BC Hydro users on the hook for $2.2B: auditor general
Published Thursday, October 27, 2011 7:25PM PDT
The provincial auditor general says that future BC Hydro ratepayers could be forced to deal with $2.2 billion in debt that the utility has "deferred" into special accounts.
John Doyle released his report examining the practice of rate-regulated accounting Thursday, and expressed alarm about the utility's financial management.
"There does not appear to be a plan to reduce the balance of these accounts, let alone halt their growth," the auditor general said in a release.
"While the use of rate-regulated accounting is acceptable under existing Canadian generally accepted accounting standards, it can mask the true cost of doing business, create the appearance of profitability where none actually exists, and place undue burdens on future ratepayers."
BC Hydro's deferred expenses are expected to climb to $5 billion within the next six years, according to government estimates.
Rate-regulated accounting lets companies defer revenues and expenses to future years. According to the auditor general, the utility has used deferral accounts to cover things like foreign exchange gains and losses, negotiations with First Nations and environmental compliance.
Doyle says that deferring expenses has allowed BC Hydro to record higher net income and the province to receive higher dividend payments.
Sometime in the next year, Canada will adopt international financial reporting standards, which do not allow deferral accounts, but Doyle says the B.C. government is considering not moving BC Hydro to the new standards.
"It concerns me that government is willing to override the due process that is involved in the setting of Canadian accounting standards, and instead legislate an accounting result that will have a significant impact on both the financial statements of BC Hydro and the province," the auditor general said.
NDP finance critic Bruce Ralston says he's troubled by BC Hydro's accounting practices.
"It's out of control, it's escalating, there's no plan to get out of it. It distorts the financial condition -- the real financial condition -- of BC Hydro and it also has an impact on the finances of the province," he told CTV News.
But Energy Minister Rich Coleman is defending the use of rate-regulated accounting, saying it's employed by electrical utilities in other provinces.
"It's a question of whether people like deferred accounts or not. They're used across the country," he said.