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Nunavut Power proposes one-price rate system

New plan would help to close chronic revenue gap

JIM BELL

"QEC needs $77 million a year to operate," Simon Merkosak, the chair of the QEC's board, told reporters on Monday, as he explained the new power rate structure. (PHOTO BY JIM BELL)

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The Nunavut Power Corp. wants to make itself profitable next year with a one-price-fits-all rate system that would zap customers, especially businesses, in Nunavut's big communities, while reducing prices in smaller places.

Last week, the power corporation's parent company, the Qulliq Energy Corp., submitted its 297-page rate application to Nunavut's energy minister, David Simailak, who will pass it on to Nunavut's utility price watchdog, the Utilities Rate Review Council.

The plan would erase the complicated power rate system used now, where each of Nunavut's 25 communities is assigned its own price for each category. The URRC must say yes to the plan before it's carried out.

The QEC proposes the following Nunavut-wide rates for customers in all communities:

• Commercial: 49.83 cents per kilowatt-hour;
• Residential: 53.33 cents per kilowatt-hour.

CLICK PHOTO TO ENLARGE
This chart shows that Nunavut's average power rates (shown in the three dark bars on the left) are now much lower than the average rates charged in the NWT by the Northwest Territories Power Corp. (shown in the three light bars on the right).

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"It's simple," said Simon Merkosak, the chair of the QEC's board.

Power rates in Nunavut haven't changed since 1997. Earlier this year, the Auditor General of Canada, Sheila Fraser, said the power corporation has been undercharging its customers, producing big revenue shortfalls.

"QEC needs $77 million a year to operate. Currently it is taking in $19 million less. The revenue gap cannot be sustained," Merkosak told reporters.

That's because the corporation's costs, especially for diesel fuel and employee wages and benefits, have risen sharply since 1997.

If the URRC accepts the proposal as is, the biggest price shock would likely be felt by unsubsidized small business owners in Iqaluit and Rankin Inlet.

That's because, under the plan, the commercial rate would rise in Iqaluit from 25.9 cent per kilowatt-hour and in Rankin Inlet, from 30 cents a kilowatt-hour to the new Nunavut-wide commercial rate of 49.8 cents a kilowatt hour.

On the other hand, rates in smaller communities such as Whale Cove, Kimmirut and Pelly Bay would fall dramatically.

Residential customers — mostly public housing tenants and homeowners — won't see much change in their power bills.

That's because most residential customers already benefit from an array of territorial government subsidy programs.

Public housing tenants everywhere in Nunavut — about 50 per cent of residential customers — pay a service charge of $18 a month, plus a rate of only 6 cents per kilowatt-hour. So unless the Government of Nunavut changes that subsidy, which costs the GN about $9 million a year, public housing power bills won't change.

Most other residential customers qualify for the "territorial support" program.

Under that scheme, people living in privately-owned housing pay only 15.22 cents a kilowatt-hour on the first 700 kilowatts they consume every month. So unless the GN changes that subsidy, which costs the GN about $5 million a year, privately-owned housing power bills also won't change much.

"A territorial rate structure recognizes that the corporation's base, minimum, and administrative charges are already territorial rates," the QEC's rate application states.

The new proposed rates also include small amounts in each kilowatt-hour earmarked to pay for special programs:

• an alternative energy rate of half a cent to create a total of $675,000 for use in an alternative energy fund;
• a beneficiary employment rate of one and a quarter cents to create a $1.7 million training fund to help the power corporation meet its Inuit hiring obligations under Article 23 of the Nunavut Land Claims Agreement;
• an environmental initiatives rate of half a cent to create a $675,000 fund for use in environmental protection and remediation.
  

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