Customers on the hook for $5.5 billion in deferred BC Hydro operating costs: report

Auditor General Carol Bellringer says BC Hydro has deferred $5.5 billion in expenses that it plans to recover from ratepayers in the future.

Bellringer focuses on the deferred expenses in a report on the public utility's use of rate-regulated accounting to control the prices it charges customers.

"As of March 31, 2018, BC Hydro reported a total net regulatory asset of $5.455 billion, which is what ratepayers owe," says the report. "BC Hydro expects to recover this from ratepayers in the future. For BC Hydro, this is an asset. For ratepayers, this is a debt."

She says rate-regulated accounting is used widely across North America, but cautions that Hydro has largely overridden the role of the independent B.C. Utilities Commission to regulate rates.

"We think it's important for the people of B.C. and our members of the legislative assembly to better understand rate-regulated accounting in order to appreciate the impact it has on the bottom line for BC Hydro, for government as a whole, for ratepayers and for taxpayers," Bellringer said in a conference call with reporters.

Last June, the B.C. government launched a two-phase review of BC Hydro to find cost savings and look at the direction of the Crown utility.

The review came shortly after a planned government rate freeze was overturned by the utilities commission, which resulted in a three per cent rate increase in April 2018.

A statement by BC Hydro and the government says a key objective of the review due this month is to enhance the regulatory oversight of the commission.

Bellringer's office will become BC Hydro's auditor next year — and will be assessing the impact of regulation on the utility's financial reporting.

"It is a complex area and confidence in the regulatory system is critical to protect the public interest," wrote Bellringer.