Nunavut’s power corporation gets thumbs-up review

The people who run Nunavut’s power corporation heard something they haven’t heard for a long, long time last week: public praise.

It’s contained in an 89-page report produced by a team of electrical utility experts hired last fall to do an “external review” of the much-maligned Qulliq Energy Corp.

“[S]ince its inception in 2001 QEC has made significant improvement in the management and operation of the utility. This is particularly true for the last 12 to 18 month period and QEC is to be commended for its progress,” their report concludes.

Headed by a firm called CMC Consultants Inc., the team found that many power customers and other Nunavut residents still think the QEC is in bad shape — but they say that perception is based on outdated information.

“It is important to note at the outset that a number of the stakeholders’ and customers’ concerns and experiences… are not supported by the external review findings,” the report says.

Alain Carriere, an Iqaluit business owner who this past Friday attended a webcast presentation on the external review, said the report goes a long way towards reassuring him that the QEC is on the right track.

“All I can say is keep up the good work. I think we’re heading in the right direction. I’m very happy as a consumer,” Carriere said.

Simon Merkosak, the chair of the QEC’s board of directors, said at the end of the webcast that QEC’s board voted to accept the report last month, and that they’re already reviewing its recommendations to figure out how to carry them out.

Merkosak pointed out though, that many of the recommendations have to be carried out by the Government of Nunavut, not the QEC.

“We will do our part, but there are also other parts of the report that will need the action of the GN,” Merkosak said.

And the external review appears to vindicate the QEC’s efforts to get more revenue by charging higher rates, in conclusions that suggest more power rate increases lie ahead.

They say it’s “critical” that the QEC’s rate structure provide the corporation with a healthy rate of return: enough money to pay its operating costs, and enough money to pay for new capital investments.

But most important, the team says, is that the QEC’s rate system eventually ought to allow the corporation to achieve financial independence from the Nunavut government.

“Under such a regime, QEC will eventually attain financial integrity and stability, and will not require ad-hoc cash injections by the GN,” their report says.

As for the corporation’s operating costs, the CMC team said the QEC “has in fact achieved a sense of stability and has reduced operating costs significantly.”

And they say that even more cost reductions could actually hurt the corporation.

“Further reduction in costs, without achieving further efficiencies, could negatively affect the operation and reliability of the system,” the report says.

The team does say, however, that the QEC could achieve a bit more efficiency by tightening up reporting relationships, using electronic technologies to reduce meeting costs and by putting all Iqaluit employees under one roof.

To avoid controversy over the QEC’s operating costs, the team strongly recommends that the Utilities Rates Review Council do a “cost of service study” the next time the power corporation applies for a rate increase.

The report also says that the QEC should do a better job in the following areas:

• Long-term planning — the CMC team says the GN should set long-term goals and objectives for QEC’s board to carry out, and that the QEC should produce a 15 to 20 year long-term corporate plan.

• The rate-setting process — the CMC team says the QEC, the URRC, and the GN should “fine-tune” the regulatory process by giving adequate notice of meetings, providing people with enough time to prepare submissions, and ensuring that “two-way communication becomes the norm.” To make this happen, they recommend that the QEC hire a full-time staff person to co-ordinate rate applications.

• Communications — the CMC team said the QEC should improve internal communications, and communications with the public. That includes efforts aimed at getting people to understand the true cost of generating electricity in Nunavut, and more efforts aimed at encouraging conservation.

• Financial information — the CMC team said the QEC should produce more timely financial information.

Other findings and recommendations include:

• A hydroelectric plant near Iqaluit is the best way of developing an alternative to diesel fuel;

• Between April 1, 2003 and March 31, 2005, the QEC achieved a reliability index of 99.86 per cent. That compares well with a national index of 99.96 per cent. In simple terms, this means the QEC is good at keeping the lights turned on, except in Coral Harbour, which suffered an eight-day power outage.

• The GN should develop an energy policy;

• The QEC should develop a formal performance measurement system;

• To recruit and retain staff, the QEC should continue to own or lease staff housing, but should also encourage more home ownership among staff.