BC Hydro

Masking BC Hydro’s financial condition

Analysis and commentary by Richard McCandless is incisive. He noted in a recent paper that public-sector pensions are generally well-funded.

However, there is one major exception.

You guessed it already didn’t you.

Yes, of course, it is BC Hydro.

rick 550

Table 2 shows that on 31 March 2008 the BC Hydro pension plan had a solvency ratio of 97%, but by 2017 the ratio had dropped to 75.4%. The $1.1 billion deficit was offset by close to $1.1 billion in two regulatory (deferral) accounts; without the deferral accounts BC Hydro’s equity of $4.9 billion would have been reduced by $1.1 billion.

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Beginning in 2009/10, …the BC Utilities Commission agreed to a new deferral account for the variance between the indicated (budgeted) and the actual pension liability. The scope of the deferral was widened for 2012/13 when the variance in other non-funded pension benefits was also allowed to be deferred…

It would appear that having access to a deferral account has allowed BC Hydro management to avoid reducing the pension solvency shortfall through raising the contribution levels or reducing the benefits.

It would also appear that the bond rating agencies have turned a blind eye to the large pension liability at BC Hydro…

The entire McCandless paper is linked here:

COMMENTARY Pension Solvency 9 May 2018


BC Auditor General Carol Bellringer explained deferral accounting as it should work:

Utility companies like BC Hydro often use rate regulated accounting to defer certain expenses and revenue to future years. That means customers using BC Hydro’s utilities pay rates that do not match all of today’s costs. Rather, some of those amounts can be deferred and will impact rates paid by tomorrow’s customers.

From an accounting perspective, these deferrals mean items that would otherwise affect today’s bottom line can be set aside and recognized later. Rather than increasing rates dramatically in one year (for example, to cover unusually high costs from a storm that damaged utility lines) and then lowering them in following years, rate-regulated accounting allows the company to smooth out the recovery of the costs over a longer period.

…The overall effect has been to limit rate increases, thereby increasing the deferred balance in BC Hydro’s net regulatory asset accounts. As a result, from an accounting perspective, the net earnings, equity and other comprehensive income in self-supported Crown corporations and agencies, as recorded in the Public Accounts, are overstated.

…customers will have to cover all of these deferred costs in the future…

This chart shows that under Liberals, BC Hydro stopped using regulatory accounts for rate smoothing and used them instead to hide the true state of the utility’s financial condition.

regulatory assets 550

The main purpose of deferring expenses and recording non-existent revenues was to claim profitable operation. Executives could then be rewarded with additional remuneration and government could pull “dividends” from the utility.

In fiscal years 2012 through 2017, regulatory “assets” rose $3.4 billion. Claimed profits in that period were $3.5 billion and from those, government extracted $1.4 billion.

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10 replies »

  1. What can the BC voters expect from a Trump-like character, the unethical leader Christy Clark? As Government, Clark was able to manipulate BC Hydro accounting . She was never elected by the voters to be Premier as she lost in her own riding. She lied about the events regarding the BC Governor General’s decision on her final day as Premier.
    She faked “Balance Budgets” by robbing ICBC, BC Hydro, the imaginary LNG Prosperity Fund, permitted laundered Casino money into BC Real Estate, sold B.C. Rail to insiders and sold provincial assets below cost to donor supporters.
    MLA’s pensions were supported by shares in inflated B.C. Hydro assets/evaluations and Kindermorgan -Trans Mountain shares.
    Liberal insiders said “Christy Clark would have her way by failing to reveal the truth.
    During meetings, she would invite the members to leave the room if they did not agree with her. She would then take a vote … telling the media that she had 100% support from everyone in the room.”
    The deception continues today as the top Civil Servants (the masters of delete deceit) are still running the Legislature.
    BC Hydro executives are now claiming that “the electrical buy back program is causing them to lose money” … not the bungling of the Site C Dam project.
    BC Pension Plans are holding BC Hydro shares. If Hydro fails, so do the pension plans.

    The only time Politicians are telling the truth, is when they are calling each other, “Liars!”

    Liked by 1 person

    • Keep in mind the pensions discussed here and in the McCandless paper are provincial. Federal public service have a different plan

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      • We probably shouldn’t worry anyway. Rich Coleman dismissed the Auditor General’s concerns about deferral accounts and said they’d be paid off once Site C was up and running. John Horgan has adopted that plan and will borrow another $10 billion to ensure Site C is completed and can start selling power at a loss.

        What could go wrong with a plan like that in place?

        Liked by 2 people

  2. What a crook show.
    It makes the Howe Street Boys look naive as they were not paid by the taxpayer to defraud the public trust we placed in them.
    They had to come up with the funds to defaud out of their own pocket!
    We paid these people to be clever crooks?
    It’s so stinko. It’s why its so quiet and nothing appears to be happening
    Now a new CEO,and VP for BCHydro has happened behind the curtain.
    How deep does this crook show go??
    What a terrible reputation for the province if this got out to those who consider business ought to have some integrity so to invest in it.
    What to do?
    I’d weed out the IPP projects to detail the ones where the Liberal politicians were involved, and develope new laws defining criminal collusion by politicians and prosecute forever these people.
    If we don’t have consequences for this corruption socially it means we will never learn to avoid it in the future.
    Wow an open season then for crooks!!
    Which side is the media on?
    Hugh

    Like

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