Power rates, subsidies go up together

Most Nunavut Power Corp. customers will find next month’s bills easier to swallow than they once feared, following a GN decision this week to sweeten its rate-hike medicine with bigger subsidies.

Ed Picco, Nunavut’s energy minister, and Leona Aglukkaq, Nunavut’s finance minister, announced the new rate and subsidy systems this past Monday.

The rate increases work as follows:

* Residential customers: an across-the-board rate increase of 15 per cent;
* Commercial customers: an across-the-board rate increase averaging up to 16.5 per cent.

In doing this, the GN is accepting power rate recommendations made in a report finished two weeks ago by the Utilities Rate Review Council. The URRC began studying the Quilliq Energy Corp. general rate application last October, when the QEC filed it on behalf of the Nunavut Power Corp.

The URRC rejected the one-price-fits-all rate system proposed by the QEC. They’re recommending that, for now, the QEC should keep its system of individual community-based rates.

For example, the residential rate for Iqaluit will rise from 31.5 cents a kilowatt-hour to 36.8 cents. The non-government commercial rate in Iqaluit will rise 24.47 cents a kilowatt-hour to 29.67 cents a kilowatt-hour.

But the URRC did recommend that whenever diesel fuel prices rise, the QEC be allowed to put money into a special pot called the “rate stabilization fund.” That money would be collected from customers through a special Nunavut-wide surcharge on power bills called “a rate rider.”

The QEC may seek such a rate rider if the fund drops by more than a million dollars, and must top it up within six months.

On the other hand, if fuel prices fall, and the stabilization fund grows by more than a million dollars, the “rider” would become a refund to customers.

In 2003, when widespread political opposition scared the GN away from a 7.5 per cent rider recommended by the URRC, the territorial government topped up the fuel fund by simply giving $14 million to the power corporation.

For 2004-05, the GN will give $22 million to the power corporation. Of that, $8 million is to replace the missing rate rider, $10 million will compensate the corporation for capital costs, and $4 million is an “extraordinary contribution.”

The QEC will then take that $22 million, add $5 million of its own cash to it, and pay a longstanding $27 million debt owed to the GN’s petroleum products division.

As well, a Nunavut-wide way of paying for new infrastructure, such as expensive new generators and plant upgrades, could be just around the corner.

Called an “Equalization Rider,” this method would add a small surcharge to powers bills paid by all or most Nunavut customers, to spread out the high cost of new infrastructure among a wider base. Money raised by the surcharge would go into a special fund for capital projects.

In the past, the old NWT power corporation paid for plant upgrades by simply jacking up prices in the affected communities, which sometimes produced astronomical rates.

Picco has asked the QEC to produce a proposal for an equalization rider within 90 days. After that, he’ll likely submit it to the URRC.

After the new rates kick in on April 1, the power corporation will receive an extra $8.3 million for 2005-06.

That won’t be quite enough to help the corporation break even. NPC officials told reporters attending a technical briefing that they expect to post a $4.1 million operating loss by March 31, 2006.

But Picco said the URRC wants to give the power corporation an incentive to reduce its expenses and become more efficient, an approach he says he supports.

“It is reasonable… I’ve asked the board to look for some economies of scale and to become more lean and mean and efficient,” Picco said.

The URRC also recommends in its report that on April 1, 2006, the power corporation could qualify for a smaller rate increase, if it can carry out efficiency measures recommended in the URRC report.

As for the GN, its beefed-up consumer subsidies will add about $1.4 million a year to the $5 million its already been spending on them every year.

What the bills will look like

The new subsidies work as follows:

* Residential customers: From October to March, the first 1,000 kilowatt-hours used each month will be billed at 18.4 cents a kilowatt-hour. From April to September, the first 700 kilowatt-hours will be billed at the same amount. Any power consumed in excess of those limits will be billed at the full rate that’s set for the customer’s community.

This is an increase of 3.18 cents a kilowatt-hour from the old subsidized rate of 15.22 cents a kilowatt-hour, inherited from the Northwest Territories.

Starting April 1, residential customers who use no more that 700 kilowatt-hours a month will pay no more than $128.80, plus an $18 service charge and GST.

From October to March, a period when people use more power, residential customers who use no more that 1,000 kilowatt-hours a month will pay no more than $184.00, plus an $18 service charge and GST.

* Social housing tenants: No change. Social housing tenants will continue to pay only 6 cents a kilowatt-hour, no matter where they live. The rest of their bill will be subsidized as in the past.
* Small businesses: Businesses with annual revenues of $2 million or less can receive a rebate, based on the first 1,000 kilowatt-hours consumed per month.