The Commission regulates ferry fare levels on 25 routes operated by BC Ferries. These routes are divided into three groups. The largest group has 18 routes, while the smallest group has only one route. Generally, the routes in a given group have common characteristics. For instance, the “major route group” comprises the busiest routes which connect the BC Lower Mainland with Vancouver Island.
Every three months BC Ferries must report to the Commission the actual average level of fares paid by its customers, reporting a single figure for each of the four route groups. The figure is a weighted average for all the routes in the group and is a complex calculation. The Commission directs BC Ferries on the raw data, formulas and assumptions that it must use and computes a maximum permitted level of average ferry fares for each route group. This ceiling is called the price cap for each group.
Click here for information on the relationship between actual fares and price caps for each of the three groups.
How is the price cap for each group determined? The Coastal Ferry Act sets the initial cap at the level of the fares when the Act was passed, and it allowed the price cap to rise annually by 2.8% (for the major route group) and 4.4% (for the other six route groups) every November 1 through the year 2007. For fares starting April 1, 2008, which was the start of the second performance term, the Commission set the caps for the four-year term, fixed in Commission Order 0701A of December 21, 2007.
The Commission will set caps for the third performance term, which will last four years starting April 1, 2012. Here is a one-page timeline for the price cap review for performance term three.
The Commission can make adjustments in the price cap under certain circumstances (e.g. if fuel prices take an extraordinary jump and BC Ferries applies to the Commissioner for relief). To date, BC Ferries has made several such applications, starting with an application for a fuel surcharge in June 2005. Click here for more on this.
Infraction and Enforcement
The average level of the ferry fares, and of the price cap, are expressed as indexes which had a value of 100 when the Coastal Ferry Act became effective in April 2003. BC Ferries must not allow the index of actual ferry fares for a route group to rise above the index of its price cap for more than three consecutive quarters, as explained in Memorandum 31. If it does, the Commissioner can order BC Ferries to reduce its fares. If it fails to do so, the Commissioner can reduce the price cap as a penalty to BC Ferries.