Nunatsiaq News
NEWS: Nunavut October 07, 2010 - 1:51 pm

Nunavut electrical utility files for 19.3% rate hike

Without rates increase, QEC forecasts $22.7 million shortfall

JIM BELL
Peter Mackey, the CEO of the Qulliq Energy Corp., Nunavut's electrical power utility. On Oct. 4, Mackey presented Nunavut Energy Minister Lorne Kusugak with a general rate application that proposes an across-the-board rate hike of 19.3 per cent. (PHOTO BY CHRIS WINDEYER)
Peter Mackey, the CEO of the Qulliq Energy Corp., Nunavut's electrical power utility. On Oct. 4, Mackey presented Nunavut Energy Minister Lorne Kusugak with a general rate application that proposes an across-the-board rate hike of 19.3 per cent. (PHOTO BY CHRIS WINDEYER)

(Updated 5:15 p.m., Oct. 7)

The Qulliq Energy Corp. handed Energy Minister Minister Lorne Kusugak a new set of rate hike requests Oct. 4 (see embedded PDF file at bottom of page) that asks for a 19.3 per cent increase in all power rate categories in all Nunavut communities.

In its 285-page general rate application, covered with a letter signed by QEC president Peter Mackey, the power corporation says it needs the extra money to fend off a projected revenue shortfall of $22.7 million in the 2010-11 fiscal year.

The corporation says its needs revenues of $101.2 million for 2010-11. But the current rate system, set in 2005, would give the corporation only $76.2 million, the corporation’s application says.

At the same time, the corporation wants Kusugak to allow them to charge half their proposed rate increase earlier, on “an interim and refundable basis,” presumably while the rate application makes its way through the regulatory system.

Kusugak is expected to refer the application to the Utility Rates Review Council, which serves as Nunavut’s utility-rate watchdog. The URRC would then likely hold public hearings and seek submissions from Nunavut residents and organizations before making recommendations to the minister.

After receiving the URRC’S recommendations, Kusugak would tell the corporation how much it may raise its rates.

At least half of all Nunavut residents, those who live in public housing units, would see no change in their power bills if the QEC’s proposal were carried out.

That’s because public housing tenants pay a heavily subsidized rate of only six cents per kilowatt-hour, which amounts to only a small fraction of their power bills. The Nunavut Housing Corp. picks up the rest of it.

Private businesses, however, would face big increases in their monthly power bills.

So would most homeowners, though homeowners are protected by QEC subsidies that cover them up to certain levels of consumption.

Unlike most electrical power utilities in Canada, Nunavut’s power corporation charges a different rate in each community, based on the cost of generating power for that community.

This means that the smallest communities pay the highest rates, while the largest communities, especially Iqaluit, pay the lowest rates.

Here are some sample power rates from three Nunavut communities:

Domestic non-government rate (applies to homeowners)

• Cambridge Bay 51.78 cents per kwh (Now);  67.38 cents per kwh (Proposed)

• Iqaluit 39.9 cents per kwh (Now); 52.6 cents per kwh (Proposed)

• Kimmirut 73.52 cents per kwh (Now); 93.33 cents per kwh (Proposed)

Commercial non-government rate (applies to most private businesses)

• Cambridge Bay 43.93 cents per kwh (Now);  58.01 cents per kwh (Proposed)

• Iqaluit 31.84 cents per kwh (Now); 43.59 cents per kwh (Proposed)

• Kimmirut 60.92 cents per kwh (Now); 78.29 cents per kwh (Proposed)

The proposed rates do not include the 4.68 cents per kilowatt hour surcharge, or rate rider, that is now applied to protect the corporation from fluctuating fuel prices, and appears to assume the rate rider would not be charged after new rates are granted.

In the first general rate application, filed in the fall of 2004, the power corporation proposed the creation of a one-rate system for power customers in all communities.

That scheme would have reduced power costs for users in smaller communities, but would have created dramatic increases for larger communities, especially Iqaluit, where power bills would have risen by an estimated 92 per cent.

Eventually, the Utility Rates Review Council in 2005 recommended a 15 per cent across-the-board increase to all existing community power rates.

But in its recent application, the power corporation suggests Nunavut should at least move to a “levelized” rate system by grouping communities into rate zones, a practice used in most other provinces and territories.

In justifying its need for more revenue, the power corporation cites figures showing dramatic increases in labour costs, due to collective agreements with the Nunavut Employees Union and the cost of taking on 17 apprentices.

They also enumerate the rising cost of equipment, supplies, computer software and hardware and transportation, as well as the cost of amortizing the falling value of its assets as they depreciate over time.

Also this week, the power corporation asks the URRC to maintain a special surcharge, called a “rate rider,” that’s used to stabilize the fluctuating price of fuel.

Right now, that rate rider adds a charge of 4.68 cents a kilowatt hour to all power bills.

(MORE TO FOLLOW)

Related:

QEC web page on general rate application

Qulliq Energy Corp., General Rate Application 2010

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