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McQUARRIE - More smoke and mirrors

September 7, 2016 4:18 A.M.

SOME READERS may recall last week’s use of the phrase, “smoke and mirrors” when describing the fiscal attributes of our current provincial government.  I think I may have also used the term “Game of Cons,” a slight play of words on the fantasy series, Game of Thrones.

A few gentle readers, feeling as they do about the incredible competency and fiscal responsibility of our provincial government, were less than amused with my choice of words.  Others though were pleased that throughout the entire column not once did I mention the federal conservatives or provincial liberals by name.  However, that will change in today’s column as I present one, I repeat, just one of those Game of Cons and I’ll start the story with the NDP.

You see, back in 2001 when Gordon Campbell led the Liberals to victory, the NPD left his incoming government with a BC Hydro deferral account pegged at $200 million.  That was $200 million of debt that at some point would have to be recognized and the new Liberal government was quick to point fingers and cry shame on those NDP money tricksters.

Deferral accounts you see are used by many utilities and were originally set up as a way of smoothing out the ups and downs of the cost of energy.  Think of it as a shock absorber that spreads the recognition and recovery of the expense over a couple of accounting periods. 

It’s also a way of making things look better than they really are, especially if you’re in need of some extra cash from a crown corporation to say, help balance a provincial budget.

Deferral accounts have this amazing ability to hide or at least bury in massive amounts of paper work, expensive decisions.  You can postpone the reckoning and therefore the accountability and Gordon Campbell’s Liberals were about to teach the NDP a thing or two about deferral accounts… that is, right after they finished telling anyone who would listen that the NDP were deferral account bandits of the highest order and $200 million was an obscene amount of money.

Turns out though that $200 million was chump change and the Game of Cons had begun in earnest and was to be practiced at a whole new level.

Under Campbell’s hand, BC Hydro deferral accounts (note the plural now) were used for a number of reasons and rate instability was the least of those.  As a political tool, they could be used to postpone – not moderate – scheduled rate increases.

According to John Doyle (then Auditor-General) these deferral accounts were also a great accounting weapon, uniquely suited to and deployed on projects like the Site C damn.  In a recent article in the Vancouver Sun, they note a similar practice in programs such as Smart Meters, employee pension payouts and in settlements with First Nations.

In every one of those cases, the money had been spent.  That part could not be delayed.  What had been delayed and still is was the recognition of those expenses and therefore a true accounting of where BC Hydro and therefore we the ratepayer and taxpayer stood.

So where do we stand?  Well, the demonized $200 million incurred by the NDP has swollen to $6 billion under the Liberals.  Yes, that is a ‘B’ as in billions not millions.  Which begs the question… how balanced would our provincial books be if today we had to recognize $6,000,000,000.00 in expenses? 

Much like that peculiar and odd acting relative that no one in the family wants to talk about, the Province has some dark little secrets too.

Bill McQuarrie is a Kamloops entrepreneur. He can be contacted at billmcquarrie@gmail.com. He tweets @mcrider1.

Salal says:
September 9, 2016 07:58pm

Pity the government taking over. They don't stand a chance with the debt load and the long term, locked in IPP contracts. The latest ones have been for sixty years. And here I thought Christy's twenty-five year Petronas contract was as bad as it could get. She's certainly deserving of a legacy.

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Karen Goodings says:
September 9, 2016 01:30pm

Thanks for this article. How can I validate your article in order to stave off any comments about sour grapes re: deferral accounting.

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Jane says:
September 8, 2016 06:13pm

"Fudge-it budget", anyone? This meme took the Socred/BC Liberals far in 2001. Yet on their own books they've more than doubled the provincial debt. Off the books, likely tripled. Where is the outrage? Where are the cutesy memes that will sweep these incompetents out of the Legislature?

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Mary says:
September 8, 2016 05:57pm

What's worse is that much of this money is being spent on projects that are unnecessary, ruining the environment, and even dangerous. I expect the corporate buddies are going to be very grateful....

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Grant G says:
September 8, 2016 02:25pm

One helluva of an accurate read....Our mainstream media has mentioned BC Hydro deferral accounts on occasion, Vaughn Palmer certainly has...Funny thing is,, those scribes merely say.."Both Political Parties do it"...

$200 million BC Hydro deferral under NDP

$6 billion under BC Liberals

Speaking of the "game of Cons"

Can you say acumen, or LNG?

http://powellriverpersuader.blogspot.ca/2016/09/justin-trudeau-christy-clark-we-are.html

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Erik andersen says:
September 8, 2016 09:46am

Thanks Bill for featuring this topic. Three years ago I tried suggesting remedial practices to the travelling gang of MLAs seeking public input for budget making.

They refused to talk about this debt as debt, they refused to talk about or entertain the notion that P3 and IPP contracts were like debt even though they were reported by Mr. Doyle as "Contingencies and Contractual Obligations" in a foot note in the Comptroller General's Annual report on the finances of BC.

Until the public is able to force discussions that include these "off-balance sheet" amounts (exactly what Enron did) our provincial finances will only continue worsening.

Take BC Hydro as an example. In 2005/6 the amount of total revenue per year was 22% of total liabilities (taken from the 2006 annual report). With that amount of cash flow the corporation managed to keep mostly current with all its operating bills in the year (little to no deferrals).

In fiscal 2016 the total revenues only managed to reach 5% of total liabilities (sum of total liabilities plus $50 billion in IPP contracts admitted to by a pervious BCH CEO). This was all the cash flow, even after a 25-35% increase in rates.

It would not be a surprise to hear that BC Hydro was considering paying contractors and employees with IOUs.

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jim says:
September 7, 2016 12:42pm

Not to worry, our Premier can return to China any time and borrow a few billions. After all just a few months ago she came home from China happy as could be, because at a secret interest rate got almost a billion dollars out of China. And lo behold we now have a balanced budget. I guess the Game of Cons has a future in BC.
Cheers

jim

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peter says:
September 7, 2016 08:34am

The question that needs both asking and answering is why is this practice accepted and/or needed.

I would suggest it is to achieve "sustainability targets" which are utterly artificial and imposed by "globalist" ideology. If you honestly believe the NDP would back away from and not embrace this toxic notion even more than the Liberals you are failing to accurately observe what is happening next door in Alberta.

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Liz says:
September 7, 2016 07:18am

Great, just another $6,000,000,000.00 in the hole, but wait, don't stop here, go and add up the deferral amounts in all other Crown Corps, Agencies and Commissions and you can easily double this amount!
Users and taxpayers get ready, yes you will have to pay more, yes a lot more in coming years to cover the spending of this Liberal government.

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