Toronto, September 24, 2012 -- Moody's Investors Service has affirmed the Baa1 senior unsecured rating for FortisBC Inc. (FBC), the A3 senior unsecured and A1 senior secured ratings of FortisBC Energy Inc. (FEI), the A3 senior unsecured rating for FortisBC Energy (Vancouver Island) Inc. (FEVI) and the Baa2 senior unsecured rating for FortisBC Holdings Inc. (FHI). The outlook for all four is unchanged and stable.

RATINGS RATIONALE

FortisBC Inc.'s Baa1 rating reflects the low risk nature of the utility where over 95% of its operations are regulated and the few unregulated operations relatively low risk. FBC self generates about 45% from its hydroelectric generation and the balance is met through contracts with BC Hydro and Brilliant Power, other small power purchase contracts and spot market purchases. BC Hydro assumes all of FBC's hydrology risk beyond the 50 year norm via the Canal Plant Agreement.

FortisBC Energy Inc.'s A1/A3 ratings reflect the relatively low risk nature of its regulated natural gas transmission and distribution business with its low reliance on industrial customers. This is offset by its relatively weak financial metrics compared to similarly rated U.S. peers that is largely a function of the lower deemed equity and allowed ROE permitted by BC regulations. The financial metrics are balanced by the generally supportive business and regulatory environment in British Columbia.

FortisBC Energy (Vancouver Island) Inc.'s A3 rating reflects its regulated cost of service operations in a small market that has had a history of strong government and regulatory support which has offset its high cost of service. With cessation of royalty revenues from the province in 2011, cash flow and the resulting financial metrics are expected to be weaker in 2012. We expect this to be short-lived with FEVI either merging and amalgamating rates with FEI or increasing its rates to offset the lost royalty revenue. The amalgamation application is currently in process with the BCUC.

FortisBC Holdings Inc.'s Baa2 senior unsecured rating reflects the ratings of its two natural gas distribution subsidiaries, FEI and FEVI, and the structural subordination of FHI's debt to that of those subsidiaries combined with the existence of regulatory ring-fencing separating FHI from its principal operating subsidiaries. FHI has largely replaced its external debt with intra-group borrowings from its parent Fortis Inc. which is payable on demand. Moody's does not expect Fortis Inc. to exercise that demand right.

Overall, Moody's views the business and regulatory environment in British Columbia as generally supportive for natural gas and hydroelectric utilities. As noted, the lower business risk has offset relatively weak financial metrics. Recent changes to the province's energy policy, perceived rate "fatigue" and political intervention into the regulatory process are negative factors that we expect to stabilize without materially affecting our assessment.

WHAT COULD CHANGE THE RATINGS UP

A change in the regulatory environment that would increase the allowable ROE and/or the deemed equity component would enable these regulated issuers to improve financial metrics and bring them more in line with their North American peer group. This would remove the major impediment limiting upward movement in the ratings.

WHAT COULD CHANGE THE RATINGS DOWN

Government intervention in the regulatory process that would place downward pressure on financial metrics would cause us to reassess the qualitative elements in our rating analysis which have been considered as particularly strong factors for BC's regulated utilities. Alone, or in combination with a significant negative change to the generic cost of capital or risk premiums currently under review, this would place downward pressure that would likely be sufficient to move ratings down.

The principal methodology used in this rating was Regulated Electric and Gas Utilities published in August 2009. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

Headquartered in St John's, NL, Fortis Inc. is the largest investor owned distribution utility in Canada serving more than 2 million natural gas and electricity customers. Its regulated operations in British Columbia comprise natural gas transmission and distribution through its wholly owned subsidiary FortisBC Holdings Inc.'s operating companies: FortisBC Energy Inc., FortisBC Energy (Vancouver Island) Inc. and FortisBC Energy (Whistler) Inc. (not rated); and its wholly owned vertically integrated hydroelectric utility FortisBC Inc.

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David Brandt VP - Senior Credit Officer Infrastructure Finance Group Moody'sCanada Inc.70 York Street Suite 1400 Toronto, ON M5J 1S9 Canada(416) 214-1635William L. Hess MD - Utilities Infrastructure Finance Group JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653 Releasing Office: Moody's Canada Inc.70 York Street Suite 1400 Toronto, ON M5J 1S9 Canada(416) 214-1635(C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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