This year’s delay in the release of B.C.’s year-end fiscal reports likely had red lights flashing in more than the offices of auditor general Carol Bellringer.
As they say in high finance circles, bad news travels slowly.
But there was some good news for B.C. taxpayers in the wake of the delay. The BC NDP government has finally acted on years of auditor-general criticism over how the provincial government has prevented BC Hydro from abiding by International Financial Reporting Standards (IFRS) when it comes to deferring revenue and debt.
North American utility industries often use deferral accounting to smooth out the effects on ratepayers of unexpected costs or windfall profits.
However, if not accompanied by an independent third-party rates regulator, it can also paper over poor fiscal performance by those utilities or the governments that oversee them and artificially improve their bottom lines.
When it comes to BC Hydro, now carrying net debt of $20.2 billion and embarked on its controversial $10 billion Site C dam project, clarity of revenue, assets and debt should be paramount because ratepayers somewhere along the line will have to pay for any miscalculations and debt accumulations, regardless of how well the Crown corporation and government play the regulatory-transfers game.
Finance Minister Carole James responded to nearly 10 years of concerns over questionable deferral of revenue and debt last week by announcing a $950 million reduction in the government’s net earnings from Hydro for fiscal 2017-18.
That’s a welcome first step, but, as Bellringer’s opinion accompanying B.C.’s 2017-18 summary financial statements notes, had the provincial government made a full adjustment for its departure from generally accepted accounting principles in the current fiscal year, its expenses would have been $4.5 billion higher.
Ratepayers can only hope that the provincial government’s BC Hydro review, announced in June, will restore honesty as a fundamental principle in the financial reporting of B.C. Crown corporations.
