Skip to main content

BC Hydro is keeping rates artificially low by funnelling billions of dollars in expenses into deferral accounts, the province's auditor general says.

And the day of reckoning for ratepayers will come, Auditor General John Doyle warns, because BC Hydro has no clear plan to repay those burgeoning accounts, which now stand at $2.2-billion. By 2017, BC Hydro expects to have deferred $5-billion in expenses.

"It is a bit like using a credit card: You have to pay it off or you have lots of problems," Mr. Doyle said Thursday.

Story continues below advertisement

While the B.C. government defended the accounting tactic, Mr. Doyle says Canada is moving to new standards next year that would disallow the practice. In response, the province says it will exempt BC Hydro from the new rules rather than force its Crown corporation to book those expenses.

"The response is a disappointment," Mr. Doyle said. "I have difficulty with a province that once led the country in accounting standards and now we have to move away from Canadian accounting standards, and the transparency they are providing, and adopt an American standard which perpetuates the deferral of expenses."

By not counting some of its expenses – such as the costs of developing plans for the Site C dam – BC Hydro has been able to record higher profits. And that means the cash-strapped government, which has been struggling to eliminate its deficit, has been collecting higher dividends.

In the past 10 years, BC Hydro has paid the province more than $2-billion in dividends while its deferral accounts ballooned from $200-million to $2.2-billion.

"There does not appear to be a plan to reduce the balance of these accounts, let alone halt their growth," the auditor's report states. "If overused, rate-regulated deferrals can mask the true cost of doing business, distort the financial condition of an enterprise and place undue burdens on future ratepayers."

Energy Minister Rich Coleman dismissed the concerns, saying he is confident BC Hydro will repay the expenses once projects like Site C are completed and can bring in revenue.

"This allows us to shape certain types of events for our ratepayers," he told reporters. "As the pieces of investment come on board, they are brought into the fiscal plan of Hydro, and then the revenues associated with the improvements actually come in to support that debt.

Story continues below advertisement

"So it's a question of whether people like deferral accounts or not."

Bruce Ralston, the New Democratic Party finance critic, noted that other Canadian utilities are using deferral accounts as well, but those accounts are relatively stable.

"This technique is being abused," he said. "In British Columbia, it's out of control."

He said the province has been encouraging the practice so that it can make its own books look better.

"It distorts the financial condition of BC Hydro and it also has an impact on the finances of the province, because when you create a phony profit at BC Hydro and take a dividend, you are understating the deficit."

Report an error Editorial code of conduct
Comments

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • All comments will be reviewed by one or more moderators before being posted to the site. This should only take a few moments.
  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed. Commenters who repeatedly violate community guidelines may be suspended, causing them to temporarily lose their ability to engage with comments.

Read our community guidelines here

Discussion loading ...

Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.
Cannabis pro newsletter