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A financial history of Qulliq Energy Corp.

How a $2 million surplus became a $15.9 million loss

JIM BELL

In the power corporation's early years, its managers failed to produce financial information at a time when it was badly needed, delaying the production of a general rate application.

Energy Minister Ed Picco said that between April of 2001, when the power corporation was created, and December of 2002, when the first year's financial statements were finally produced, the power corporation's managers had been predicting a $2 million surplus for that period.

Around that time, a 3.4 cent a kilowatt-hour rate rider inherited from the NWT was removed.

But after the Auditor General of Canada's bean-counters pored over the corporation's books, they revealed a $5.3 million operating loss for 2001-02. The company also suffered from a one-time loss of $10.7 million for division-related start-up costs, for a total loss that year of $15.9 million.

"Two weeks later I had Rick Blennerhasset sitting in that chair there, and I was asking, what's going on?" Picco said.

Blennerhasset, who was the power corporation's first president, along with Dwight McTaggart, the vice president of finance, departed the company not long after.

In the meantime, the corporation applied to the URRC for a five cent a kilowatt hour rate rider to replenish the power corporation's depleted fuel stabilization fund, which suffered from a whopping $10 million deficit.

The fuel stabilization fund is a pot of money that's supposed to protect the power corporation against fuel price increases. When the fund gets too low, the power corporation is allowed to apply for a kind of temporary surcharge on power bills - called a rate rider - to build the fund back up again to its normal level of $2 million.

In early 2003, the power corporation upped its 5 cent a kilowatt-hour rate rider request to 10 cents. The URRC then split the difference between the two applications, recommending a rate rider of 7.5 cents.

But by then Nunavut's chambers of commerce, many MLAs, and the Nunavut Association of Municipalities had lined up to oppose any form of rate hike, whether it be a rate rider or a general rate increase. Critics said they wanted more financial information about the power corporation and demanded a rate freeze.

So in June of 2003, Picco announced that cabinet had rejected the rate rider. And the assembly later voted to put $14 million into the fuel stabilization fund to make up for the revenue that a rate rider would have brought in.

The power corporation's financial statements for its second year weren't available until the fall of 2003. After the Auditor General of Canada's staff had gone through them, by December of 2003, the corporation's books showed a $7.9 million loss for its 2002-03 fiscal year.

And in her scathing report, Sheila Fraser said Nunavut's power corporation badly needs higher rates. After the February 2004 territorial election, MLAs did an about-face and began to question why the previous year's rate rider was not imposed.

But now, Picco says the third financial statement shows the corporation's loss projections were correct, and that the $14 million contribution to the fuel stabilization fund was close to the right amount.

"That's why we went forward with the $14 million revenue requirement. We figured we were short between $10 million and $15 million," Picco said.

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