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AG concerned BC Hydro accounting shrinks provincial deficit

British Columbia's annual deficit would balloon by $447 million if the province properly accounted for expenses at BC Hydro, according to a report Auditor General John Doyle released today.

"The effect of rate regulation in 2010/11 . . . has been to increase the net earnings of BC Hydro, and thus reduce the annual deficit recorded by the Province," said the report.

The announced deficit for 2010-2011 was $309 million, an amount that would more than double if the deferred amount from BC Hydro were included.

BC Hydro is spending money but pushing it off into a deferral account so it doesn't show up on the Crown corporation's bottom line, said Bruce Ralston, the New Democratic Party finance critic. "Last year BC Hydro deferred $639 million of real expenses," he said. "They just pushed it off and as a result they were able to show a profit."

The auditor general is concerned the dollar amount is building up rapidly and there's no plan to get out of it, said Ralston, noting the total deferred amount is projected to hit $5 billion by 2017.

The government will take Doyle's report into consideration as it reviews BC Hydro's operations, said energy and mines minister Rich Coleman. "Deferral accounts are used on large projects many times," he said.

For a large project like the proposed Site C dam or smart meters the utility defers some of the costs and accounts for them later when they are balanced by revenues from the project, he said.

"In utilities you do some of that to smooth rates, but what the auditor general is concerned about is this technique is being abused," Ralston said. "There will be a day of reckoning . . . At some point there's going to be an accounting for it. That will damage the financial credibility of the province, it might even affect the credit rating of the province."

Andrew MacLeod is The Tyee’s Legislative Bureau Chief in Victoria. Reach him here.

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