B.C. Hydro rate increase is inevitable

After all, most things in life become more expensive over time, and why should your electricity costs be any different?

And yes, the B.C. government will continue to "take" money from B.C. Hydro, and why shouldn't it?

After all, the government (i.e. you and I) owns the Crown corporation, so why shouldn't it be able to dip into its bank account?

However, these questions mask the real problems facing B.C. Hydro and its customers. And many of those problems can be laid squarely at the feet of the B.C. Liberal government.

The government has been kicking B.C. Hydro around like a political football for the past decade, and as a result the corporation is showing a lot of dents and abrasions on its hide.

An internal document leaked to COPE 378, one of the unions at B.C. Hydro, suggests a rate hike of 26.4 per cent over the next two years is required to cover costs.

Those costs total about $1 billion. Here's the breakdown:

* $515 million for capital spending, amortization and financing costs.

*$160 million for "rate smoothing," which covers the rate increase that was supposed to occur last year.

* $135 million for contracts with independent power producers.

* $130 million to pay for deferred expenses.

* $65 million to cover interest and operating costs.

A closer look at those numbers shows at least half the total amount is attributable to policies of the B.C. Liberal government.

The makeup for a cancelled rate increase on the eve of the provincial election, the requirement that B.C. Hydro buy power from IPPs when it didn't need it (and at higher-than-market prices) and the deferring of expenses for years, plus the interest charged on all that, can be traced back directly to the government.

As well, some critics claim at least part of B.C. Hydro's massive capital spending plan is not needed or has not been adequately explained and defended by the corporation or the government. For example, the $1-billion smart meter installation program has never been scrutinized by the B.C. Utilities Commission because the B.C. Liberals ruled it was exempt from such scrutiny.

In fact, much of what B.C. Hydro has or hasn't done over the past decade has occurred without any external scrutiny, and that partly explains why the mess the corporation is in today is so bad.

Problems flagged years ago (putting off paying for expenses and signing more than $50 billion of dubious contracts with IPPs) have been allowed to mushroom in size and the result is the inevitable kick in the teeth to the ratepayer.

Rates should have been allowed to increase gradually over a period of time, rather than all at once. Instead, political considerations have prevented that from occurring.

During the B.C. Liberal party leadership, the reporters participating in the televised leaders debate (I was one of them, along with Vaughn Palmer of The Vancouver Sun and Justine Hunter of The Globe and Mail) deliberately chose hydro rates as one of the questions.

At that time, B.C. Hydro had already said it required a rate increase of more than 25 per cent, and all of the candidates dodged the question of whether they agreed it was inevitable rates had to be increased (to be fair, the NDP also dodged the question in the run-up to the election campaign).

And then with an election looming after that, the government again put off what had to be done because it didn't want to rile a public it was courting for vote support.

But now the day of reckoning is at hand. However, more political meddling will take place before the size of the actual rate hike is decided.

That leaked document says B.C. Hydro's financial problems can be answered three ways: a rate increase, even more deferred expenses, or a small payment to the government.

I suspect the end result will be a combination of all three, or perhaps two (the government is likely loathe to take less money when it's desperately trying to balance its budget).

But the best thing would be to send the whole mess to the B.C. Utilities Commission to sort out.

The B.C. Liberals don't like external scrutiny, but in this case, it might save everyone money.