Power costs under microscope
Northland responds to criticism from MLA, insists infrastructure is not for sale
Elaine Anselmi
Northern News Services
Wednesday, March 11, 2015
SOMBA K'E/YELLOWKNIFE
Talks of restructuring power distribution has permeated the final sitting of the legislative assembly, drawn the interest of government departments and driven Northland Utilities to clarify its role through a website post titled, "Setting the Record Straight."
A Northland Utilities worker checks out a power line near Tin Can Hill late last month. The company purchases power from the Northwest Territories Power Corporation to power the city, plus owns all the infrastructure. - Erin Steele/NNSL photo
Understanding your bill
Rate: In Yellowknife, Northwest Territories Power Corporation sells power to Northland at 18.09 cents per kilowatt hour, which includes the cost of the backup diesel plant, said Michael Miltenberger, minister responsible for the power corp.
The per-kilowatt-hour energy charge to customers is 23.72 cents, with an additional 5 cents for distribution costs, said Duane Morgan, Northland general manager.
The final rate is 28.3 cents per kilowatt hour on customer bills, which is then multiplied by the number of kilowatt hours.
Riders: these amounts cover the unforeseen costs or savings to providing power, after what was forecast in the last general rate application (GRA) – done every four or five years, Morgan said.
"Riders are fundamentally a mechanism to look at costs that are either under or over what you're forecasts are," said Morgan.
"If there are extra expenses – say the price of oil doubled and we have to collect that, that's a fuel rider that would go on the bill. Actually, it dropped in half so we have to pay customers back."
Franchise fee: $4.18 on every bill collected from customers and paid to the city, to be able to provide power within its jurisdiction. The amount is calculated as a percentage of the Northland's overall sales.
Customer charge: this fixed $18 customer charge is a base amount for providing electricity. It is an amount, says Gordon Van Tighem, Public Utilities Board chairperson, comparable to the initial charge when a taxi cab meter starts up.
This charge was put in approximately five years ago, Morgan said, under the direction of the previous PUB chairperson, incorporating all fixed costs aside from GST and the franchise fee.
Source: Northland Utilities |
"There are a lot of things that could be rolled into one and better managed and these are the things the (NWT) power corp. and the minister are looking at right now," Yellowknife Centre MLA Robert Hawkins told Yellowknifer.
The issue of high energy costs has been raised numerous times in the 17th legislative assembly, often by Hawkins. The reason, he says, is that the current structure is driving up the cost due to a third-party distributor with no competition.
Currently, both Yellowknife and Hay River have franchise agreements with Northland Utilities, which buys power from NWT Power Corporation and then distributes and sells it to customers. In most communities in the territory, the power corp. is the distributor.
The GNWT commissioned reviews of the electrical system and its regulation in 2000 and again in 2009, which both came to the conclusion that the territory should have only one distributor: the power corp.
Stemming from recommendations from an energy conference in November, Minister Michael Miltenberger, who is responsible for the power corp., said that option was being looked at by the Ministerial Energy Co-ordinating Committee, made up of GNWT officials representing the Department of Finance, the power corp., Public Works and Services, and Industry, Tourism and Investment.
The working group is particularly active since the Town of Hay River indicated that it will not be re-signing its franchise agreement with Northland when it expires in 2016. In Yellowknife, the franchise agreement expires in 2020.
"Those agreements, fundamentally, are not even in question as far as we're concerned," said Duane Morgan, Northland general manager.
"We're going to continue to provide that level of service, that great level of service we always have," said Morgan.
With the Town of Hay River releasing a request for proposals in the coming months, Miltenberger said the power corp. has been asked to submit a bid and is looking into recommendations made on power distribution, and the logistics of taking over that role. No details were given on the cost of taking on distribution.
"The broad issue addressed in those previous reports was taking a look across the Northwest Territories," said Miltenberger.
"The general recommendation was for a jurisdiction with as few people as us, it made sense to have one distributor and that distributor would be the power corp., but it was never acted on."
Cutting costs
One of the points Hawkins drove at is that without the third-party distributor, power rates could be dropped – he suggested by 10 cents a kilowatt-hour.
This, Morgan said, is simply not the case.
"Absolutely not. We don't believe the cost of the exchanging of assets is going to lower the rates one cent," said Morgan.
"It doesn't matter who fundamentally owns the assets, at the end of the day, the costs are the costs, the poles are the poles and the wire is the wire.
"That's the way it works in the regulated utility environment with the Public Utilities Board (PUB)."
The process and rates passed onto customers by Northland is overseen by the PUB – an arms-length organization of the GNWT.
"They are the ones that make the final decisions and only the PUB can set the final power rates in any jurisdictions," said Morgan.
"We have to follow it; it's the law."
Disparity noted
Hawkins pointed to the disparity in the cost of power distribution between the cities and outlying areas.
"The problem is there are questions about why power is provided just outside of the community of Hay River at 19 cents, and in the community at 29 cents?" said Hawkins.
In both Fort Smith and Fort Resolution, the power corp's power rate is 19.77 cents per hour whereas in Hay River the cost is 27.21 cents per hour.
Miltenberger explained the disparity as the price Northland pays the power corp. for the power.
"That 10 cents is the wholesale cost of what power is," said Miltenberger.
Should the power corp. become the distributor, he said that 10-cent charge would not be alleviated.
"(Power corp.) would still incur costs to generate and transmit electricity to Hay River from its Taltson generating station which is largely what the 10-cent rate recovers," Miltenberger said.
The Taltson Hydro plant is 64 km north of Fort Smith on the Taltson River.
Power infrastructure not for sale
In terms of transitioning all distribution under the power corp., chairperson Gordon Van Tighem said there has been no discussion within the PUB.
"There is a huge capital investment in the cities and towns that have an independent supplier or indeed where the power corp. is there," said Van Tighem.
"They aren't going to just give you their poles and power lines and their generators, and in essence their people that keep those things working. So, the initial investment would be huge."
Northland declined to put a dollar figure on the value of the power lines, poles and transformers it uses to distribute electricity in Hay River and Yellowknife.
But he noted the cost of the investment would then likely have to be passed onto customers.
While a cost for the existing infrastructure and company assets was not given, Morgan said any discussion of transfers would be had with the necessary parties only.
"It is a conversation I want to have with the cities and towns at the end of the day," said Morgan.
"But I can tell you that they are not for sale."
The price of oversight
The cost of the PUB varies from year to year, depending on the number of contractors used, but Van Tighem said that cost is borne by the government.
Last year, the GNWT budgeted $440,000 for the PUB, under the Department of Justice, spokesperson Sue Glowach told Yellowknifer by e-mail.
"The day-to-day operations of the PUB is not affecting your power bill," said Van Tighem.
"But the hearings on power rates do have a tiny impact."
When third-party experts are brought in as interveners – during general rate applications, for example – the PUB can allow for those costs to be reimbursed, through additional rates.
"If reimbursable they get run forward on the rates during the next term," said Van Tighem.
"If it costs $10,000 to hire an expert, that $10,000 gets spread over all ratepayers in that zone area."
According to the PUB Annual Report from 2013, two instalments of intervener costs totaling $77,960 and $8,788 were reimbursed in Yellowknife and Hay River.
This cost, Van Tighem said, would appear under the fixed "customer charge" – a rate for basic service that, through Northland, is $18 on every bill.
Should power across the territory be distributed by power corp., he said the PUB would continue to act as the regulator, despite the government affiliation.
"We're an independent, quasi-judicial board, so we operate on the basis of the information we received on hearings, whether written or verbal, and operate under the same authority of the court," said Van Tighem.
"That's why we go through the Department of Justice, but that's only for administrative support. In hearings, we won't have comment from the government unless they're a participant in the hearings."
