Can you blame British Columbians for being uninformed when the people delivering political news are uninformed?
$101 billion in contractual obligations is breathtaking? What is really surprising is that Toronto Globe and Mail’s BC political reporter didn’t notice before February of 2017.
On one hand, I applaud Ms. Hunter for daring to mention the subject now. On the other hand, I wonder why she previously avoided this huge issue and did not report it fully in her newspaper?
The Auditor General discusses these contractual obligations but does so with the intention of defending past treatment of the commitments:
Governments enter into contracts with third parties for various reasons. Long-term agreements to purchase services or supplies can, for example, be an effective way to guarantee government a specified quantity of goods or services at pre-determined prices.
However, agreements can also limit the flexibility of future governments to change financial operating arrangements, and the payments can become onerous if the future cost of those goods and services goes down.
The A-G neglected to say that contracts can be an effective way of guaranteeing that future governments are locked into long term purchases at prices that are a multiple of market value, from day one of the agreements.
The A-G speaks of buying services and supplies but the bulk of British Columbia’s contractual obligations are payable for healthcare, educational and road facilities and to independent power producers. These power plants were financed on the strength of contracts with BC Hydro obliging the utility to take IPP output, regardless of whether it is needed or not.
The result is worse than if BC Hydro had borrowed money directly and constructed those same facilities. In practice, with profits guaranteed, IPPs were able to take their BC Hydro contracts to bankers and secure funds needed to build generating facilities. BC Hydro took all the market risk and absorbs all the financial losses from creating power that cannot be profitably resold. Under these sweetheart deals, losses belong entirely to BC Hydro.
We can’t be surprised that the energy industry contributes generously to BC Liberals. The return on investment is spectacular.
The A-G wants us to think that contractual obligations are similar to making a fixed price agreement to buy toilet paper from one of many potential suppliers. From the private companies viewpoints, the long term power contracts were highly effective. For the public, contrary to the auditor’s comments, they are an unmitigated disaster.
Comments about contractual obligations are a disingenuous effort from Auditor General Carol Bellringer. She knows better but defends a practice that aims for deception.
A quick review of Public Accounts published for 2016 by the ten Canadian provinces reveals this information, with the per household amount calculated using Statistics Canada population and household size statistics.
Plainly, BC is way out in front of every province in Canada
But remember, government friendly pundits in British Columbia don’t want this information getting out. So, if you tell friends, say it in a whisper.