QEC handout not nearly enough

The federal government’s $5.8 million handout to the Qulliq Energy Corp., announced Feb. 8 in Iqaluit, will provide the territory’s electrical power utility with a small measure of badly-needed help.

But this money, paid out through the the Canadian Northern Economic Development Agency, isn’t nearly enough to help the power coporation reduce its dependence on expensive diesel fuel and does little to prepare Nunavut’s economy for the future.

Under the scheme announced this week, the federal agency will put up $5.8 million to help pay for new electrical power generators in eight communities: Arviat, Cambridge Bay, Chesterfield Inlet, Gjoa Haven, Pond Inlet, Rankin Inlet, Resolute Bay and Whale Cove.

It’s Nunavut’s power corporation, however, that will spend the biggest chunk of money: $8.1 million. Added to Ottawa’s contribution, this brings total spending on the project to $13.9 million.

The federal government’s press release brags the new generators will reduce the QEC’s consumption of diesel by 1.62 million litres a year and reduce greenhouse gas emissions by 4,212 tonnes a year. Like much material found in government press releases, you should treat these claims with a grain of salt.

Still, residents of the affected communities are likely to welcome the prospect of getting newer, more reliable generators. The people of Rankin Inlet, who suffered through a debilitating series of power failures in February of 2008 that cost the power corporation more than $1.6 million to fix, will be especially pleased.

At the same time, the QEC will equip each new generator with heat exchangers to distribute waste heat to nearby buildings. This is a useful way to conserve energy that would otherwise go up in smoke and gives the QEC a small, but useful source of extra revenue.

But despite these modest improvements, there’s no sign the federal government actually understand the power corporation’s long-term needs

First, it’s worth looking at why the QEC now needs outside help to pay for badly-needed capital projects.

In March of 2005, the power corporation finally won a set of power rate increases that were high enough to cover its operating costs. Until then, Nunavut power customers simply weren’t paying enough for power, producing big annual deficits for the QEC that the territorial government was forced to cover.

But the QEC still had no way of raising extra money to pay for plant upgrades and new generators.

To fix that, in June of 2005, they proposed the imposition of a new surcharge on customers, called a “capital rate rider.” The QEC proposed to put the money raised by this surcharge into a special fund devoted to new generators and equipment upgrades.

The idea fizzled. And, except for some special fuel-price surcharges, the QEC’s rates have remained unchanged since 2006.

This means Nunavut’s power corporation still has no reliable way of raising money to pay for new infrastructure.

The federal program that supplied the $5.8 million announced this week is part of the Conservative government’s stimulus package, which expires March 31, 2011. This means that, although it meets a small part of Nunavut’s short-term need, the contribution amounts to a one-time handout that does nothing to address the power corporation’s long-term infrastructure financing needs.

Second, Nunavut’s biggest energy need ought to be obvious by now: the territory’s utter dependence on expensive diesel for the generation of electricity.

As long as this continues, increases in oil prices will continue to batter the territory’s economy and the Nunavut government’s budget. Even if you don’t care about climate change and the emission of greenhouse gases, you cannot deny the crippling economic consequences of Nunavut’s dependence on fossil fuels.

It’s clear that wherever and whenever possible, Nunavut must find other ways to generate electrical power, especially through proven methods like hydroelectric power stations.

But neither the Nunavut government nor the QEC has the capacity to borrow the money required to build such projects — because territorial laws impose strict limits on the amount of long-term debt that each organization may carry.

So to pay for a new hydroelectric plant in Iqaluit, likely to cost at least $200 million, or for a similar project in the Kivalliq region, Nunavut needs far more help than Ottawa now seems prepared to offer.

Instead of small, one-time handouts, Nunavut needs loan guarantees and contributions worth hundreds of millions to transform the way electrical power is generated in the territory. It’s too bad Ottawa still doesn’t get it. JB