Bill 47 Highlights

These highlights of Bill 47, given Royal Assent on May 31, 2012 and amending the Coastal Ferry Act of 2003, were prepared by the commission to show the changes for the convenience of readers.

Topic Bill 47 Amendments Coastal Ferry Act 2003
Definitions “Ferry Users” now defined as ferry passengers and their families, communities serviced by ferries and businesses that rely on or use ferry services Not previously defined
Policy principles (sec. 38) Requires the primary role of the commissioner to balance the interest of ferry users, taxpayers and the financial sustainability of ferry operators in the manner considered to be appropriate.Now requires ferry operators to be innovative as well as to minimize expenses without adversely affecting safe compliance with core ferry services.Allows for cross subsidization from major routes to other designated ferry routes.Gives the commissioner authority to order a ferry operator to prepare plans, review policies that may not be considered to be in the interests of ferry users and taxpayers and undertake public consultation.Movement towards greater reliance on a user-pay system to reduce government service fee contributions eliminated. Repeals sec. 38(1)(a) in which priority is to be placed on the financial sustainability of the ferry operators.Ferry operators were just required to minimize expenses without the need for innovation.Cross subsidization between major and minor routes not allowed.
Establishment of price caps for subsequent performance terms (sec. 40) The commissioner may or must refuse disclosure of information provided by the ferry operator that is deemed to be harmful to the financial or economic interests of the ferry operator or to the business interests of a third party. The commissioner must publish material on its website.
Principles applicable to price cap reviews (sec. 41) When setting the price cap, the commissioner must allow for a return sufficient to enable the ferry operator to meet its debt obligations, and maintain access to reasonable borrowing rates as well as attribute to capital assets deployed within or in support of the route group an appropriate and reasonable value. Required the commissioner to set the price cap for each route group without reference to the price cap set for any other route group.Required the commissioner to set the price cap that enabled the ferry operator to receive a pre-tax return on equity calculated by adding an equity risk premium and a bond yield that is consistent with Government of Canada bonds.  Determination of price caps was also based on current replacement costs, the appropriate value of capital assets deployed within, or in support of, the route group.
Fuel deferral account (sec. 41.1) The commissioner may require a ferry operator to establish a fuel deferral account and establish terms and conditions for the use of this account.The commissioner may allow a ferry operator to add a temporary fuel surcharge or require the ferry operator to provide a temporary discount to reflect fluctuations in the fuel deferral account for any period. No reference to fuel deferral accounts previously made under the Act.
Extraordinary situations  (sec. 42) Allows the ferry operator to apply for relief if it believes that an extraordinary situation exists such as those detailed to the right. In its application, the ferry operator may request a price cap increase or a reduction in service. Notification of the public and a public comment period of at least a month remain.  Despite this, the commissioner must issue a preliminary decision. The commissioner’s decision may include relief by providing temporary or permanent price cap increases, temporary or permanent service reductions or deferrals of major capital expenditures. A ferry operator could apply to the commissioner for an extraordinary price cap increase for situations such as the deployment of a new capital asset such as a vessel on one or more designated ferry routes, an extraordinary price increase of any non-controllable input such as fuel, an unanticipated and extraordinary traffic level change or safety or other regulations introduced that impose a new, unexpected and significant cost burden. Changes in labour costs or terms of employment do not constitute an extraordinary situation.
Service reductions (sec. 43) Clarifies means by which ferry operators can temporarily reduce services.  The commissioner can also direct a ferry operator to permanently reduce service on a designated ferry route but only in a manner and to a level consistent with the Coastal Ferry Services Contract.
Performance Reviews  (sec. 46.1) Allows the commissioner to conduct a review of ferry operations, including ancillary services. No such provision previously allowed.
Annual reports (sec. 53) Extends the deadline for submission of the commission’s annual report to August 31st. Previously the deadline was four months after the end of the fiscal year or July 31st.
Capital deployment and expenditure (sec. 55) Requires commissioner approval to incur a major capital expenditure to be provided within two months of receiving an application from the ferry operator.  Approval is granted if the proposed expenditure is reasonable, prudent and consistent with the current Coastal Ferry Services Contract and long-term capital plans. Commission approval required only upon an application under sec. 55.
Commissioner’s budget (sec. 59) Now cannot exceed 1/5 of 1% of the ferry operator’s previous year’s tariff revenue. Previously the budget of the commission could not exceed 1/20 of 1% of the previous year’s tariff revenue for each quarter in a year when price caps were being reviewed.  For all other years, a maximum of 1/40 of 1% of the previous year’s tariff revenue for each quarter.