The ruin of BC Hydro by the BC Liberals

It wasn’t an easy birth. The private companies opposed it. It took the vision of one man to bring BC Hydro into existence in1961. Before that, a patchwork of power companies supplied the province. The largest, BC Electric, served the lower mainland. Premier W.A.C. Bennett had a dream. He wanted a single provincial power grid but the power commission of the day was dragging their feet explains Norman Farrell in The Tyee, (September 12, 2016.)

Our dam power

Our dam power

“But Bennett, premier since 1952 and an MLA since 1941, was unhappy with the power commission. He wanted faster expansion of the electrical grid — and he wanted greater control.”

Bennett faced problems in the creation of BC Hydro. His vision included the Two Rivers Policy –the damming of the Peace and Columbia rivers –something BC Electric wasn’t interested in doing. Worse still, BC Electric was antagonistic: proclaiming that they would not buy power from the Peace River dam even if it was built.

Damming the Columbia River presented a different problem. Kaiser Aluminum wanted to build a dam on the river, not for generation of public power but for the production of aluminum. Outrageously, they wanted to control water flow so that power could be generated in the U.S. by the Kaiser’s parent company.

Bennett was not going to see Canadian water go to the U.S. for hydro power, so he negotiated a deal with U.S. Kaiser to receive 20 per cent of the power generated downstream plus taxes and water license fees. The Government of Canada, headed by PM Diefenbaker, quashed the deal citing federal jurisdiction.

By now, Bennett had enough. In 1961, with the support of the NDP forerunner (the CCF), he seized control of the private BC Electric and formed the public crown corporation BC Hydro. Bennett understood the obvious: governments can borrow money cheaper than private developers. Now he could proceed with a plan that would span generations; something that private developers, who require quick returns, would never do.

Things were falling in place at the federal level, too. Liberal PM Lester B. Pearson replaced Diefenbaker as prime minister. Pearson negotiated a deal with the U.S. that effectively restored the former Kaiser one. With the money raised from the Columbia deal, Bennett built the Peace River hydro dam eight years later.

The ruin of BC Hydro came when the Campbell government decided to re-privatize power generation. Ideology drove Campbell into thinking that privately operated generators could do a better job. To push his ideology, he had to subsidize private suppliers in order to get generators built.

Campbell’s gift to private operators was to lock in prices that BC Hydro would have to pay. Last year, BC Hydro bought power from private sources at nine cents per kilowatt hour and sold it at three cents.

It doesn’t take a marketing genius to figure that selling a product at one-third what you pay for it is not good business. Worse, the BC Liberals are pushing for more hydro production at Site C on the Peace River –power that will be hard to sell in a market with flat prices.

NDP critic Adrian Dix said BC Hydro’s errors are a disaster for domestic customers and taxpayers.

“Both the government and BC Hydro misread the market years ago and are pushing ahead hoping no one notices,” Dix said. “The company failed to admit previous errors in demand forecasting and continues similar projections without explanation.”

NDP’s public insurance corporation is saving the BC Liberals from heat

It’s all because of the NDP.  That we have amongst the lowest automobile insurance rates in Canada, that is.

The B.C. Liberals are quick to blame the former NDP government for all their troubles. But they would never admit that our public insurance corporation, ICBC, is saving them from a lot of political heat.

Premier Campbell will grin and bear the distinction of being the only right-wing government in Canada with socialist auto insurance.  He will even strengthen the public insurer that was incorporated by NDP Premier Barrett in 1973.

While Campbell eagerly dismantles BC Hydro, he dare not touch ICBC.  Not now.  Campbell has learned from political blunders.  No, I don’t mean his impaired driving conviction in Hawaii.  I mean the one in New Brunswick.

The otherwise popular Premier Bernard Lord of New Brunswick and his Conservative government were nearly defeated in the last election over auto insurance.  Voters were mad as hell with the price-gouging of private insurance and they were prepared to toss out the government to show their anger.

And the Campbell can’t even look for comfort in that fortress of free enterprise, Alberta.  Their insurance rates are the highest in Canada.   His friend, Alberta premier Ralph Klein is frantically trying to control the political damage by freezing insurance rates.  Klein shrewdly knows when to control the marketplace.  The competitive free enterprise system is the best way to keeps prices low – – except when it doesn’t.  Jim Rivait, with the Insurance Bureau of Canada, was caught off guard by the freeze. “We certainly don’t like them, it’s interventionist. I think we should just fix the problem.”

Private insurance companies fix the problem by making customers pay for their bad investments.  Ironically, insurance companies don’t make money by selling insurance.  In the last 25 years, 1987 was only year that selling insurance was profitable, according to Paul Bobier in his article for the Canadian Centre for Policy Alternatives (September, 2003).

Private insurers make money by investing your money in the hope that the investment returns will cover the true cost of insurance and provide a profit for shareholders.

Before the collapse of the stock market, insurance companies (and almost any fool) made big returns by investing money in inflated stocks.  After the bubble burst, pickings are much slimmer.  Now drivers are paying for bad investment returns.

To make matters worse court settlements for injuries to people are rising, now exceeding the cost of repairs to vehicles.  The costs for insurance companies are going up and the returns from investments going down.  But those costs have increased for both private and public insurers, so why the difference in what drivers pay?

The difference is that public insurers are in the insurance business, not the investment business.  Public insurers reduce driving risks, reduce accidents, and consequently damage claims.   For example, ICBC identifies dangerous intersections and roads, and works with local governments to make them safer.  They work with police forces to reduce speeding and violations that cause accidents.

The B.C. Liberals have wisely reversed earlier thinking.  They eagerly canceled photo radar because it was unpopular with speeders.  They put police out of a job.  Now the Liberals have ordered an extra 100 cops to patrol highways with more road checks and speed traps.

“ICBC is willing to fund enhanced enforcement, because that’s one of the best ways to make roads safer, to reduce injuries and fatalities, reduce ultimately ICBC’s claim costs,” says spokesperson Doug McClelland.

And who will pay for those extra police?   You and I will through our auto insurance.  ICBC will pay cops to crack down on speeders to prevent us from hurting ourselves, and thus keep insurance rates down.  Not exactly right-wing policy.

The only other provinces with public insurance plans are Saskatchewan and Manitoba, where insurance increased by only 8 per cent.  In all other provinces with private insurance, increases averaged 58 per cent.

When he thinks he can get away with it, Premier Campbell will revert to his old ways and privatize auto insurance.  He will carve up ICBC the way he is slicing up BC Hydro.  We will soon pay the same high electricity rates and the same high auto insurance rates as Alberta.

Too bad that Campbell doesn’t learn from Alberta’s mistakes.  Public corporations are best served whole, not sliced up.

In BC Hydro’s case, ideology means higher electricity costs 

When I opened my BC Hydro bill and read the leaflet inside, I thought some transformation must have taken place.  The leaflet said that Accenture was now a B.C. business.  The last I heard, Accenture was based in Bermuda.

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Accenture has been blacklisted by California’s state treasurer for questionable business practices such as relocating to offshore tax havens.  The Ontario Auditor General slammed Accenture in 2001 for a deal to take over a government program that resulted in massive cost over-runs.  Apparently image problem is nothing that can’t be fixed by opening a B.C. office of Accenture.

The flyer said that “Accenture Business Services of BC is committed to building a world-class operation in British Columbia that will contribute to the province’s economic growth and provide employees with expanded career opportunities.”

Accenture, through BC Hydro, is trying to counter the growing opposition to the privatization of the publicly-owned utility.  People are angry that Premier Campbell has handed one-third of BC Hydro operations over to Accenture.  It’s a sweet deal — a ten year contract worth $1.45 billion.

Accenture will save BC Hydro money, Stephen Bruyneel told me. He’s the manger of Corporate Communication for BC Hydro.  He said that Accenture is contractually obliged to save $250 million over ten years.

“Exactly how would Accenture save that money?” I asked.  Well, it turns that we will never know.  Private businesses are not obliged to divulge such things.  But in general, “savings will result from economies of scale,” says Bruyneel, “by having a larger customer base.”

Accenture Business Services of British Columbia has big plans and BC Hydro is just the start. The plan is to bring other North American power companies into the B.C. office.  BC Hydro will share in those profits, Bruyneel said.

“How much profit will Accenture get from the BC Hydro contract?” Sorry, that’s a secret.

Jerri New has a problem with all this secrecy.  She’s the head of the Office & Professional Employees International Union.  Her members were not given much choice — move to Accenture or retire.

“If this is such a good deal,” Jerri New told me, “why is the government afraid to show us the details?”  The whole transfer of a public crown corporation has also been done in secret.  “It’s normal business practice when one company takes over another that hearings are held.  The shareholders of BC Hydro — the people of B.C. — were not consulted,” she said.

Jerri New also disputes BC Hydro’s claim that they could now “focus on its core business of generating, transmitting and distributing electricity.”  Some of that core work is now done by Accenture, such as monitoring water levels in dams.  “The whole computer system is integrated with BC Hydro,” said New, “it’s a matter of public safety.”

The former BC Hydro workers feel betrayed.  They are still providing Information Technology, computer networking, customer service, and building supplies but their employer is now Accenture.

She suspects that profits for Accenture will come by increasing BC Hydro rates.  Accenture is not in business as a public service – – last year they had net revenues of $11.6 billion world-wide.  Also, Accenture will save money from fewer staff.  Of the 1,600 staff that worked for BC Hydro, only about 1,450 moved to Accenture.  That alone results in over one-third of the claimed savings.

BC Hydro employees (some from Kamloops) moved to Accenture call centers in Vernon, Nanaimo, Prince George, and Vancouver.  Most call centers are not unionized, so you can be sure that when the current collective agreement expires, they will be asked to take a pay cut.  And if they don’t, call center operations can be moved to where workers will accept lower wages.

The real question is why Premier Campbell would dismantle a profitable company that provided high customer service and the lowest electricity rates in North America?

The answer is ideology.  In the premier’s mind, crown corporations and public utilities are sources of untapped profits.  Regardless of how efficient they are or how well they are operated, they are public services that must be dismantled for the corporate good.

If money and jobs flow out of the province, and if we pay higher electricity rates, Campbell considers it  a small price to pay for sake his ideology.

Campbell eager to sacrifice well-run utility on altar of ideology 

 

Who do you believe?

Richard Neufeld, B.C. Minister of Energy and Mines,   In response to what he calls the “frenzied speculation”  about B.C. Hydro, said in his letter to The Daily News “All of the Crown corporation’s existing generation, transmission, and distribution assets — all the wires and dams — will continue to be owned by the people of British Columbia (November 14).”

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On the same day, B.C. Liberal Paul Nettleton said the opposite. He said that his government’s  secret plans are to privatize B.C. Hydro.  The Liberal’s  “ultimate goal is the wholesale privatization of the utility,” he said in his letter to colleagues.  Honesty doesn’t pay, as Nettleton found after he was tossed out of the Liberal caucus.

Regardless of who you believe, the horse is already out of the barn. You will notice that Minister Neufeld carefully avoids mention of privatization of B.C. Hydro’ customer service.  That’s because it has already been done.  The Liberals have handed one-third of B.C. Hydro over to a company with a dubious track record called Accenture.

Accenture will “assume BC Hydro’s Customer Services . . . IT services provided by Westech, Network Computing Services, HR Services, Financial Systems, Purchasing, Disbursement Services, Property Services, Business and Office Services,” according to B.C. Hydro’s web site.

Accenture has been blacklisted by California’s state treasurer for questionable business practices such as relocating to offshore tax havens.  Accenture, recently known as Anderson Consulting, is a multinational consulting company based in Bermuda which has come under fire for its dealings in jurisdictions across North America.

The Ontario Auditor General slammed Accenture and the Ontario government in 2001 for a deal to take over a government program which resulted in massive cost over-runs.  The government paid Accenture $193 million to slash their welfare system. The B.C. Liberals should have known of Accenture’s sleazy background.

“The BC government should follow California’s lead and stop the deal to take over key services from BC Hydro,” says Rudy Lawrence, a spokesperson for the B.C. Citizens for Public Power.  You may have seen their ads in the Daily News.

They want support for a class action lawsuit against the government of B.C. to prevent them from privatizing and deregulating B.C. Hydro. The supporters of the B.C. Citizens for Public Power include the Union of B.C. Municipalities, the Council of Canadians, Labour, seniors, consumers,  environmentalists, and community groups.

Social Credit premier W.A.C. Bennett had the vision to expropriate the existing power utility in 1961 and create B.C. Hydro.  It belongs to the citizens of B.C. and the Liberals have no right to give it away.

Just what are Liberals trying to fix when they meddle with our dam power?  “What is it that’s broke with a system that’s providing cheap, reliable electricity, that’s paying sizeable dividends to the government?” says David Freeman, energy expert and chair of the California Power Authority.

Ideology is your answer, Mr. Freeman.  B.C. Hydro represents a socialist threat in the mind of Premier Campbell.  It wouldn’t matter that we have cheapest, best run electrical utility in North America.  Don’t confuse Campbell with the facts.

The facts differ from ideology, as the Conservative government of Ontario is finding out.  After allowing private marketing of electricity, the cost has skyrocketed for homeowners and business alike.

Ontario restaurant owner Mike Jaznik’s last hydro bill was $5,000 — twice what it was before.  “We just can’t turn around and increase our prices, and we can’t, we certainly can’t eat the prices. It just doesn’t make sense,” says Jaznik.

No, it doesn’t make sense until you realize that right-wing governments are willing to sacrifice well run public utilities in the altar of ideology.

You would have thought that Ontario would have learned something from Alberta’s experience. “They’re botching it up in ways similar to the way we botched it up,” Frank Atkins, an economist at the University of Calgary.

Alberta broke up the province’s three power monopolies starting in 1996, promising  lower prices and more stable supplies. Albertans saw their power bills triple. The province gave consumers a rebate for a year to cushion the blow, but prices are still unstable and high.

“We keep asking the question, ‘why do governments keep doing it?'” says Jim Walkawich of the Edmonton Consumers Association.  Ideology is your answer, Jim.

Public insurance cheaper because profits aren’t main goal

The Insurance Bureau of Canada has examined our public insurer, ICBC, and found it wanting.  In their recent full-page newspaper ads, they have a plan to make ICBC better.

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Or, more plainly, the Insurance Bureau of Canada wants some of the action.  They  see the arrival of our new B.C. Liberal government as a sign that ICBC is a plum ripe for picking.  And they want to shake the tree.

The insurance business is straightforward — collect premiums and hope that you don’t have to pay out claims.  Profits go to shareholders.  In the case of ICBC, the shareholders are you and I.  Last year, ICBC’s investments in B.C. and road safety programs paid dividends to auto insurance holders of $100.

Dennis Prouse, spokesman for Insurance Bureau of Canada was not impressed by the dividend.  He told me that it was “reckless, irresponsible, and politically motivated,” to return the money.  Surpluses should be kept in contingency reserves, he said.  Private insurers keep a much bigger rainy day fund.   ICBC has the luxury of financial backing from the government.

ICBC insured drivers will likely have to pay that $100 back, Prouse continued.   Higher than normal accidents this year in the lower mainland are resulting in more claims, which will push premiums up.  The transit strike is being blamed for higher collision rates.  “How will drivers in Kamloops feel about returning their dividend because of a strike in Vancouver?”, Prouse mused.

Another investment that has paid off for ICBC is road safety programs. In Kamloops, ICBC funded the use of de-icing compound on city streets. The result has been a reduction in accidents, fewer claims, and greater profits for ICBC.   According to ICBC, every dollar spent on reducing hazardous road conditions saves two dollars in claims.

The idea that ICBC is innovative in road safety is plain wrong says Prouse.  Programs like Road Star, graduated drivers licences, and road safety improvements were all started by private insurers.  ICBC is simply reacting to competitive pressure, and competition is what the Insurance Bureau of Canada would like to more of.

Prouse doesn’t like the idea that private insurers pay taxes and ICBC doesn’t.  Last year, Canada’s private insurers paid $3.7 billion in taxes.  On top of that  B.C. drivers pay an auto premium tax of 3.3% that most aren’t aware of.   I don’t see that as a consideration since drivers pay the same tax elsewhere on private insurance.

The ads from the Insurance Bureau of Canada point to a Pollara poll that shows that British Columbians prefer a system which allows full competition between the government-run ICBC and private insurers (81% in favour).  But the same poll shows that 73% of ICBC claimants are satisfied with the way ICBC dealt with their claim.  Not as satisfied as Ontario at 85%,  but dissatisfaction with ICBC was connected to dissatisfaction with the NDP government.

No doubt private insurers will be able to offer reduced premiums to low-risk drivers.  If drivers don’t get in accidents and don’t file claims, the profits are easy pickings.  The catch is that private insurers will have to charge youths and high-risk drivers more than ICBC does.  As a result, high-risk drivers will choose ICBC and low-risk drivers will choose private insurers.

If ICBC is stuck with high cost claims and private insurers are left with the profitable side of the business, that will not be good for ICBC.  The Insurance Bureau of Canada claims that they want to make ICBC better.

Public insurance is cheaper for everyone because the goal of public insurance is not to make money but to provide a public service.   And ICBC can reduce injury and save more lives because of the scale of ICBC’s operation.  Since 1996, injuries have been reduced by 10% — 2,500 fewer injuries a year.

Like public health insurance, public auto insurance has less overhead and duplication of administration.   It seems to me that public insurance is a better idea.  If a private insurer is extracting a profit from insurance, and that is the goal of any business, then eventually British Columbians collectively will pay more for insurance.

Politics of privatization left people of Walkerton high and dry.

It would be simplistic to say that the privatization of Ontario’s labs that tested Walkerton’s water caused the tragic deaths in that town. But the politics of privatization were a factor.

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Garry Palmateer worked for the public lab that tested Walkerton’s water. He was a microbiologist for the Ontario Ministry of the Environment.  Palmateer found himself unemployed when the “common sense” politics of Mike Harris swept through Ontario.  Premier Harris decided to reduce the size of government by shutting down the public lab.  After all, small government is good government, right?

Palmateer wasn’t out of a job for long.  He formed a private water testing company named GAP Environmental Services, and was joined by a core of microbiologists who used to work for the Ministry of the Environment.  They found warning signals in Walkerton’s water and passed on the information to Environment  Minister and the Public Utilities Commission of Walkerton.

GAP tested Walkerton’s water up to April 24th.  Palmateer’s company stopped testing their water because there was no money in it. They moved on to more profitable consulting ventures.  Walkerton’s water commission, desperate for a lab to test water, sent samples  to a Canadian branch of an American lab: A&L Canada Laboratories East.   A&L agreed to test the water as a temporary measure only.

The new lab found the same warnings as Palmateer’s lab but didn’t tell the Medical Officer of Walkerton.  The Officer would have issued a warning to boil water, which would have saved lives.  As a private lab, A&L saw the Walkerton water utility as the client, not the citizens of Walkerton.  In the absence of clear direction, the allegiance of private business is to those paying the bills, not to the public.

A&L did disclose the results to Ontario’s Environment Minister, but the Ministry did nothing to investigate Walkerton’s water.  No alarm bells went off.  The Medical Officer wasn’t warned. To understand why the Environment Minister wouldn’t be shouting warnings from the rooftops, you need to understand the right-wing politics of the environment.

In the neo-conservative lexicon, “environment” is a code word for an impediment to business and profit-making.  Environmental concerns of dumping animal excrement on the ground and in waterways amounts to an obstacle to the profits of agri-business.  The Industrial production of animals is most efficient when thousands of livestock are concentrated on a small areas of land, and the government of Ontario had promoted that industry.

Industrial animal sewage is not treated, despite volumes as great as a small city.  Although the government of Ontario relaxed laws to enable huge cow and pig growing factories, they made no provision to deal with the pollution that they produce.

No regard was given to those people living on small farms and towns in the midst of the stink and disease generated by the crap. Rural Canadians, after all, serve one purpose — as subjects for quaint advertisements for the products of agri-business.

It’s the same callous disregard that the government of Canada displayed to small-time farmers.  When prairie farmers faced financial collapse due to weather and low grain prices, they looked for the kind of help that farmers in other countries had received. The federal Liberals think that Canadians who choose a rural lifestyle are expendable, and the government of Ontario agrees.

In the minds of neo-conservatives, environmentalists are best thought of as crackpots. Why have a Ministry of the Environment populated by fruitcakes who tangle business in red tape?

It’s not that private labs lack qualified staff or quality of the health services they provide.  The problem is that they are driven by profits, not public service.  If testing water for a small community doesn’t make much money, they move on to something else.

Now Gary Palmateer is back on the job, not as a biologist working for the public labs of the Ministry, but as a detective hired to hunt down the exact source of the deadly strain of E. coli. I’m sure that he will do as a good job.

But after the furor of Walkerton has died down, Palmateer’s company will be seeking greener pastures elsewhere.  Little towns like Walkerton will be left scrambling to find a lab to test their water at a price they can afford, and wondering why the Ministry of the Environment didn’t protect their environment.