BC Hydro bookkeeping creates $2.2 risk for ratepayers, auditor general warns

Scott Simpson, Vancouver SunOctober 27, 2011 3:06 PM

Questionable bookkeeping methods by BC Hydro have put ratepayers on the hook for $2.2 billion in public debt – with no apparent plan in place to recover the money, Auditor General John Doyle warned in an audit report on Wednesday.  Doyle said that if Hydro stays with the practice of deferring large debts rather than paying them back and balancing their books each year, the total debt will swell to $5 billion by 2017.  At $2.2 billion, Hydro would need a one-year rate increase of 60 per cent to pay off the debt. At $5 billion, the increase would be 150 per cent.  He said Hydro's bookkeeping methods – as defined by the provincial government – “create the appearance of profitablity where none actually exists, and place undue burdens on future ratepayers,” according to a statement in a news release from Doyle's office.  Doyle said that the government is essentially inventing its own bookkeeping standards for Hydro's use, and that the practice also casts a cloud over the province's finances as well.  “It concerns me that government is willing to override the due process that is involved in the setting of Canadian accounting standards, and instead legislate an accounting result that will have a significant impact on both the financial statements of BC Hydro and the province.”  Doyle urged the BC Liberals to reconsider a plan that would exclude Hydro from new international financial reporting standards which do not allow for so-called “deferral accounts” that can conceal year-to-year shifts in revenue – and stave off rate increases that would otherwise keep Hydro's books in balance.  A decade ago, Hydro used deferral accounts to smooth out the bumps and drops that occur in its annual revenue as a result of year-to-year fluctuations in weather. (more)