Common Sense Canadian
 

Kicking the Can Down the Road, BC Hydro Style – Billions in Bogus Accounting Revealed

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Posted October 29, 2011 by Erik Andersen in Economics
BC Auditor General John Doyle recently caught Hydro covering up $2.2 Billion in liabilities, with no plan to pay it back except jacking up your power bills
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This month (October 2011) The Auditor General of British Columbia presented his report to Government titled “BC Hydro: The Effects of Rate-Regulated Accounting”. For most folks this is not be a gripping story they will want to master. That of course is exactly what your Government is counting on.
 
To get everyone’s attention here are in his words the financial dimensions of the issue. “As of March 31, 2011, a net total of $2.2 billion in expenses had been deferred and, by government’s own estimate, the balance is predicted to grow to nearly $5 billion by 2017″. Since this is a total of deferred expenses one could add current total liabilities and get per capita liability for everyone in BC in 2017 of $4,600 at a minimum. That is for BC Hydro liabilities alone.
 
The Auditor General’s Report describes what the “Regulatory Asset Account” is about. Theoretically it is about smoothing large incomes and expenses across several years. As used by BC Hydro it has been about exaggerated use of credit to fund questionable expenditures.
 
Perhaps a personal analogy might help. Let’s say that in 2006 your house was assessed at $124,840 and you were carrying a mortgage of $65,420 plus credit card/overdraft debt of $42,350. Your real job produced $27,270 before income tax and HST. Your creditors knew that your dad was a good credit risk and in fact had co-signed your mortgage and credit lines.

Now fast forward to 2011. Your house has an assessed value of $194,790 and you have used your new equity and your dad’s credit standing to re-mortgage to $106,320 plus you now have $59,000 of short term debt. In that 5 years you have managed increase your income from your day job to $34,380. Over the five years you have also managed to run up extra expenses of $22,000 which your dad is on the hook for and you have to tell him the amount will increase for certain by $30,000 more 5 years out. Your creditors are okay with this because you have convinced them that the $22,000 and extra $30,000 of future income will materialize because you own a business that is in fact a monopoly.
 
The above values are taken from BC Hydro’s Annual Reports, only the decimals are moved. The guarantor (AKA dad) in BC Hydro’s case is every citizen of BC.
 
Since 2005 when the “Regulatory Asset Account” was zero, about $4.4 billion of expenses have been designated as accounts receivable from rate payers in BC. As the Auditor General mentioned about $2.2 billion remains today. Brace yourselves for higher rates needed to pay this off and more.
 
Erik Andersen; Economist
 

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About the Author

Erik Andersen

Erik Andersen is a retired economist who practiced as a transportation economist with the Canadian Transport Commission; with Airports Branch, Transport Canada; with ICAO and at private corporations such as Pacific Western Airlines. More recently he has been lobbying Federal Ministers to reform the way Canada Pension Plan Investment Board invests pension funds. He has been using his talents of late to expose the calamitous fiscal impact of private power companies on British Columbians.

4 Comments


  1.  
    Andy Sinats

    I’ve wondered where the liabilities of BC Hydro had gone, since the meetings with Hydro to stop the powerlines on Lasqueti back in the late 1970’s.
    I didn’t know the term Ponzi scheme back then, but it applies to what we learned back then, namely that the debt of BC Hydro then was $7,000 per capita. The only way for them to make the payments and interest was to roll it into the future by borrowing new money for new projects like dams.
    For years I couldn’t understand where this liabilty had disappeared to, and now here it is.
    I think it incentivizes projects now planned like Site – C, and “smart meters” because it allows new borrowing. Also I bet that the debt amount is understated and part of it has evaded scrutiny.




  2.  
    Jack Masterman

    There must be a better method of paying persons in Public Service. Perhaps a formulized wage where several factors are added and mulitiplied by a factor. IE, education, responsibility, danger, discomfort, life expectancy, etc. X a factor = median wage. 10% down for probationary entry level and 10% up for journeymen.

    Bonuses should not be allowed in public service. The wage they are hired at is their renumeration. The pension scheme should be looked at and modified to the same type of pension most people in private industry receive.

    The directors of large corporations should be held accountable to the shareholders. If a shareholder vote is taken and there is reason to question the wage structure of senior management then legal action can be taken against the directors. There is no one worth the money and bonuses paid to CEO’s of some corporations. It is stealing from the shareholders. They are hired at a salary to do the job. Bonuses should not be paid.

    I see the frustration building in the majority of workers. Why should so few control most of the wealth of the country. What is it in the U.S. 1% own 52% of the wealth.




  3.  
    Wayne

    A clear example of why there are so many protests and overthrown governments around the world these days!





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