March 6, 2013
Consultant’s Report Verifies BC Ferries’ Quarterly Price Cap Compliance Index Calculations
The BC Ferry Commission today is publishing a report from a consultant who has verified that the computations used by BC Ferries for calculating the quarterly price cap compliance index conform to relevant commission orders and amendments to the Coastal Ferry Services Contract.
Specifically the commission requested verification that the computations conformed to the Direct Paasche Index methodology approved by the commission and reflect recent changes as follows:
- Inclusion of reservation fees as a new category in the price cap and calculation of weighted average fares as indicated by amendments to the Coastal Ferry Act;
- Inclusion of route 3 (Horseshoe Bay to Langdale) into the major route group as indicated by amendments to the Coastal Ferry Services Contract; and
- A decision of made by the commission to rebase the price cap compliance index to 100 beginning April 1, 2013.
The commission had also requested that the consultant compare the computation of the price cap compliance index for the three route groups (major, minor and northern) as at March 31, 2012 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 – and an assessment as to whether any differences are fundamentally detrimental to the operation of the price cap compliance process and/or to fare payers.
The report prepared by the consultant concluded that:
- The methodology used in calculating the compliance price index conforms to the Direct Paasche Price Index methodology as approved under Order 11- 03.
- 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.
- The methodology correctly incorporates ferry reservation services as a new traffic category to be covered by the price cap.
- The spreadsheet correctly incorporates route 3 into the major route group for the purpose of computing the compliance price index.
- No errors were found in the rebasing method. The rebasing of the quarterly price index was correctly done.
The commission is satisfied with the report and its findings.
Click here for a copy of the report.