Ferry Commissioner Issues Final Price Cap Decision
The British Columbia Ferry Commission, the independent regulator of British Columbia Ferry Services Inc. (BC Ferries), has released details on its final price cap decision for the remaining three years of the third performance term for BC Ferries. The final decision allows for annual increases in the price cap for all route groups as follows:
1. April 1, 2013 - 4.1 per cent;
2. April 1, 2014 - 4.0 per cent; and
3. April 1, 2015 - 3.9 per cent.
The price cap, which is set and enforced by the commission on BC Ferries’ fares, determines the maximum permitted weighted average fares for all route groups. The commission’s final price cap decision reflects the recent amendments to the Coastal Ferry Act and the most recent amendments to the Coastal Ferry Services Contract between BC Ferries and the provincial government.
The price cap also incorporates efficiency targets and provides for service level adjustments still to be determined through a public consultation process led by the Province. The efficiency target has been set at $54.2 million over four years. Service level adjustments are expected to contribute $30 million to keeping the price cap lower than would otherwise be the case.
The commission has also released two additional related orders which establish the terms and conditions for use of fuel price deferral accounts by BC Ferries and establishes the threshold for major capital expenditures which will fall under the commissioner’s purview.
Fuel deferral accounts allow for fare stability and predictability through the use of surcharges and rebates and will ensure fairness and equity for ferry users and greater transparency and accountability. Fuel procurement costs are the second largest expenditure for BC Ferries and the high degree of market volatility in recent years represents a significant risk to ongoing financial sustainability of the company. BC Ferries is required to submit a plan for use of alternate fuels, and a plan for reducing fuel consumption, both due 30 days after the publication of these orders.
The commissioner has set the threshold for major capital expenditure approval by the commission at $30 million for vessels and terminals, and at $5 million for specified upgrades to information technology systems. Moreover, the commission requires BC Ferries to annually submit a rolling five-year board-approved capital plan.
For copies of the orders, visit: http://www.bcferrycommission.com/reports-press/whats-new/
John Hodgkins, Chair of Gabriola Ferry Advisory Committee yesterday expressed disappointment that fares would continue to rise despite the Ferry Commissioner’s acknowledgement in January that fares ‘had reached the tipping point of affordability’.
“With consumer prices across BC rising at little more than 1% in the past year, the imposition of fares increases averaging 4% a year for the next three years is a bitter pill for ferry users, especially those who depend on ferry services for their journey to work.”
“Many islanders feel that ferry fares had gone beyond the tipping point of affordability before last year and yet we’ve already been hit with a 4% increase in 2012. We now face a further 4% fare rise each year until 2016 and that will just compound the misery for ferry-dependent communities – and inevitably lead to further decline in ferry ridership. That’s bad news for the future of our ferry services and bad news for our local economy.”
“Given the Ferry Commissioner’s mandate, a 4% fare cap is perhaps not surprising. He still has to ensure that BC Ferries maintains its long-term viability against a continuing decline in business. The increase would have been even higher if the Province hadn’t committed to making $30 million savings from service adjustments over the next three years.”
“It’s regrettable that the Province doesn’t seem to recognise that as fares continue to rise, the spiral of decline just deepens. Ferry-dependent communities not only carry the burden of taxation on transport infrastructure, but face escalating ferry fares as well.”
Ferry Advisory Committee Chairs expect to meet with Ministry officials later this month for an update on the planned public consultation on ferry service adjustments.