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.