Wednesday, March 16, 2016

Erik Andersen on BC Hydro debt

This devastating information from Erik Andersen, an economist and widely recognized expert on government and Crown Corporation financing:
You will note the unbelievable increase in BC Hydro's debt since Christy Clark took over, due largely to payoffs to Independent Power Corporations who repay Christy's kindness with immense political contributions.

A case can be made that there is a positive co-relationship between total energy consumed and the economic health in the country of interest.

A reduction or flat-lining of total electricity consumption in the US is an indicator of reduced economic activity and a more miserable life style for the population. Is it any wonder that Mr. Trump is attracting such a political following when he seems to be able to express a frustration that likely has been building for a decade or so.

British Columbia is no different. Domestic electricity consumption today is exactly the same as was 10 or more years ago and that has varied almost not at all across the period. What has varied, naturally, are the rates charged by BC Hydro, globally up 30% and set to go a lot higher because of the $6 billion in deferred collections and the intension to spend $9 billion building the Site C dam.

Looking at just BC Hydro's formal debt , the increase since 2005 has been a staggering 130%. If the contractual obligations to the Independent Power Producers is added in, the total as of a year ago was $13.2 billion plus about $50 billion for a total of nearly $70 billion. when the $6 billion of deferred collections is added in as well.

So here is the Government's and BC Hydro's brilliance. The customers of BC Hydro have not needed any additional electricity for more than a decade yet all the while customer rates increased by 30% and the debt to run the crown corporation has been increased by 1,170%, from $6 billion in 2005 to $70 billion in 2015.

Breathtaking does not begin to adequately characterize these developments.

Erik Andersen
H/T Rafe Mair



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9 comments:

  1. This comment has been removed by the author.

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    1. I want to add to Mr. Andersen's comments about the billions in deferred debt that BC Hydro has been adding during recent years. My analysis of two decades of financial statements reveals they are doing something else to conceal costs of operations and create phony profits that are transferred to the province as dividends, even though the utility's need for cash is so desperate that each year's borrowings take 10 digits to describe.

      The amounts of operating expenses capitalized each year recently is without precedent in earlier BC Hydro operations. That means they transfer certain costs from operating expense accounts to property, plant and equipment. Those assets are depreciated at varying rates but most BCH assets are written off over periods that last from 15 to 100 years.

      Companies that want to show higher short term profits may capitalize expenses aggressively, particularly if there are no tax consequences. Private companies aiming to reduce current income tax payments, try to expense as much as possible for immediate write-offs and capitalize minimum amounts.

      From the financial statements, it appears BC Hydro has decided to capitalize as much as possible and thereby minimize expenses. As I indicated, what they've been doing lately is out line with years before Christy Clark was Premier.

      Consider that domestic power consumption has not changed in the past decade but the undepreciated balance of BC Hydro's property, plant and equipment has doubled from $10 billion to $20 billion. And, with planned projects, it may double again in the next decade, even though BC electricity consumers will be continue consuming quantities of electricity similar to the amounts in 2006.

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  2. So is BC Hydro, essentially "bankrupt", given that taxpayers cannot continue to fund this governments fiscal mismanagement, both with hydro and the other ongoing economic fiasco's?

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  3. It is criminal, yet no police, no investigation, nothing. No wonder people cheat, evade fares on transit, run from accidents, and deal drugs, our politicians have mastered the art of total corruption.

    Laws in BC only apply to those not elected to office.

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  4. Great work, Norm, Rafe and Erik! Thank you.

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  5. We punish petty thieves and appoint great ones to public offices.

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  6. This is obscene! Imagine if you 'balanced' your household debt like this. Would you still be able to get a mortgage? Feed your kids? You'd be in debtors prison! NO? Well, you must be a politician!

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  7. Here's a useful piece written by Ben Parfitt, which ran in The Province on Friday.

    http://blogs.theprovince.com/2016/03/18/ben-parfitt-rising-hydro-bills-pushing-mills-to-burn-fossil-fuel/

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  8. The reporters and the people that hire them {not referring to Clark & her gang backers} Media should let it be known where the only truth about this corrupt Government cannot be found is in Mainstream media and that is why readership and viewers are going Kaput!!!!!!! Loos Good on YA ?

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