A retired civil servant who served at senior levels, Richard McCandless is an articulate advocate for the public interest. As he has done before, Richard offers unique commentary below.
Citizens should be astonished by his statement that BC Hydro’s “net income is almost fully insulated from the vagaries of actual revenue and expenditures.” Indeed, the utility books revenues not received or owing to it and treats incurred expenses as if they are assets.
This brings to mind Dr. Harry Swain’s comments about how British Columbia’s government chooses to ignore generally accepted accounting principles when they are inconvenient. Swain says deferral accounts are normal in the utility business but usually are short term variables that amount to 6 or 7 percent of equity. For BC Hydro, that would be between 275 and 320 million dollars.
Instead, the company was hiding more than $6 billion of expenses and phantom revenue as “regulatory assets” at December 2016. This, and the $2 billion unrecorded royalty credits owed gas producers, allowed Liberals to claim it operates with balanced budgets.
The following is the work of Richard McCandless.
With all the current concern about the cost/benefit equation of the Site C project, interested parties are reminded that the long running BC Utilities Commission review of BC Hydro’s April 2016 to April 2018 rate increases is nearing completion.
Interveners must final their final arguments by June 13th, and BC Hydro has until July 4th to file its rebuttal. My final argument, attached, was filed today.
The rate increases of 4% for 2016, 3.5% for 2017 and 3% for 2018 have been ordered by cabinet. In fact the corporation’s net income (profit) for the three years was ordered by cabinet OIC 590 in July 2016.
As I noted in my submission, because of the myriad of deferral mechanisms, the net income is almost fully insulated from the vagaries of actual revenue and expenditures: “the layered directives have become so complex and interconnected that calculating how all interact has become more important than forecasting sales and costs. Actual revenue and expenditures are no longer relevant in calculating the annual rate requirement; they are more relevant to calculating the increase in BC Hydro’s debt.” (page 2)
It now appears that by July the New Democratic Party will form the government. The NDP has promised an early review of BC Hydro’s finances. Given this, I have recommended that the BC Utilities Commission only approve those aspects to the three year rate proposal that are required under current legislation and cabinet directives.
Categories: BC Hydro