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B.C. Hydro has accumulated a US$4.2-billion (C$5.5 billion) pile of so-called deferral accounts as a result of political pressure from provincial governments to keep rates lower than they need to be so the company could cover its operating expenses, the Globe and Mail reports citing Auditor-General Carol Bellringer.
“BC Hydro was not allowed to charge its customers enough to cover its operating costs each year,” the official said. As a consequence, now every household customer of the utility represents some US$980 (C$1,300) of the total debt, with commercial and light industrial customers representing another US$7,500 (C$10,000), and large industrial customers representing some US$3.77 million (C$5 million) each.
The current NDP government has promised to fix the problem. According to the acting minister in charge of the utility, Bruce Ralson, the government has already managed to reduce the deferred accounts burden by over US$700 million (C$950 million) by moving the sum directly onto government accounts.
“It would be wrong to promise overnight change, but we have changed direction,” Ralson told the Globe and Mail. The official added "We are going to keep rates affordable. No one’s rates are going up by $1,300 in a year.”
It was this ambition to keep rates affordable that led a number of past governments to resort to deferral accounts for decades in a bid to avoid price hikes that could create disgruntlement among the electorate.
The current government, however, has said it will restore the British Columbia Utility Commission, the local industry regulator, to its lead role and will make sure B.C. Hydro follows the example of other utilities across the country and resumes using ordinary accounting practices that do not include deferral accounts.
The Auditor-General, however, is skeptical. “The ability of BCUC to regulate BC Hydro and its regulatory accounts remains hampered by government direction,” Bellringer said, adding that she would prefer to see some results first to believe the good intentions are leading to something material.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.