There's more public oversight ahead for BC Hydro operations, but its financial outlook remains decidedly mixed.
As illustrated in the power utility’s recent third-quarter financials, domestic sales and demand are either down or marginally up.
The export market outlook for the relatively high-cost producer is also challenging.
The good news for B.C. residents and ratepayers is that the province’s BC Hydro review released in February resulted in recommendations that will improve third-party oversight of BC Hydro costs and rate increases via the BC Utilities Commission.
The province also accepted auditor general Carol Bellringer’s recommendation that BC Hydro be required to adhere to International Financial Reporting Standards and stop using the rate-smoothing regulatory account (RSRA) that exempts Crown corporations from adhering to tighter accounting rules for deferring debt and restricted revenue.
The result for Hydro in its 2018-19 annual report is an operating loss of $428 million from a $1.1 billion RSRA writeoff.
More concerning in the annual report are flatlining sales for residential, light industrial, commercial and large industrial customers.
Capital investment outlays, meanwhile, have jumped to $3.8 billion in 2018-19 compared with $2.2 billion in 2014-15. Hydro’s $10.7 billion Site C dam is a key factor here.
The ongoing shutdown of major industrial customers such as lumber mills in B.C. raises more doubts about the prudence of that investment.
Retired B.C. government public servant Richard McCandless also notes that even though BC Hydro’s annual free cash flow over the past five years has been negative, the provincial government has continued to squeeze dividends from it. That has benefited government budgets at the expense of BC Hydro’s.
Instituting independent third-party oversight of regulatory accounts and pulling the plug on the RSRA shell game should increase clarity around BC Hydro operations and reduce politicized presentation of its finances.
The truth might hurt in the short term, but the result in the long term should be better-informed BC Hydro budget decisions.