Tuesday, January 27, 2015

Eventually, the piper must be paid

L.F. Copeland (1888):
Mathematics is an exact fact; figures don’t lie, but liars sometimes figure.
Financial statements of governments and crown corporations should be simple and understandable. They should be; but seldom are when the issuers would rather obscure than reveal.

I've been examining 25 years of BC Hydro Annual Reports, trying to gain an accurate understanding of the utility's financial position. I will post a number of small pieces with information that, when taken together, should provide a view of Hydro's financial performance over time and the challenges that lie ahead.

For knowledgeable people, major concerns are many but cost deferral is one subject that would be on everyone's list. BC Hydro has spent about five billion dollars and recorded the expenditures as "regulatory assets." Whether or not these items have tangible worth equivalent to the carried value is uncertain. The view of some, including me, is that massive deferrals have been an irregular accounting device to distort BC Hydro results. One purpose is to allow payment of "dividends" to government of "surplus equity." To make the payments, as we've demonstrated previously, the utility had to borrow the money.

I will write more of this subject in the future but one thing is indisputable: accounting policies of the last few years are materially different than in BC Hydro's first five decades.


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35 comments:

  1. Gordo and his gang perfected the fine art of flim-flammery, where asute accountants could so manipulate the numbers that bankruptcy, looks like profit.

    Accountants have implemented ways and means to hide debt. like the infamous derivatives, which nearly bankrupted the USA in 2008 and indeed bankrupted millions of people.

    We live in a con-artist age, solely designed to make the wealthy a lot wealthier; destroy the middle class and undertake to form a new subclass of low wage and low expectation peons.

    The perpetrators of this quasi political movement is political ennui; political ignorance; and political hubris, by the electorate. We live in an age where the hated Communist countries of old have all but disappeared, but still being called a socialist or even left of centre can mean political execution by the "Sarah Palin" level of political philosophy espoused by so many.

    The piper will be paid, but me thinks the piper debt may be paid with something more unsavoury.

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  2. Why do credit agencies allow this and or general accounting practices.?does this occur at federal level also or municipal.?

    ReplyDelete
    Replies
    1. Municipalities are charter governments, still responsible to their constituents, yes, but not sovereign: they cannot run budgetary deficits.

      Credit agencies are concerned about debt being serviced, and as long as sovereign governments like the eleven we have in Canada can raise revenues, they don't so much worry about whether debt will be paid, but more about how much interest they will charge. The BC Auditor General has characterized the BC Liberal governments accounting practices as "unacceptable" in each and every year they've been in power, which means it's impossible to tell, perhaps intentionally, what debt servicing, among other fiscal policies, is doing to taxpayers, to other citizens, BC's resource base and general economic health; by all other reputable measures, BC's economy has been performing poorly compared to the previous NDP regime in the 90s which did better despite the serious Asian Meltdown economic crisis of the time, in contrast to the worldwide economic boom in the following BC Liberal decade.

      But hey!...as far as credit agencies are concerned, it wouldn't matter if BC Liberal checkpoints were set up to shake BC citizens down for additional revenue---just as long as they service the debt...

      ...which of course includes the money the BC Liberals force BC Hydro to pay their IPP buddies' expensive, uncompetitive electricity they could never sell on the open market.

      Delete
    2. Before the last BC election I predicted the NDP would ensure the BC Liberals' misappropriation of BC Hydro was the most urgent issue raised...

      ...which means that it will be an even more urgent issue for the next election.

      Thanks for sticking with this one, Norm---we need you more than ever.

      Delete
  3. Maybe port Mann also ,at 3,600 million dollars cost,should be looked at.?

    The RCMP Commercial Crime Program's mission is to detect and prevent threats to the Canadian economy and to help ensure the integrity of Canadian institutions. The RCMP has 27 Commercial Crime Sections strategically located across the country
    http://www.rcmp-grc.gc.ca/ccb-sddc/index-eng.htm
    http://www.rcmp-grc.gc.ca/ccb-sddc/fraud-fraude-eng.htm

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  4. Sounds like BC

    http://t.thestar.com/#/article/news/gta/2015/01/26/mayor-linda-jeffrey-to-brampton-residents-expect-bad-news-in-auditors-report.html

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  5. Norm, You mentioned that a Royal Commission is the only way to get to the bottom of things. What would have to happen for this commission to get the go-ahead?

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  6. Or the Canada Line? Here we have a metro, that was first said to cost $1.3 billion, rose to $1.8 billion, then surpassed $2.2 billion and in documents in the Susan Heyes lawsuit, the cost of the Canada Line surpassed $2.5 billion, yet because it is a P-3, the public have a near impossible task of getting the true cost of the metro.

    One FOI managed to get the TransLink payment to the SNC Lavalin lead consortium that operates the Canada Line in 2013, which was $145 million, which is two to three times higher than comparable transit lines.

    On can assume that the Canada Line is not carrying the number of revenue passengers that TransLink claims, thus not getting the revenue from ridership and there is a hint that the operating consortium financed the line to a much higher degree than what the public have been told and the high payments from TransLink are paying off the cloaked debt.

    Where is Baldry, Palmer and 'NW on this one?

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  7. Over $50 billion for over priced IPP power.
    $1 billion for smart meters.
    NW transmission line $millions in cost overrun.

    "and the $5-billion mountain of debt that awaits ratepayers in so-called deferral accounts."

    http://www.vancouversun.com/news/Vaughn+Palmer+Alarm+bells+about+Hydro+spending+fail+trigger+government+action/8595334/story.html

    Plus over $ 16 billion in debt, which is more than double what is was in 2007.

    Holy crap.

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  8. Norm, I am in awe of not only the digging you are doing but it’s depth and the rapid fire pace at which you are reporting to us. It seems to me there are more and more readers (new readers) coming on board and that is a good sign. Hopefully, soon, someone with the expertise and stones will stand up and take a run at this bunch; a legal run. If it ever happens, it will be in large part, due to your hard work.

    I find, as a simple person, the numbers so staggering, and the ponzi scheme so twisted, I have a hard time sorting it out. Terms like “regulatory assets,” “dividends” and “surplus equity” just confuses me. It’s difficult to stay focused. I guess that is the intent.

    If Hydro is 5 billion in debt, or is it 16, I can’t keep track; how can they borrow money and who lends it to them?

    The more I read about this whole sordid mess, the more I am reminded of Enron in the US. http://en.wikipedia.org/wiki/Enron

    Some out takes:
    ---“it was revealed that it’s reported financial condition was sustained substantially by an institutionalized, systematic, and creatively planned accounting fraud.”
    --- “many of Enron's recorded assets and profits were inflated or even wholly fraudulent and nonexistent.”
    ---“One example of fraudulent records was during 1999 when Enron promised to repay Merrill Lynch & Co.'s investment with interest in order to show profit on its books. Debts and losses were put into entities formed "offshore" that were not included in the company's financial statements,”
    ---“other sophisticated and arcane financial transactions between Enron and related companies were used to eliminate unprofitable entities from the company's books.”

    So, who was the creator of that monster?
    Why, Richard Kinder, that’s who.
    No, surely not the same Liberal friendly donor of Kinder Morgan fame?
    Yup?

    Makes you wonder what kind of “seminars” take place up the coast on private islands with estates, golf courses and air strips. Or do they all just get together on little junkets to China or India where no one is watching?
    Hawgwash.

    ReplyDelete
    Replies
    1. I believe it is the same company that managed Enron, is managing BC hydro - Accenture IIRC. It looks like a similar thing is happening here in BC too,

      Delete
    2. Not quite that simple. The predecessor to Accenture was Andersen Consulting, which was associated with the accounting firm Arthur Andersen, once one of the "Big Five" of professional accounting and auditing companies. The two units split and the consultants became Accenture. This was shortly before news of the Enron scandal became public. Andersen was the main financial auditor of Enron so many see them as having been complicit in fraud. It is unclear if the gathering storm at Enron, and Arthur Andersen's involvement, was among the reasons for separation. The consulting group claims it was not but the words of former insiders are not trustworthy.

      The Enron scandal is an old one but it remains instructive. A more current concern is that companies like Accenture use tax havens to avoid taxation. So, we have a situation in BC where employed citizens who paid income taxes to BC and Canada were dumped so that a foreign owned company could be hired to have the same work performed by lower paid people. BC Hydro may or may not save money but what is certain is that governments collect less in taxes and merchants and manufacturers suffer from reduced demand, which in turn lowers government revenues from income and sales taxes. Was it appropriate to go through the privatization routines or did that just suit ideological purposes of Gordon Campbell and his crew? One thing is certain, it prevents the level of oversight that once existed which is a requirement for corruption.

      Delete
    3. Sounds like RBC hiring offshore; laying off local folks

      Delete
  9. https://mobile.twitter.com/publiceyeonline/media/grid?idx=1&tid=519217081699405824

    ReplyDelete
    Replies
    1. If you are not following Sean Holman on Twitter and reading his blog, you should be doing both.

      @publiceyeonline

      Sean Holman's Unknowable Country

      Compared to me Sean is a kid, but his work over the years has been an inspiration and that is only partly because of the encouragement he gave when I first began blogging in 2009.

      .

      Delete
  10. Can anyone explain? The BC Govt recently announced a balanced budget. Yet debt keeps growing. This is from:

    http://www.bcbudget.gov.bc.ca/2014/backgrounders/2014_backgrounder_1_fiscal_plan.pdf

    "The total provincial debt is forecast to be $ 64.7 billion in 2014-15, $66.9 billion in 2015-16 and $68.9 billion in 2016-17."

    ReplyDelete
  11. Accounting today sounds a lot like science today....tell me what you want,pay me lots of money and I can come up with what ever you need...absolutely disgusting if you ask me...I don't know how they sleep at night..and I realy hope some of them go to jail for what they are doing

    ReplyDelete
  12. In 2003 Gordo tried to privatize Hydro. It cost a lot of executives and senior managers their careers.
    I was told he "vowed" to make it happen "come hell or high water" and a ten year plan was put in place. Board members were changed, senior executives were vetted to be "on board" and so it began...
    The reason Hydro couldnt be privatized is that it was too big, financially strong, had minimum debt and had the support of the people.
    Fast forward to today.
    1/3 of the company was literally given to Accenture, debt - both reported and hidden - is off the scale and Hydro's reputation is on a huge slide due to yearly rate increases, smart meters, etc etc.
    VOILA
    Gordo's plan is just about complete - Privatization failed because the company was sound and respected. That is not the case anymore.
    As the entire LNG fiasco proves to be nothing more than lies....expect BC Hydro to be privatized as a HUGE cash cow for the Liberals prior to the next election.
    We are so screwed....

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  13. Does J Bateman of ctf have a glass ceiling, like won't complain above a certain point?

    ReplyDelete
  14. With Norm's approval, check out this link - class action lawsuit against BC Hydro.

    http://citizensforsafetechnology.org/Newsletter-Life--Liberty--Under-Attack-By-BC-Hydro,97,4064

    Just in case anyone didn't know about it - I was completely unaware until a couple of days ago. I am sure there are many who don't know what is happening. Well worth a visit to link.

    ReplyDelete
    Replies
    1. A previous class action against BC Hydro ended when the BC Govt made the BC Hydro/Accenture privatization deal exempt from common law.

      "(11) Despite the common law and the provisions of this or any other enactment, if an agreement is designated under subsection (9),

      (a) the authority (BC Hydro) is deemed to have, and to have always had, the power and capacity to enter into the agreement,

      (b) the agreement and all actions of the authority taken in accordance with the provisions of the agreement are authorized, valid and deemed to be required for the public convenience and necessity,"

      https://www.leg.bc.ca/37th4th/3rd_read/gov10-3.htm

      This bill is from Senator Richard Neufeld.

      Delete
  15. Dark days for BC when it's citizens have to question everything it is told.
    Manufacturing consent?

    ReplyDelete
    Replies
    1. Citizens in a democracy should always question what they are told. The dark days start when the government and the fourth estate conspire not to offer anything for question.

      Delete
  16. I don't know how many of your readers saw Mark Hume's piece on "Site C won't stifle independent power projects... (says Bill Bennett.)" It was last Tuesday and I just came across it this week.

    There are many great comments following the article — but my favourite was from BCGuy99: "... agreeing to purchase independent power at mini-bar prices"! I love the visual imagery there.

    http://www.theglobeandmail.com/news/british-columbia/site-c-wont-stifle-independent-power-projects-bc-energy-minister-says/article22530480/

    (BTW: posting this via Firefox on my Mac, as Safari still makes comments vapourize when I click on "publish." You may be missing some good comments from readers because of this.)

    ReplyDelete
    Replies
    1. Just FYI, running Safari here and there's never been a problem.

      Delete
    2. About 1/3 of visits come from people using iPads or other devices involving the Safari browser so I don't know why it should be a singular problem. I've not heard from others with difficulty posting comments other than the ones who are rude or spreading obvious misinformation.

      Delete
  17. Visits aren't the problem... it's the posting comments — though I see that Lew has no trouble. I'll try this on my new Mac mini and latest software. Here we go... Nope... didn't work. Nor the iPad, nor my wife's Macbook Air. All Telus high speed wireless internet. Trying again, (copying my message before pressing "publish."

    Message got zapped... so now I've pasted it into my newly-downloaded Firefox on my Mac mini. Here we go: (seconds later... good sign, I have made it to the Captcha screen, which no Safari in the house has permitted...)

    ReplyDelete
  18. Maybe we can find an answer in The Google. A quick search shows you are not alone but I haven't seen a certain solution.. Here is one discussion:

    http://gggiraffe.blogspot.ca/2012/10/technical-question-commenting-in.html

    Google is the corporation behind the Blogger platform that I'm using here and I've been working on a switch to an independent website that uses another platform. Google seems to be putting few resources into Blogger and they are an arrogant company to deal with. Nearly every contact is handled by a robot and a dissatisfied user is ignored in nearly every case. Their "support" is largely users communicating with other users.

    Unfortunately, the competing services have got a different set of problems. Google at least knows how to provide a secure system with pretty decent spam filtering.

    ReplyDelete
    Replies
    1. http://www.johnlarge.co.uk/2013/01/26/problems-posting-comments-on-blogger-from-ios-ipad-safari-and-chrome/

      Delete
    2. Thanks Norm. I didn't think I was crazy! (Not sure how Lew has gotten through on Safari, though...)

      Delete
    3. Lew probably is using a different version of Safari. I'll try using the browser on my wife's iPhone.

      Delete
  19. Safari Version 7.1.3 (9537.85.12.18)

    ReplyDelete
    Replies
    1. Hmm... 6.1.6 on my old Mac tower — and 8.0.2 on the new machines. Lew is in the groove, I guess. (Don't upgrade!)

      Delete
  20. BC Hydro STANDING OFFER PROGRAM Program Rules, Version 2.5, November 2014

    BC Hydro’s Standing Offer Program (the “SOP”) encourages the development of new small and clean or renewable energy Projects throughout British Columbia. The SOP was developed to streamline the process for selling electricity to BC Hydro, and to simplify the contract, called the Standard Form Electricity Purchase Agreement (“EPA”), between BC Hydro and the Developer.

    The SOP is also intended to decrease transaction costs for Developers while remaining cost-effective for ratepayers, and embodies the principles and policies set out in the BC Energy Plan and the Clean Energy Act.

    Point of Interconnection (POI)

    Base Price by Region

    Region of POI
    Base Price
    (2010$/MWh)
    Vancouver Island 102.25
    Lower Mainland 103.69
    Kelly/Nicola 97.02
    Central Interior 99.26
    Peace Region 94.86
    North Coast 96.17
    South Interior 98.98
    East Kootenay 102.18

    ReplyDelete
  21. Another argument against the flooding of Site C agricultural land is the low Canadian dollar. Fruit and veggies will be more expensive due to drought in California and the low dollar.

    ReplyDelete

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