Year of scrutiny ahead for BC Ferries

Ferry Advisory Committee Chairs attended a series of meetings this week with government officials, the BC Ferry Commissioners and BC Ferries executives to review recent performance and to gain a clearer picture of the steps that are necessary in the lead up to BC Ferries’ Performance Term 4 (PT4) which will run from April 2016 to March 2020.  Gabriola FAC Chair John Hodgkins was there.

On Friday, the release of BC Ferries’ first quarter results coincided with the corporation’s Annual General Meeting, which reported the lowest traffic levels on the coastal ferry system for 23 years – and underlying the $13 million increase in revenues to BC Ferries, the worrying reality that the decline in ridership continues.

At a time when neighbouring Washington State Ferries is reporting an upturn in ridership during the first quarter (+3.4% in passenger traffic; +1.4% vehicle traffic), traffic on BC Ferries routes has continued to decline by almost 0.5% across the board. The decline on some minor routes has been significantly more – especially those routes (such as our own) which suffered significant service cuts.

Looking Back

Inevitably, there is much focus on the impact of the service cuts imposed by government on April 28 to close the funding gap in the current performance term (PT3).  Many of those cuts were modified by BC Ferries to address local concerns and clearly the Gabriola route is not the only one that is going to need some corrective action to deal with unreliability and overloading. The priority though, say BC Ferries, is to ensure that there is adequate time to consult with local communities (via the FACs) before any further changes are made.

At the start of PT3, the Ferry Commissioner set targets for BC Ferries to find $54 million in efficiency savings in addition to the service cuts that have already been made on the minor routes and the $4.9m in savings that have yet to be found from the major routes. BC Ferries is “on track to meet and potentially exceed” the combined $84m target, which should reduce the pressure for higher fare increases or service cuts in PT4.

Deputy Assistant Minister Deborah Bowman, who recently took over responsibility for coastal ferry services from Kevin Richter, acknowledged that “lessons were learned” from the recent community engagement process but she signalled that the government’s approach to ferry services was unlikely to change significantly in the next performance term.

Performance Term 4

Every four years, BC Ferries has to submit its financial plans to the BC Ferry Commissioner, whose task it is to set the fare cap (the maximum increase that BC Ferries can apply to the average fares paid by ferry users). See here for more information on this process.

Ferry Commissioner Gord Macatee described the steps that will be followed in determining the fare cap for PT4.

  • By September 30, 2014 BC Ferries must submit its financial and operational forecasts for 2016-2020 including, for the first time,  a 12-year capital programme covering major projects – primarily vessel and terminal upgrades and vessel replacements. This will be a critical element during PT4 and beyond, as up to 15 of BC Ferries’ fleet will be due for replacement by 2030.
  • During October 2014, the Ferry Commission will publish the BC Ferries submission on its website and invite public comment. Financial consultants PWC will conduct an independent evaluation of BC Ferries’ submissions
  • On March 30, 2015 the Ferry Commissioner is required to publish the Preliminary Fare Cap for 2016-2020.
  • By June 30, 2015, BC Ferries and the government are required to finalise any proposed changes to the Coastal Ferry Services Contract and provide a copy to the Ferry Commissioner.
  • Following input from government and public consultation, the Final Fare Cap will be published on September 30, 2015. 
  • PT4 starts on April 1, 2016.

Performance Reviews

The BC Ferry Commissioner has determined that a number of Performance Reviews of BC Ferries will be conducted in the coming months to inform his evaluation of BC Ferries’ financial forecasts.  The purpose of Performance Reviews is to hold the operator (BC Ferries) accountable, and by doing so raise public confidence that the company is operating efficiently, making prudent use of its resources and operating in such a way as to keep ferry fares as low as reasonably possible. Among the organisations that have requested reviews was the Islands Trust Council

The findings of a recent Performance Review of the progress towards the implementation of BC Ferries’ Automated Customer Experience (ACE) Program can be found here.  The ACE Program is a large, complex – and costly – set of IT initiatives designed to enable BC Ferries to develop new business management capabilities.

We understand that four further Performance Reviews are planned over the coming months. These will examine:

  • The organisational efficiency of BC Ferries , with specific comparisons to Washington State Ferries and others
  • The cost-efficiency of current Homeporting* arrangements at BC Ferries
  • The financial performance of the BC Ferries Vacations business
  • BC Ferries’ Fuel Management strategies

* Homeporting refers to the arrangements made for overnight docking of vessels and the locations from which ferry crews are employed.

In recent years, the report by the BC Comptroller General to government in 2009 found BC Ferries’ operations “to be well managed and reasonably effective” but called for improvements in governance “to ensure strong oversight and accountablily”.  A subsequent investigation commissioned by the BC Ferry Commissioner as part of a Review of the Coastal Ferry Act  in 2012 found that “Among publicly-owned systems, BC Ferries appears to be relatively efficient” following analysis by PWC of similar ferry systems in North America and Europe.

However, there continues to be much concern about the underlying reasons for the high cost of coastal ferry services in British Columbia and the impact that escalating ferry fares have had on island communities and the local economy. At a time when the pressure on ferry fares has never been greater, the Ferry Commissioner’s decision to carry out these Performance Reviews will surely be widely welcomed.

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