Power players talk takeover
A 'partnership' between Northland and power corp could reduce rates: distributor vice-president
Meagan Leonard
Northern News Services
Friday, August 14, 2015
SOMBA K'E/YELLOWKNIFE
It's been 16 years since NWT Power Corporation last brought up the prospect of purchasing distributor Northland Utilities - and the company is still defending itself with the same phrase seen in this newspaper in 1999: "We are not for sale."
After the Town of Hay River issued a request for proposals for its power distribution earlier this year - rather than renewing Northland Utilities' agreement - the future of Northland Utilities, which has distributed power in Hay River since 1951, was called into question.
The city's franchise agreement with Northland is set to expire in 2020, meaning Hay River is being watched closely because, for the first time, NWT Power Corporation has submitted a bid.
Power corp., a crown corporation wholly owned by the GNWT, generates the power used by Yellowknife and Hay River residents mostly through hydro but also diesel, and sells it to Northland Utilities. Northland Utilities - owned by Alberta company ATCO Ltd. and the territory's Denendeh Investments Inc. - distributes that power through a system of poles and powerlines in those communities, as well as a handful of others. Power corp. distributes power to the majority of the communities in the territory.
When power corp. announced it wished to purchase Northland in 1999, then-general manager John Carroll described the proposal as an attempted "hostile takeover" and said the company would only sell if "forced to," Yellowknifer reported at the time.
The suggestion came from former power corp. president Leon Courneya who said the company wished to take over the Yellowknife market when the city's franchise agreement came up for renewal.
"We're still interested and we want to make our case that we are the best company to deliver services to the city," Courneya said at the time.
The city ultimately decided to renew its contract with Northland.
Now as hydro bills continue to skyrocket, Doug Tenney, Northland Utilities' vice-president of Northern development, speculates power corp. or the GNWT still plans to take over the distribution company.
He said despite the possibility of losing its monopoly in Hay River, there is still no chance the company would sell outright to either entity.
"We are not interested in selling any part of our company," he said flatly, reiterating the same sentiment of his predecessors.
But he is willing to budge a little.
Although he agrees a merger between Northland and power corp. could be beneficial for consumers and the company is willing to negotiate a partnership, it would have to remain financially equal.
He imagines the partnership could take many different forms, with each company owning 50 per cent, or maintaining individual assets but merging staff. Another arrangement could see the power corp. owning rights to generation and transmission, with Northlands dealing with distribution.
"There's lot's of possibilities that could play out or be explored to see how we could reduce costs for customers," Tenney explained. "I do think there could be some real savings there."
However, he emphasized power corp. has stated it is not interested in a partnership and would rather purchase the company outright.
"They're willing to come in and buy us out to get the savings they think comes with a single entity, yet we've proposed to get those very same savings with a merged entity without expropriation or a forced takeover," he said.
Interim spokesperson for power corp., Sharla King said the company is not aware of any plans to purchase Northland or amalgamate the two companies.
"NTPC is not aware of any serious discussion with regard to such a possibility and therefore refrains from comment," she stated in an e-mail.
Pam Coulter, another NWT power corp. spokesperson, told Yellowknifer she could not comment on the process in Hay River nor what, if anything, the company's plans are for Yellowknife in 2020. It would be up to the city to renew its franchise agreement or follow Hay River's lead and put it out for competition.
Meanwhile, the power corporation continues to struggle in providing affordable power. Last fall, the GNWT gave the corporation $20 million so it could avoid increasing rates for consumers due to low water levels. Just last week, Yellowknifer reported the GNWT is considering another bailout as the low water levels are expected to continue well into next summer.
During an energy conference last fall, Michael Miltenberger, minister responsible for power corp., criticized the company's reliance on the government and inability to stabilize hydro rates. He suggested the energy giant's days could be numbered, Yellowknifer reported at the time.
"The power corporation could never survive as a revenue generator, charging what they charge," he said at the time. "If we hadn't given them $80 million I shudder to think what their rates would be."
In June, Tenney told News/North the GNWT had commissioned a report seeking to restructure the territory's electrical system with intentions of taking over power distribution. He said if Northland were to be bought out, it would come with $180-million price tag.
Cabinet spokesperson Shaun Dean said currently the GNWT is not looking to "buy anybody out" and its primary concern is "lowering cost of living." Miltenberger declined Yellowknifer interview requests, but said in previous interviews he did not know what report Tenney was referring to and "there is a lot of misinformation being thrown around."
Nevertheless, cost of living in the territory continues to be an issue and this is what Yellowknife Centre MLA Robert Hawkins says everyone should be focusing on. He said according to cost-analysis studies completed by the GNWT, amalgamating the power companies would result in cheaper hydro rates for consumers.
"Anyone will tell you in business 101, if you can thin the distribution line down you will incur efficiencies," he said. Hawkins added it will be critical for the City of Yellowknife to open up the playing field and at least allow power corp. to compete for the franchise.
Hay River is expected to announce the successful bidder by mid-August.
