BC Hydro

Hydro’s deferred costs 20x typical

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.

gob smackedCitizens 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.

BCUC BC HYDRO FINAL SUBMISSION June 8, 2017

10 replies »

  1. I might try BC Hydro’s system when I next talk to my banker. I’ll say those thousands of dollars I spent last year on food, clothing, transportation and entertainment are not gone, they’re valuable assets that benefit my future life.

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  2. Norm, could you rephrase that in common vernacular that the majority unwashed can comprehend? I’m sure it won’t be pretty and might best be unsaid, but perhaps it’ll convince some of the naysayers that Chrispy and cahoots have not always had our best interests at heart.

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  3. one way to put it would be Detroit North. If Christy ever gets out of the office of the premier Horgan may find we really don’t have any money to do much of any thing. The debts will overwhelm the province.

    CHRISTY CLARK LEAD THE PREMIERS OFFICE NOW. WE CAN’T AFFORD YOU ANY MORE. WE NEED MONEY FOR HEALTH AND COMMUNITY CARE. WE CAN NOT AFFORD TO HAVE MORE PEOPLE DIE BECAUSE OF YOU.

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    • I’d like to know more about what David Bond means by many agreements with IPPs being in default. I haven’t heard Norm speak of IPP contracts in those terms.

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      • He means that many contracts have been issued but not all suppliers have been meeting the terms for environmental protections, time and quantity of deliveries. Since our courts make it very difficult to unilaterally break contracts, the best way of dealing with the IPP situation is for BC Hydro to be very diligent about ending every one that has not lived up to obligations. Non-performance is the best way to cancel a contract but, since the Liberal Government has had a policy of encouraging private power operators, they’ve taken no significant action when terms of the agreements were broken or unfulfilled. (I’ve been told there are facilities that have not operating reliability and have been down frequently yet there has been no change to the producer’s status.)

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