BC Ferry Commissioner Review of the Coastal Ferry Act

 

The following is the 21 specific areas that the Commissioner will be looking at during his Review of BC Ferries and the Coastal Ferry Act. The report will be conducted this fall and will be completed in the New Year. The report will then go to the Provincial Government for consideration and to determine if they need to change the Coastal Ferry Act or BC Ferries.

Save Our Ferries will be submitting our own submission to the Commissioner in the fall. We will be supplying over eight years worth of research on BC Ferries and the Coastal Ferry Act, along with insights into other established ferry systems.

This is a great opportunity, and one that we intend to make use of to ensure that BC Ferries gets back on course.

Thank you,

Gregg Dow, Save Our Ferries

 

 

 

 

BC FERRY COMMISSION REGULATORY REVIEW

 

Provide advice and assistance to the Commissioner to facilitate completion of his review and development of his recommendations to the Minister for potential changes to the Coastal Ferry Act.

The Commission requires a Service Provider to assess the results of Price Cap regulation since 2003 as measured against the Province’s stated public policy and the guiding principles contained in the Act.  Specifically, the Service Provider is to address the following areas:

1. Assess BC’s price cap model relative to price cap models in other jurisdictions, advise on any aspects of the BC model which stand out as being unique or different, and provide an explanation of the implications of any such differences.
2. Determine whether other price cap models make provision for a periodic policy review, and if they do, the timetable and terms of reference.  Provide advice on whether a periodic review is a feature which should be considered in BC and if so, on what timetable, with what mandate and who should conduct such a review.
3. In other jurisdictions where price caps are used to regulate an industry, how are the interests of the users of the system balanced against the financial sustainability of the service providers? Determine how other jurisdictions define the interests of the users of the system and the financial sustainability of the service providers. Also, determine how other jurisdictions address the issues of affordability and sustainability.
4. Develop options for a definition for “the interests of ferry users” for regulatory purposes.
5. Develop options for a definition of “financial sustainability of the ferry operator” for regulatory purposes.
6. Identify barriers in the Act which prevent the Commissioner from balancing the interests of ferry users with the financial sustainability of the ferry operator and; develop options for any changes to the legislation that would enable the Commissioner to better balance those interests with the financial sustainability of the ferry operator.
7. The Coastal Ferry Act has provisions to encourage the ferry operator to seek alternate service providers. Identify any legislative or other barriers to alternate service delivery and advise on what changes could be considered to encourage this form of service delivery.
8. Assess whether the Commissioner has sufficient powers to hold the ferry operator accountable for minimizing expenses in delivering core ferry services in accordance with the Coastal Ferry Services Contract without compromising safety and for publicly justifying expenditures which may impact ferry fares.
9. Assess whether there are any impediments in the Act and/or the Coastal Ferry Services Contract which impacts the ferry operator’s ability to deliver an efficient and effective level of service.
10. Assess the requirement in Section 41 that the Commissioner determine whether expenses which qualify for inclusion when the price cap is calculated are reasonable, and advise whether a prudence test is appropriate as well.
11. Assess whether the Commissioner should be required to approve capital expenditures prior to them being incurred.  Provide best practices from other “light handed” or comparable regulatory models regarding the role of the regulator in approving the service provider’s capital expenditures.
12. Identify the implications of a system of one price cap for all routes or route groups.
13. Assess whether opportunities for ancillary revenue are being effectively and fully utilized as a tool to help keep fares lower. Identify how ancillary revenues are treated in other regulatory models in other jurisdictions and assess whether the Commissioner should have the legislated ability to regulate ancillary revenue.
14. Evaluate the current methodology for forecasting future ridership, and elasticity of demand, and provide advice on best practices.
15. Evaluate the complexity of the model for calculating the price caps and the average fares for compliance purposes , and advise on whether the level of complexity is necessary, and if not, what changes could be made to the model so it is more readily understood by the general public .
16. Assess whether there should be any provisions in the Act to address a possible situation where equity levels grow larger than what is required to finance the long term capital plan of the ferry operator or to achieve/maintain financial sustainability. Evaluate the Act’s provisions for equity and return on equity and determine the appropriate parameters for an operator that does not pay income taxes. Identify how other jurisdictions with a comparable regulatory model define equity and determine return on equity.
17. Assess the requirement in the Act that the Commissioner use replacement cost valuation of assets, and determine what effect that policy has or is likely to have on fares.  Provide advice on alternative methodologies which could be permitted in the legislation, and provide specific comments on the appropriateness of differential weighted cost of capital as an option. Also, with respect to the alternative methodologies where replacement cost valuation of assets is not used, comment specifically on the consequences for setting price caps for future performance terms.
18. Advise whether there should be a provision in the Act for an off-setting extraordinary price cap reduction during a performance term if the operator comes into an unanticipated windfall or decrease in expenses and whether such a provision exists in price cap regulatory models in other jurisdictions.
19. Assess whether or not the Act’s provisions for regulating unfair competitive advantage are adequate to achieve a public policy objective of fostering competition while also encouraging the ferry operator to maximize tariff revenu
20. Assess whether there is a need for a mechanism to consider adjustments to the Coastal Ferry Services Contract during current or future performance terms to achieve service level improvements or efficiencies.
21. Assess the impact of any potential changes to the legislation on bondholders and other providers of investment capital, and provide advice on mitigation measures for any impacts which could impair access to financing by the company in future.

For more information:

COASTAL FERRY ACT REVIEW

June 24, 2011
Request for Proposals Issued

June 2, 2011
Bill 14 Enacted

May 19, 2011
Commissioner Announces Review of Coastal Ferry Act