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Pressure gauges in the vaporizer outlet area at the Mt. Hayes Natural Gas Storage Facility in Mt. Hayes, B.C.

Chad Hipolito/The Globe and Mail

The B.C. Utilities Commission will be allowed back in the driver's seat to set electricity rates for BC Hydro's customers, Energy Minister Bill Bennett promised Wednesday after a report blasted government for decades of cabinet interference that have undermined the watchdog's credibility.

But the independent agency won't see its powers restored just yet: The artificially low rates that have been set by the B.C. Liberal government will remain in place until after the next election.

"That's not going to change," Mr. Bennett said in an interview.

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The B.C. Utilities Commission is responsible for regulating natural gas and electricity utilities, as well as the universal, compulsory automobile insurance provided by the publicly owned Insurance Corporation of B.C. But its power to set rates and review projects has been trimmed by a government that increasingly regards the watchdog's functions as a costly and time-consuming process to be avoided.

Hydro rates were almost frozen in the lead-up to the 2013 provincial election by order of the cabinet. Months after the election, rates were again suppressed by the government. But the Crown corporation's growing debt and its need to upgrade aging infrastructure would lead to significant rate hikes if the regulator was allowed to take charge now, Mr. Bennett said.

"People have relied on our commitments [to reduce and cap rates]," he said. "For us to change course – I don't think that is what ratepayers want." Those pressures will be left to the commission to sort out in the year 2019, two years after the next provincial election.

The panel review, conducted at Mr. Bennett's request, found that the independent utilities regulator needs a credibility makeover.

"The commission needs to be strengthened, and be seen to be strengthened," the report says.

"To be effective, the BCUC needs to have credibility, public confidence, and independence within the exercise of its mandate as set by government."

The government's frequent interference in rate-setting and project approval "suggests that government may have lost confidence in the BCUC's decision-making capability and ability to implement public policy objectives," the report concludes.

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The panel delivered its report to Mr. Bennett last November, but it was only released on Wednesday. The panel also urged the government to allow the BCUC to review major projects even when the cabinet wants the final say.

While the report was sitting on the minister's desk, the government approved the $8.8-billion Site C hydro dam, the biggest of many projects that have been exempt from review by the BCUC.

The panel says there is a better way: The government can retain control on major policy decisions, but still allow the public review process to take place at the BCUC by asking for recommendations only. The authority for such a review already exists in legislation but is rarely used.

"This provides the benefit of a public process and independent verification of projects and plans but reserves the final decision on plans and projects that have broader public interest criteria to be decided by elected officials," the report says. Mr. Bennett said he would not have changed anything about the Site C decision, but will consider the review option in the future.

Adrian Dix, the NDP critic for BC Hydro, was unimpressed with the promise to give the BCUC back the authority to set rates four years from now. "They will respect the commission after the next election, why not now?"

One change Mr. Bennett is prepared to bend is his government's limits on salaries for senior executives. The report concluded that the commission cannot retain top experts in the field because of the province's compensation guidelines. A director at the commission earns $177,496 in total compensation, while equivalent executives at the corporations under the regulator's watch earn two to three times as much.

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"They don't pay the commissioners enough, they certainly don't pay the chair enough," Mr. Bennett said. "It's not a competitive salary."

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