The Utilities Commission Act prevents the government from overriding a BCUC decision. It may have done just that.
Introduction
The BC government recently issued an Order to the BC Utilities Commission (BCUC), the most widely-publicized effect of which was to set the next two years’ rates for BC Hydro, the provincially-owned electric utility, a job normally done by the BCUC.
But lurking in the details of the Order is something else, a change which will reduce the transparency of BC Hydro’s bills. This appears to override a previous decision made by the BCUC, which the Utilities Commission Act expressly forbids.
Did the government overstep its authority here?
Background
The government has for a long time used the profits (known as Trade Income) from Powerex, BC Hydro’s energy trading subsidiary, to subsidize electricity rates in the province. Most of us benefit from this subsidy, including businesses based in BC. This is generally a good thing.
Of course, the subsidy doesn’t really make our electricity “cheaper”, it just makes it appear so. The subsidy doesn’t change BC Hydro’s costs of generating and distributing our electricity. If the subsidy, which exists at the government’s discretion, were to be withdrawn, we would be back to paying the “real” cost of electricity.
This means any claims that BC Hydro’s rates are “near the lowest in North America and about half what Albertans pay” have to be treated with some suspicion – is it really a fair comparison when our rates are subsidized?
It was never very clear how large this subsidy was, because on our bills it was buried in the electricity rates and in the Deferral Account Rate Rider, which collects or refunds amounts from previous years. This reduced transparency and the ability to understand the true cost of BC Hydro’s electricity.
Regulatory sunlight
Transparency being a core regulatory principle, the regulator decided to make the size of the subsidy clear to customers. In 2023 the BCUC directed BC Hydro to distribute the subsidy through a new item on the bill called the Trade Income Rate Rider.
The BCUC issued two specific directives:
- BC Hydro was not to include the Trade Income (i.e. the subsidy) in its general electricity rates but was to distribute it through the Trade Income Rate Rider instead, and
- BC Hydro was not to recover or repay any cumulative balances from previous years’ Trade Income using the Deferral Account Rate Rider – these cumulative balances must also go through the Trade Income Rate Rider.
In this way, the subsidy would no longer be buried in the electricity rates and the Deferral Account Rate Rider, and we would see the subsidy-free cost of BC Hydro’s electricity.
The New Order
Then along comes the government’s Order, section 3 (f) of which says that the BCUC:
- Must not order BC Hydro to distribute the Trade Income via a rate rider in 2026/27 and 2027/28, and
- Must allow BC Hydro to recover or repay any cumulative balances from previous years’ Trade Income using the Deferral Account Rate Rider in 2026/27 and 2027/28.
In other words, the government is ordering the BCUC to override both of its previous directions to BC Hydro to use the Trade Income Rate Rider to distribute the Trade Income subsidy. The subsidy will once again be buried, and we won’t see the true electricity rates.
It’s important to note that the BCUC directions applied “Commencing in F2025 [i.e. on April 1, 2024]” (emphasis added), so they applied indefinitely, and were not just limited to the 2024/25 year.
What’s the problem?
The Utilities Commission Act allows the government to issue directions to the BCUC. This is done quite often, usually to prevent the BCUC applying the same regulatory principles to BC Hydro that it applies to other utilities. You might disagree with some of these directions (indeed I often do), but the Act does permit them.
The government’s powers are not unlimited, however. Section 3(3) of the Utilities Commission Act says that the government must not “specifically and expressly:
- declare an order or decision of the commission to be of no force or effect, or
- require the commission to rescind an order or a decision.”
But the government’s new Order has both “specifically and expressly” ordered the BCUC to allow BC Hydro to do something that was expressly forbidden by the BCUC’s two previous directives, thus they will have no “force or effect.” The new Order appears to be in contravention of the Act; if so, the government has exceeded its legal powers.
Section 3(3) of the Act is an important legal protection. A direction from the BCUC has the force of law, a power delegated to it by the legislature through the Act. It is surely right that the Act prevents BCUC directions from being reversed at the whim of government without due process.
The Utilities Commission Act provides for just such a process (reconsideration, section 99) if BC Hydro or the government wants to challenge a previous decision. This allows the BCUC to re-examine its earlier decision, and change it if, for example, there was an “error of fact or law” or a material change in circumstances.
But in this case, there was no request for a reconsideration of the BCUC’s directives to BC Hydro to use the Trade Income Rate Rider to subsidize customers’ bills. There was no opportunity for the BCUC to examine whether its previous decision was wrong, or what change in circumstances might justify reversing it.
Conclusion
I’ve disagreed with plenty of this government’s decisions on utility regulation, but I think it’s crossed the line this time.
Not only has the latest government Order usurped the BCUC’s role to set BC Hydro’s rates for the next two years, it also appears to have trampled on one of the most important powers of the BCUC – that its decisions have the force of law.
With Bill 7 (the Economic Stabilization (Tariff Response) Act) yet to be passed, the BC government does not have free rein over existing laws and regulations. In its eagerness to grab power it appears to have jumped the gun and ignored an important provision of the Utilities Commission Act.
I understand that the rule of law seems to be going out of fashion around the world these days. But if our government does not take the high ground by ensuring businesses and investors know that the rule of law applies in BC, it will damage the province’s reputation as an attractive place to do business. Given the current geopolitical tensions, that is the last thing we need.
This is not a technicality; it is an important point of principle. The provincial government is starting to take an authoritarian turn. Is anyone willing or capable of standing up to them?