The BC Ferries commissioner has announced his preliminary decision on price caps for the next performance term, which would allow average ferry fares to increase by a maximum of 2.3% annually beginning April 1, 2020, and ending March 31, 2024.
The proposed price cap increases anticipate that total operating expenses — including those that BC Ferries has no control over — will increase at, or slightly above, the rate of inflation, while the trend of increased traffic will level off.
The commissioner has until September to finalize the decision. In the meantime, the public has an opportunity to comment on the preliminary decision, and the B.C. government and BC Ferries have an opportunity to review the Coastal Ferry Services contract and potentially make changes that could affect the final decision.
Detailed reasons for the preliminary price cap increase are set out in the Report on the Preliminary Price Cap Decision for the Fifth Performance Term. The report, available online, also includes a review of the BC Ferries’ current performance. Highlights include:
- In fiscal 2018, BC Ferries delivered 79,082 round trips, exceeding the required trips under the Coastal Ferry Services contract by 2,962.
- BC Ferries implemented average fare increases that were lower than the 1.9% it was allowed for performance term four.
- Vehicle and passenger traffic increased in fiscal 2017 by 2.9% and 1.7%, respectively, breaking the previous 2008 record. The trend continued through 2018 and is expected to climb further in 2019 and 2020.
- Fuel costs, the second-highest operating cost for the service and projected to be $108.7 million in fiscal 2019, have been effectively managed and are expected to decline primarily due to higher usage of liquefied natural gas (LNG) fuel.
- Long-term capital plans will have a moderate impact on performance term five price caps but could have a larger impact for following terms.
- Increases in non-controllable costs in performance term five include $19.8 million for the provincial carbon tax, $6.1 million for the new provincial health tax and $19.4 for Canada Pension Plan rates.
Along with its preliminary decision on price caps, the BC Ferries commissioner is urging BC Ferries to develop a plan for the conversion to all-electric ferries as soon as infrastructure and technology is available, consider possible reductions in its long-term capital plan to ease pressure on future price caps and develop a tracking process and reporting requirement to meet targets for reducing operating, maintenance costs and administration costs.
The deadline for public comments on the preliminary price cap decision and report by June 30, 2019. Comments can be sent by mail to Office of the BC Ferry Commissioner, P.O. Box 9279, Victoria, British Columbia V8W 9J7 or: email@example.com
Sheldon Stoilen, BC Ferries commissioner —
“BC Ferries have fully co-operated in providing the commissioner with the information he needs to make a preliminary price cap decision. I am pleased to see the price caps tracking close to the consumer price index for British Columbia. The major challenges to operating a world-class system that is affordable to the riding public and taxpayers can be expected to persist and even deepen. The commissioner will applaud any effort by BC Ferries and the Province to address the Redlin report recommendation for a jointly developed vision to address them.”
- A price cap is a form of regulation to set on the total amount of revenue that can be earned from ferry fares.
- Under provincial legislation, the Office of the BC Ferries Commissioner serves an oversight and regulatory role over BC Ferries’ operations, including setting price caps on the maximum allowable increase in the average fare levels that BC Ferries is permitted to charge its customers and the approval of major capital expenditures.
- The last price cap decision by the BC Ferries commissioner was September 2015 when it was set at 1.9% annually for the current performance term.
To learn more about the BC Ferries commissioner’s Report on the Preliminary Price Cap Decision for the Fifth Performance Term, visit: www.bcferrycommission.ca/PT5-Preliminary-Price-Cap-Report.pdf
PricewaterhouseCoopers LLP assessment of BC Ferries’ performance term five submission: www.Assessment-of-BC-Ferries-PT5-Submission-March-2019.pdf (bcferrycommission.ca)
PricewaterhouseCoopers LLP price cap compliance performance review: www.Price-Cap-Compliance-Performance-Review-March-2019.pdf (bcferrycommission.ca)
PricewaterhouseCoopers LLP drop-trailer compliance review: www.Drop-Trailer-Compliance-Review-March-2019.pdf
A backgrounder follows.