It might be a tale of two Crown corporations in a time of economic and environmental crises, but the two tales have much in common. Neither have particularly happy themes for B.C. taxpayers.
BC Hydro’s 2019-20 annual report, released in September, provides more detail on what is now a familiar story line of declining demand coupled with higher infrastructure costs and bad financing bets. BC Hydro’s sales to pulp mills and other large industrial customers dropped again in 2020. Revenue from its residential sales increased marginally, mainly as a result of higher rates. BC Hydro’s gamble on interest rate hedging has also proved to be a bad bet. As retired senior B.C. government public servant and Crown corporation watchdog Richard McCandless has pointed out, the program, meant to protect ratepayers from higher future borrowing costs, has racked up liabilities and losses of more than $1 billion. Meanwhile, the Insurance Corp. of British Columbia (ICBC) posted lower revenue from premiums and overall lower costs in 2020’s first quarter, but, as McCandless notes, the province’s beleaguered auto insurance corporation’s $1 billion improvement in its equity position compared with the same quarter in 2019 and its $100 million drop in claims were due to COVID-19’s enforced reduction in vehicle traffic on B.C. roads. McCandless adds that, without the “pandemic-related reduction in claims costs, the Q1 total would have been $1.51 billion or an increase of 17.7% over the prior year total.” That bodes ill for progress on the road to operational improvement for ICBC and any significant premium reductions for the province’s drivers. Crown corporations are facing the same market disruptions as their private-sector counterparts. The difference, however, is that the latter don’t have a taxpayer safety net to keep them in business if they make more bad business decisions than good. The bad news now for Crown corporations and the public they serve is that threadbare taxpayer safety nets can no longer afford subpar management of major public assets.