Auditor general a must read

B.C. auditor general John Doyle's Report Six for 2011/12 is a masterpiece of professional decorum.

Not only does the document say as much between the lines as on them, it is easy to understand. Sited at bcauditor.com/pubs/ subject/finance, it should be required reading in postgraduate curriculums and for candidates seeking office at any level of government.

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Overall, this report on audits of "150 separate government organizations" paints a disturbing picture of ongoing financial and accountability deficiencies. It cracks open closed doors and tells us what it can about how things are being managed - or mismanaged - inside not just the provincial government, but also our Crown corporations and other government-grown and controlled agencies.

As I read, I focussed on three items: BC Hydro, the Port Mann Bridge project and the games being played with provincial accounting standards.

Today's column will continue the in-play Hydro story, with discussion of the others to follow.

I have long believed that BC Hydro, our one remaining major Crown asset, is being systematically destroyed by a provincial government hell-bent to complete its privatization agenda.

The Campbell-Clark blueprint for action is distressingly similar to the one that succeeded against BC Rail in 2003: manipulate the accounts into a deficit position, persuade British Columbians the corporation is dysfunctional and sell it off for pennies on the dollar.

The first step taken against Hydro also occurred in 2003 when Accenture Business Services (ABS) was awarded a 10-year contract to provide some of the corporation's administrative functions. That accomplished, the Liberals began tackling the other twothirds of the corporation.

After setting artificial deadlines in their Clean Energy Policy, the Liberals forced Hydro to negotiate long-term contracts with independent power producers (IPPs) that no sane company would have entertained.

Was it ongoing financial fallout from those contracts that caused president and CEO Dave Cobb to react testily to televised media questions about the negative review of the corporation by senior provincial officials?

An Aug. 20, 2011 Vancouver Sun article by Chad Skelton reported that one day after releasing a feel-good letter to Hydro customers on Aug. 11, Cobb was more forthcoming in a conference call with his demoralized staff.

According to Skelton, and relevant to Doyle's audit, Cobb was recorded on tape saying he expected Victoria to soon end its current energy self-sufficiency policy, a move that would free Hydro from buying hundreds of millions of dollars worth of electricity that it doesn't need from independent power producers.

This long-overdue admission adds fuel to the fire of Doyle's observation that "Accounting by rateregulated entities such as [BC Hydro] continues to be a significant issue.

If government had not been permitted to defer certain expenses [its] annual deficit would have been approximately $450 million higher this year."

As economist Erik Andersen has explained previously in this column and elsewhere, Hydro's regulatory asset accounts are camouflage for spending on credit with the expectation that future revenues will be available to cover the debt. "The lender grants the reckless credit, knowing it is guaranteed by an indulgent government that has the capacity to cover the loan by forcing others to pay up when needed," he said.

So if Cobb's optimism does not prove out, and if the auditor general continues to be ignored, paying up would mean hefty bills for British Columbians. Electricity rates would have nowhere to go but up and the interest on debts will be impressive.

But there's an unhappier side to the story: the fate of Hydro employees whose jobs are being axed.

We may never know whether the writing arrived on the wall after ABS lost out to the Telus bid for the post-2013 contract. Nor do we know how much effect the $930-million Smart Meter programme is having on Hydro's IT department.

Suffice it to say that the Sept. 30 Thanksgiving gift for 72 employees in the Burnaby Data Centre was an emailed pink slip.

I could not discover whether any North Shore residents numbered among the 72, but more than 300 terminations are yet to come from the Lower Mainland, with another 400 from around the province.

Never mind, energy minister Rich Coleman has assured about 27 IPP companies that in-force electricity purchase agreements are secure. Presumably that would include four in-force contracts awarded in March 2010 to Finavera Renewables Inc. - the IPP led by two former ABS executives.

Now that's job protection par excellence. So where do we go from here?

Do we leave provincial politicians to work furiously as they set up BC Hydro for a complete takeover - by Telus or whomever else?

Do you care?

You should, because the real danger is this: Once our public assets have been dealt away to a private corporation we have absolutely no control over their destiny.

The energy services British Columbians depend on will be vulnerable to bankruptcies, mergers/acquisitions, or outright sales to foreign interests.

We're already part way there.

Our auditor general has done the tough sledding on the financials; it is up to us to run with the ball from here.

rimco@shaw.ca

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