As I’ve written here before, financial expert Richard McCandless is a source of intelligent analysis of public issues in British Columbia. His website, BC Policy Perspectives, pays particular attention to ICBC and BC Hydro.
Richard’s commentaries are more technical than mine but his work is helpful to anyone seeking better understanding. He also circulates occasional emails to a list of people interested in public policy.
The latest posits that future BC Hydro ratepayers will be paying excessive rates for electricity and it describes how BC Hydro financial statements have been distorted by non-standard accounting methods. These allowed the provincial government to direct payments of dividends funded by borrowing, not by real profits of the utility.
The previous government utilized three interrelated techniques to manipulate BC Hydro’s finances to achieve high net income and lower than required rate increases.
These actions included:
(a) using non-standard (“prescribed”) accounting which did not require an independent regulator to oversee the regulatory accounts
(b) a high net income target which assumed much greater risk than actually existed because of
(c) the over-reliance on deferral (regulatory) accounts which practically eliminated the risk to the shareholder’s profit target by transferring cost and revenue variances to future generations of ratepayers.
Credit rating agency S&P Global recognizes that utilities are protected from competition by government regulation and because high capital costs mean very few companies are capable of entering the sector. While utilities are typically unconcerned about competitors, S&P believes most management teams remain mindful of the benefits of limiting risk and maintaining a strong financial profile. It notes that utilities are typically downgraded by
- poorly executed strategic plans,
- stretched financial profiles from expansion,
- adverse regulatory rulings,
- or pressure from operational stumbles.
The BC Government protects BC Hydro from adverse rulings of BCUC, so that is not an issue. However, by any objective measurement, past and present BC Hydro executives clearly fail on the other three points.
With the Milburn Report soon to suggest yet more vaporous promises for effective oversight, the Horgan Government will announce continuation of the Site C megaproject.
How do I know? Because work on the project continues and the top management at BC Hydro is unchanged.
Minister Ralston and BC Hydro ought at least to have the courage to release the Milburn Report and overdue quarterly reports for Site C. The last one made public was for the period that began more than a year ago.
However, courage and transparency are not two qualities displayed in public management of British Columbia’s energy sectors.
I wrote my MLA Ronna Ray Leonard early last summer for an update on Site C costs and was advised my enquiry was forwarded to Minister for Hydro. Waited a month and asked for the information again and then was advised that due to the election they could not answer my question.
This government is doing the very same delay tactics as the previous Liberals. No accountability.
Still waiting. So is everyone.
A government can not only just get by, because they are playing with the books, but can get re-elected repeatedly the way the Liberals and NDP have done, by twisting integrity and truth into a story about low cost electricity for the people. Mean while the debts we are responsible for go through the roof while our finances go into a money pit. It is better to admit that the system isn’t working and change it. The old Socreds did this back in the early 80’s, they accepted that the public has a right to know and the public has a right to good decision making. They created the BC Utilities Commission and gave it the powers and the capability to examine the tough issues like Site C. Repeated governments have taken those decisions back behind the closed doors of cabinet.
I’m afraid we are beyond accountability and integrity. Now, the actions at all levels of government and crown corps are so bad and so incompetent that their full time job is to cover up the misdeeds until they leave their position.
Role of the opposition: everything the government is doing is stupid and we can do it better.
When opposition switches to government: all the things that were formerly bad are now better than ever and nothing needs to change.
Please remind me why we continue to have elections
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To answer your question Concerned Engineer; With elections we have the option of electing a really corrupt political party to form our Government or a slightly less corrupt political party to form our Government.. Tommy Douglas speech about fat cats and mice, comes to mind.
“This is the story of a place called Mouseland. Mouseland was a place where all the little mice lived and played. Were born and died. And they lived much as you and I do. They even had a parliament. And every four years they had an election. They used to walk to the polls and cast their ballot. Some of them even got a ride to the polls. They got a ride for the next four years afterward too. Just like you and me. And every time on election day, all the little mice used to go to the ballot box and they used to elect a government. A government made up of big black fat cats….”
The story of Mouseland: a political allegory
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Political projects just exist in a different world, where 1 + 1 = 3.
This means just about every major political mega project built has a foundation of red ink, debt, and higher taxes.
Fast Ferries comes into mind; conceived fro a 40 minute crossing from Iona Island to Gabriola Island, was inherited by the NDP after the planned crossing was cancelled, They foolishly continued to make these boats fit routes that they were nowhere close to operating efficiently or economically
The rest is history.
The original Expo line, using the proprietary ALRT system was said to be cheap to operate because it had no drivers.
Then GVRD Engineers and Managers were so shocked at the huge amounts of money this transit system was taking from the regional budget commissioned a study comparing the financial costs of moving people in the Fraser Valley region.
In 1992 study compared the annual subsidy of the four public transit modes:
SkyTrain (Expo line to Columbia St. Station): $157.63 million
Diesel Bus: $90.74 million
Trolleybus: $43.65 million
Seabus: $3.03 million
The study fell on deaf ears, especially the NDP who forced a newer version of ALRT, then renamed to ART on a route originally planned for light rail and is know known as the Millennium Line.
What is the annual subsidy for the SkyTrain light metro system? Translink hides this very well, but we do know about $110 million is paid to the SNC Lavalin/Caisse consortium operating the Canada Line, and over $250 million is paid in various subsidies to the Expo and Millennium Lines.
These subsidies come from the province, gas tax, Hydro levy, non-residential property tax and municipal property taxes and general municipal revues.
The Broadway subway is more of the same and subways both being expensive to build and to operate will drive the annual subsidy by a minimum of $40 million annually.
Site – C and just about every other government project is tainted by pixie dust and sparkle pony accounting.
A person I know told me about the secrecy surrounding route planning done decades ago for SkyTrain routes. The source was directly involved. People like him who knew the selected routes were incapable of taking advantage of the information directly but could pass along inside knowledge to agents of wealthy land speculators. There were massive profits available to organizations buying up land parcels alongside the intended transit stations and there were ways of gaining advance knowledge that could never be sanctioned in court.
I assume that the potential for ill-gotten gains has always influenced transit choices in BC. That assumption is reinforced by the fact that Socreds, Liberals and NDP have each avoided employing “value capture” as a contributor to rapid transit funding.
You are correct. The Broadway subway is a very good example and the flip flop from LRT to SkyTrain in Surrey was done for land development, where land speculators wanted to make big profits.
I could say a lot more but what one is told and what one can prove are two very different things.
This is where the mainstream media have done absolutely nothing.
Just to add to this discussion about accounting , BC Hydro has not delivered an Annual Report since about 2016. In its place BC Hydro delivers a Service Plan.
One may ask what is the difference and the answer likely lies in the legislation applicable to Crown Corporations. The legislation requires all Crown Corporations to report to the public with the Annual Report format, which in turn means having it personally signed by the Minister of Energy and the Chairman and senior executives of the Corp.. So to escape legal liability , the named parties get a free pass from the L. G. G. and by using the Service Plan. Deliberate no accountability.
A private corporation not delivering an annual report is going to face delisting from exchanges coupled with a cease trading order from the local Securities Commission.
To bad we ratepayers can’t force accountability onto BC Hydro/Government by getting a legal court order stopping trading.
Page 5 of BC Govt Contractual Obligations lists the amount owed by BC Hydro for independent power producer energy purchase agreements. For the year 2020 it is:
That’s $2.03 billion,
Click to access pa-2018-19-contractual-obligations.pdf
Hugh. The number you posted is staggering. Do you know if all these contracts leave no ownership with BC Hydro ? If no, that is a huge transferred capital and likely out of the province.