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Territory feels pressure of upcoming power rate increase
Electricity cost would raise an already high cost of living for NWT communities

Northern News Services
Published Monday, April 2, 2012

NORTHWEST TERRITORIES
NWT business owners and leaders are predicting residents of the territory will be hit hard by a jump in the cost of living if an application to increase power rates by nearly 30 per cent is approved.

The NWT Power Corporation has submitted a general rate application to the NWT Public Utilities Board requesting a 29 per cent increase to power rates to be phased in over the next four years.

If approved, some say residents could be slapped with more than increased power rates, but with a higher cost for goods and services and taxes as well.

Sean Whelly, mayor of Fort Simpson, said the increase will hurt the people who can least afford it, many of whom live in small communities.

"Twenty-nine percent over four years seems exorbitant," he said.

Electricity is one of the village's largest expenses, Whelly said, adding because the territorial government hasn't increased funding to the village it may become necessary for the village to pass the additional costs onto residents through higher taxes.

As of April 1 - the date requested for the first phase of the increase - the power corp. estimates residents using 1,000 kWh or less each month can expect to pay $144 more a year.

Wrangling River Supply co-owner and Inuvik resident, Judy Harder, thinks more could have been done by the territorial government to cushion the consequences of the decisions made over the past five years.

"The rates are way too high," Harder said. "The GNWT needs to be looking at other ways of addressing this. Power is a basic necessity."

Harder, who currently spends approximately $700 a month on power, said business owners have their hands tied, and can't help but pass the additional costs on to their customers through increased prices.

"The rate increase means an increase to the cost of business and that inevitably has to be passed on to the consumer," said Harder. "There is no other way. We have to pay bills and we do that by selling product. I don't think it's fair to anyone in the NWT."

The territorial government has allocated $33.4 million over three years to allow the increase to be spread out over four years.

Norman Yakeleya, MLA for the Sahtu, said he understands why the rate increase needs to happen, but is disappointed that more couldn't be done earlier to avoid the current situation.

"The rate increase certainly will have an impact in the small communities. As you know, the last general rate application went through five years ago and a rate increase couldn't be held off forever," said Norman Yakeleya, MLA for Sahtu. "The cost of providing the services has gone up every year. Revenue isn't there for us in government and so the decision had to be made to keep pace with costs. Communities need continuous energy and so we need to pay the price for that."

Yakeleya said the government should have done more in previous years to reduce northern NWT communities' reliance on fossil fuels. Since the last general rate application five years ago, the cost of fossil fuels has increased by 57 per cent.

"There was $60 million available for the development of alternative energy resources from the government," said Yakeleya. "Those dollars did not make it to Sahtu, they went to Yellowknife and communities south of the lake.

"The government missed an opportunity to provide alternative energy to smaller communities where the cost of service is high. It's almost like the rich got richer and the poor are still getting poorer ... we hope that there will be a change of heart and they will help offset the high cost of fossil fuels."

The power corp. is also projecting the price of diesel to increase by another $10 million over the next five years.

Millions in capital costs

In addition to fuel costs, Bob Kelly, communications manager for the power corp., stated, one-third of the increase over the next four years is due to capital additions, largely improvements or replacements for aging infrastructure.

The Bluefish Dam Replacement Project accounts for half of that capital cost - $37.4 million.

Bluefish Dam supplies power to the snare power system which covers Yellowknife, Behchoko and Dettah and is in dire need of repair. The power corporation purchased the original dam in 2002 for $12 million and stated in a 2010 press release that it has made back that $12 million many times over in avoided diesel costs.

In 2009, the power corp. submitted an application to the Public Utilities Board asking to build a replacement dam, since a replacement would be cheaper than the combined costs of repairs and switching to diesel if the dam suffered, what NTPC considered to be an "imminent" collapse. At that time, the estimated the cost was $18.5 million and the cost of repairing the dam if it collapsed was $30 million.

Kelly said the original budget was underestimated due to the short timeline the power corp. faced when submitting the application.

"There was an urgent need to replace a deteriorating dam ... the final budget, approved by the PUB, included many other project costs that could not be accounted for in the original budget, due to time."

More than 100 other projects are listed in the power corporation's rate application, ranging in value of $1.4 million to approximately 160,000. Included are upgrades to the Snare Rapids hydro generation system; $900,000 for fuel system upgrades in Tuktoyaktuk; $700,000 to increase fuel capacity in Fort Liard; and $161,000 to purchase new tools and equipment.

Along with capital additions and fuel costs, NTPC stated the price increase is also due to the combined impact of inflation and a lack of sales growth. Company-wide sales between 2007/2008 and 2012/2013 are forecasted at only six GWh, which is an increase of less than 0.5 per cent. Meanwhile, inflation has occurred at one to four per cent each year.

Cutting costs

Last year, bonuses were cancelled by the power corp. as part of an overhaul on operating costs.

"A review of the bonus system was conducted in response to direction management received from the NTPC board to find ways to reduce costs," stated Kelly. "It accomplished that in a number of ways."

These ways included eliminating nine senior positions within the corporation and taking advantage of new long-term debt at lower rates that had not been previously available while retiring debt that had been borrowed in a high-interest-rate environment.

Kelly also echoed Minister Michael Miltenberger's comments last week regarding the five year gap between general rate applications. Both say the power corp. plans to work with the PUB over the next year or two to adjust the mechanism for approving rates. Regardless of how the mechanism is changed, there will not be another general rate application until 2016.

The territorial government and the power corp have said they encourage the public to make their voice heard through avenues such as letter-writing, e-mails, and by sending a community representative to speak at the general rate application hearing, the date of which has yet to be announced.

Chance to intervene

Michael Miltenberger, minister responsible for the power corp., said information on the proposed rate increase has been public for the past six months.

However, many citizens feel there hasn't been enough time or publicity to give them a chance to be involved.

"I just know what was published in the paper," said Harder. "This is the first we've heard anything. Frankly, I don't think they want to hear what we have to say."

Yakeleya had similar concerns and doesn't think the members of his constituency were given enough notice to speak up.

"The power corporation is encouraging customers to make their views known but I was hoping for more time." he said. "People need time to prepare their notes, to get funding to research the relevant information. But that seems to be the process of our crown corporations."

Joe Acorn, chairman of the NWT Public Utilities Board, asked for interveners to make comments on the April 1 interim rate increase of by Thursday, March 29. As of March 30, the NWT Association of Communities, Fort Smith, Norman Wells, Yellowknife and Hay River, and Inuvik had registered to intervene.

- with files from Roxanna Thompson

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