At this point, Hydro would need a one-year rate increase of 60% to pay off the debt; at $5 billion the increase would be 150% Hydro adopts the provincial government’s bookkeeping method, “create the appearance of profitability where none actually exists, and place undue burdens on future ratepayers.” Indeed, what Hydrois doing is deferring large debts rather than paying them back and balancing its books each year.
Hydro’s situation reflects what we learn about financial accounting and government intervention. Financial statements are keys for companies to understand their current position and make important decisions; Hydro has to adopt a new method to change its condition. Decades before, deferral accounts were adopted to help the company to stabilize rate for dealing with its year-to-year revenue fluctuations due to weather change, but the method is not practical nowadays.
Taxpayers will also have to pay the “bills” for Hydro eventually due to the monopolistic nature of its market position. Because Hydro is the only electric utility in the province, government will intervene to pull the company out of the trouble. Therefore, tax increase will be inevitable.