Energy minister to scrutinize NPC financial statements

CHARLOTTE PETRIE

Steve Cook, the president of the Iqaluit Chamber of Commerce, said this week that he’s pleased with the Government of Nunavut’s decision to examine the financial management of the Nunavut Power Corp.

During the sitting of the legislative assembly in Baker Lake last week, Ed Picco, Nunavut’s Energy Minister, announced the he is rejecting a request by NPC for a 10-cent rate increase to rebuild its fuel stabilization fund, and a recommendation by the Utility Rates Review Council for a 7.5-cent increase.

Picco also tabled NPC’s first annual report, saying his office needs to determine what is causing NPC’s financial woes before approving any rate hikes.

“The reason we said no on the rider application is we only have one set of financial statements,” Picco told MLAs.

“We don’t know based on one audited report whether the problem at the power corporation is on the revenue side or, as some members have said, on the expense side.”

Cook applauded the decision. “I think it’s good that they’ve decided to hold the line and get Nunavut Power sorted out, find out where they’re at financially,” he said in an interview.

NPC’s financial statement for 2001-02, its first year of operation as an independent entity, shows that the company suffered a net loss of $5.15 million, plus a one-time loss of $10.7 million caused by expenses related to division from the Northwest Territories Power Corp. That adds up to a total loss of over $15 million.

In its annual report, the company attributes the $5.5-million loss to higher than expected operating expenses. The company sold $53 million worth of power in 2001-02.

If the department determines the company’s losses are largely due to inefficient expenditures, Picco said he will look at ways of running a tighter ship. Revenue problems will be dealt with separately through a general rate application (GRA) in the spring.

A GRA requires a formal process of public review, and can take between six and nine months to complete, while an application for a temporary fuel stabilization rider requires only the minister’s approval.

Picco argued it is better to have a precise understanding of the corporation’s expenditures and revenues and move forward with a GRA than approve temporary fuel riders willy-nilly.

“We never argued that the fund was in a deficit. What we did question was how it got in a deficit position, are the numbers correct, and why did they take the rider off in the first place?” Cook said.

He added that the chamber intends to be very active during the GRA process next spring.

NPC applied for the temporary fuel stabilization rider in a letter to the minister on Jan. 2. The letter highlighted the fact that there hadn’t been a rate increase since 1998, and that the corporation was requesting the stabilization rider to compensate for increased fuel prices since that time.

The rider was designed to automatically kick in when the fuel stabilization fund reached plus or minus $2 million. It was in place, at 3.4 cents per kilowatt hour, from July 1, 2000 to March 31, 2002.

However, NPC claims that extra revenue was chewed up when fuel costs rose dramatically in the last year. As a result, the fund was depleted and a deficit of $4.8 million accrued by March 31, 2002, when the stabilization rider was removed.

Since then, the corporation claims to have gone as much as $10 million in debt. It therefore requested a five-cent rider to recover that money.

But then NPC sent a second letter, dated March 26, in which it reported to actually be $15 million in debt. To cover the extra $5 million, NPC requested an additional five cent per kilowatt hour rider, for a total of 10 cents per kilowatt hour.

The Utility Rate Review Council considered both requests and returned with a recommendation to the minister for a 7.5 cent per kilowatt hour rider, which was ultimately rejected by Picco in the legislature last week.

Picco said a loss was expected and a good portion of it might be recouped once the financial strings are finally cut with NPC’s birth company, the Northwest Territories Power Corporation.

Negotiations over the division of assets and liabilities between NPC and the Northwest Territories Power Corp. are still not finished. The two sides are in dispute over the division of the old NTPC’s short- and long-term debts.