Second price increase in the fall not ruled out

Beset by skyrocketing energy costs, the Government of Nunavut will ask us to pay a little more now, hoping we won't be forced to pay a lot more later.

To that end, the GN decided to impose – as of July 1 – its earliest-ever fuel price increase, hoping to raise enough cash to head off an even bigger price-hike later in the year.

As of Canada Day, all Nunavut residents started paying 22 cents a litre more for most fuel products, while airlines started paying 30 cents a litre more for jet fuel.

At the same time, the Qulliq Energy Corp. will raise its special fuel-price surcharge, applied to all power bills, from 6.4 cents a kilowatt-hour to 12.52 cents a kilowatt-hour.

Ed Picco, the energy minister, said all Nunavut fuel customers, the biggest of which is the GN, will actually begin to pay these prices on fuel that was bought last year, when fuel cost less on world markets.

He said that's because the GN wants to avoid an even bigger price shock this fall, the time of year when Nunavut fuel prices are normally set.

"We're the only jurisdiction in Canada that has to buy 100 per cent of all fuels each year for all residents. How do you manage that?" Picco said.

But world fuel prices are now so unpredictable, Picco cannot absolutely rule out another price hike in the fall, after all fuel products are purchased and delivered for the coming year. It's only then that the GN will know the exact cost of this year's fuel supplies.

"I have no crystal ball. I think that the 22 cents will get us to where we want to be. But it's a pretty fluid situation. No one knows where this is going," Picco said.

Nunavut's new fuel prices aren't as bad as many residents feared.

In Iqaluit, motorists now pay $1.519 a litre, up from the $1.299 a litre price set last Nov. 1.

That means if you have a a 60-litre tank in your vehicle, a complete fill-up at an Iqaluit gas station will now cost you about $91, compared with about $78 before July 1.

That sounds like a lot of money, but it's only slightly higher than the Canada-wide average price of $1.384 a litre that was recorded June 24.

National per-litre gasoline prices, as of June 24, ranged from $1.55 in Labrador City to $1.46 in Vancouver, $1.30 in Calgary, $1.33 in Toronto and $1.47 in Montreal.

Here are some sample per-litre gasoline prices from other Nunavut communities:

• • Cambridge Bay: $1.519, up from $1.288
• • Rankin Inlet: $1.502, up from $1.271
• • Igloolik: $1.432, up from $1.201
• • Pond Inlet: $1.462, up from $1.231
• • Sanikiluaq: $1.372, up from $1.141
• • Cape Dorset: $1.452, up from $1.221

The price of P-50 home heating oil in Nunavut will now range between about $1.41 and $1.18 a litre, depending on the community.

Naptha, an important fuel for hunters, will range from about $1.96 a litre to about $1.53, again depending on the community.

The cash the GN receives in exchange for selling this fuel to Nunavut residents is not enough to cover what it spends to buy, transport and store it.

So all those prices reflect a variety of GN subsidies aimed at protecting Nunavut residents from real market prices.

Picco said this summer's fuel resupply will likely cost the GN nearly $220 million at current market prices. That's more than double the $93 million the GN spent on the territory's 2003-04 fuel supply.

That figure rose to $137 million last year, and to a projected $218 million this year, a rate of increase that's frightening the living daylights out of GN officials.

At that rate, more than 30 per cent of the GN's annual budget of about $1.1 billion a year will soon get burned up by energy costs.

"For us it's like a natural disaster," Picco said.

He said that's why he believes the federal government must step in to help Nunavut find new ways of generating electrical power and heating buildings.

For example, he said Ottawa should help Nunavut pay the $200 million cost of building a new hydroelectric plant near Iqaluit, perhaps through a loan guarantee.

Such a project would replace 14 million litres of diesel fuel annually, about one-third of the diesel that the QEC imports into Nunavut. At current prices, it costs the power corporation nearly $19 million a year just to buy that fuel for the Iqaluit power station, not counting the cost of transporting and storing it.

Right now, it's not clear to what extent an Iqaluit hydro plant would reduce the per kilowatt hour price of electricity, or to what extent any cost savings might be spread across Nunavut.

The Sakku Corp. is also looking into the hydroelectric potential of various rivers in the Kivalliq region.