford qualifies, independent power producers could sign up for a 20-year renewal at $58 per megawatt hour (MWh) in 2023, plus an annual increase of half the rate of consumer price inflation thereafter.
The BCUC accepted BC Hydro’s approach as being “adequate” for planning purposes, noting that specific renewal contracts still had to be filed for acceptance under section 71 of the Utilities Commission Act.
BC Hydro says it has signed 11 renewals under the program, all approved by the BCUC.
Dynamics between BC Hydro and Lil’wat get rocky
The Rockford hydroelectric facility sits on land claimed by Lil’wat and Squamish Nations. In 2023, Lil’wat acquired 51 percent of Eco Flow, which in turn owns 100 percent of Rockford.
Rockford and Lil’wat refused BC Hydro’s standardized renewal terms, noting that the winning proponents of BC Hydro’s 2024 Call for Power, which like Rockford have Aboriginal ownership, will receive an average of $86 per MWh.
To allow negotiations to continue, BC Hydro agreed to enter into a new contract, approved by BCUC, after the original contract expired. However, negotiations appear to have broken down, and on Mar. 10, Lil’wat and Rockford filed a petition in the Supreme Court of BC.
Lil’wat and Rockford accuse BC Hydro of not consulting Lil’wat about the renewal program and failing to “accommodate their interests.” Their claim is based on Section 35 of the Constitution Act, Section 3 of DRIPA, and the seminal 2004 Haida decision, which found the Crown (which includes BC Hydro) has a duty to consult and accommodate Indigenous groups if its conduct “might adversely affect” Aboriginal rights or title.
The accommodation Lil’wat and Rockford are seeking is a higher price for their energy than they would receive under BC Hydro’s standard contract renewals program. They argue that BC Hydro’s “take it or leave it” approach is not appropriate for the Crown when consulting with Aboriginal groups.
Lil’wat claims that without a higher price it won’t be able to finance its continued ownership in the hydroelectric project, causing it to be unable to support “the social and economic objectives of the Lil’wat Nation from the use of its lands.”
BC Hydro rejects duty-to-consult argument
BC Hydro disagrees.
They claim they have no duty to consult Lil’wat about the Rockford contract renewal because the hydroelectric facility in question is already operating with Lil’wat’s consent and the community invested in it “well after operations commenced and after the terms of a future [contract renewal] were announced.”
They also provide evidence of meetings with both Rockford and Lil’wat during the development of the renewal program, and claim the standard renewal price was shared with them prior to Lil’wat’s acquisition of the majority interest in Rockford.
BC Hydro confirmed that they were not willing to accommodate Lil’wat by paying Rockford more than the standard renewal price. They cite the Rio Tinto decision which determined that accommodations do not “extend to adverse impacts on the negotiating position of an Aboriginal group.”
They also point out that Rockford had alternative potential buyers for its energy, including energy marketers or other utilities, such as Fortis. Or Rockford could export its product directly to the U.S., as two other independent power producers that declined the renewal program have chosen to do.
Take-it-or-leave-it approach is reasonable
In economic terms, BC Hydro’s “take-it-or-leave-it” approach to independent power producer contract renewals is reasonable.
Independent power producers have limited alternatives, as the government has chosen not to allow electricity customers in B.C. to buy from anyone other than BC Hydro—arguably poor public policy, but those are the rules of the game.
Other than selling to BC Hydro, their best alternative is probably to export the power, but most independent power producers prefer to take BC Hydro’s offer rather than go to the effort and risk of exporting power themselves.
If BC Hydro paid existing independent power producers more than their best alternative, it would be paying more than it needs to. And, more importantly, so would BC Hydro’s customers.
Rockford argues that it should receive the higher price that BC Hydro is paying to encourage investors to build new facilities in the province, but this conflates two quite different markets. While the new facilities included in the 2024 call for power must be partially Indigenous owned, that’s not why they’re receiving more for their electricity.
The cost of constructing a new facility versus operating an existing one is considerably different. BC Hydro must offer a sufficiently attractive price for investors to bring their money to the province to build new facilities at today’s costs, which are much higher than they were 20 years ago when Rockford was built. Since BC Hydro does not have the same power over global capital markets as it does over captive suppliers in B.C., it must provide higher incentives for investors to come to B.C.
For these reasons, the difference between the contract renewal price and the price of energy from new facilities makes economic sense for B.C. and its electricity ratepayers. Rockford’s argument in a letter to BC Hydro that “an electron is an electron” may work in a physics class, but it isn’t a realistic depiction of how electricity markets work in B.C.
Desire for more revenue shouldn’t be grounds for accommodation
But the petitioners’ argument isn’t based on economics. They want more money simply because Rockford is now part-owned by Lil’wat, an Aboriginal group, and they believe this entitles them to be treated differently from other BC Hydro suppliers.
BC Hydro should have a strong case. The 2004 Haida decision requires BC Hydro to consult Lil’wat if it contemplates conduct that may adversely affect its rights or title, but BC Hydro is engaging in no such conduct.
If BC Hydro had done nothing last October, the original contract would have expired, and Rockford and Lil’wat would have stopped earning revenues. Under that scenario, Lil’wat’s rights would’ve been to earn absolutely nothing from BC Hydro after October. Far from conduct adversely affecting its rights, BC Hydro enabled the community to continue earning uninterrupted revenue when Rockford’s contract expired.
Instead, Lil’wat wants BC Hydro to improve its economic position by giving Rockford a new contract at a higher price than BC Hydro needs to, or would pay any other supplier in this circumstance. Lil’wat’s desire for more money should not be grounds for consultation, let alone accommodation.
In the words of the Attorney General, the Supreme Court of Canada’s Rio Tinto decision “expressly cautioned against” conflating the principles of consultation and accommodation with commercial negotiations—exactly what Lil’wat and Rockford appear to be attempting to do in this case.
DRIPA is legal unknown
The wild card, however, is DRIPA.
In last year’s BC Appeal Court Gitxaala decision, the B.C. government’s online mineral claims registration system was found to be inconsistent with the Declaration Act and UNDRIP. It’s not a big stretch to think that court could now cite DRIPA to find BC Hydro’s renewals program inconsistent with UNDRIP too.
According to Section 19 of UNDRIP: “States shall consult and cooperate in good faith with the indigenous peoples concerned through their own representative institutions in order to obtain their free, prior and informed consent before adopting and implementing legislative or administrative measures that may affect them.”
There’s no doubt that the standard BC Hydro renewal price “may affect” Lil’wat, in the sense that it limits how much they might earn from their investment in Rockford. Previously, that might not have been convincing enough to win the case, however having UNDRIP as the minimum standard may change that.
If BC Hydro loses, province may be on hook to cover Indigenous investment risk
BC Hydro’s stance on Rockford’s contract renewal is reasonable. It must have been tempting to just pay more to make the problem go away, with ratepayers unknowingly picking up the tab.
Instead, the court will have to decide whether Lil’wat’s acquisition of an existing private business with an expiring contract requires BC Hydro to treat that business differently simply because it’s Indigenous-owned.
If Lil’wat wins this case, it could cause some pretty serious consequences. BC Hydro has contracts with over 100 independent power producers, generating approximately 25 percent of the utility’s total electricity. If each power producer is acquired by an Aboriginal group and mandated a higher rate of return, it would significantly increase electricity bills in the province.
But the effects could go far beyond electricity bills, which is no doubt why the B.C. government is supporting BC Hydro in its case. The Attorney General states in its submission that a win for Lil’wat and Rockford would effectively impose “differential costs on contracts … where Nations have invested in a business venture, and an implicit obligation to insulate their investments in such businesses from market risks.”
In other words, if BC Hydro loses this case, all B.C. government contracts are at risk of higher costs if the supplier has Aboriginal ownership, fuelling already existing economic uncertainty in the Province.
And if this happens because of DRIPA, Premier Eby will have only himself to blame.
For more news and analysis from Richard Mason on B.C.’s energy sector, read Just and Reasonable.