Tag Archives: bc government

Public sector wage bonus tied to B.C. economic growth puzzles experts

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Proposed five-year contract has 5.5-per-cent increase guaranteed

By Gordon Hoekstra, Vancouver Sun December 4, 2013

A tentative five-year deal struck by the B.C. Liberal government with some public-sector unions that would tie additional wage increases to improvements in the economy is unusual, say labour experts.

In the private sector, prospective wage or income increases would normally be tied to workers’ efforts.

But there’s little government workers could do to improve the larger provincial economy, noted Ken Thornicroft, a professor of law and labour relations at the University of Victoria.

“The thing that differentiates this thing in my mind from private sector arrangements of the same ilk is that often in the private sector it’s a profit sharing arrangement, whereby the employees have a more direct linkage between the firm’s performance and their own efforts,” observed Thornicroft.

“Whereas here you are talking about the macro economy, and it’s hard for me to see how public sector employees could do much if anything to influence GDP,” he said.

GDP, or gross domestic product, is the value of all goods and services produced in an economy.

Simon Fraser University professor Mark Thompson said essentially the deal provides a productivity bonus, but what is interesting is it depends on the productivity of everybody else.

“It’s not like people can say we are going to process twice as many welfare recipient claims in an hour. It sounds like the kind of thing that a government desperate to hammer out a deal might throw in to soften it,” said Thompson.

So far, three tentative five-year deals cover 51,000 workers in government, social services, environment, community living and aboriginal services. The workers are represented by a number of unions including the B.C. Government and Service Employees’ Union, the Canadian Union of Public Employees, the Hospital Employees’ Union, and the Health Sciences Association.

The government has yet to negotiate deals with teachers or nurses.

The three tentative agreements, which would expire in March 2019, includes wage increases amounting to about 5.5 per cent.

The agreement also provide the possibility of increased payments to workers if the province’s real gross domestic product exceeds the forecast by the independent Economic Forecast Council published each year in February. That will be determined using Statistic Canada data that will be compared against the forecast.

If the real GDP growth is one per cent above the forecast, then workers would receive a 0.5 per cent wage increase above the already-negotiated increase. Therefore, a worker earning $50,000 a year would receive an extra $250 if the economy outperformed the forecast by one per cent.

As the B.C. government would expect to increase revenues by at least $200 million a year for a one per cent growth in GDP, it would be able to fund the wage increase.

“There is a dimension to this that is new and novel, and one that I’d be kidding if I didn’t say I’m intensely interested and excited about,” said Finance Minister Mike de Jong. “Under this mechanism, public sector workers will share in the benefits that flow from that additional (economic) growth. We think that’s appropriate.”

A similar deal was struck in Quebec in 2010, although it was tied to nominal GDP growth, which is not adjusted for inflation. The five-year deal provided guaranteed wage increases of seven per cent, which could increase another 3.5 per cent if Quebec’s economy grew faster than government estimates used to achieve a balanced budget.

BCGEU president Darryl Walker said he didn’t necessarily disagree that public sector workers do not have a big impact on the province’s economic growth, but noted there are revenues that are produced in the work they do.

Crown agencies such as B.C. Timber Sales generate revenues for the province, which are indirectly accounted for in GDP.

Walker said the union was aware of the Quebec situation, but didn’t instantly jump at the idea. When they discovered an analysis of the past dozen years showed workers could have received an additional raise of 1.5 per cent, they decided to look at it, noted Walker.

“We thought it was worth agreeing to,” he said, noting they are already guaranteed the 5.5 per cent increase.

Thornicroft believes the unusual deal, ultimately, is a way for the B.C. government to get a longer deal than unions may have been willing to agree to because now workers will benefit if the economy improves more than forecast.

Normally, you’d expect unions to sign a three-year deal, he said.

The B.C. Liberal government under Premier Christy Clark has floated the idea of a 10-year contract with teachers.

Thornicroft believes that unionized workers will vote in favour of the five-year agreement.

Thompson said while not a lot of money is at stake in the portion of the agreement tied to economic growth, workers might be concerned that the unusual deal will set a precedent where future raises are tied to economy’s performance.

In some way, they’ve increased the risk on their paycheque, he said.

With file from Canadian Pressghoekstra@vancouversun.com

© Copyright (c) The Vancouver Sun

Hydro Rates and Liberal Errors

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December 5, 2013          David Schreck, StrategicThoughts.com

The Liberal platform from the May 2013 election is still on their website and it is easily searchable. BC Hydro was mentioned seven times. Hydro rates only received passing reference by way of a paragraph header:

“Reducing pressure on ratepayers”
“As the BC Prosperity Fund reduces public debt, this will include reducing the debt for BC Hydro and the Port Mann Bridge by allowing us to accelerate the paydown of debt for capital projects that are helping build the province.”

Five of the seven references to Hydro in the Liberal platform were in the context of paying down its debt through the use of LNG revenues. (The other two were to continue to purchase private power and a boast about implementing audit recommendations regarding executives and their compensation.)

Having opened Pandora’s box, the principle of reducing Hydro’s debt through the use of resource or other government revenue needs to be fully explored. Reducing the debt pressure on rate payers through such payments can be thought of as little more than repaying what amounted to a shift of debt from government to Hydro; that is what happened when Hydro paid water rentals and dividends to the province when those funds could have been used to reduced Hydro’s debt.

BC Hydro’s total revenue in the 2012-13 fiscal year was $4.9 billion. In that fiscal year, Hydro paid $348 million in water rentals as well as $509 million in dividends to the province, which amounted to 17.5% of the corporation’s total revenue.

Many families who use natural gas to heat water and their homes have very low electric bills. Reasonable attention to turning off the lights can result in monthly bills of under $40 for such families, but those who use electric baseboard heaters and electric hot water tanks face much higher bills, averaging over $200 per month.

For those families a rate increase of 9% on April 1, 2014 and another 6% on April 1, 2015 hurts. If they have wage earners who work in industries that will be facing millions in increased costs because of the 15% two year rate hike, they could be looking at job losses.

Boards of education and hospitals were told by the government to find “savings” elsewhere in their budgets to pay higher Hydro rates; schools and hospitals may have to cut services and layoff staff to pay the higher electric bills!

Premier Clark’s Liberals would have you believe the rate increases are necessary in order to make up for decisions made by the NDP more than twelve years ago. Even their strongest supporters can’t believe that nonsense. After more than a decade the Liberals must accept responsibility for their decisions and many of those decisions were massive mistakes that inflicted billions in unnecessary costs on Hydro.

BC Hydro’s power distribution was stripped away into BC Transmission Corporation in 2003 only to see the experimental company dissolved and reabsorbed by Hydro in 2010 under the inappropriately named “Clean Energy Act“.

Will McMartin described how many Liberal friends benefited from that failed experiment which cost rate payers $65 million. That was small potatoes as Liberal waste at Hydro goes.

The Clean Energy Act excluded many pet projects from independent review by the BC Utilities Commission (BCUC). Energy economist Marvin Shaffer warned that the Act would cost BC billions, and he has been proven right.

The Act essentially required Hydro to buy high and sell low. In the fiscal year ended March 31, 2013 Hydro paid Independent Power Producers (IPPs) $760 million (annual report page 45) for 10,675 gigawatt/hrs of power, an average cost of $71.23/MW/hr. Average power cost for Hydro was $17.96/MW/hr for 62,529 gigawatt/hrs of power. The Liberal’s concept of “self-sufficiency” required Hydro to buy expensive IPP power as if every year were a drought, even if it didn’t need the power.

The Clean Energy Act was really an Act to promote the profits of IPPs and to strip BCUC of its regulatory role in protecting ratepayers. Section 7 of the Act removed the following projects from BCUC scrutiny:

  • the Northwest Transmission Line, a 287 kilovolt transmission line between the Skeena substation and Bob Quinn Lake, and related facilities and contracts;
  • Mica Units 5 and 6, a project to install two additional turbines and related works and equipment at Mica;
  • Revelstoke Unit 6, a project to install an additional turbine and related works and equipment at Revelstoke;
  • Site C, a project to build a third dam on the Peace River in northeast British Columbia to provide approximately (i) 4 600 gigawatt hours of energy each year, and (ii) 900 megawatts of capacity;
  • a bio-energy phase 2 call to acquire up to 1 000 gigawatt hours per year of electricity;
  • one or more agreements with pulp and paper customers eligible for funding under Canada’s Green Transformation Program under which agreement or agreements the authority acquires, in aggregate, up to 1 200 gigawatt hours per year of electricity;
  • the clean power call request for proposals, issued on June 11, 2008, to acquire up to 5 000 gigawatt hours per year of electricity from clean or renewable resources, and

Section 17 of the Act imposed the smart meter program and exempted it from BCUC review.

It is hard to say whether some of the projects listed above would have proceeded if they had to satisfy BCUC. If some had not, ratepayers might not be looking at a 15% rate increase over the next two years.

Smart meters cost over $1 billion and there is no evidence of any significant savings. The cost of site C is anyone’s guess but some suggest it could reach $10 billion. Even Hydro’s 2011 estimate pegged it at $7.9 billion. Remember all that power is designated for producing LNG in BC and we’ve yet to see whether LNG can be sold at a profit for the province, let alone at rates that will pay off all provincial, Port Mann and BC Hydro debt. Nevertheless, the Liberal platform promised to accelerate the paydown of debt at BC Hydro, BC Ferries and the Port Mann Bridge once the core provincial debt is paid down.

While not acknowledging their mistakes, the Liberals could argue that (except for Site C) they are mostly water over the dam, or is that water under the bridge. One way or another, the promised pay-down of Hydro’s debt is a long way in the future and it needs money now. Of course part of the reason it needs money now is to continue paying the government almost a billion dollars a year in combined water rentals and dividends.

A background note to the government’s news release on the rate increase said government would be: “Reducing dividend payments to the Province over five years starting in Fiscal 2018 to allow BC Hydro to keep more cash for infrastructure investments.”

Those paying 9% more next year and another 6% more in 2015 might notice that the government’s promise to stop draining so much from Hydro doesn’t take effect until after the 2017 provincial election. When you think about it, much of what the Liberals promised for the May 2013 election won’t be seen or proven until after the 2017 election. It all requires a great deal of faith.

Editorial: Legislature must meet to answer policy questions

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Vancouver Sun    November 21, 2013

British Columbians are seriously disadvantaged by a legislature that remains shuttered, unable to carry out its essential function as a forum for public debate.

An Agricultural Land Reserve in crisis? Forecasts showing B.C.’s long-touted greenhouse gas targets being blown? B.C. signing an agreement with Alberta in support of a national energy policy?

These are fundamental topics warranting a full public airing that, appropriately, would challenge and help shape public policy.

This won’t happen, however, because Christy Clark, who won a provincial election last May, mandated a 17-day session to pass the new Liberal government’s budget, and then proceeded to cancel any fall sitting of the legislature.

Since the start of the year, MLAs have sat for only 36 days.

As a result, government actions and policies are not receiving the scrutiny they would receive had elected members of the legislature been able to convene.

It is obvious that sitting governments prefer to have free rein, to carry on without being questioned or forced to defend decisions. But this is not in keeping with our system of responsible government.

Canada’s Constitution mandates that sittings of Parliament and the provincial legislatures must take place every 12 months.

A set number of sitting days is not specified, but parliamentary records show B.C.’s government sits relatively few days when compared to its counterparts.

The two other large provinces, Ontario and Quebec, in 2012 and 2013 sat for 143 and 121 days respectively. B.C. sat for just 83 days during that time period.

And so, even the most substantial matters are not being debated.

For example, we learned last week Agriculture Minister Pat Pimm pushed for a rodeo to be built in his riding on farmland that falls within the Agricultural Land Reserve and that Pimm is recommending to Cabinet the ALR broaden its considerations to take account of the needs of the oil and gas industry.

Is this a recommendation the government would favour in a province where less than five per cent of land is arable and as existing farmland dwindles by the year?

Also last week, internal B.C. government documents came to light showing development of a liquefied natural gas industry in the province could double greenhouse gas emissions, so that B.C.’s total emissions would be similar to those of Alberta.

This, when the province has pledged to reduce its total emissions by 2020 down to a third of its 2007 emissions.

Does the province propose to abandon its 2020 target?

Earlier this month, Clark met with her Alberta counterpart Alison Redford and reversed her earlier stand against Canada developing a national energy policy.

How does this new position square with her government’s rejection last spring of the Northern Gateway pipeline? Does this mean the government will be endorsing an expansion of Kinder Morgan’s alternative TransMountain pipeline route?

For now, with the legislature not sitting, the public can only guess at the answers to such questions. Clearly this is not the way democracy is supposed to work.

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