Power corporation gets lean and mean
QEC slashes spending, reduces annual loss
It’s not every day that a business feels good about announcing a loss.
But that’s exactly how the Qulliq Energy Corp.’s officials feel this week, after their latest numbers showed that in its last fiscal year, dramatic spending cuts narrowed the gap betweeen sales and operating costs, cutting the corporation’s annual loss by nearly 50 per cent.
The power corporation released its latest audited financial statement, covering the period from April 1, 2004 until March 31, 2005, at a press conference on Oct. 21.
The statement reveals that the QEC lost only $4.99 million in 2004-05, down from a loss of $9.45 million in 2003-04, $7.97 million in 2002-03, and $6.76 million in 2001-02.
This beats the QEC’s own projections, set out in the corporation’s latest business plan. In that plan, the QEC projected a $5.6 million loss for 2004-05.
Nunavut’s energy minister, Ed Picco, says these improvements show the QEC is listening to its critics.
“Changes have been made. The results of these actions can be seen now,” Picco said.
Between March 31, 2004 and April 1, 2005, the power corporation slashed spending by about $5 million in the following areas:
* Salaries and wages: down 13.9 per cent, for a saving of about $2.4 million;
* Supplies and services: down 14.3 per cent, for a saving of about $1.7 million;
* Travel and accommodation: down 18.8 per cent for a saving of about $483,000:
* Interest expenses: down 8.5 per cent for a saving of $400,000;
* Amortization of property and equipment: down 1.3 per cent for a saving of about $76,000.
Those savings, however, were offset by an 11 per cent increase in the cost of fuel and lubricants.
Those fuel and lubricant costs rose by nearly $2.5 million, from $22.56 million in the previous fiscal year to about $25 million for 2004-05.
Despite that, the corporation achieved an overall reduction in operating expenses of about $2.6 million, from $64.6 million in 2003-04, to about $62 million in 2004-05.
At the same time, sales revenue increased by nearly $2 million, from $55.1 million to about $57 million.
But that combination of increased sales and lower costs wasn’t enough to produce a profit, and the corporation had to content itself with its lowest loss ever.
Picco said this turnaround in the company’s fortunes was accomplished when the company’s old power rates, which date back to 1997, were still in effect.
The company’s new 15-per-cent rate increase came into effect this past April 1. Its precise effect on the corporation’s bottom line won’t be known until the corporation’s 2005-06 financial statements are finished, audited and released next year.
But Picco said that the Utilities Rates Review Council, in its analysis of the power corporation’s revenue needs, has concluded that this rate increase is not enough to bring the QEC to a break-even point.
That means the corporation may ask for a smaller rate increase by next year, something the URRC has already invited them to do.
“Good management alone will not solve a lot of the issues faced by the corporation. At some point, electricity prices in Nunavut will have to increase to follow the cost of doing business,” Picco said.
He said, though, that he can foresee the day when the power corporation is able to pay a small dividend to its only shareholder, the Government of Nunavut. In the NWT, their territorial government uses its power corporation’s profits to finance power subsidies for consumers.
As for the QEC’s request for a 3.9-cent a kilowatt-hour surcharge to top up its fuel price stabilization fund, Picco said he’ll make a decision on that in about a week and a half.
Power corp. launches energy conservation efforts
Picco also announced the creation of a new unit called the “Nunavut Energy Centre.” The energy centre’s job will be to produce information on energy conservation and energy efficiency for individuals, businesses, municipalities and non-governmental organizations.
“Conservation has to become part of how we think about all of our projects,” Picco said, pointing out that Nunavut’s per capita greenhouse gas emissions are extremely high.
As well as launching an energy conservation effort, the QEC is stepping up efforts to find alternatives to diesel-fueled power generation, such as a hydro-electric project in the Iqaluit area.
But he warned that as the QEC’s mandate expands, so will its cost of doing business.
“It is not practical to ask the QEC to increase its mandate, and not look at the some of the serious price adjustments that are on the table,” Picco said.