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When Fortis shareholders gather for their annual meeting in St. John’s today, they can expect good news about their company’s performance. Earnings for Fortis are up for the second year in a row and its newly acquired electricity business in the tiny Central American country of Belize is making a killing.

The bad news is that Fortis’s profitability in Belize depends on a monopoly power deal that Belizean consumer and environmental groups are now challenging in court.

In a deal struck with the Belize government in January, Fortis would be guaranteed hydro revenues of more than $500 million US over the next half-century by charging Belize consumers about twice the market rate for power, making it one of the most expensive private power deals anywhere.

The lawsuit, brought by a public interest coalition known as BACONGO, alleges the Belize government violated the country’s electricity law by approving its hydro deal with Fortis, without a proper competitive bidding process or public hearings.

Fortis is the majority owner of Belize Electricity, the country’s monopoly buyer and distributor of electricity. Fortis also owns the Belize Electric Company which operates the country’s only hydro facility, Mollejon, and wants to build the Chalillo dam upstream to boost the first dam’s output.

Even though Belize Electricity could buy cheaper power from Mexico or local producers, it opted instead to expand the Belize Electric Company’s hydro business.

Escaping responsibility

This deal also allows Fortis to profit without taking responsibility for the known financial and environmental risks associated with its hydro operations. So if anything goes wrong – if Fortis underestimates the cost of construction or overestimates the dam’s reliable output, or if the operation of the dams cause damage to people’s property or livelihoods downstream – those costs are borne by customers and taxpayers, not Fortis.

Then there’s the environmental impacts.

Fortis’s consultants have warned the Chalillo dam would cause major disruptions to wildlife and to the river’s flow and ecosystems but, under the terms of the deal, Fortis would get monopoly rights to the Macal River without any liability for environmental damages.

Belize’s Supreme Court has agreed to hear BACONGO’s case this summer. Whatever its outcome, the lawsuit sends an unmistakable message to Fortis. Wherever they do business today, Canadian multinational corporations can not expect to profit from environmentally damaging and uncompetitive projects with impunity, and without a legal battle.

Belizeans are prepared to fight to protect the Macal River and to get the competitive electricity services they deserve. Fortis should adapt accordingly.

Robert Kennedy Jr.
Natural Resources Defense Council

Gráinne Ryder
Probe International Toronto

—–Below is the original letter sent to the Telegram editor—–

Canadian power company faces lawsuit in Belize
Fortis’ hydro monopoly under attack

When Fortis shareholders gathered for their annual meeting in St. John’s, Newfoundland, this month they were treated to good news about their company’s performance. Earnings for the Canadian power company are up for the second year in a row and its newly-acquired electricity business in the tiny Central American country of Belize is making a killing. Notably, one quarter of Fortis’ total earnings came from Belize customers last year. The bad news is that Fortis’ profitability in Belize depends on a monopoly power deal that Belizean consumer and environmental groups are now challenging in court.

In a deal struck with the Belize government in January, Fortis would be guaranteed hydro revenues of more than US$500 million over the next half-century by charging Belize consumers about twice the market rate for power, making it one of the most expensive private power deals anywhere. The lawsuit, brought by a public interest coalition known as BACONGO, alleges that the Belize government violated the country’s electricity law by approving its hydro deal with Fortis, without a proper competitive bidding process or public hearings. According to Ambrose Tillett, a former electricity industry executive, Fortis used its insider position with Belize Electricity to gain "fast-track approval" for its preferred project, the Chalillo dam – a scheme opposed by environmentalists in Belize, Canada, and the United States because it would flood critical habitat for endangered rainforest wildlife.

Fortis is the majority owner of Belize Electricity, the country’s monopoly buyer and distributor of electricity. Fortis also owns the Belize Electric Company which operates the country’s only hydro facility, Mollejon, and wants to build Chalillo upstream to boost the first dam’s output.

Even though Belize Electricity could buy cheaper power from Mexico or from local producers, it opted instead to expand the Belize Electric Company’s hydro business. Currently, the Belize Electric Company sells its entire output from Mollejon to Belize Electricity for almost 10 cents (U.S.) per kilowatt-hour. And when Mollejon doesn’t work – as happens every dry season because there is too little water in the Macal River – ratepayers are on the hook, not Fortis.

Ratepayers have been hard hit by this maneuvering. While Fortis earned approximately Can$13 million from its Belize operations last year, Belizeans were paying a staggering Can$0.28 per kilowatt-hour, two to four times the power rates in neighbouring Mexico and other Central American countries.

The deal is profoundly unfair in other ways. First, it allows Fortis to profit without taking responsibility for the known financial and environmental risks associated with its hydro operations. So if anything goes wrong – if Fortis underestimates the cost of construction or overestimates the dam’s reliable output, or if operation of the dams cause damage to people’s property or livelihoods downstream – those costs are borne by customers and taxpayers, not Fortis. Incredibly, Fortis even has the option to negotiate a rate increase if, for any reason, the dam fails to provide an adequate return to shareholders.

Fortis knows the risks associated with hydro dams in the tropics are high. Lower than expected streamflow or higher than expected leakage through limestone formations in the reservoir area could mean the Chalillo dam may never produce the electricity promised. Equally problematic are higher than expected rates of flow which could jeopardize the dam structure or lead to overspilling and damaging floods downstream, and thus higher costs for Fortis customers.

Then there’s the environmental impacts. Fortis’ consultants have warned the Chalillo dam would cause major disruptions to wildlife, and to the river’s flow and ecosystems but, under the terms of the deal, Fortis would get monopoly rights to the Macal River without any liability for environmental damages. Nor would Fortis be required to make any releases from the reservoir other than for power production. If the government later decides that Fortis should release water from the Chalillo reservoir – in the event of water shortages downstream, for example – the government would be obliged to compensate Fortis for any lost production that resulted.

By shifting costs and liabilities onto Belizeans, Fortis has inflated the profitability of its company. "The deal is patently unfair to Belizeans," says Tillett, now an advisor to BACONGO. "If Fortis is unwilling to shoulder the risks and costs of its hydro dams why should Belizeans be expected to?"

Belize’s Supreme Court has agreed to hear BACONGO’s case this summer. Whatever its outcome, the lawsuit sends an unmistakable message to Fortis and other private power companies. Wherever they do business today, Canada’s multinational corporations can not expect to profit from environmentally damaging and uncompetitive projects with impunity, and without a legal battle. Belizeans are prepared to fight to protect the Macal River and to get the competitive electricity services they deserve. Fortis should adapt accordingly.

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Robert Kennedy Jr. is a senior attorney with the U.S.-based Natural Resources Defense Council, a science and law-based environmental organization.

Gráinne Ryder is policy director for Probe International, a Toronto-based environmental group and foreign aid watchdog.