All the talk about the installation of smart meters has perhaps clouded an even more serious issue at B.C. Hydro – how it keeps its books.
Auditor General John Doyle recently released his latest report, B.C. Hydro: The Effects of Rate-Regulated Accounting, outlining how accounting at the Crown corporation doesn’t really paint a true picture of its finances and the fact government has no plan to address the issue.
The report examines the implications of B.C. Hydro’s use of rate-regulated accounting, which allows B.C. Hydro to establish deferral accounts into which it can “defer” expenses to future years.
As of March 2011, a net total of $2.2 billion in expenses was deferred and, by government’s own estimate, the balance is predicted to grow to $5 billion by 2017. There does not appear to be a plan to reduce the balance of these accounts, let alone halt their growth.
Rate-regulated accounting “can mask the true cost of doing business, create the appearance of profitability where none actually exists, and place undue burdens on future ratepayers,” Doyle writes.
Canada will be adopting international financial reporting standards in the coming year, which does not allow for deferral accounts. As such, expenses that are currently being deferred under rate regulation would be shown each year, bringing to the forefront the financial consequences of management decisions and highlighting the challenges that lie ahead.
But the province is considering not moving B.C. Hydro to IFRS, said Doyle.
“It is requiring B.C. Hydro to adopt part of an American accounting standard that allows rate regulation, abandoning the transparency that will be required by Canadian GAAP.”
Isn’t this the same government that, not too long ago, was talking about transparency and accountability?
– Black Press