June 27, 2012
Bill 47 Amendments Come Into Force
In response to public concern about rising ferry fares, the provincial government passed Bill 14 on May 24, 2011 mandating BC Ferries commissioner Gord Macatee to conduct a review of the Coastal Ferry Act (“Act”). Under Bill 14, the commissioner was required to submit his report to the Minister of Transportation and Infrastructure within six months recommending changes to the Act. During the review, the current price cap model and its impact on affordability of future ferry fares and sustainability of ferry-dependent coastal communities for travel and commerce was assessed as well as the relative efficiency of BC Ferries compared to other ferry operators.
On January 24, 2012, the commission released its report with recommendations on how to better balance the interests of ferry users, taxpayers and the ferry operator.
On May 9, 2012, the provincial government introduced Bill 47 – 2012 Coastal Ferry Amendment Act, 2012 which received Royal Assent on May 31, 2012 and came into force by Regulation on June 25, 2012.
The proposed legislative changes move toward striking a balance among the interests of ferry users, taxpayers and the sustainability of the ferry operator by enhancing regulatory oversight powers of the commissioner to improve the efficient delivery of coastal ferry services. The commissioner will be able to approve major capital expenditures, conduct routine performance reviews, request ferry operators to prepare plans, review policies, conduct public consultations and make service level adjustments under certain conditions. The commissioner has been given additional tools to deal with the extraordinary circumstances, no longer being restricted to just increasing the price caps.
Legislative changes include:
- A definition of “ferry users” as ferry passengers and their families, communities serviced by ferries and businesses that rely on or use ferry services. In June 2010, the Coastal Ferry Act was amended requiring the commissioner to consider the interest of ferry users in the regulation of ferry operators but was not clearly defined and there was considerable ambiguity regarding the applicaton of this requirement in practice.
- Amendments to policy principles in section 38 of the Act as follows:
- regulation of ferry operators is to be done with a primary view to protect the interests of ferry users, taxpayers and ferry operators;
- encourages innovation as a principle to guide the commissioner’s regulation of ferry operators;
- removes the prohibitions against cross subsidization of ferry routes and the requirement to move towards a greater reliance on a user pay system;
- empowers the commissioner to require ferry operators to prepare plans, review policies and engage in public consultations.
- A publication ban of information that is provided by a ferry operator deemed to be harmful to the financial or economic interests of the ferry operator or to the business interests of a third party under section 40 of the Act.
- More flexibility for the commissioner to determine revenue needed to sustain operations and support ongoing investment. The ferry commissioner will set returns and price caps to enable the ferry operator to meet all its debt obligations and maintain an appropriate credit rating. This means changes to regulation of ferry fares under section 41 of the Act as follows:
- replaces the requirement that the price caps applicable to a ferry operator must allow for a specified pre-tax return on equity with a requirement that the price caps must allow the ferry operator to meet its debt obligations and maintain access to reasonable borrowing rates;
- replaces the requirement for the commissioner to determine the replacement cost of a ferry operator’s assets with a requirement for the commissioner to attribute to assets a value the commissioner considers appropriate;
- removes the prohibitions against cross subsidization of ferry routes. This will provide the commissioner with greater discretion when setting price caps.
- provides for fuel price deferral accounts or mechanisms.
- Consideration by the commissioner of applications for relief due to extraordinary circumstances from ferry operators. If approved, relief could be provided through temporary or permanent price cap increases, temporary or permanent service reductions or deferrals of major capital expenditures under section 42 of the Act.
- Service reduction clarifications allowed a ferry operator under section 43 of the Act with respect to temporary responses to circumstances in which the ferry operator is unable to provide a required level of service. The commissioner can also direct a ferry operator to permanently reduce service on a designated ferry route.
- Performance reviews of a ferry operator conducted by the commissioner under section 46.1 of the Act.
- Extension of the amount of time by which the commissioner must report to the Lieutenant Governor in Council in response to a ferry operator’s report by an additional month under section 53 of the Act.
- Commissioner approval of major capital expenditures incurred by ferry operators under section 55 of the Act and the publication of capital plans of ferry operators. This includes establishing the criteria for identifying a major capital expenditure.
- Increases to the amount the commissioner is entitled to receive from ferry operators to 1/5 of 1% of the previous year’s tariff revenue.
Click here for Bill 47 highlights and a comparison to the previous Act.