Just last week, our new Minister of Transportation pledged that the NDP’s election promises of a 15% reduction in fares on minor routes, a fare freeze on the major routes and a return to free travel for BC Seniors on Mondays to Thursdays would all be honoured “in the next few weeks”. But it seems that pledge may take longer to deliver, and it could easily be early 2018 before those price cuts can be realised.
Ferry fares are regulated by the BC Ferry Commissioner acting (we’re told) independently of the BC Government and BC Ferries. At four year intervals, the Commissioner determines the maximum level of fare increase that BC Ferries can charge in order to bridge any anticipated gap between costs and revenues. After many years of above-inflation increases, the price cap (the maximum permitted increase) was set in 2016 at 1.9% annually from 2016 until 2019.
That figure will have been based on a range of assumptions about operating costs, funding for new ferries and changes in expected traffic levels. But perhaps the most unpredictable factor is fuel prices, so at the start of each four-year period, the Ferry Commissioner determines a baseline cost per litre for fuel and as prices fluctuate, any underspend or overspend is banked in a regulated fund known as the Fuel Deferral Account. If fuel prices rise above the set level, the deferral account goes into deficit until such time as prices come down below the set price to sufficiently burn off the debt. If that looks unlikely, BC Ferries will apply a surcharge on fares to bring the deficit down.
The opposite is also true. If fuel prices stay below the set price for a long period, a credit builds up in the deferral account to be used either to shield against future high prices, or it is returned to customers as a fuel rebate on fares. That’s good news for customers, and since 2015 we have been enjoying rebates of 1% – increasing to 2.9% from April 2016.
These rebates have reduced the credit balance in the deferral account from its $6 million ‘high’ at the start of 2016 and have continued to drain the deferral account despite the acccount returning to zero by the Fall. Since then, the account has been sliding further into deficit as fuel prices have crept up but the rebates to customers have continued.
How long can this go on? Well, it’s entirely possible that BC Ferries was told not to “rock the boat” by ditching the fare rebate ahead of the provincial election. But now they are surely heading to the point where they will be told that the 2.9% rebate must go – and if bulk fuel prices continue to rise it’s entirely possible we could be seeing a fuel surcharge in its place sometime soon.
So, that good news from the NDP could be pre-empted by the 2.9% rebate on fares disappearing first, meaning the fares we pay could go up before their election commitment kicks in. What cannot be reversed is the decision in April to cancel any fare increase in 2017. That decision stands, and the price cap for 2018 and 2019 remains at 1.9% each year. So, will the NDP wait until that 1.9% fare increase is due to kick in next April before delivering their promised fare cut? Only time will tell.