The sa国际传媒 government has finally 鈥檉essed up 鈥� those sa国际传媒 Hydro dividends are not really dividends after all. It鈥檚 time politicians stopped playing shell games with the public鈥檚 money.
Energy Minister Bill Bennett has made a start. Hydro has paid billions of dollars to the province over the past decade, ostensibly to allow taxpayers 鈥� who are also the shareholders 鈥� to share in the utility鈥檚 profits, but Bennett says most of that money was borrowed. He says it鈥檚 an unsustainable practice and has committed to change it in 2018, a year after the next election.
It has been a long time coming. In 2011, John Doyle, auditor general at the time, investigated the financial workings of sa国际传媒 Hydro and said Hydro and the government should change their ways.
The NDP government decided in 1992 that sa国际传媒 Hydro should provide a fair share of its revenues to British Columbians, and so the practice of taking dividends from the utility began.
A dividend is normally considered to be a distribution of a corporation鈥檚 profits to its shareholders, but Hydro鈥檚 profitability has been an illusion.
Doyle criticized the Crown corporation for pushing off costs into 鈥渄eferral accounts鈥� so it could show annual profits that didn鈥檛 actually exist.
For instance, the corporation lost $249 million in the 2009-10 fiscal year, said Doyle, because expenses exceeded revenue. But Hydro was able to defer $696 million in expenses, thereby letting it claim a $447-million annual profit.
鈥淭hey are spending more than they鈥檝e got, they are paying out money to the province, and, as a consequence, the financial management of sa国际传媒 Hydro is being masked by these transactions,鈥� Doyle said then.
The government defended the practice as a way of avoiding sharp rises and falls in electricity rates. If natural gas prices spike briefly, pushing up the cost of power production, the corporation is able to defer some of the expense and 鈥� theoretically 鈥� cover it in a future year when gas prices fall.
But Doyle said the practice was being abused. The Crown corporation was deferring debts with no plan to pay them off when they came due, he said.
Energy Ministry data show that Hydro has paid $5.2 billion in dividend payments since 1992, nearly two-thirds of which was borrowed money. That means Hydro鈥檚 current debt of $15.4 billion would have been about $3.2 billion less if it had not been forced to pay dividends to the government.
While turning Hydro into a cash cow was an NDP initiative, Bennett admits the sa国际传媒 Liberals were quite willing to continue the practice.
The money from Hydro allows the government to borrow less for capital projects, such as hospitals, schools and roads, but that鈥檚 just kicking the problem down the road, with interest accruing the more it鈥檚 kicked. It鈥檚 like using your credit card to pay off your bank loan.
In being party to sa国际传媒 Hydro鈥檚 debt deferrals, the government is deferring the political pain it would risk from raising taxes or reducing spending.
That鈥檚 short-sighted and disingenuous 鈥� what we don鈥檛 pay in taxes, we will pay in higher electricity rates. The government isn鈥檛 robbing Peter to pay Paul, it鈥檚 robbing Peter to pay Peter.
Bennett鈥檚 plan is to slowly wean the province off Hydro payments. The dividend will be reduced to zero between 2018 and 2020, and will not be resumed until the corporation鈥檚 debt-to-equity ratio improves, says the government.
Better late than never. It鈥檚 acceptable for the government to require sa国际传媒 Hydro to share its profits, but it鈥檚 wrong to insist the corporation continue to make payments to the government when profits don鈥檛 exist.
