Inuvik (Mar 28/03) - Some 600 customers of natural gas in Inuvik are bracing for a price hike of 45 per cent.

A recent notification from Inuvik Gas Ltd. to bump the price of natural gas has met with some heated opposition from the Town of Inuvik and many other customers.

The town is filing its first formal complaint against the gas company that will trigger an investigation by the Public Utilities Board (PUB), but it may not have an effect on the rate hike.

PUB chair John Hill said the Town of Inuvik has a contract that stipulates the price of gas is tied to the price of heating fuel. Hill has not yet seen the town's complaint, so he could not comment directly on that.

"The bottom line is any complaint has to have merit," Hill said. "The facts are that they signed a contract that has nothing to do with natural gas pricing and everything to do with diesel fuel pricing."

Electricity is a fully regulated utility while the gas business is a quasi-regulated utility that is exempt from the Public Utilities Act, but they do have to file 60 days notice with the PUB.

Peter Watt, spokesman for the Northwest Territories Power Corporation (NTPC), said any rate hike the they propose must be approved by the PUB and they must prove that the increase is warranted.

Watt said the PUB has to approve any profit made by the corporation and that's always based on a rate of return on investment.

In 2002-2003 NTPC was approved a return on rate base or about a 9.62 per cent profit.

"That's how much we can earn to cover our debt charges, dividend that we pay," Watt said.

A 45 per cent increase is unheard of for regulated public utilities.

"How can the gas company hike their price 45 per cent, when it comes out of the same hole and down the same pipe," Watt asked. "Where's the increased cost ... where's the justification?"

"Kick the customer in the guts ... it doesn't seem logical."

NTPC is also a consumer of the same gas, but like Inuvik Gas, they will not realize a price change until Aug. 1, 2003, should the price hike be warranted.

If the price of their fuel goes up, the price of electricity could jump as well.

The NTPC has a fuel stabilization fund that cushions any fuel price increase. If its cost goes up, an account absorbs that extra cost, to a maximum of $250,000.

Once that point is reached, the NTPC can apply to the PUB for a rate increase to cover that cost.

Duane Morgan, manager of Northland Utilities Ltd. in Hay River, has acted as intervenor on many increases made to the PUB by NTPC.

Morgan said like NTPC, they are regulated to a rate of return, but any profit is usually capped at about 10 per cent.

"It's determined on recent decisions out there in the market," Morgan said.

"Traditionally, utilities are somewhere in the area of eight and 12 per cent rate of return on their investment."

"We don't make money on the actual product; we get a rate of return on our investment," he explained. "If we have $10 million invested, we make our return on that."

Morgan said he feels the proposed gas hike in Inuvik goes too far for a public utility.

"I think they're way out of line going down that road," Morgan said.