Liberals rein in Hydro rate hike

Increase limited to 17 per cent

VICTORIA — The B. C. Liberal government has overruled the province’s independent utilities regulator to preserve Premier Christy Clark’s promise of reining in rate increases at BC Hydro.

On Tuesday, Energy Minister Rich Coleman signed two cabinet orders directing the B. C. Utilities Commission to adopt a proposal that will set the Hydro increase at 17 per cent over three years.

And yes, that means the regulator is bound hand and foot to do the bidding of the very utility it is presuming to regulate.

The provincial Liberals emasculated the B. C. Utilities Commission on Tuesday, issuing a special directive that all but terminated the independent commission’s pending hearings on a proposed 17- per- cent increase in electricity rates over three years.

“Within 30 days of this direction comes into force,” said a cabinet order issued over the signatures of Energy Minister Rich Coleman and deputy premier and Finance Minister Kevin Falcon, “the utilities commission must issue orders as follows.”

There followed a 14- item mustdo list, that was as detailed as it was heavy handed. The commission had to approve the rate increase sought by BC Hydro in every respect, as set out in a 1,500- page application.

Capital budgets. Operating costs. Rates of return. Amortization. Forecasts, even for such inherently volatile exercises as trading electricity with neighbouring jurisdictions.

After reading through the six- page directive, I half expected to discover that the Liberals were presuming to dictate rainfall, global interest rates, and the minute- by- minute fluctuations in the spot electricity market.

There was also this: “The commission may not reconsider, vary, or rescind the orders it issues except on the application by the authority.” The authority being BC Hydro — and yes, that means the regulator is bound hand and foot to do the bidding of the very utility it is presuming to regulate.

In fairness, though, the 17 per cent was not really Hydro’s idea. The Crown corporation had gone into the rate- regulation process seeking 32 per cent over three years and only scaled back on orders from the Liberals.

The Liberals were wedded to the lower target as the maximum that could be digested by the public before the next election. But the utilities commission cast that scenario in doubt by scheduling full- blown public hearings, starting in June.

In publicly reviewing the need for any rate increase, the regulator would have a free hand to revisit any number of government decisions that contributed to the dubious cost structure at Hydro. The $ 1- billion Smart Meter project, itself part of an almost $ 20- billion capital plan. The widespread and growing practice of deferring billions of dollars in current costs to future accounts. The use of those accounts to create bogus profits at Hydro, profits that are then siphoned into the accounts of the provincial government to improve its bottom line. The role played by independent power, green power and energy self- sufficiency in driving up costs at Hydro. The success of the recent cost- cutting exercise at Hydro. And other potential embarrassments.

Not likely would the process have endorsed the Liberals’ ambitions in every respect. Indeed, the commission had already signalled its independence by rejecting an application, driven by the government, to sweep the whole exercise under the carpet with a negotiated settlement.

Seeing where all this was headed, the Liberals struck. Indeed, their all-bases-covered diktat also included an unusual imposition affecting the various interest groups with standing before the commission.

Normally, they are entitled to recover from Hydro the cost of reviewing its often massive applications ( 24,000 pages including supporting material in this case) and attending the often-lengthy hearings on same.

But the cabinet capped those potential recoveries at no more than 30 days of running costs, meaning many parties will be unable to get back what they’ve invested in the 14 months to date.

And Coleman, for one, didn’t leave much doubt about the motivation in squashing both the commission and its process.

“I didn’t feel that they were recognizing the work that had been done to find the savings, and the improved procurement savings, and all of those things that would help the customer,” he told my Vancouver Sun colleague Jonathan Fowlie.

“You’ve gone through the process with the commission and they want to start having conversations about strategic directions for the company. We’re saying, ‘ No, you’re the rate people, you’re not the people who tell us how to run the company.’ ”

Let’s contrast that message with the one that Coleman, Falcon and the other B. C. Liberals took to the voters in the 2001 election platform: “Restore an independent Utilities Commission to re- regulate BC Hydro’s electricity rates.”

Coleman on Tuesday: “It came down to ... in this particular cycle, let’s stop this, let’s give them the rate because that’s what our numbers tell us.”

Lets stop this, meaning lets shut down the rate hearings, a development the government somehow neglected to mention in a guff- laden press release headed: “B. C. families to benefit from lower BC Hydro rates.”

But even when prompted Tuesday, the Liberals couldn’t quite admit what they’d just done. “We did not cancel the hearings,” said a followup statement from the energy ministry. “We have directed the utilities commission to set rates. We would expect the commission to now conclude there is no need for oral hearings.”

Right. With the verdict already dictated from the cabinet room and the prisoner sent to the gallows, no need to hold a trial.