Hydro report raps corporation, government

The government’s review of B.C. Hydro and power rates was grim reading.
The initial attention was focused on inefficiency within the Crown corporation.
The review panel — John Dyble, Premier Christy Clark’s deputy minister, Peter Milbrun, deputy minister of finance, and Cheryl Wenezenki-Yolland, acting deputy minister of advanced education — found B.C. Hydro paid too little attention to controlling expenses.
Hydro has an admirable commitment to quality, reliability and safety. But it has been paying a high premium to achieve those goals, and passing the cost on to its customers.
The result, the panel said, has included overstaffing. It suggested about 20 per cent of the 6,000-person workforce could be eliminated. Compensation had not been properly managed — 99 per cent of eligible employees received performance bonuses — and the corporation had missed opportunities for savings in dealing with suppliers.
The frank, independent look was welcome, though it raises questions about the attentiveness of B.C. Hydro directors — five of the 10 have been on the board for more than two years — and past energy ministers.
The report also suggested the government’s policy orders to B.C. Hydro have resulted in large and unnecessary rate increases.
Gordon Campbell, for example, said B.C. Hydro must make the province self-sufficient in electrical by 2016. It was ordered to have enough capacity to meet the entire power needs of the province even in a year of record low water — and to build a big buffer on top of that.
That has proved an expensive, wasteful order. B.C. Hydro had to ramp up staffing to achieve the goal.
And because the power was to be acquired by contracting with private producers, the public corporation had to commit to costly, long-term contracts for electricity that might never be needed.
B.C. Hydro estimates its current round of power from private producers will cost $124 MWh, for example. That’s more than twice as much as the market price, and one-third more than power from a Site C dam would be.
Because of the government’s order, B.C. Hydro faces the real risk of buying expensive power from private producers and selling it at a loss on the open market.
There is little risk in adopting a more conservative approach in adding capacity; in a crunch, B.C. can buy power from U.S. or Alberta producers, as it has in the past.
There’s another major policy issue. The report indicates that the government has been, effectively, using B.C. Hydro to bring in hidden tax revenue.
B.C. Hydro pays government for water rights — the use of rivers and streams across the province. It charges twice as much as other Canadian governments charge power companies, the report found.
If B.C. charged rates in line with Manitoba and Quebec, then B.C. Hydro’s costs would fall by $150 million a year, the panel noted. That would result in an immediate rate cut of at least four per cent.
And the government also claims a larger share of B.C. Hydro’s revenue as a dividend than comparable utilities — more than $600 million this year.
Energy Minister Rich Coleman said that’s not likely to change. The government is running a deficit; it needs the revenue from water rights.
But it’s an inefficient and unfair way to collect revenue. Taxes, generally, are imposed based on some principles, with a primary one being that they are progressive — the amount paid rises with income or wealth.
Raising revenue through electricity bills doesn’t work that way. A low-income family with an older house — perhaps heating with electricity — would pay a larger share than an wealthy couple in an expensive condo.
And this approach to taxation also imposes larger costs on energy-dependent industries, reducing what should be a competitive advantage on attracting investment.
B.C. Hydro has some work ahead in improving its efficiency and cutting costs. But the government has an even larger role in fixing flawed policies.
Footnote: The review panel looked at the smart meter program and concluded it was justified based on future savings, although it urged B.C. Hydro to seek ways of cutting the $930 million cost. The panel also notes that unless the corporation introduces differential rates to discourage power use at peak periods, some potential savings under the smart meter program won’t be achieved. Government policy has rejected differential rates; that too should be reviewed.

The first five thoughts on the BC Hydro review

Five early thoughts on the BC Hydro review.

1) Where were the board, ministers responsible and government as BC Hydro, apparently, was mismanaged and staff soared 20 per cent over the levels needed over a period of years?

2) The government now should explain the huge amounts of money wasted by its discredited policy directives that BC Hydro use IPP purchases in pursuit of a foolish goal of electricity self-sufficiency.

3) The government has to explain its decision to use BC Hydro rates as a vehicle for tax increases. The review found, for example, that the government charges Hydro excessive rates for water rights, which are passed on to customers in the former of higher electricity bills. That's a regressive tax, and potentially destructive to industry in the province, encouraging investment elsewhere.

4) The review read much like something that would be done after a new party was elected to government and set out about fixing - and highlighting - the errors of the previous administration. Christy Clark deserves credit for the hard look (although there are political advantages to distancing herself from Gordon Campbell). But not all Liberals might agree - Bill Bennett and Blair Lekstrom, for example, were briefly energy ministers during the problem years. Half the B.C. Hydro board have been in place for more than two years, and the report raises serious questions about their effectiveness.

5) The report suggests failures of government policy and management. It is good to bring them into the light, but does raise questions about other areas of government.

Full post to come.

Banishment our way of treating mental illness

Donovan Seward’s banishment from Saltspring Island is a nice metaphor for the way we deal with mental illness.
Seward was ordered off the Island by a justice of the peace after a bail hearing. He faced several charges, including a dine and dash and assaulting an RCMP officer during his arrest. He was also a nuisance since joining the local homeless community.
So he was banished. Problem solved, at least for Saltspring residents.
But not really.
Seward is 31. He’s suffered from mental illness since childhood, says his mother, Myrna Seward. He’s had past brushes with the law, stints in hospitals and a suicide attempt. He’s tormented by voices in his head sometimes, she says, and if he quits taking his medication, he lives in a fantasy world. “He’s completely delusional,” she told the Times Colonist. “He thinks he’s John Lennon half the time.”
The bail conditions didn’t include a requirement that he get medical help or supervision. The officers didn’t take him to emergency for assessment, a possibility under the Mental Health Act.
Really, the problem has just been pushed along from Saltspring to wherever Seward lands next.
Don’t criticize the justice of the peace, the police or the people of Saltspring. Our whole approach to mental illness is based on pushing people away so they become someone else’s problem if things go wrong. (It’s important to note that most people with mental illness manage quite well, as do most people with diabetes or any other disease.)
The health care system shortchanges people with mental illness. There are always other priorities, usually with more skilful advocates. Boomers demanding timely hip replacements are more likely to be heard than someone struggling with unmanaged schizophrenia.
Alan Campbell, who retired last year as director of mental health and addictions for the Vancouver Island Health Authority, said B.C. and Canada lag. “For every one of the five years I’ve been doing this job, we’ve put forward strong, well-reasoned cases for more funding,” he said. “My understanding is that our requests are given real consideration, but they just don’t fare well in the end.”
The health system manages its costs by denying or rationing treatment. But it’s actually banishing troubled patients, just as Saltspring did.
Sometimes families or social service agencies are forced to pick up the pieces. Communities deal with the fallout, as people who are not treated fall to the streets.
And often, the police, courts and jails take on the responsibility the health care system shunned - as they did in Seward’s case.
Police spend their days dealing with people who are addicted, intoxicated or mentally ill. They face challenges, and sometimes danger, acting as social workers and counsellors.
Officers know that because the root problems aren’t being addressed, they’ll deal with the same people and the same behaviors the next day.
When the problems become serious enough, or annoying enough to the community, then people with unmanaged mental illness end up in court and, far too often, in prison.
Correctional Investigator Howard Sapers, who oversees the federal correctional system’s operations, estimates that 36 per cent of men in federal prisons, and 50 per cent of women, have some form of mental illness. The figures are similar for provincial jails.
There is a cruel irony in all that. Governments closed down large residential mental health facilities, partly to save money and partly because they were considered inhumane. But they failed to deliver the promised health care, housing and community support, with the result that people with mental illness ended up in prisons, which are far more inhumane, and offer no effective treatment.
There is no universal, simple solution. People with mental illness have rights, including the right to refuse treatment. Seward had been living in subsidized housing, with support, in Victoria, but decided to move to Vancouver.
But the current approach is a shambles. And rather than dealing with the issue and providing the health care and community support needed to allow people to deal with their illnesses, we are, like Saltspring, just pushing them along to become someone else’s problem.

Cuts to B.C. human trafficking office

The B.C. government has cut funding for an office dedicated to dealing with human trafficking.

Which does not displease Jody Paterson, who argues the money could be spent much more effectively on more pressing issues.

"We spent $2.25 million on this office in the last four years, apparently to help 100 people. It kills me to think how that money could have been used for real needs rather than for chasing ghosts.
You'd think that with all the sex workers I'd met over the years in B.C., I might have met one who'd been trafficked at some point in her life. Nope."

You can read the rest here.

More on solving America's debt crisis

I wrote last week that the U.S. could go a long way toward solving its debt crisis simply by being a bit more like Canada and raising taxes to our level.

"The U.S. collects taxes equal to 24 per cent of its GDP. If the take was increased to 31 per cent - the amount collected in Canada - the current year's deficit would fall from $1.5 trillion to $500 billion....

In fact, if the Americans increased overall tax revenue as a share of GDP to the average for OECD countries - 34.8 per cent - they could have a balanced budget immediately, without cutting anything from spending."

(You can read the post here.)

The New York Times makes the same point in an editorial today.