BC Ferries commissioner Gord Macatee released the preliminary price cap for the term commencing next April and ending in March 2020, and it is a far cry from the previous price cap.
Macatee announced a proposal for an fare increase cap of 1.9 per cent for each of the years included in what is referred to as Performance Term Five, a number that applies to both major and rural routes. In comparison, the last price increase cap was at 4.15 per cent for major routes and 8.23 per cent for the smaller routes.
In addressing the recommendation, Macatee said the lower number is a recognition of the cost-cutting measures BC Ferries has put in place over the past five years.
“Administrative costs have been reduced, they are now $5 million less than they were in 2009, executive compensation levels were reduced by $1.2 million per year, overtime has been reduced, safety improvements have led to significant reductions in Worker’s Compensation premiums, labour costs have been held to a reasonable late of growth and there have been no labour disruptions in over 12 years,” he said, adding ferry users also contributed to the lower number.
“They have adapted to a revised service level, ridership declines are leveling off, utilization of ferry capacity is improving, people are spending money on ancillary and commercial services and people are buying the BC Ferries vacations.”
One of the major considerations for the years ahead is the price of oil, which has fluctuated greatly since the last cap was introduced.
“Trying to predict fuel pricing over the next five days is daunting, our challenge is to do it for the next five years,” he explained.
“We tried to strike a balance between optimism and being conservative. We’re assuming fuel prices will rise from where they are now but will stay lower than where they have been. We’re assuming the volatility that is in the market right now will settle down and that refiner margins will return to their more normal levels. We’re using a price of $65 per barrel in our determination and we heard the price.”
However, Macatee said it is important to note that, even after a public comment period that lasts until June 30 and a final decision being rendered in September, this cap is not set in stone.
“The price cap is set and I can’t change it, but BC Ferries can come in and ask for a change if we’ve really made a mistake and costs are much higher and they’re not able to meet their financial requirement. There is a provision, if needed, for the company to be able to ask for an increase,” he said.
“The thing I don’t want to do is set it too high at the front-end because there is no mechanism for anyone to come and ask me to lower it.”