richard t.landale 14952 95a, avenue surrey, british ... · page 1 . richard t.landale . 14952 95a,...

Richard T.Landale 14952 95A, Avenue Surrey, British Columbia. V3R 7T6 6th. February 2015

Ms. Erica Hamilton

Commission Secretary

British Columbia Utilities Commission

Sixth Floor,

900 Howe Street

Vancouver,

British Columbia

V6Z 2N3

Dear Ms Hamilton, and All Interveners,

Re: 2014 ICBC Revenue Requirements Application Responses to Intervener Requests on Intervener Evidence (Exhibit C1-8)

Further to Commission Order G-155-14 with respect to the above noted Application, please find

enclosed my Responses to Information Requests received from the BCUC on Intervener Evidence

submitted January 12th

2014.

Kind regards,

Richard T. Landale

Enclosure

cc: Registered Interveners

C1-9

markhuds

ICBC RR 2014 stamp

Prepared by: 2014 ICBC Revenue Requirement Application

Richard T. Landale Responses to IRs on Intervener Evidence 6th.

February 2015

1. My APPOLOGY

1. A most sincere apology to the BCUC Commissioners and Staff, and to the Insurance

Corporation of British Columbia for the errors in my Intervener Evidence.

2. I am humbled to admit the haste of my errors, partly due to the timetable following the

Christmas/New Year season. My wife and I were on vacation of sorts, where some of the

work was prepared, returning early January. More important to me, the passing of my father.

In my haste I just ran out of time for due diligence and cross checking. An item I am painfully

aware I complain of in others.

3. All that I am able to do is apologize to everyone in reading my mistaken evidence, and the

time taken to develop a response to my errors. I must do better in the future.

Sincerely, Richard T. Landale.

Intervener C1

BCUC INFORMATION REQUESTS

4. BCUC 1.1: Question; “Does Mr. Landale have any other suggestions with respect to the

“Independent actuarial review” proposal ?”

As I am not an actuary, accountant, or insurance professional there are many consulting

professionals that could address the issues encountered in ICBCs RRAs past and present. As a

Senior Citizen with constrained CPP income resources and a small investment income, I do not

have savings or cash resources to hire an Actuary Professional. I do believe the BCUC

Commissioners and Staff are fully cognoscente of this. As to offering the Commissioners an

alternative, I believe the recent Independent BCUC Review undertaken this year hi-lights

Intervener funding concerns very well, including the articulation by the BC Public Interest

Advocacy Centre letter of June 9th. 2014 quote:

“Third, interveners in BCUC proceedings have no certainty whether they will be approved for any cost award, or if so, how much that award will be. In larger processes, interveners submit a budget estimate early on in a proceeding, and receive a review letter from BCUC staff advising the likelihood that the budget will be deemed reasonable at the end of the proceeding. However, these advice letters are not binding on the Commission Panel in determining participant entitlement to a (full or partial) cost award. This is particularly problematic with respect to retaining third party experts and consultants, many of whom are unwilling to work for something as ephemeral as the possibility of payment several months down the road. Further, often experts must be retained before PACA advice letters are issued, resulting in even less certainty.

Fourth, even if there was certainty that an award would be made, it would still be difficult for interveners to retain experts when those experts must wait so long to be compensated for their work. In addition to their time, experts generally pay their expenses out of pocket (i.e., when they are required to travel to provide evidence in a proceeding). Interveners, such as the BC Public Interest Advocacy Centre, are not able to pay experts' expenses until proceedings conclude and cost award applications are decided. Nor are we able to guarantee payment of any kind to the experts we retain. High quality experts are often not willing to work on these terms. This in turn compromises the quality of the information before the Commissioners.”

5. It is my understanding from this Independent BCUC Review, the BCUC do hire an

Actuary Consultant, (never knew that until recently). If the BCUC were to make their contracted

Actuary available to Intervener for exploratory questions following the Review Working Session.

Then perhaps Intervener questions would become more prudent.



February 2015

6. I am not advocating the BCUC Actuary replaces the Intervener and his/her/organization

right to submit their Information Request, just more focused, appropriate and perhaps error free.

Ultimately a real potential for cost savings to the BCUC, ICBC and other Interveners in terms of

extraneous Information Requests and responses. An idea not discussed in the Independent BCUC

Review, of Summary Reports.

7. I am not trying to belabor the point, but the BCUC have asked. The Preliminary

Regulatory Timetable indicates this current RRA Review process started on August 15th. 2014.

The PACA filing date was December 8th. 2014. I am still awaiting the BCUC staff’s letter to

advise whether my budget is deemed worthy, (not complaining, just mentioning it in context).

8. A natural question arises, how much if at all should the BCUC plan and budget for

registered interveners to put informal questions to the BCUC Contracted Actuary, in an effort for

the intervener to construct worthy Information Requests within the given regulatory timetable, and

“on point” ? A concern ICBC has raised in the past, and during the BCUC Independent review.

9. My answer is based on the Actuary having intermit knowledge (not cursory knowledge) of

the RRA ahead of “informal intervener questions”. Maximum one full day (8 hrs of his/her time)

per Information Request Round, per number of Registered Interveners.

10. In this current 2014 RRA, this would amount to Eleven Interveners times eight hours times

two rounds of Information Requests, for a total of one hundred and seventy six hours.

11. This budgetary proposal also assumes the BCUC in preparing the Regulatory Timetable

will adjust the Timetable to support Actuary fulfilling intervener enquires.

12. This proposal also expects the BCUC Actuary while responding to Intervener enquires will

maintain full confidentiality obligations to the BCUC / ICBC confidential filings.

13. BCUC 2.1: Question; “It appears that Mr. Landale used a different arithmetic

operator (i.e. "multiply" instead of "plus" in the numerator). If the equation was

followed as specified in slide 8 of Exhibit B-7, please indicate if Mr. Landale

wishes to amend (or confirm) his evidence and if further clarification to the

capital maintenance calculation is required.”

I have completely reviewed the Minimum Capital Test (MCT) Calculation I prepared in my Intervener

Evidence paragraphs 30 and 32. I have attached a revised exhibit “RTL Evidence BCUC IR 2.0-1”, and

provided to my submission email, the original excel spreadsheet file (filename: MCT 145% Calc Slide

#8.xlsx)

14. In the exhibit “RTL Evidence BCUC IR 2.0-1” one can see all the ICBC evidence and my

Basic Maintenance Exhibit G2 calculation on one page. The yellow represents the data and

corrected formula used. The answer derived of 1.439114990677, which has no relation to the $80

million plus ICBC suggested in Slide #8 I have circled the corrected arithmetic operator “+” to

emphasize the correction. I have also shown the original errored calculation for context only.

(albeit in error, by using the incorrect arithmetical operator “x” the resultant $88.3 million is closer

to what ICBC told everyone in Slide #8 during the Working Review Session).



February 2015

15. In the BCUC IR 2.0 question I was asked whether I wanted to amend or confirm my

evidence.

16. I respectfully submit my “RTL Evidence BCUC IR 2.0-1” as an amendment, with the

caveat;

The formula presented by ICBC for the calculation of the Capital Maintenance of $80 million for

the 145% MCT level is seriously flawed in some manner. As one person put it to me, “you cannot

do that, you cannot compare apples and oranges in the same formula” My resubmitted evidence

simply does not represent $80 million, based on ICBC’s formula.

17. I would be obliged if the BCUC Commissioners will accept my corrected “RTL Evidence

BCUC IR 2.0-1” by substituting it in my Intervener Evidence Paragraph 33. And then please

continue with the Intervener Evidence from Paragraph 30 to 42 inclusive, as being restated herein.

18. In my pursuit to identify the route cause, referring to the ICBC Exhibit G2 line (a) Capital

Available at December 31, 2014 $1,714,218,000 and line (b) Minimum Capital Required at

December 31, 2014 $1,179,589,000 I cannot independently substantiated the source of these

numbers within the ICBC 2014 RRA filing. These two numbers are crucial “building blocks” to

the computations leading to line (k) Capital Maintenance of $63,641,000. Why is that ?

19. I would also be obliged if the BCUC Commissioners would say for the record, that they

confirm ICBC’s Exhibit G2 lines (a), (b) and (k).

20. Special Direction IC2 provides guidelines for “Rate Smoothing” ± 1.5 ppts. It also

empowers the BCUC Commissioners discretion in the determination of Universal Compulsory

Basic Insurance Rates while in accordance with a Capital Management Plan.

21. Recommendation: Therefore I propose the BCUC Commissioners do not approve the

costs associated with raising capital (maintenance or rate smoothing) from MCT 130% to MCT

145%.

Reasons: Because ICBC in their evidence have not proven the values given in ICBC

Exhibit G2 line (a) Capital Available at December 31, 2014 $1,714,218,000 and line (b)

Minimum Capital Required at December 31, 2014 $1,179,589,000, as they are the leading

components to line (k) Capital Maintenance of $63,641,000. Further, these numbers can not be

independently verified by Interveners.

22 To conclude the conversation on this topic, the MCT at 145% adds 0.2ppts to the indicated rate

change, if I have understood ICBC correctly. So in the context of Intervener Evidence, getting this issue

properly resolved is exactly on topic, and an important element for the determination of Universal

Compulsory Basic Insurance rate increase to every British Columbian.



February 2015

23 BCUC 3.1: Question; “Please confirm the two links cited are the sources of

RTL Evidence #3.1 and RTL Evidence #3.2. If not, please provide the

sources”.

Response: RTL Evidence #3.1 Confirmed.

RTL Evidence #3.2, not confirmed. Exhibit is dated 2014-12-9

(where CPI for All-items is 2.0) for a reason. CPI and CPP are determined in

November. The exhibit presented in the BCUC question is dated 2015-01-23

where CPI for All-items is 1.5).

24 BCUC 3.2: Question; “The 2015 CPP Rate Increase, according to Service

Canada website, states a positive 1.8 percent increase. Please clarify if Mr.

Landale wishes to amend his evidence, or confirm his evidence.”

Response: With respect to the following numbered paragraphs from my

Intervener Evidence, I respectfully wish to clarify/amend accordingly:

(underlining and bold text highlight amendments only).

Paragraphs 52 and 58: text as stated, with acknowledgement to the correction

from the BCUC in their IR # 3.1, response above paragraph 23

Paragraph 59: is amended by substitution: “pension increase in 2015 as the CPI

indicated the overall annual CPI “increased only 1.8%” for 2014

Paragraph 64: is amended by substitution: “Effectively since 2011 the Canadian

Pensions income to British Columbian Senior Citizens has been indexed up only

by 7.1% versus ICBC Basic Insurance Premium rates of 21.6%”,

“- three times ! the CPP rates”

Paragraph 65: is amended by resubmission of: “RTL Evidence 2.1, 2.2 and

2.3 (data sheet) before in 2013”, tables and graphs updated to reflect 2015

CPP increase of 1.8% “has been updated to reflect the record and this current

2014 application.”

Paragraph 67: is amended by substitution: “ICBC Basic Insurance Premium

compounding rate increases since 2011 – 21.6% versus the Federal Government

CPP and CPI increases of 7.1% over the same period”.

Paragraph 76: is amended by substitution: “CPP 7.1% versus ICBC 21.6%”

25 BCUC 3.3: Question; “According to the CPI estimation procedures as noted in

the preamble, would Mr. Landale agree that the auto-insurance expenditure may

be one of many components included in the basket of goods and services? In

other words, as the CPI is an average of many items, auto-insurance expenditure

can be higher, lower, or the same relative to the CPI in different time periods.”

Response: I agree with the generality expressed by the BCUC, with the caveat

that the BCUC refer back to their source, and accept the Description of the CPI

from that source. The following is an extract from Statistics Canada title

document– Consumer Price Index (CPI) , Record number 2301 dated 2015 -01-

22, in respect to the opening four paragraphs.



February 2015

“The Consumer Price Index (CPI) is an indicator of changes in consumer

prices experienced by Canadians.”

Not just British Columbians, but all Canadians.

Source (http://www23.statcan.gc.ca/imdb/p2SV.pi?Function=get5urvey&SDDS=2301.)

“Description The Consumer Price Index (CPI) is an indicator of changes in consumer

prices experienced by Canadians. It is obtained by comparing, over time, the

cost of a fixed basket of goods and services purchased by consumers. Since

the basket contains goods and services of unchanging or equivalent quantity

and quality, the index reflects only pure price change.

The CPI is widely used as an indicator of the change in the general level of

consumer prices or the rate of inflation. Since the purchasing power of

money is affected by changes in prices, the CPI is useful to virtually all

Canadians. Consumers can compare movements in the CPI to changes in

their personal income to monitor and evaluate changes in their financial

situation.

The CPI also has a number of specific applications:

(1) It is used to escalate a given dollar value, over time, to preserve the

purchasing power of that value. Thus, the CPI is widely used to adjust

contracted payments, such as wages, rents, leases and child or spousal

support allowances. Private and public pension programs (Old Age Security

and the Canada Pension Plan), personal income tax deductions, and some

government social payments are also escalated using the CPI.

(2) It is used as a deflator of various economic aggregates, either of income

flows, to obtain constant dollar estimates of income, or of expenditure

flows, to obtain personal expenditure estimates at constant prices.”

(underlining for emphasis)

26 We live in British Columbia, BC Senior Citizens receiving CPP are governed by the

Federal Government, which in part administers their programs based on the computations

established by the Consumer Price Index for “ALL Canadians” Singling out British Columbians

and the BC Provincial CPI in respect to Passenger Vehicle Insurance Premiums is totally irrelevant

to the Federal CPI index and CPP annual incomes/increases to BC Senior Citizens ;

27 As noted by the BCUC, “auto-insurance expenditure may be one of many components

included in the basket of goods and services” I read within the CPI description, there are over 178

items tracked by the CPI across the country. It is the “aggregate” of all those items that compute

the CPI, not the British Columbian CPI basket of goods, and not ICBC’s basket of goods.

28 On the next page I have provided the latest CPI Table 4-5, I have underlined the “ALL

Canada” CPI index for “Passenger Vehicle Insurance Premiums”. Year to Year, an increase of

0.9%, and since 2002 this category has risen 63.9% across the country. I have no idea what ICBC

basic premiums have risen by over the last 12 years in comparison ? Perhaps that would be useful

information to obtain ?



February 2015

29 I thank the BCUC Commissioners and Staff for giving me the opportunity to correct the

record, and provide context responses.

Prepared by:

Richard T Landale

2014 BCUC IR#2.0 Response

ICBC 2014 REVENUE REQUIREMENT APPLICATION

INTERVENER EVIDENCE C1 REPONSE TO 2014 BCUC IR 2.0

06/02/2015 1:00 PM

The following calculation has two changes,' +' operator was ' x' and

(1+4.73%) was (1+4.7%)

line (a) line (k)

145% = 1,714,218,000.00$ + 63,641,000.00$

1,179,589,000.00$ x (1+4.73%)line (b) line (j)

145% = 1.439114990677$

What is the correct formula ? =(D5+F5)/(D6*(1+4.73%))

I know the answer is $80 million plus (slide #8)

based on ICBC evidence (G2), I just can not prove or disprove

These are the correct values from ICBC evidence Exhibit G2

2014 Basic Capital Maintenance EXHIBIT G2

(Figures in $ 000's)

line (a) line (k) CAPITAL MAINTENANCE

145% = 1,714,218,000.00$ x 63,641,000.00$ (a) Capital Available at December 31, 2014 1,714,218

1,179,589,000.00$ x (1+4.73%) (b) Minimum Capital Required at December 31, 2014 1,179,589

line (b) line (j) (c) 2014 Minimum Capital Test (MCT) Ratio Outlook at December 31, 2014145.3% (a) / (b)

145% = 88,308,239.88$ (d) Regulatory Target MCT Ratio 100.0%

(e) Capital Management Target MCT Ratio 145.0%

The BCUC correctly pointed out =(D21*F21)/(D22*(1+4.73%)) (f) Current Capital Target 1,710,404 (b) * (e)

the formula given here does not (g) 2013 Transient Target MCT Ratio 110.5%

match Slide #8 (h) 2014 Transient Target MCT Ratio 114.0% (g) + 3.5%

Yet the $88.3 million Capital Maintenance Value does match Slide #8 (i) Transient Capital Target for 2014 1,344,731 (b) * (h)

(j) Growth in Capital Required 4.73%

(k) Capital Maintenance 63,641 (i) * (j)

The above calculation changed (1+4.73%) was (1+4.7%) following BCUC IR

BASIC MAINTENANCE EXHIBIT G.2 (see lines)

BASIC MAINTENANCE EXHIBIT G.2 (see lines)

C:\Users\Richard T. Landale\Desktop\ICBC\November 2014\RTL Evidence\MCT 145% Calc Slide #8.xlsx RTL EVIDENCE BCUC IR 2.0-1

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