Friday, 6 January 2012

Of Crown corporations, hockey tickets and yes, the fast ferry fiasco

This week the media reported BC Hydro has decided to sell its half share of a suite at Rogers Arena as part of its cost cutting efforts.

The announcement generated a short term media feeding frenzy.  A couple of mornings ago on the way into work I heard what sounded like a contest between CKNW’s John McComb and Michael Smyth to see who could be the most outraged by the shocking discovery of the truly appalling fact that BC Hydro had ever - gasp! - dared pay for someone’s ticket to a hockey game.  

Well, I have a different perspective.  In my opinion, while this particular decision may have been exactly the right one for BC Hydro at this point in its business cycle, there is absolutely nothing wrong with a business that is a Crown corporation spending money on a suite at the Rogers Arena.

I suspect I may be in a minority on this one.  But hey, what’s the point of writing a blog if you can’t say something controversial once in awhile?

For me the decision whether a Crown corporation should spend money this way should be a business decision, and ought to be made on a business basis.  It shouldn’t be about politics.  That way, I say, lies madness, ruin and the fast ferry fiasco.  

I’m all in favour of BC Hydro doing what it can to reduce its costs, particularly given the difficult economic times and the need to keep rate increases within some reasonable range.  But I’m not bothered by the idea that it might actually be good business for a Crown corporation to entertain its customers. 

After all, this is what businesspeople do - they entertain each other.  Why?  To help maintain and grow their businesses.   It’s not just big businesses, either.  The coffee shops near my office in downtown Vancouver are busy all day long with business folks meeting clients, customers, and even, god forbid, their lawyers.  In truth the hospitality sector would be pretty quiet if business people stopped entertaining each other.  

And it needs to be said that thousands and thousands of jobs in our province depend upon this long-established practice.

Interestingly enough, those jobs include the talented and highly-paid folks who play hockey for the Vancouver Canucks.  After all, it’s the expensive game tickets and suites at Rogers Arena - so many of which are paid for by businesses large and small - that help make the Vancouver Canucks a viable enterprise.  And I bet you generally don’t complain about the fact that, thanks to your support of our local NHL franchise, Roberto Luongo earned more in this first week of January than the premier of our province will in a whole year?

But I digress.

If entertaining is good for private businesses, why isn’t it good for Crown corporations that run businesses?

One of the CKNW commentators said it’s wrong for a monopoly to spend money this way.  

But that’s at the very least a profoundly ignorant statement about BC Hydro’s business. 

The fact is that there are some awfully large consumers of electricity in British Columbia. Mining companies, forest companies, and oil and gas companies spend millions of dollars each year on the electricity needed to power their facilities.  And many of these companies do have a choice about where and how they get their electricity.  In fact, many of them even make their own electricity.  (For example, BC Hydro just announced a 15-year deal with Nanaimo Forest Products representing a $45 million investment by that company in constructing a proposed 25-megawatt turbogeneration plant at Harmac)  

For these companies BC Hydro is potentially both a supplier and a customer. The question whether they choose to enter into business arrangements with each other is a business decision like any other.  Discussions and negotiations about these kinds of arrangements are exactly the sorts of things that business people do in all the other suites and seats in Rogers Arena.  It’s really difficult to see why BC Hydro is any different from any other business in that regard.  

Another argument is that there is something wrong about a Crown corporation spending “my” money on this kind of thing.    

Hmm.  Some part of the price of everything we purchase is attributable to the cost of advertising, marketing, and yes, people taking other people out for lunch.  When you are buying Nike running shoes or an iPhone, do you complain that some of your consumer dollar is being spent by these companies on marketing and advertising?  

The critical question for all these expenditures ought to be whether they make good business sense.  Do they produce enough return to make the investment worthwhile?  If they do, then are they not worthy objects of expenditure?  If not, then they are unnecessary frills and should be stopped.  That’s surely as true for Crown corporations as it is for private businesses.

I know that in some sense, every Crown corporation belongs to all of us as citizens, residents, and voters.  

But I think that fact argues in my favour.  

In BC there is a vivid history lesson from the fast ferry fiasco of what can happen when a Crown corporation is used as a tool for a purely political objective - in that case, trying to kick-start the BC shipbuilding industry.  The result was three vessels that cost nearly half a billion dollars to build, were completely unfit for their intended purpose, and ultimately sold for scrap value - and there was certainly no long term spin-off benefit for shipbuilders.

My view is that the best way to maximize the value, and (equally importantly) minimize the risk to taxpayers from owning businesses like BC Hydro is to require them to operate - as far as possible - like businesses.  That’s the best way to protect “my” investment in “my” Crowns.

If this means that, like other businesses, Crown corporations need to spend some money on entertainment to build productive relationships with its customers and clients, then that, it seems to me, is entirely worthwhile.


  1. Do we really need another Liberal flag bearer distorting the truth on the net..... not.

    Guy in Victoria

  2. Thank you for joining us BCLibs on the Internet. Guys like Guy will spew becuz they're BCNDP and hate the voices of freedom drowning out their gaga of socialism.

    Plz keep blogging. The BCLibs to me are heroes who are totally awesome and many of the reforms you and your buddies like Fightin' Jude Reid, "Gyratin' Gord" Campbell, "Fighter Jock" Collins, and "Cute Christy" Clark from 2001 are a model to the world. Keep on keeping on!