Quarterly Price Cap Compliance Index Calculations

January 2013
Commissioner Asks for Verification

The commission requested verification that BC Ferries’ quarterly price cap compliance index calculations conformed to the Direct Paasche Index methodology approved by the commission and reflected recent contractual and legislative changes.  The commission  also requested that the computation of the index be prepared under two methodologies (the original Tornqvist Index that was in place from 2005 to 2010 and the Direct Paasche Index methodology that replaced the Tornqvist Index in April 2010) to determine if there are any detrimental differences to the operation of the price cap compliance process and/or to fare payers.

January 2013
BC Ferries Replies

BC Ferries replied with a report prepared by a consultant that concluded that:

  1. The methodology used in calculating  the compliance price index conforms to the Direct Paasche Price Index methodology as approved  under Order 11- 03.
  2. A comparison of the two methods reveals, as expected, that the difference between the Paasche and Tornqvist methods is relatively small. For the northern route group, the difference is roughly 1.5 per cent after a period of eight years and for the others is roughly one-half of one per cent.
  3. The methodology correctly incorporates ferry reservation services as a new traffic category to be covered by the price cap.
  4. The spreadsheet correctly incorporates route 3 into the major route group for the purpose of computing the compliance price index.
  5. No errors were found in the rebasing method. The rebasing of the quarterly price index was correctly done.

Click here for a copy of the consultant’s report.