Articles & Long Notices
General News · 20th June 2008
John Sprungman
"So I think this August if we can talk to the Ferry Commissioner and get a positive ruling out of him, we'd see on the majors and (Horseshoe Bay to) Langdale probably a surcharge in the range of 8 to 9 per-cent and on the minor routes about 20 per-cent so it's a very significant cost increase."
BC Ferries' President & CEO David Hahn on the Bill Good Show Tuesday (June 17, 2008) morning. Quoted from the CKNW Radio web site.
Last September, when Ferry Commissioner Martin Crilly determined the price caps for fare increases for the next four years, he built in a separate formula to deal with expected volatility in fuel prices.
The formula included a “set price” for light diesel fuel of 79.48 cents a litre. That's what it cost BC Ferries eight months ago. The complex formula essentially allows BC Ferries to add surcharges to fares if their cost overrun for fuel exceeds certain parameters. In May, BC Ferries says it was paying $1.20 a litre.
Since April 1, the average price of a “barrel of oil” has been about $120 Cdn., according to Rob Clarke, BC Ferries' Chief Financial Officer.
“Assuming we experience $130 Cdn. for the balance of the year, refining premiums remain as they are and taking into account the carbon tax, I would expect fuel surcharges to be applied in the Minor Route Group by November 1, 2008, “ Clarke wrote in an email a few weeks ago. “I think there is a very real possibility that the surcharges could be increased each quarter thereafter.”
Now, however, BC Ferries isn't planning to wait until Crilly's formula allows them to implement surcharges in November. They are going to him to ask for big boost starting in August.
“This,” Clarke now says, “would allow the opportunity to pick up the heavy summer tourist traffic and take some of the edge off the surcharges. Nobody saw this (fuel prices) coming on so quickly and steeply. So when the surcharges kick in, it will be with a vengeance.”
Actually, BC Ferries has been suggesting the likelihood of surcharges for some months, but it's the 20% figure for the minor routes that's shocking.
BC Ferries' March 31 quarterly report states:
“High levels of fuel pricing could translate in significant fuel surcharges and result in unprecedented total tariff levels. Although our traffic levels have not shown any significant effect from higher tariff costs, there is uncertainty about the future if total tariff charges rise significantly.”
Over the last three years, the Ferry Commissioner authorized three fuel surcharges, totaling 18.6%, which he ultimately rolled into the regular fares April 1, because BC Ferries still had more than $20 million in extra fuel costs. Incorporating those surcharges was calculated to repay BC Ferries for those losses by 2012.
To cover other expected cost increases, he also approved 7% fare hikes on April 1, 2009, 2020 and 2011, assuming Vancouver's Consumer Price Index will go up by 2% each year, as it has every year since 2003. If CPI is more than 2%, then 3/4 of that amount will be added to the price cap for each year.
In April alone, Vancouver's CPI went up almost one percent. A 4.3% jump in energy costs in that one month is largely responsible for the increase so higher fuel prices are beginning to significantly affect the cost of all goods and services which involve transportation.
Carbon Tax Hits BCF Too
The carbon tax is the Provincial Government's initiative to encourage us all to use less gas. It takes effect July 1st with an initial levy of 2.4 cents per litre. Just like the rest of us at the pump, BC Ferries has to pay it.
The tax will gradually rise to 7.24 cents a litre by July 1, 2012. Vancouver Sun columnist Vaughn Palmer pointed out that BC Ferries' tab over the next four years will be almost $32 million, based on current rates of fuel consumption, and “most, if not all, of those millions will be recovered from ferry travelers through fuel surcharges.”
“Ferry riders will pay more for all kinds of fossil fuel -including gasoline, natural gas and home heating oil- as well as their ferry fares,” Palmer wrote. He should, of course, have said propane instead of natural gas, but he's right about the higher cost of all fuels on our islands. Last weekend, regular gas at Squirrel Cove on Cortes was $1.489 per litre.
The government says their tax will be revenue neutral, meaning they won't wind up with any extra loonies in the treasury, but their means of returning it to the citizens of BC is a $100 per person cheque, soon to be in your mailbox, and reductions over the coming years to the provincial personal and business income tax rates.
Most island incomes are not at urban levels so it is questionable how much an income tax cut will return to the average islander. They say there will also be an annual rebate to low income people. It remains to be seen how this will all balance out.
No Help From Victoria
After meeting with Ministry of Transportation officials in May, the FAC Chairs came home with little hope that there will be any change to government funding for BC Ferries' Minor Route Group.
However, in the North, on the routes between Prince Rupert and the Queen Charlotte Islands and between Rupert and Port Hardy, the government has decided to pay for the North's new ships and to protect those ferry users from fuel surcharges. Why? Because they recognize that BC Ferries cannot extract any more revenue from fare increases on those routes. The local and tourist traffic there has hit, shall we say, a point of no return.
While the government refuses to recognize the negative impact of their ferry policies on more southerly coastal communities, BC Ferries acknowledges the potential “risk” of declining tariff revenue due to decreasing traffic.
“We believe,” the quarterly report says, “that demographics are changing on many of the small coastal islands that we serve. Individuals appear to be purchasing properties on these islands as vacation rather than primary residences. These individuals visit their island properties less frequently. This appears to have caused a decrease in the number of commuters on these routes. The continuation of this trend may result in a more significant decline in traffic.”
They don't seem to have any idea how much year-round residents have cut back on town trips, walked on or car pooled instead of taking their cars, and reduced trips for recreational purposes.
“We believe that a significant number of our customers travel for leisure purposes,” the report says. “Traffic on our vessels may decline, or fail to increase as expected, if world or local events have a negative effect on tourism or other leisure travel.”
I think they also fail to recognize that a significant number of islanders travel to see family elsewhere, and many of our “tourists” are family members or friends coming to the islands to visit. The high cost of this travel is affecting many of us.
There are even larger issues looming. The carbon tax will seem inconsequential if fuel prices keep jumping like they have in recent months and the news about the impact of carbon emissions keeps getting worse.
If you have been reading or hearing about peak oil and about the accelerating rate of climate change, you may have different thoughts about a ferry system that burns 118 million litres of diesel a year. How sustainable is it? If oil goes to $200 a barrel, what will it cost to keep the ferries running on their current schedules? If emissions have to be restricted radically, are we faced with changes that will severely limit our travel options?
Change of Queens Delayed
The Powell River Queen was scheduled to return from refit today, but on Monday, Marine Superintendent Gordon Nettleton said it won't be back until June 30. He said the passenger deck shelter may be removed from the Bowen Queen a few days before the PRQ returns to facilitate the change. The Bowen Queen was scheduled to begin its usual summer service in the Southern Gulf Islands next week. It will be rushed down there as soon as the PRQ returns.
Capt. Nettleton said the shipyard in Vancouver has been working “flat out” to finish the $14 million replacement of the car deck with a structure that will allow the PRQ to carry highway legal weight loads across all five lanes. He said this was a Transport Canada requirement to keep the ship in service.
The deck was replaced with the vessel in the water, cutting the old deck apart and using cranes to lift out the pieces and replace them with prefabbed sections with the superstructure built in. It's been a four-month project.
The new Quathiaski Cove terminal building will be officially opened at 1 p.m. today (June 20) with a brief ceremony and refreshments for those who stop by.
By John Sprungman, Chair, Ferry Advisory Committee
BC Ferries' President & CEO David Hahn on the Bill Good Show Tuesday (June 17, 2008) morning. Quoted from the CKNW Radio web site.
Last September, when Ferry Commissioner Martin Crilly determined the price caps for fare increases for the next four years, he built in a separate formula to deal with expected volatility in fuel prices.
The formula included a “set price” for light diesel fuel of 79.48 cents a litre. That's what it cost BC Ferries eight months ago. The complex formula essentially allows BC Ferries to add surcharges to fares if their cost overrun for fuel exceeds certain parameters. In May, BC Ferries says it was paying $1.20 a litre.
Since April 1, the average price of a “barrel of oil” has been about $120 Cdn., according to Rob Clarke, BC Ferries' Chief Financial Officer.
“Assuming we experience $130 Cdn. for the balance of the year, refining premiums remain as they are and taking into account the carbon tax, I would expect fuel surcharges to be applied in the Minor Route Group by November 1, 2008, “ Clarke wrote in an email a few weeks ago. “I think there is a very real possibility that the surcharges could be increased each quarter thereafter.”
Now, however, BC Ferries isn't planning to wait until Crilly's formula allows them to implement surcharges in November. They are going to him to ask for big boost starting in August.
“This,” Clarke now says, “would allow the opportunity to pick up the heavy summer tourist traffic and take some of the edge off the surcharges. Nobody saw this (fuel prices) coming on so quickly and steeply. So when the surcharges kick in, it will be with a vengeance.”
Actually, BC Ferries has been suggesting the likelihood of surcharges for some months, but it's the 20% figure for the minor routes that's shocking.
BC Ferries' March 31 quarterly report states:
“High levels of fuel pricing could translate in significant fuel surcharges and result in unprecedented total tariff levels. Although our traffic levels have not shown any significant effect from higher tariff costs, there is uncertainty about the future if total tariff charges rise significantly.”
Over the last three years, the Ferry Commissioner authorized three fuel surcharges, totaling 18.6%, which he ultimately rolled into the regular fares April 1, because BC Ferries still had more than $20 million in extra fuel costs. Incorporating those surcharges was calculated to repay BC Ferries for those losses by 2012.
To cover other expected cost increases, he also approved 7% fare hikes on April 1, 2009, 2020 and 2011, assuming Vancouver's Consumer Price Index will go up by 2% each year, as it has every year since 2003. If CPI is more than 2%, then 3/4 of that amount will be added to the price cap for each year.
In April alone, Vancouver's CPI went up almost one percent. A 4.3% jump in energy costs in that one month is largely responsible for the increase so higher fuel prices are beginning to significantly affect the cost of all goods and services which involve transportation.
Carbon Tax Hits BCF Too
The carbon tax is the Provincial Government's initiative to encourage us all to use less gas. It takes effect July 1st with an initial levy of 2.4 cents per litre. Just like the rest of us at the pump, BC Ferries has to pay it.
The tax will gradually rise to 7.24 cents a litre by July 1, 2012. Vancouver Sun columnist Vaughn Palmer pointed out that BC Ferries' tab over the next four years will be almost $32 million, based on current rates of fuel consumption, and “most, if not all, of those millions will be recovered from ferry travelers through fuel surcharges.”
“Ferry riders will pay more for all kinds of fossil fuel -including gasoline, natural gas and home heating oil- as well as their ferry fares,” Palmer wrote. He should, of course, have said propane instead of natural gas, but he's right about the higher cost of all fuels on our islands. Last weekend, regular gas at Squirrel Cove on Cortes was $1.489 per litre.
The government says their tax will be revenue neutral, meaning they won't wind up with any extra loonies in the treasury, but their means of returning it to the citizens of BC is a $100 per person cheque, soon to be in your mailbox, and reductions over the coming years to the provincial personal and business income tax rates.
Most island incomes are not at urban levels so it is questionable how much an income tax cut will return to the average islander. They say there will also be an annual rebate to low income people. It remains to be seen how this will all balance out.
No Help From Victoria
After meeting with Ministry of Transportation officials in May, the FAC Chairs came home with little hope that there will be any change to government funding for BC Ferries' Minor Route Group.
However, in the North, on the routes between Prince Rupert and the Queen Charlotte Islands and between Rupert and Port Hardy, the government has decided to pay for the North's new ships and to protect those ferry users from fuel surcharges. Why? Because they recognize that BC Ferries cannot extract any more revenue from fare increases on those routes. The local and tourist traffic there has hit, shall we say, a point of no return.
While the government refuses to recognize the negative impact of their ferry policies on more southerly coastal communities, BC Ferries acknowledges the potential “risk” of declining tariff revenue due to decreasing traffic.
“We believe,” the quarterly report says, “that demographics are changing on many of the small coastal islands that we serve. Individuals appear to be purchasing properties on these islands as vacation rather than primary residences. These individuals visit their island properties less frequently. This appears to have caused a decrease in the number of commuters on these routes. The continuation of this trend may result in a more significant decline in traffic.”
They don't seem to have any idea how much year-round residents have cut back on town trips, walked on or car pooled instead of taking their cars, and reduced trips for recreational purposes.
“We believe that a significant number of our customers travel for leisure purposes,” the report says. “Traffic on our vessels may decline, or fail to increase as expected, if world or local events have a negative effect on tourism or other leisure travel.”
I think they also fail to recognize that a significant number of islanders travel to see family elsewhere, and many of our “tourists” are family members or friends coming to the islands to visit. The high cost of this travel is affecting many of us.
There are even larger issues looming. The carbon tax will seem inconsequential if fuel prices keep jumping like they have in recent months and the news about the impact of carbon emissions keeps getting worse.
If you have been reading or hearing about peak oil and about the accelerating rate of climate change, you may have different thoughts about a ferry system that burns 118 million litres of diesel a year. How sustainable is it? If oil goes to $200 a barrel, what will it cost to keep the ferries running on their current schedules? If emissions have to be restricted radically, are we faced with changes that will severely limit our travel options?
Change of Queens Delayed
The Powell River Queen was scheduled to return from refit today, but on Monday, Marine Superintendent Gordon Nettleton said it won't be back until June 30. He said the passenger deck shelter may be removed from the Bowen Queen a few days before the PRQ returns to facilitate the change. The Bowen Queen was scheduled to begin its usual summer service in the Southern Gulf Islands next week. It will be rushed down there as soon as the PRQ returns.
Capt. Nettleton said the shipyard in Vancouver has been working “flat out” to finish the $14 million replacement of the car deck with a structure that will allow the PRQ to carry highway legal weight loads across all five lanes. He said this was a Transport Canada requirement to keep the ship in service.
The deck was replaced with the vessel in the water, cutting the old deck apart and using cranes to lift out the pieces and replace them with prefabbed sections with the superstructure built in. It's been a four-month project.
The new Quathiaski Cove terminal building will be officially opened at 1 p.m. today (June 20) with a brief ceremony and refreshments for those who stop by.
By John Sprungman, Chair, Ferry Advisory Committee