Similarities Abound – BC and Manitoba Hydro

Blog, Crown Corporations, Frontier Centre

The rate practices, requirements and options of BC Hydro were recently leaked to the media by the Canadian Office and Professional Employees Union (COPE), which represents the unionized staff of the utility. Apparently, senior BC public servants and BC Hydro executives ‘secretly’ huddled to consider rate requirements and options. BC Hydro’s CEO reportedly claimed that the Utility could require a rate hike of 26% over the next two years. The purpose of the meeting reputedly was to find way to reduce the magnitude of the rate hikes. As for the reasons for a need for such a large increase, BC Hydro apparently noted a need to meet the rising costs associated with the expansion and refurbishment of the Utility, along with recognizing the problems associated with the now long-standing accounting practice of ‘deferring’ expenses rather than recognizing them, which simply ‘moves’ the majority of any otherwise needed rate hike to future ratepayers.

Another option, that of having the BC government reduce its annual ‘take’ from BC Hydro, seems to have been of little interest to the government. The Vancouver Sun indicates that BC Hydro will cut back on its planned capital expenditures to relieve some of the pressure, and utilize more clever accounting to keep the rate hikes low enough to avoid a major confrontation with ratepayers. And, that once the group arrives at rate hike proposals deemed low enough to reduce pressure on the politicos they will be put before the B.C. Utilities Commission, a body appointed by the government that has been regularly ignored or bypassed by the government.

So much of the BC story is similar to the Manitoba situation that it is eerie. In Manitoba, the government relies on Manitoba Hydro for annual contributions to its overall revenue flow, while supporting the Utility’s feathering out of its expected massive rate hikes. Just like BC Hydro, Manitoba Hydro is accustomed to deferring costs already incurred to relieve the rate pressure now, only to move the rate hikes out in time, ever larger, to be assumed by the ratepayers of the future. As for ‘going  around’ the rate regulator, it seems the Manitoba government is doing even better than BC’s, as Manitoba’s PUB has been brought in to assist the government and Hydro in moving ahead its risky and costly expansion plans.  By the time the NFAAT report of PUB is out, scheduled for mid-2014, hundreds of millions more will have been spent, and commitments now being made further confirmed. The ratepayers of neither BC nor Manitoba are being well served by accounting mechanisms and a lack of openness and transparency.