Tuesday, September 23, 2014

BC Ferries costly but not innovative

A report by CBC News says that BC Ferries will equip two Spirit Class vessels to run on LNG. With minor hull improvements, annual fuel savings for the 20-year-old ships are estimated at $9.2 million. The conversion is scheduled for completion by 2018.

That will be seven years after I first complained in Northern Insight about the ferry company exercising zero innovation in developing alternative fuels for its fleet. I drew attention to Norwegian operator Fjord1, the largest operator of natural gas powered ferries in the world. In a recent update to Ferry innovation? Wazzat?, I noted that Norway is now turning to battery powered ferries for crossings under 30 minutes. They will save fuel costs and make a major reduction in GHG emissions since 99% of Norway's electricity is hydro-power.

The senior officers of BC Ferries, along with directors, commissioners and government ministers who were supposed to provide direction and supervision, may have failed at managing this vital transportation service, but they succeeded in lining private pockets with public cash removed from dependent coastal communities. The numbers shown below demonstrate that BC Ferries was floating in a pool of patronage.

The following was first published October 25, 2011.
* * * * *

I have been reviewing amounts paid senior officers of BC Ferry Services Inc. and also the amounts paid to directors. In 2009, the Comptroller General of British Columbia reviewed governance of the organization and made strong observations. The response of BCFS leaders was a collective thumb in the eye of British Columbians. In 2010, not only was the grab for cash by senior executives higher, so was the take of directors:
"BCFS executive compensation was significantly higher than that paid by several larger public sector entities. For example, the Chief Executive Officer‟s (CEO) total 2008/09 compensation was more than double that of the larger public sector comparators. We also found that the performance measures and targets used to determine the incentive bonuses for executives made the bonuses easier to attain than we would have expected.

"The BCFS Board Directors' remuneration was also higher than public sector organizations we compared against, and the retainer fee portion, which was most of the remuneration, was three to five times higher than permitted under a Treasury Board (TB) directive...

"Our concerns regarding BCFS‟ compensation are compounded by the fact the BCFS Board sets its own compensation and approves the executive compensation without accountability..."
David Hahn received supplemental pension benefits that cost BCFS $450,000 each year, in addition to the approximately $1 million a year of other earnings. (The chief of Washington State Ferries earns $148,000 a year, one tenth Hahn's level.) Totals shown below include that extra pension cost. The generosity with public funds did not stop with Hahn, the directors were rewarding themselves handsomely too, for rather little work and almost no responsibility.

Despite being the most expensively managed ferry operation in the world, BC Ferry Services has been anything but the most innovative, except for the ground breaking payments to those who should have been exercising fiduciary responsibility. Former Chair Elizabeth Harrison in particular ought to be returning a pile of money for her oversight failures.

Norwegian operator Fjord1 is already the world's largest user of natural gas powered ferries and is building a 242-car gas-electric system ship with a service speed of 20 knots. Payback on the system compared to conventional diesel is a short few years but the major advantage is clean and reliable operations.

BCFS has had a preference for doing its capital spending overseas but the company should already be working with one of the world's leaders in natural gas engine technology, here in this province. Westport Innovations has existing capabilities along with related technical contacts throughout the world. With British Columbia's abundant natural gas and its large ferry fleet, it is a serious error for BC Ferry Services to have pioneered no work in this field.

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  1. How many Directors does a company need?

    BC Ferries upper management has grown beyond belief from its earlier days.
    Yet the ship's crew have stayed the same, also the number of ships or routes in operation hasn't grown much.

  2. So true, but the board members at BCFS and countless provincial agencies are mostly there to pocket rewards for loyalty to the Liberal Party, not because they have unique skills or insights into ferry operations.

    Fundamentally, BCFS has a simple set of tasks. Read the Oct 13 article here quoting Patrick Brown of Island Tides. It sets out the ferry service purpose;

    ‘to provide safe, reliable, and efficient marine transportation for people and goods…’ while being "the most efficient and affordable, customer-focused ferry operator in the world."

  3. Too bad that some well connected LINO didn't own Westport Innovations so we could make domestic use of cheap , clean and plentiful gas from the Northeast of the province. But that would start to make sense and why would we do that when we let our only electric rail line, also with the potential to use natural gas on its mainline to be given away? Now Greg Reimer wants to "talk to Us" if we dedide not to take a smart meter?
    Great item as always Mr. Farrell.

  4. Looks like we need more directors like Geoff Plant. Why does he come in so much cheaper? Paid per-meeting-attended?

  5. I have October 25, 2018 entered into my daytimer. It will set off an alarm to remind me to buy a Sun or Province newspaper and read about this.

  6. I refer to 2018 not because of scheduled date for completion of this conversion, but because of the seven years it will take our "professional journalists" to report on Norm's salary story.

  7. The one I like is that when WSFS is held up as a comparison, i.e. the head of BCF earns more than the top 3 WSFS execs COMBINED, we are told that BCF is compelled to compare with other like systems in Canada.

    Oh, ok, sorry, how picky of us.
    Who writes this stuff?

  8. Has our intrepid reporter Mr. Baldrey called you an idiot yet ?
    BC. Ferries is but a shadow of it's former self, I've lost count of what the liberals have destroyed in this province...My mom was a long time BC Ferry employee, in the days when the politicians had to ride the ferry, Dave Barrett, always a favorite with staff and passengers so out going ,that man, so down to earth, the Socred's on the other hand usually stayed in their cars

  9. "BCF is compelled to compare with other like systems in Canada."

    That argument didn't gain any (useful) traction in the recent BC teachers' dispute. There is no similar ferry system in the rest of Canada to compare to; not in number of vessels or routes traveled or volume. Washington State is the best comparison.

  10. A ferry fleet partly powered by electricity would have been a big win last year, considering that water was dumped from hydro reservoirs without generating power. Power to charge ferry batteries would have cost the public rather little.

  11. G Barry Stewart.
    So that gives them license to do as they please.

  12. Maybe Westport got the upgrade contract?
    Also several years ago I asked Bcf why no LNG/cng.reply was coast guard regulations
    The Bcf gravy train continues because public does not complain at all.nothing to see here move along.


  13. I guess they forgot about the carbon offset tax .?
    World class I tell ya.?

  14. "New Westminster wants the province to roll back changes in utility markets which have benefited independent power producers, forcing municipalities to pay “huge utility rates,” "

    "The resolution asks Victoria for new legislation “that would permit B.C. Hydro to produce power from existing public facilities as opposed to forcing it to buy expensive power from independent producers,”


  15. It looks like David Hahn's total compensation over the 4 year period is actually $6,216,291.00 ...not the $4,297,025.00 that is listed....wow we got robbed.

    1. Indeed, you are correct and the spreadsheet formula is now corrected.

  16. Fabulous work, Norm. And of course the Board has changed now - there are other pigs at the trough. I'm thinking of Jane Bird who doubtless phones in from London where she's with DFAIT. Her chequered history includes the disaster of the RAV line and the countless businesses lost there.

  17. Who had the 100 million a year plus bunker fuel Bcf contract.?
    Sole sourced or tendered rfp

  18. I could never figure out how Gordo discovered David Hahn who was busy beavering away at Tilden Rent-a-Car (sure sounds like 'related' experience doesn't it). However, if memory serves me, he showed up as the new very expensive guy (remember when he stated on BCTV that he was worth every penny?) hired to run BC Ferries not that long after our Gordo had met with his chief advisor, Dick Cheney on primarily energy matters but generally a lesson on how to screw the BC taxpayers.

  19. If in 2001 Gordon Campbell had a plan to privatize BC Rail, BC Ferries, and BC Hydro, and then had to abandon dismantling the latter two seven or eight years along after the BC Rail privatization blew up on him, BC Ferries and BC Hydro might look much like they do today. The question is how either will ever recover

  20. Here is Christy Clark, the premier of our province, speaking as a radio show host just before leaving to run for leadership of the BC Liberals:

    “Ferry fares go up on Friday. It will be the eighth fare hike over the past five years, and this time BC Ferries says it needs to do it to find the money for rising fuel costs, and since the provincial government refuses to chip in, they’re dumping almost all of those new costs on users.

    The impact of the new fare increases? Well, according to BC Ferries latest annual report, these unprecedented fares, as they say, could result in a decline in ferry traffic, and that’s a quote. No kidding! And I’m guessing that the fares have finally gotten so high that for every dollar they raise it will actually garner less in revenue. Higher fares mean fewer passengers, so the accountants will have to subtract paying customers from every new dollar they add to ticket prices, and at this rate how long will it be before they abandon the routes where they don’t make any money? How long before the provincial government abandons their responsibility to provide a public service to many of the people who depend on the ferries to travel and ship their goods?

    Our transportation minister seems to have an insatiable appetite for funding highways if they require blacktop, and he seems perfectly at peace with providing free ferries on inland lakes in BC, but he doesn’t seem to have the same affection for our maritime highway on the coast.”

    The audio clip can be found in the CKNW audio vault for September 24th, 2014 starting at 2:26 pm.

    Contrast her comments then with what her transportation minister is now telling the UBCM in the face of their report demonstrating that what radio host Clark said was valid and quite prescient.

    “Our government has no plans to roll back any service adjustments that were made,” said Stone. “We have no plans to interfere in the independent process respecting rates, certainly for the rate increase that the B.C. ferry commissioner has set for next year.”



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