When British Columbians were paying eye-watering prices for gasoline earlier this year, the BC NDP government resisted calls to cut gasoline taxes, even temporarily, and instead announced that the Insurance Corp. of British Columbia (ICBC) would cut rebate cheques.
Even electric vehicle owners insulated from high gas prices received them.
More recently, the government announced that BC Hydro will give credits on residential and commercial power bills, even though hydro rates are among the few goods and services that didn’t go up during the recent period of high inflation. Hydro rates actually went down slightly, by 1.4 per cent, in April.
And two weeks ago, Premier David Eby announced that ICBC premiums will be frozen for the next two years.
Most British Columbians probably don’t care where the money for rebates, credits and rate freezes comes from; they’re just happy to get a break at a time when almost everything costs more.
But there’s one big problem with all of this, said Richard McCandless, a former senior B.C. government bureaucrat who now blogs about public policy issues: “It’s not their call. It’s the call of the utilities commission.”
“Governments of all stripes just can’t resist using the Crowns … as ways of passing money off to residents in a non-transparent way and having some of their pet projects undertaken,” said Marvin Shaffer, a now-retired public policy professor at Simon Fraser University who was critical of the previous Liberal government’s interference with BC Hydro and the BC Utilities Commission (BCUC).
While the NDP government can take credit for putting the financial houses of ICBC and BC Hydro back in order – with Eby responsible for turning ICBC from a money-loser to a money-maker – it lately appears to be giving Crown corporations directions on spending, and kennelling the watchdog that is supposed to guard ratepayers – the BCUC.
It’s the kind of political back-seat driving that the NDP, when in opposition, accused the Liberals of doing.
“They’re using those Crowns for political purposes,” McCandless said. “They are limiting the discretion of the commission to make decisions.”
In November, the B.C. government announced a second-quarter operating surplus of $5.7 billion and $1.9 billion worth of cost-of-living measures to help British Columbians cope with high inflation.
Of that $1.9 billion, $395 million was funded by ICBC in the form of rebates and $320 million was from BC Hydro, which will take the form of credits. BC Hydro customers will receive $100 credits on their power bills; commercial customers will receive an average of $500.
ICBC is now facing a $298 million year-end shortfall, due to declining returns on its investments. While spending on rebates didn’t cause the shortfall, it does mean the Crown corporation now has $395 million less to balance its books.
As for BC Hydro, it had a windfall from electricity trade this year. Revenue from electricity exports and arbitrage was up by about $1 billion over a six-month period in 2022 compared with the same period in 2021. Typically, surpluses from electricity trade are banked and eventually may be used to lower annual rate increases.
“Ratepayers would have gotten the benefit of that surplus anyway,” McCandless said. “The way they set the rates – the utilities commission – that surplus would be used up in future rate adjustments.”
The B.C. government chose instead to direct the BCUC to approve BC Hydro bill credits.
The BCUC is ostensibly an independent regulator set up to protect ratepayers from Crown monopolies like BC Hydro and ICBC, as well as private utilities, like FortisBC, while at the same time ensuring Crowns and utilities remain financially sound.
The Opposition is in no position to criticize the NDP government’s recent meddling, because the previous Liberal government did it too, especially when it came to BC Hydro.
“With the Liberal government, I think it was even worse because they not only muddled with their finances, but they muddled with their resource plan,” Shaffer said.
As former auditor general Carol Bellringer detailed in 2019, the BC Liberal government had directed BC Hydro to undertake costly capital projects, but then intervened with the BCUC to cap the massive rate increases BC Hydro said it needed to help pay for those projects.
Capping rate hikes or handing out rebates can be politically popular, but too much government interference in the business of Crown corporations can eventually lead them into financial trouble.
Constrained from raising rates that BC Hydro said it needed, while being forced to pay the government dividends, BC Hydro resorted to deferring debt through rate regulated accounts. BC Hydro rates were kept artificially low, Bellringer said, while its debt ballooned.
The new NDP government ended up writing off $1 billion in BC Hydro debt, and vowed to take the politics out of BC Hydro decision-making and restore the BCUC’s independence.
“The old government sidelined the BCUC and made decisions forcing BC Hydro to advance its own political agenda at the expense of ratepayers,” former energy minister Michelle Mungall said in 2019.
Now it’s an NDP government that appears to be sidelining the BCUC to advance its cost-of-living spending agenda.
George Hoberg, public policy professor at the University of British Columbia, said cabinet is well within its right to give directions to Crown corporations and the BCUC. In some cases, it may be necessary.
In ICBC’s case, Eby undertook significant reforms, like introducing no-fault insurance, to rescue the Crown corporation from financial ruin.
“One of the reasons why I think Eby is able to get away with this is that he has built a lot of credibility from going in and fixing ICBC,” Hoberg said.
But there are longer-term risks with political interference in Crowns and regulators that are supposed to operate at arm’s length from government.
“If government over-interferes, it creates a risk of undermining the fiscal soundness of the entity for political gain,” Hoberg said.
“That’s a problem,” Shaffer said. “If you want to have Crown corporations, and you want them to be efficient and well-run and well-regulated through the BCUC or some other means, you can’t just go in there and play around with them the way governments do.
“It imposes added costs. It results in non-transparent distribution of funds. I just don’t think it’s good public policy.”
