Hydro paid bonuses for non-existent profit
Auditor general’s report discovered millions of dollars in deferred debts
B.C. Hydro executives have taken home hundreds of thousands of dollars in bonuses based on profits the province’s auditor general says didn’t really exist.
Senior Hydro officials have their performance bonuses determined in part by the corporation’s ability to turn a profit.
But auditor general John Doyle’s scathing report on the Crown corporation’s finances, released Friday, showed Hydro actually lost money recently, and managed to show a profit only by deferring hundreds of millions of dollars in expenses to the future using debatable accounting methods.
Nonetheless, the corporation paid out sizable incentive-plan bonuses to its CEO, vice-presidents and chief financial officer.
In 2009-2010, five senior executives shared $528,856 in bonuses tied to financial performance, including pre-defined targets in net income, return on equity and other financial benchmarks.
Executive vice-president Bev Van Ruyven collected the largest bonus, at $124,928, which pushed her total salary and compensation package to $505,939. Former CEO Bob Elton received $107,936 in bonuses as part of a $749,213 compensation package.
Those incentive-plan bonuses were based in part on a target of $452 million in net income for B.C. Hydro, with a return on regulatory equity of 12.54 per cent.
However, B.C. Hydro actually lost $249 million that year, Doyle noted in his audit. The corporation responded by pushing $696 million in expenses into a future deferral account. That created the appearance of a $402-million profit. Hydro executives then claimed their bonuses for hitting profit targets.
The practice of pushing billions in debt into the future, instead of counting it on the books each year, means Hydro shows profit where none exists and lacks a plan to pay its future bills, said Doyle.
“I haven’t made that correlation yet,” Energy and Mines Minister Rich Coleman said when asked if the Hydro executives deserved their bonuses based on the information in Doyle’s audit.
Coleman said he’s reviewing the auditor general’s report. He has defended the use of deferral accounts as a way to prevent rate increases for customers by smoothing out turbulent financial times.
The Opposition NDP said Doyle’s review is clear.
“It seems to me that there’s an overwhelming body of evidence on the table right now that would demonstrate these senior management executives have not deserved the bonuses that they’ve been receiving,” said NDP energy critic John Horgan. “That’s pretty simple.” Horgan said he’ll be raising the issue with the minister, along with concerns that Hydro’s “distorted” books affect the entire provincial budget.
Doyle’s audit showed B.C. Hydro has inflated its net income, using deferrals, since 2002.
Hydro has racked up $2.2 billion in its deferral account, with no plan to pay it off, Doyle said. The total will rise to $5 billion by 2017.
Outgoing Hydro CEO Dave Cobb, who succeeded Elton, earned $73,400 in bonuses last year, as part of a $467,641 compensation package.
Van Ruyven, who served as acting CEO as well as executive vicepresident, earned $100,715 in bonuses toward a $482,125 package.
B.C. Hydro declined interview requests Monday.
In a statement, board chairman Dan Doyle said reliability, safety, customer satisfaction and environmental performance are also factors in bonus pay.