Hydro’s tricky books bad news for public

When B.C. Hydro reported a profit of $447 million last year, you probably thought the Crown corporation took in more money than it spent.

When B.C. Hydro reported a profit of $447 million last year, you probably thought the Crown corporation took in more money than it spent.

Nope. On that basis, Hydro lost $249 million.

But the corporation took $696 million it had actually spent off the books. The money would be deferred, counted as an expense in some future year.

Presto, a loss become a profit. Managers get their bonuses — an average of more than $100,000 each for the five highest-paid execs.

And the government claims its $571 million dividend from B.C. Hydro.

Energy Minister Rich Coleman says this kind of bookkeeping is fine. B.C. Auditor General John Doyle says it isn’t. You decide who to believe.

Coleman would like to characterize this as an accounting dispute. But the auditor general, more convincingly, argues that the government and B.C. Hydro are abusing the use of deferral accounts, and British Columbians are going to pay a steep price in the future.

B.C. Hydro has already pushed $2.2 billion worth of expenses off into the future. It plans to increase that to almost $5 billion by 2017.

But at some point, the Crown corporation has to find that money. It has three options. Slash spending, not likely giving the rising costs of new electricity. Get a big contribution from government, also unlikely.

Or raise electricity rates sharply, a damaging choice for families and the economy

Deferral accounts have been accepted under Canadian accounting standards. The theory is that utilities can avoid rate shocks by smoothing things out over the course of a few years.

If profits increase one year because there’s a lot of rain and B.C. Hydro can rely on cheap hydro power, then it might defer some revenue for a tougher year. If spiking natural gas prices mean power costs more, it might defer some of the expense until prices fall.

But that’s not what B.C. Hydro has been doing.

If the goal was to smooth rate increases, then the total of deferred expenses would rise and fall over time. Instead, the total has just risen steadily. There was just $182 million in deferred expenses in 2005. Today, the total is over $2.2 billion and increasing. B.C. Hydro has no plan to reduce the huge balance.

Other utilities use deferral accounts. But the auditor general includes comparisons with Hydro Quebec and Manitoba Hydro in his report, which show that the amount deferred by those Crown corporations rises and falls as they use the accounts to smooth rates. Hydro Quebec, relative to its size, has deferred one-sixth as much money as B.C. Hydro.

The executive bonuses based in part on what the auditor general said were non-existent profits made headlines.

But the government has been using the same justification to take money from B.C. Hydro to cover its expenses — $3.2 billion since 2000. The auditor general reported that in six of the last 10 years, the government has collected a larger dividend from B.C. Hydro than the corporation’s net income before the deferrals.

Doyle points to a number of problems with the practice. For starters, the whole purpose of financial reporting is to provide an accurate, transparent account of the corporation’s performance. That’s not happening.

The information is also used to make decisions on investment, power purchases and other issues, and those are distorted when inaccurate information is being presented.

The government is setting itself up for future financial hits, as it is becoming dependent on revenue from B.C. Hydro that has been created through an accounting measure the auditor general says is misleading.

And B.C. Hydro will eventually have to deal with the multi-billion deferral accounts — likely by increasing rates sharply.

Doyle says the government should quit using the deferral accounts and present a plan to reduce the $2.2-billion balance, instead of continuing to increase it.

That’s good advice.

Footnote: The use of deferral accounts will become unacceptable under Canadian accounting standards after this year. But the government, which has committed to living up to the standards, plans to opt out of this provision and continue using the accounts despite the auditor general’s concerns.

willcocks@gmail.com

Just Posted

Protestors blocking Columbia Avenue Saturday evening. Photo: Betsy Kline
Old growth protesters begin 24-hour blockade of Castlegar’s main street

Members of Extinction Rebellion plan to stay overnight

Forty sled dogs were seized by the BC SPCA from a Salmo kennel in February. A recent ruling has decided the dogs won’t be returned. Photo: Gounsil/Flickr
BC Farm Industry Review Board rules against Salmo kennel after 40 sled dogs seized

Spirit of the North Kennels was also ordered to pay BC SPCA $64,000

Residents line up outside the Vernon Recreation Complex for their COVID-19 vaccine Saturday, June 5. (Jennifer Smith - Morning Star)
No appointments necessary for first dose COVID-19 vaccine: Interior Health

People can just show up at clinics, register on the spot and get the shot

SD20 now has an electric bus. Photo: Submitted
Kootenay-Columbia School District 20 adds electric bus to fleet

Bus will be incorporated into Castlegar route for next school year

Painting by Dave Davies from Shaver’s Bench facing Teck Trail.
Happy 120th Birthday to the City of Trail!

The town of Trail Creek- or Trail Creek Landing - was incorporated as a city on June 14, 1901.

At an outdoor drive-in convocation ceremony, Mount Royal University bestows an honorary Doctor of Laws on Blackfoot Elder and residential school survivor Clarence Wolfleg in Calgary on Tuesday, June 8, 2021. THE CANADIAN PRESS/Jeff McIntosh
‘You didn’t get the best of me’: Residential school survivor gets honorary doctorate

Clarence Wolfleg receives honorary doctorate from Mount Royal University, the highest honour the school gives out

Two-year-old Ivy McLeod laughs while playing with Lucky the puppy outside their Chilliwack home on Thursday, June 10, 2021. (Jenna Hauck/ Chilliwack Progress)
VIDEO: B.C. family finds ‘perfect’ puppy with limb difference for 2-year-old Ivy

Ivy has special bond with Lucky the puppy who was also born with limb difference

A million-dollar ticket was sold to an individual in Vernon from the Lotto Max draw Friday, June 11, 2021. (Photo courtesy of BCLC)
Lottery ticket worth $1 million sold in Vernon

One lucky individual holds one of 20 tickets worth $1 million from Friday’s Lotto Max draw

“65 years, I’ve carried the stories in my mind and live it every day,” says Jack Kruger. (Athena Bonneau)
‘Maybe this time they will listen’: Survivor shares stories from B.C. residential school

Jack Kruger, living in Syilx territory, wasn’t surprised by news of 215 children’s remains found on the grounds of the former Kamloops Indian Residential School

A logging truck carries its load down the Elaho Valley near in Squamish, B.C. in this file photo. THE CANADIAN PRESS/Chuck Stoody
Squamish Nation calls for old-growth logging moratorium in its territory

The nation says 44% of old-growth forests in its 6,900-square kilometre territory are protected while the rest remain at risk

Flowers and cards are left at a makeshift memorial at a monument outside the former Kamloops Indian Residential School to honour the 215 children whose remains are believed to have been discovered buried near the city in Kamloops, B.C., on Monday, May 31, 2021. THE CANADIAN PRESS/Darryl Dyck
‘Pick a Sunday:’ Indigenous leaders ask Catholics to stay home, push for apology

Indigenous leaders are calling on Catholics to stand in solidarity with residential school survivors by not attending church services

“They will never be forgotten, every child matters,” says Sioux Valley Chief Jennifer Bone in a video statement June 1. (Screen grab)
104 ‘potential graves’ detected at site of former residential school in Manitoba

Sioux Valley Dakota Nation working to identify, repatriate students buried near former Brandon residential school

The Queen Victoria statue at the B.C. legislature was splattered with what looks like red paint on Friday. (Nicole Crescenzi/News Staff)
Queen Victoria statue at B.C. legislature vandalized Friday

Statue splattered with red paint by old growth forest proponents

Most Read