Temporary power surcharge sparks resistance

Nunavut Tunngavik Inc., the Northwest Co., and the Nunavut Association of Municipalities all say a proposed hike in power rates could inflict major damage on Nunavut’s fragile economy, leading to a loss of jobs and a spike in the cost of living.

This is the latest chapter in a long-running saga that began in the fall of 2004, when the Qulliq Energy Corp. started its quest for a rate system that gives the corporation enough money to at least break even each year.

This time, the fight is over a 6.1 per cent rate hike request that Nunavut’s utility-price watchdog, the Utility Rates Review Council, actually approved, with conditions, in its 2005 report on the corporation’s first general rate application.

Because of its potential effect on the cost of living, critics say the rate scheme, plus a proposed new surcharge, will hurt people regardless of whether their power rates are subsidized, leading to higher food and transportation costs that hit low income people the hardest.

“It is estimated that overall consumers would face a 3.6 per cent increase in expenditures as a result of the rise in electrical rates,” NTI said in a submission to the URRC.

In its submission, NTI says the cumulative effect of last year’s 15 per cent rate hike, a 3.9 per cent surcharge for fuel, the proposed 6.1 per cent rate hike, and another proposed surcharge could cause:

* the loss of 114 jobs (based on $50 thousand dollars per year per job);
* a fall in GDP of $20.1 million;
* $14.7 million loss of labour income.

But the controversy isn’t about the size of the 6.1 per rate hike.

It’s about QEC’s desire to make the proposed rate hike retroactive to April 1, 2005, and a QEC proposal to add a temporary surcharge on top of the 6.1 per cent hike to make up for the shortfall.

NTI’s submission says “it is reprehensible to expect that customers be asked to pay for such costs retroactively.”

That surcharge – or “recovery rider” – would hike rates, temporarily, in one of three ways: 4.1 per cent over 24 months; 5.4 per cent over 18 months; or 8.4 per cent over 12 months.

This means Nunavut power customers could see their power bills go up, temporarily, by as much as 14.5 per cent, if the 12-month shortfall recovery option were used.

The QEC submitted the application May 3, continuing a lengthy process that started in August of 2004. That’s when the corporation filed its last major rate-hike application.

In February of 2005, the URRC responded to that application by recommending a 15 per cent increase in power rates. At the same time, the Nunavut government expanded its subsidy for private home owners.

The URRC also said the QEC actually needed a second rate hike – of 6.3 per cent – to bring the money-losing corporation up to the break-even point.

But to get that rate hike, QEC managers first had to show that they’re capable of controlling costs – and to submit the corporation to a wide-ranging probe called an “external review.”

The power corporation released that external review, done by consultants with expertise in the electrical power industry, this past March. The consultants heaped praise upon the corporation for making numerous improvements, including a dramatic reduction in internal costs.

The QEC then took the next step this past May, filing for the extra rate increase that the URRC recommended in 2005 – but adjusting it downwards to 6.1 per cent.

By a June 23 deadline, the URRC received numerous written submissions from organizations and companies – but they’re not planning to hold public hearings.

That’s because they view this current rate application as a continuation of a process that started in the fall of 2004, when the URRC held lengthy public hearings in several communities.

But that doesn’t sit well with groups like the Nunavut Association of Municipalities and the Nunavut Economic Forum, who say the combined impact of all rate increases will force businesses to raise their price and suck money out of the economy.

“We have been consistently concerned about the unsustainable model of the Nunavut utility, pursuing higher and higher fuel costs as well as other costs from a limited and already overburdened Nunavut economy,” said Jim Deyell, the Northwest Co. director of public affairs for northern Canada.

The municipal association and the economic forum each say the URRC should hold a “public forum” to talk about the cumulative effects of all the recent rate increases – and that any rate increase should be delayed until that forum is held.

And even though all customers, except for larger businesses, are subsidized, nearly all submittors predicted that higher power rates will lead to higher food and transportation costs, hitting low income people the hardest.