British Columbia Analysis

Plenty of cracks in B.C. government's claim of hydro rate freeze

With heavy debt and possible Site C cancellation, hard to say if freeze would be permanent

Justin McElroy - CBC News

November 10, 2017

BC Hydro has been asked to apply to the B.C. Utilities Commission for a rate freeze for the 2018/2019 fiscal year. (CBC)

"Today is a good news day," said Michelle Mungall, B.C.'s Minister of Energy, on Thursday as she faced the media after her government announced it was freezing BC Hydro rates, effective April 2018.

It was meant to be a good news day, because by freezing Hydro rates, the government was delivering on a key campaign promise.

ADVERTISEMENT

 

But as Mungall responded to questions, it became clear Hydro rates aren't actually frozen yet, and even if they eventually become frozen, they could easily be followed by increases in the near future.   

Rather, the government is requesting the B.C. Utilities Commission freeze rates. But there's no telling whether it will, given Hydro's uncertain financial situation.

"We're working with BC Hydro collaboratively on taking steps on how we [freeze rates] so we can save ratepayers $150 million," she said, adding that Hydro will amend its yearly application to the utilities commission, so what was previously a three per cent increase becomes a zero per cent increase.

What that means is the decision on whether rates become frozen will be made by the independent utilities commission, following the request of BC Hydro — in theory, an arms-length Crown corporation.

Greens unimpressed

​When in opposition, the NDP complained the B.C. Liberals politicized B.C. Hydro and ignored the utilities commission. 

This, said Mungall, was different. 

"Our concern with the previous government is they did not show the respect they should have for the BCUC. It's an independent regulatory body. It works in the interest of ratepayers. We want to respect that process," she said.  

It was an argument that failed to impress Green Party leader Andrew Weaver, who said the NDP should have been clearer that a rate freeze wasn't guaranteed.  

"It's okay to admit that you made a mistake. Everybody understands that you might have inadvertently not provided enough information. Just say that," Weaver said.  

"If [the] BCUC says yes to the application from BC Hydro, and there's no submissions, and they're allowed to be independent, then perhaps rates will be frozen. But that doesn't make catchy headlines."

The Site C Dam location is seen along the Peace River in Fort St. John, B.C. (Jonathan Hayward/Canadian Press)

Hydro's messy long-term future

Another salient point from the government's announcement is that the rate freeze request is only for one year.  

"The rate freeze will provide government the time to undertake a comprehensive review of BC Hydro," the government said in a statement.

"That review will identify changes and cost savings to keep rates low while ensuring BC Hydro has the resources it needs to continue to provide clean, safe and reliable electricity."

A one-year freeze gives the government flexibility in case that review shows future increases are needed — and given BC Hydro's finances, they might be.

After all, it had an estimated $18.1 billion in debt as of last fiscal year, and Moody's Investors Service has warned the government's credit rating is at risk if Hydro can't get its finances under control.

And Hydro has already said that a 10 per cent hike in rates would be needed if the controversial Site C dam was cancelled. 

And if the dam goes forward, what happens if construction costs continue to escalate, as warned by the utilities commission? And could a rate freeze — which would remove $150 million from Hydro's revenues — add to Hydro's financial precariousness, and make it tougher for the government to reduce debt held in deferral accounts? 

"There's a variety of questions," said Mungall. "At the end of the day, we committed to British Columbians to make life more affordable to them. This is going to be big savings in their pockets." 

It was just last weekend that Premier John Horgan, in front of an adoring crowd at the annual NDP convention, reminded supporters that tough decisions were ahead

Those decisions will come.

For now, ministers can continue to declare "good news days" as campaign promises are worked towards.

With files from Megan Thomas

ABOUT THE AUTHOR

Justin McElroy
@j_mcelroy

Justin is the municipal affairs reporter for CBC Vancouver, covering political stories throughout the Lower Mainland.

Start the day smarter
Get the CBC News Morning Brief, the essential news you need delivered to your inbox