Nunavut needs new energy corporation, report says

Fuel distribution system plagued by hidden subsidies and inefficiencies


Ed Picco wants to change the way everyone in Nunavut buys, sells and uses fuel and electrical power.

To that end, the minister responsible for the Nunavut Power Corporation gave his fellow MLAs a massive blueprint for change last week, as the spring sitting of the Nunavut legislative assembly drew to a close.

The report, called “Ikuma II: Meeting Nunavut’s Energy Needs,” is as thick as the NorthwesTel phone book. It was prepared by a team of government and non-government experts headed by Peter Scott, a long-time senior civil servant with the governments of Nunavut and the Northwest Territories.

The team found that energy policy in Nunavut right now is a dog’s breakfast of hidden subsidies, inefficient practices, duplicated functions and out-of-control costs.

Counting all the hidden subsidies, grants, and payments that it hands out every year in addition to what it actually pays up front for fuel and power, the government of Nunavut now spends about $121 million on energy, a quarter of its budget.

“With so many subsidies and no central tracking mechanism, it’s very difficult to know what energy costs,” the report says.

It estimates that, in four years, subsidies could rise to a level where they could eat up close 25 per cent of the Nunavut government’s budget — or about $140 million.

“That’s money that you can’t put into health, social programs and so forth,” Picco said.

New Crown corporation

To fix these problems, the team recommends that Nunavut create a new Crown corporation to handle electrical power generation and the buying and selling of all petroleum products: the Qulliq Energy Corporation.

The Qulliq Corporation would have two subsidiaries: the Nunavut Power Corporation and a new entity called the Nunavut Fuel Corporation.

The new Nunavut Fuel Corporation would take over the functions of the Petroleum Products Division, which now supplies fuel products to Nunavummiut under the department of public works.

The report says that, right now, the Nunavut government suffers from two big financial problems: it doesn’t don’t know how to figure out the real cost of supplying energy, and it doesn’t know how to control those costs.

The cause? For the most part, it’s the confusing patchwork of hidden subsidies stitched together over the years that are aimed at making fuel and power cheaper for consumers, businesses and hamlets.

As well, two different government entities — the Power Corporation and the Petroleum Products Division — both buy fuel in bulk and maintain their own tank farms in each community.

To reveal the true cost of supplying fuel, the report recommends dumping the Petroleum Products Division and replacing it with the Nunavut Fuel Corporation. This new Crown-owned firm would operate as a public utility, in a manner similar to the power corporation.

Instead of using a revolving fund to keep consumer prices within affordable limits, the report recommends the creation of an “affordable energy fund.”

Energy strategy needed

But Nunavut needs more than just a new way of purchasing and distributing energy, Ikuma II says. Nunavut also needs new ways of encouraging energy conservation, lowering energy costs and designing energy policy for the future.

To that end, it recommends that Nunavut appoint an “energy advisor,” who would report directly to the Premier. It says the cost of creating such a position would be more than offset by savings in the cost of energy.

Finally, the report recommends that Nunavut develop a comprehensive energy strategy aimed at exploring ways of breaking what it calls Nunavut’s “addiction to fuel.”

“The line in the report that I really liked is that Nunavut is addicted to oil. It’s a very costly habit,” Picco said.

The report says Nunavut should look seriously into the idea of becoming an energy exporter — by using hydro-electrical projects to generate power for use in Nunavut and for sale to Manitoba or other provinces.

“I think there is an opportunity there to look at the exporting of power,” Picco said, pointing out that the feasibility of a hydro line running from Manitoba to Nunavut has already been established.

“But instead of just looking at a line coming in, why don’t we develop two hydro sites in the south Keewatin and export the power to the north and south, which means we feed into the Manitoba grid, and any extra power that they buy from us, they can sell the power to the States,” Picco said.

Picco said that in the Kitikmeot region, there’s also potential for the development of hydroelectric power, especially for sale to mine sites.

As for the Baffin region, Picco says there’s the possibility of building small-scale hydro projects near communities.

For example, he says his office has commissioned two preliminary reports — not released to the public yet — on ways of generating hydro power for Iqaluit.

One plan involves the Apex Creek, and the other plan looks at two rivers near Iqaluit, one of which is the Sylvia Grinnell River.

“The technology is there today to mitigate environmental damage, such as fish ladders and so on,” Picco said.

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