Nunavut, NWT reach last-minute deal on NTPC
Negotiators from Nunavut and the Northwest Territories have bought another year during which they’ll try to strike a permanent agreement on the future of the Northwest Territories Power Corporation.
IQALUIT — Negotiators for Nunavut and the western territory say they have reached a tentative agreement to keep the Northwest Territories Power Corp. together after April 1.
The deal postpones by one year a final decision on the future of the crown corporation, and will entitle the Nunavut government to roughly one-third of the utility’s corporate dividend.
But it will also weaken the ability of both territorial governments to tap into the crown corporation’s profits to finance consumer rate-subsidy programs.
“Short of having agreement that both governments would continue the Power Corp. indefinitely, this is the best we could do,” said Charles Dent, the GNWT’s minister responsible for the Power Corp. “I think it gives us some breathing room to try and reach that indefinite agreement.”
The deal, which can’t be inked formally until it has the approval of the federal government, would allow the Power Corp. to continue operations for two years as a single entity.
One-year grace period
In the first year of the two-year transition agreement, Dent said, both governments have committed to further exploring ways to establish a joint corporation.
If there is no agreement in place by March 31, 2000, however, talks would be shifted toward splitting the Power Corp. and a portion of the utility’s assets and liabilities would be hived off to create a Nunavut Power Corporation.
The Western Coalition, the GNWT, Nunavut Tunngavik Inc. and the Office of the Interim Commissioner first began talks more than a year ago, hoping to reach consensus on a fair division of the Power Corp.’s assets and liabilities.
When negotiators finally conceded last fall that they would never achieve such a deal by April 1, talks were shifted toward reaching a transition agreement.
A sticking point was just how the Power Corp.’s $10 million annual profit would be split between the Nunavut and western territorial governments.
Nunavut negotiators originally sought a formula that would give it close to 45 per cent of the dividend. Some western negotiators had argued for a 70-30 split, since communities in the West comprise the larger customer base, and contribute most to the company’s earnings.
“It really did come down to an agreement on the formula for the dividends and to get there I think it took some time for everybody to gain some comfort with the numbers,” Dent said.
The dividend will be split according to a complex accounting formula based on the utlility’s financial balance sheet, as of March 31, 1999.
Currently, that would translate roughly into giving Nunavut one third of the dividend, with the West getting two-thirds.
The same basic formula will be used to divide the crown corporation’s assets and liabilities, if the corporation is eventually split, Dent said, adding that “the best solution is one Power Corporation, because that keeps the prices lowest.”
Power subsidy threatened
In the past, the dividend paid by the Power Corp. has enabled the GNWT to finance the government’s power rate subsidy. The subsidy currently makes it possible for consumers in the NWT and Nunavut to pay just 15 cents per kilowatt hour, although the true cost of producing electricity ranges as high as 62 cents.
The GNWT currently directs the Power Corp. to declare a dividend at whatever level is required to pay for the subsidy, but there is consensus now that the utility cannot afford to continue, Dent said.
“The power subsidy program, between the Northwest Territories and Nunavut, has grown into such an extent that the company would be driven into real dire financial straits if it were forced to pay dividends at that level,” Dent said.
The tentative agreement would limit the amount of money the Power Corp. pays its shareholders, by handing the corporation’s board of directors authority for setting the total dividend it pays to both governments.
“Chances are that neither government will get enough money from the the dividend in the long term to pay for the power subsidy program,” Dent said.
Over the life of the two-year agreement, the utility’s own board of directors will declare dividends, subject to one crucial restriction: each year, the amount of the dividend must not be less than the average dividend declared for the preceding three years.
Dent said he was hopeful that the NWT and Nunavut governments will arrive at an arrangement that is acceptable to both East and West.
“From what I’ve seen of the numbers, it is in the best interest of all of us who live north of 60 to find some way to keep this corporation together for the long run,” Dent said.