Business dumps on power rate proposal
“What they’ve done is cut every business off at the knees”
Nunavut residents will pay more for food, lodging, and transportation if the Nunavut Power Corporation’s one-price-fits-all rate scheme goes through unchanged, and the cash-starved Government of Nunavut will take the biggest hit in the long run, Nunavut business owners say.
“What they’ve done is cut every business off at the knees,” said John Jacobsen of Tower Arctic, which owns the Discovery Lodge Hotel in Iqaluit, along with a group of contracting businesses.
That’s because the power corporation’s proposed new Nunavut-wide price for commercial customers would wallop customers in Nunavut’s large communities – where most of Nunavut’s businesses are located.
* Iqaluit – the commercial rate would rise from 25.9 cents a kilowatt-hour to 49.8 cents a kilowatt-hour, a 92.3 per cent price hike;
* Rankin Inlet – the commercial rate would rise from 30 cents a kilowatt-hour to 49.8 cents a kilowatt-hour, a 65.9 per cent price hike;
* Panniqtuuq – the commercial rate would rise from 32.3 cents a kilowatt-hour to 49.8 cents a kilowatt-hour, a 54.1 per cent price hike;
* Cambridge Bay – the commercial rate would rise from 35.2 cents a kilowatt-hour to 49.8 cents a kilowatt-hour, a 41.3 per cent price hike.
The power corporation sells electricity to about 780 private-sector businesses in Nunavut. Nearly half of those businesses, more than 300, are located in Iqaluit.
This means the power corporation could end up extracting nearly half the extra revenue it needs every year from its commercial customers in Iqaluit – about $7 million of the additional $19 million they need to balance their books.
Businesses like grocery stores, hotels and restaurants need huge amounts of electricity to power refrigerators, freezers, ovens, fryers, dishwashers and other electrical equipment.
It’s these businesses that will be forced to raise prices to pay their power bills – pushing a higher cost of living onto ordinary people, and producing bigger subsidy bills for the Nunavut government.
Doug Cox, the president of Nunastar Properties, which owns the Frobisher Inn, along with the Astro Hill highrise buildings, and the white row housing complex, says he believes the power corporation’s proposal makes no economic sense.
Nunastar spends $400,000 a year on electricity. The NPC’s proposed rate hike would elevate that figure to nearly $800,000 a year, Cox said.
“This will have a major impact on us. A 92 per-cent increase is way out of line with what we would consider reasonable,” he said.
John Jacobsen, whose company also owns a popular hotel and restaurant in Iqaluit, said the NPC’s rate hike proposal makes a mockery of the Nunavut government’s oft-stated commitment to private sector growth.
“People who have only X amount of dollars to spend are not going to be able to support the local restaurants, the local retail stores, the local movie theatre,” Jacobsen said.
What’s more, the NPC’s proposal, if accepted as is, would end up costing the GN more than other ways of dealing with the power corporation’s financial problems.
“It’s all going to flow back to the government.” Jacobsen said, saying that in the long run, the GN would save more by simply giving the NPC the $19 million that it needs, applying a temporary rate rider, and then set a rate for each community based on the cost of generating power for that community.
But that’s exactly what the power corporation wants to do away with.
Their rate application, submitted late last month, would erase the 25 separate power rates used in each Nunavut community since 1997.
In their place, the NPC proposes one residential rate for all of Nunavut – 53.3 cents a kilowatt-hour, and one commercial rate – 49.8 cents a kilowatt-hour.
So in small communities like Whale Cove and Grise Fiord, where it costs far more to generate power than in big communities, prices will fall. But power customers in big places like Rankin Inlet and Iqaluit will get hammered.
Kenn Harper, the owner of Iqaluit’s Arctic Ventures, said people in larger communities should not be asked to subsidize the costs of smaller communities.
“This makes about as much sense as Nunavut being in one time zone,” Harper said.
Harper said Arctic Ventures would pay $150,000 more in power bills, a cost that the store might have to pass onto to its customers.
“This increase may make some existing businesses unviable. It will also make it more attractive for community residents to purchase their food in the South instead of buying locally,” Harper said.
Harper said he understands that the power corporation needs more revenue, as Auditor General Sheila Fraser pointed out in a scathing report earlier this year. But he said the one-rate system “is to purposely misread and pervert” Fraser’s recommendations.
And he said the power corporation’s problems have been caused, in part, by “inattention and lack of understanding” on the part of Ed Picco, the minister responsible for the power corporation from 1999 to early 2004.
The Utility Rate Review Council, a three-person watchdog body, must now study the NPC’s proposal and make recommendations to Nunavut’s current energy minister, David Simailak.