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Picco defends temporary power rate hike

About 80 per cent of homeowners will see no increase in bills

CHARLOTTE PETRIE

Ed Picco, Nunavut's minister of energy, attended a recent meeting of Iqaluit city council to discuss the Nunavut Power Corporation's bid for a temporary hike in power bills to cover higher fuel costs. (FILE PHOTO)

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Ed Picco, Nunavut's energy minister, defended the Nunavut Power Corporation's proposed temporary rate increase before Iqaluit city council this week, saying the corporation hasn't raised its rates since 1998.

"There is no business that I know of in the Western world that never increased its prices for five years while costs are going up, and expect to be in business. The power corporation is no different," Picco said.

He added that the proposed increase, called a "rider," should not be confused with a permanent general rate application, or "GRA," which is subject to different regulations.

"GRA legislation specifies that NPC conduct a public review process as part of its application to raise its rates permanently. The fuel rider is a temporary rate increase used to counterbalance the rising cost of fuel and not subject to the same process," he said.

A GRA is the only type of rate application that requires NPC to consult the public.

But the approval of the Utility Rates Review Commission is still needed before a temporary rider, such as the current application, can be put into effect, Picco said.

Responding to questions from councillor Keith Irving, Picco emphasized that, legally, NPC's recent application is not subject to public scrutiny.

"I appreciate where Keith is coming from. He is for the best interest of the constituents. So am I. I have a home. I have to pay bills," he said.

Given that the first 700 kilowatt hours of every private household's electric bill is already subsidized, the minister emphasized that most power consumers will not see any increase.

"The biggest hit of this recuperation will come from government. For example, the largest power users in this town are the hospital, the Brown building, buildings owned by the government. That's where the majority of the payment will come from."

There will also be an impact on some private businesses, Picco said.

He won't know the amount of the rider, or its duration, until he gets has an opportunity to analyze the URRC's report, which was expected to be completed May 15.

But it won't end there. The power corporation will apply for a permanent rate increase next year.

"In the new year, NPC will likely apply for a general rate increase, the first rate application in six years," Picco said.

If approved the new temporary rider wouldn't be the first that Nunavut power consumers have been required to pay.

In the first full year of NPC's operation, from April 1, 2001, to March 31, 2002, the corporation charged a rider of 3.46 cents per kilowatt hour.

"The cost of fuel that year was above and beyond 3.46 cents, but we had made a commitment to not raise the rates," Picco said.

Cash raised by such temporary increases are put into a stabilization fund, which is then used to defray fuel price increases.

A year ago, after the stabilization fund had reached about $2 million, the rider was removed.

But as of March 2002, fuel prices kept on rising.

"We had under-collected from our customers on the FSR by about $5 million. That continued until the power corporation came forward with the recent application to myself as minister responsible, for a rate of 10 cents per kilowatt hour for an FSR.

"The FSR is an automatic procedure to reduce the fund to zero over time and can be done over two or three years at 10 cents. Or, it could be done in the first year at say 25 cents so as to eliminate the debt in the first year."

Those are the options being studied right now by the URRC.

"Given that the fund will be in a negative balance of $10 million by the end of this fiscal year, the corporation applied to me for an interim rate of 10 cents per kilowatt hour to be put in place on top of the current rate, across the board beginning April 1, 2003."

So far the rider hasn't been applied because the URRC hasn't approved it yet.

It could be in place for up to two years or longer depending on what schedule the commission decides on to bring the stabilization fund to $2 million, Picco said.

"The FRS is not something new. And I have to emphasize that about 80 per cent of private homeowners won't see any increase because of the subsidy."

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