Like an alcoholic, the provincial government is promising to cut down on the amount it guzzles from the sa国际传媒 Hydro keg. Energy Minister Bill Bennett said Tuesday that as part of a 10-year plan to keep rate increases manageable and fund improvements to Hydro鈥檚 facilities and equipment, the government will start taking less in dividends in 2017 and whittle it down to zero by 2022. By the end of the first 10 years, it will save Hydro $2 billion altogether.
The change has been a long time coming. Funnelling money out of Hydro every year for government programs has left the utility with less money for capital projects.
The sa国际传媒 Liberals are not going cold-turkey, but after decades of addiction to those dividends, shaking the habit will hurt. If the province doesn鈥檛 reduce its spending by an equivalent amount, British Columbians as taxpayers will pay more to spare British Columbians as Hydro customers from bigger rate increases.
鈥淏igger鈥� because as part of the 10-year plan, hefty increases are coming anyway. The government says Hydro customers will pay 25.5 per cent more for their electricity over the next five years. Compounded, the increase is about 28 per cent.
The money is needed because Hydro needs to upgrade its generating equipment and pay down years of accumulated debt. The Crown corporation will spend $1.7 billion a year on capital projects to meet the demand and update its system. Hydro also had to pay a $750-million settlement in California鈥檚 power scandal and continues to pay for overpriced electricity from private power producers.
Those facts aren鈥檛 surprising, but the increase will be a bitter pill to swallow after the Liberals made much of rejecting Hydro鈥檚 proposal for a similar increase over two years. We鈥檙e going to end up in the same place; it will just take us longer to get there.
As it did with the smart-meter program, the northwest transmission line and other large Hydro projects, the government has largely cut the sa国际传媒 Utilities Commission out of the loop. The commission, instead of being an independent evaluator of rate increases, is getting marching orders from the province.
In this case, the government has mandated rate increases of nine and six per cent for the first two years. For the following three years, the commission gets to weigh in, but the government has instructed it to cap increases at four per cent, 3.5 per cent and three per cent. So much for independence.
It鈥檚 only in the final five years that the commission gets to set the rates. The government news release says, 鈥渁ctions by government and sa国际传媒 Hydro will ensure increases remain low and predictable.鈥� That suggests the government might put its thumb on the scales for the last five years.
While the Liberals appear to be committed to ensuring Hydro has enough money to do its job, they are still indulging in financial sleight of hand by using deferral accounts that put off debts and make the corporation appear to be profitable in the short term. The government will pay off the 20 per cent of deferral accounts that aren鈥檛 going to be paid off with rate increases, but it will create another $1 billion account to ease the pressure on rates.
Those rates have to go up, even though it will hurt consumers. Governments have played politics too often with Hydro rates, keeping them down to please customers while the corporation鈥檚 鈥渢o do鈥� list got longer. Our residential rates are the third lowest in North America, according to a Hydro Quebec study.
Weaning government off the Hydro dividends is a step in the right direction.
