BC Hydro looks at rate review as Deferred Debt Mounts

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What is the driving force between BC Hydro's style of operations? Clearly, it not a desire to meet needs of the province's electricity consumers.

The term "deferred expense" is used to describe a payment that has been made, but will not be reported as an expense until a future accounting period.​

In 2002, WorldCom, a company with a peak net worth of $100 billion, submitted the largest bankruptcy filing in United States history. The action followed an accounting scandal that created billions in illusory earnings. Edmonton born Bernard Ebbers, WorldCom's former CEO, is now in Louisiana, serving the tenth year of a 25-year sentence.

Fraud at WorldCom

WorldCom was accused of having inflated profits by $3.8 billion over a period of five quarters. The company undertook the massive fraud by capitalizing costs that should have been expensed. Capitalization of these costs allowed the company to spread the expenses over several years instead of recording all the costs as expense in the current period. Such deferral of costs allowed the company to report lower expenses and therefore inflated income.​

But, beyond its flawed financial reporting, WorldCom was spending huge sums to add capacity when the market was already oversupplied. Similarly, BC Hydro, despite 10 years of flat domestic demand, is proceeding with unprecedented additions to its power capacity. In addition, the utility has contracted with so much high-cost power from private producers that it has at times been forced to turn off its own low-cost generators.

Not to be forgotten is that term debt of BC Hydro is rising rapidly. With current capital projects estimated above $10 billion and with British Columbia's record of exceeding initial estimates by 100% and more, long term debt of the utility may exceed $30 billion within five years.

That borrowing is in addition to the more than $50 billion in long term energy purchase commitments.


Justine Hunter at The Globe and Mail provided BC Hydro preps for rate review. It contains this statement:

Because rates haven’t kept up with Hydro’s real revenue requirements, the corporation has been amassing debt in what it calls “deferral accounts” – those accounts will reach more than $5-billion by 2018.​

It an analysis that is less than honest. First, the deferred charges already exceed $5-billion by hundreds of million of dollars and that would have been apparent to Ms. Hunter if she'd read the 2015 annual report of the public utility. Secondly, the idea that debt and deferrals are caused because "rates haven't kept up" - as if these accounting devices have some animate existent of their own - is errant nonsense.

The reporting tricks are there to disguise actual results and facilitate transfers of "surplus equity" to government accounts. Thee Liberal Government defers BC Hydro expenses, then skims its pretend-profits to create pretend-surpluses. However, revealing that inconvenient truth would not serve groups the media wishes to serve.


Site C to be debated in BC Legislature


Site C to be debated in BC Legislature tomorrow,rally against the project to be held outside. | No Strings Attached : Laila Yuile on politics and life in B.C.

 

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Instead of building the controversial Site C dam on the Peace River, a British Columbia New Democratic Party government would spread jobs around the province by retrofitting buildings and supporting renewable energy projects, party leader John Horgan is announcing today.

The announcement provides more detail on a plan Horgan mentioned during his Nov. 7 speech to the NDP convention. "There are a whole range of options we're going to put forward," Horgan said following that speech.

At an event today at the B.C. Institute of Technology in Burnaby, Horgan was to unveil further details that included energy efficiency retrofits, upgrading existing BC Hydro infrastructure and allowing the Crown corporation to develop its own renewable energy projects.

"Energy efficiency retrofits create twice as many jobs as building a new dam, and the jobs are long-lasting, good-paying, and close to home in every community across British Columbia," said an NDP background document on the plan.

Public buildings including schools and hospitals would be eligible, with the energy-efficiency work done at the same time as seismic upgrades.

The NDP would also use a pay-as-you-save approach to encourage families and businesses to retrofit homes and commercial buildings to make them more energy efficient.

Besides retrofits, the NDP plan includes upgrades for existing BC Hydro facilities, such as building the Revelstoke Unit 6 project that would cost $420 million and add 500 megawatts of capacity.

"Across B.C., many hydroelectric dams are operating '50s-era machinery," according to the NDP. "By upgrading these turbines and transformers with modern high-efficiency technology we can increase output while protecting our farms, protecting our natural environment, and respecting First Nations land title."


The NDP would also like to make B.C. a leader on wind, solar and other renewable energy sources by allowing BC Hydro to develop such projects itself, ending the current practice of requiring the Crown corporation to buy renewable energy from private developers.

Premier Christy Clark and the BC Liberal Party have been portraying Horgan and the NDP as anti-job and anti-development because of their opposition to projects like Site C.

Horgan came out firmly against building Site C in his recent convention speech, though in an interview he allowed that the project might make more sense in 10 or 15 years if the province needs the power. The $9-billion dam project has been controversial since it will flood farmland currently protected in the agricultural land reserve, and local First Nations oppose the project saying it infringes their treaty rights.

Clark oversimplifies the issue, he said. "She wants to set up arguments about 'yes' and 'no' [on energy projects], and it's just not that simple. I think most thinking people understand that."

Horgan said the NDP energy plan, which will create jobs and power throughout the province, is "more rational" than the current government's approach. The NDP plan will create jobs "not in camps, but in communities," he said.

He would welcome a debate with Clark on the subject anytime, he said

Opposed to Site C, NDP Has a Plan B | The Tyee