MLAs go scapegoat-hunting over NPC mess

Members of the legislative assembly’s standing committee on government operations went on an old-fashioned scapegoat hunt this past Monday afternoon, and with the company’s former bosses no longer around to blame, they ended up with former Energy Minister Ed Picco’s political hide as a trophy.

In her latest report on the Nunavut government’s finances, Auditor General Sheila Fraser pointed out that the money-losing Nunavut Power Corp.’s power rates are too low, and are responsible for losses totalling $13.1 million for the NPC in its first two fiscal years: 2001-02, and 2002-03.

So MLAs on the committee spent most of last Tuesday afternoon trying to figure out why the cash-strapped Nunavut Power Corp. did not ask regulators to approve various types of power rate increases at different times over the past three years.

Tagak Curley, the MLA for Rankin Inlet, concluded that the situation was caused by meddling on the part of the minister responsible. Though Curley didn’t refer to Picco by name, Picco was the only cabinet minister to hold the energy portfolio during the life of the last legislative assembly.

“I believe there was political interference,” Curley said, suggesting that Picco should have allowed the NPC to go ahead with a fuel-price rate-rider proposed in January of 2003.

Rate riders are temporary increases aimed at paying for extra diesel fuel costs.

Curley made those comments after Hazen Hawker, the NPC’s new chief operating officer, and Bobby Gunn, the NPC’s new president, told committee members that Picco directed the NPC in May of 2003 to freeze its rates – which go back to the late 1990s – for one year.

At that time, the two-year-old power corporation’s senior managers had not produced audited financial statements for 2003-03, and had only just released financial statements for 2001-02. They were also immersed in collective agreement talks with the NEU.

To compound the confusion, the power corporation’s president and other senior managers – blamed by the auditor general for poor financial management – were in the process of being replaced at the time of the May 2003 rate-freeze decision.

In legislative assembly sessions held in March of 2003 in Iqaluit, and May of 2003 in Baker Lake, MLAs peppered Picco with numerous questions about why the power corporation was asking for a 10 cent a kilowatt-hour rate rider at the time.

The rate-rider was also opposed by members of the Baffin Regional Chamber of Commerce, who feared the effect of higher power bills on their businesses.

Just before the May session, the Utilities Rate Review Council finally approved a fuel rate rider of 7.5 per cent, but because of the rate freeze, it was never imposed.

That fuel rate rider was intended to replace an older one – worth 3.4 cents a kilowatt hour – that was removed in March of 2002, many months before NPC managers produced financial statements showing they had actually lost money the previous year.

Hawker suggested that, in retrospect, the power corporation probably should have charged a rate rider of 9.9 cents as of April 1, 2001, not 3.4 cents, similar to a rate rider that the Northwest Territories Power Corporation had imposed just before the NPC split from the NWT corporation in April of 2001.

“Management at the time knew that not raising the rate rider would produce a $3 million deficit. In fact, it was $2.75 million,” Hawker said.

The NPC was created after Nunavut and Northwest Territories negotiators could not agree on who would control a unified power corporation after division of the NWT.

NWT politicians insisted that a two-territory power corporation be run by a board composed of a majority of NWT appointees, and that the Northwest Territories government would own a majority of its shares.

So fearing that Nunavut would lose control over electrical power supply, the Nunavut government decided that Nunavut should have its own power corporation, and the NPC was created in April, 2001.

The NWT still owes the NPC between $5 million and $9 million, in a longstanding dispute over division of the old power corporation’s assets and liabilities.

Iqaluit Centre MLA Hunter Tootoo, when questioning Bobby Gunn about the contents of a letter that Picco had written in May of 2003 to order the rate freeze, accused the NPC of trying to solve its financial problems on the backs of its workers.

That’s because the letter also ordered the power corporation to start making its wages and benefits consistent with those applying to the rest of the GN’s workers.

Gunn said the letter referred to policies that apply to “excluded,” or non-union management employees, including the company’s bonus system.