Nunatsiaq Online
NEWS: Nunavut November 10, 2017 - 3:30 pm

Nunavut power utility takes another crack at controversial one-rate system

QEC also proposes 7.6-per-cent rate hike, phased in over two years

JIM BELL
Nunavut electrical power customers will almost certainly pay higher power bills after April 1, 2018 and many may endure further rate shocks over the next six years if the Utility Rates Review Council and the Nunavut government approve the creation of a one-rate system for all of Nunavut. (FILE PHOTO)
Nunavut electrical power customers will almost certainly pay higher power bills after April 1, 2018 and many may endure further rate shocks over the next six years if the Utility Rates Review Council and the Nunavut government approve the creation of a one-rate system for all of Nunavut. (FILE PHOTO)

After trying and failing to gain approval for the idea twice since 2004, the Qulliq Energy Corp., through a general rate application released Nov. 9,  will once again pursue a one-rate system for all Nunavut communities.

“Our plan is to have one rate for each type of customer across Nunavut. This means that all residential customers will pay the same amount of money for using the same amount of electricity regardless of where they live in our territory,” Bruno Pereira, the president and CEO of QEC, said Nov. 9 in a news release.

This is the power utility’s third attempt at the creation of a one-rate system.

Right now, the QEC, in a system inherited from the Northwest Territories, uses a different rate system for each Nunavut community, based on each community’s unique operating costs.

That means Nunavut’s high-cost small communities pay the highest power rates, while the largest communities pay the lowest rates.

In 2004, the QEC proposed to change that with a system in which each class of customer in each community would pay the same rates.

But the 2004 proposal fizzled, following furious opposition from businesses and homeowners in Iqaluit and other large communities.

That’s because customers in Iqaluit, Rankin Inlet and other large communities would suffer the biggest rate increases under a one-rate system. Grocery stores, restaurants, hotels and other customers who receive no subsidies in these communities would be hit especially hard.

Critics predicted that the proposed rate hikes would force grocery retailers to cover the increased cost of running power-hungry fridges, freezers and warehouses through higher food prices.

In 2011, the QEC tried again, through a scheme dubbed “rate rebalancing,” which also provoked loud opposition from larger communities.

In March 2014, Paul Okalik, then the minister responsible for the QEC, put the kibosh on rate rebalancing when he ordered the power utility to dump the scheme, which was set to start on April 1 that year.

But now, the QEC says the current community-based rate system produces unacceptable distortions when across-the-board per-cent rate increases are applied to all communities at the same time—causing bigger actual rate hikes in small places like Kugaaruk and smaller hikes in centres like Iqaluit.

And the current system does not actually reflect real operating costs in many communities anyway, the QEC said in an executive summary of its proposal.

“The rate adjustments needed to achieve community-based rates that fully reflect community-based costs would be substantial, far greater than rates proposed in this [general rate application]. For example, Grise Fiord would require a rate increase of 172 per cent and Iqaluit would require a 22 cent rate increase,” the QEC said.

Furthermore, community-based rates can’t accommodate the new costs of building replacement power plants and other badly needed capital improvements.

“A community that needs a new power plant may face rate increases of 50 per cent or more,” the QEC said.

This time, the power corporation proposes moving to a one-rate system gradually, over six years, and would limit any rate increases to less that five per cent a year.

The QEC’s current application covers only the first two years of that process. They’ll deal with the remaining four years in future applications.

And they point out that the Northwest Territories and Yukon have already moved away from community-based power rates.

But the one-rate proposal is already generating opposition in Iqaluit. Kyle Sheppard, an Iqaluit city councillor, said in a tweet the QEC’s application is “idiotic” and that he plans to fight it.

In the meantime, the utility is also proposing a 7.6-per-cent rate increase across all rate classes over two years: 2018-19 and 2019-20.

This means rate hikes of about 3.6 per cent in each of those two years for all customers, the QEC said.

That’s because the corporation estimates they’ll need annual revenues of $134 million to operate next year and the year after that.

But the current rate structure will produce an $8.8 million shortfall, and they need the proposed 7.6-per-cent rate hike to make it up, the QEC said.

Some of that shortfall is produced by salary and wage increases at the QEC, including those imposed on the corporation by this year’s collective agreement with the Nunavut Employees Union.

This past August, unionized workers at the QEC won wage increases of 2 per cent, 1 per cent, 1 per cent and 2 per cent for each year between Jan. 1, 2017 and Jan. 1, 2020.

“Increases in non-fuel expenses are approximately $6.7 million. This mainly reflects general inflationary pressures over the last three years as well as increases in salaries and wages from additional positions required to maintain and improve service levels, as well as salary increases consistent with labour agreements,” the QEC said.

At the same time, a rate rider fuel-price refund worth 5.41 cents per kilowatt hour, applied to all customers, has produced a decrease in revenues.

“[T]he combined revenue at existing rates with the fuel rider has decreased by approximately $5.7 million, the QEC said.

That rate rider refund would be eliminated after April 1 next year, and folded into a new rate system.

The combined effect of the 7.6-per-cent rate increase, the first phase of a one-rate scheme, and elimination of the rate rider would reduce power bills in 18 small communities and raise power bills in seven larger communities.

Iqaluit commercial customers, which includes stores, restaurants and hotels, would suffer an 11.4 per cent increase in 2018-19, the QEC said.

In comparison, similar customers in Whale Cove would see a decrease of 4.8 per cent.

The QEC has sent its general rate application to the minister responsible for the QEC, Johnny Mike.

But Mike, who was lost his seat in Pangnirtung in the Oct. 30 election, will be succeeded later this month by a new minister.

The QEC minister, whoever that may be, is expected to turn the application over to the Utility Rates Review Council.

The URRC, between November 2017 and February 2018, will look at the application and seek public comment, in a process that would likely include public hearings.

In March of 2018, the URRC is expected to submit a report with recommendations to the minister.

And by April 1, 2018, the minister will order the QEC to start charging new rates.

Public housing tenants everywhere in Nunavut will not be directly affected by any power rate increases.

That’s because they pay only a service charge plus a highly subsidized rate of only 6 cents per kilowatt-hour.

People who live in in privately owned housing also pay a subsidized rate up to 700 kilowatt-hours per month in the summer and 1,000 kilowatt-hours per month in the summer.

You can find the QEC’s general rate application and related documents at this web page.

  2018-2019 QEC General Rate Application, Executive Summary by NunatsiaqNews on Scribd

 

 

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(14) Comments:

#1. Posted by Home Owner Iqaluit on November 10, 2017

I want to know how many home owners in smaller communities would benefit from this. Most communities are full of social housing and staff housing that receive subsidies.
So my interpretation of this is, QEC wants my home owner power to increase to lower the cost of Power for Public Housing tenants in smaller communities.

#2. Posted by sled dog on November 10, 2017

geez, @maqaiti sure is a whiney dude. moves to IQ. complains about airfare costs. Moves to IQ and complains about internet speeds.

now, complains about a one rate system. A one rate system sounds interesting. i’d like JB to keep up on this story. One rate has merits, so heat them out

#3. Posted by Rip off on November 10, 2017

You’ve got it right #1. It’s a GN cash grab from Iqaluit businesses and homeowners plain and simple. The power bill in the small communities that the GN pays will go down and the bills that private citizens here pay will go up. Government pays less and we pay more. Wonder what our “outstanding” new Iqaluit MLAs will have to say about this?

#4. Posted by QEC Employees PAY 75% LESS RENT than NEU and NTA e on November 11, 2017

GN is cash grab is paying off GN employees.  They call them Crown Corporation workers but in the end, they’re all GN workers.

#5. Posted by I Don't Get It on November 11, 2017

QEC has had time and time again a chance to reduce their diesel cost, and O&M cost by integrating renewable energy into their power grid. But Choose to use Federal Grant money to build new diesel plants. They use this grant money and still say they need to “rate increase” because of the cost to build when 75% was paid by the feds! Now they see some fresh faces in the Leg and its time to bombard them with this new proposal.

The Leg should turn this down very fast, and do a full review of QEC, and forces them to develop renewables them selfs, and work with Housing to make home more efficient like every other province has done, and incentives conservation to those in public housing. This needs to come from our leaders at the Leg, not from QEC bureaucrats!

#6. Posted by QEC PAYS 75% LESS RENT THAN NEU on November 11, 2017

QEC PAYS 75% LESS RENT THAN NEU
QEC PAYS 75% LESS RENT THAN NEU
QEC PAYS 75% LESS RENT THAN NEU
QEC PAYS 75% LESS RENT THAN NEU
QEC PAYS 75% LESS RENT THAN NEU
QEC PAYS 75% LESS RENT THAN NEU
QEC PAYS 75% LESS RENT THAN NEU
QEC PAYS 75% LESS RENT THAN NEU
QEC PAYS 75% LESS RENT THAN NEU
QEC PAYS 75% LESS RENT THAN NEU
QEC PAYS 75% LESS RENT THAN NEU
QEC PAYS 75% LESS RENT THAN NEU
QEC PAYS 75% LESS RENT THAN NEU
QEC PAYS 75% LESS RENT THAN NEU
QEC PAYS 75% LESS RENT THAN NEU

#7. Posted by IceClass on November 11, 2017

I call bullshit on your dream of lower cost power with renewables.
Unless you are talking hydro, renewable systems still require diesel generators, meaning you then have to run dual systems.

We are lucky to have a councillor in Iqaluit who takes his position seriously for the benefit of the community.
Thank you Kyle Shepperd.

#8. Posted by You know who on November 11, 2017

QEC has been mismanaged and waisting money for so long. Whatever happened to the past president and the HR consultant?

#9. Posted by carved in snow on November 11, 2017

#5 “Now they see some fresh faces in the Leg and its time to bombard them with this new proposal.” ...and when they do not get what they want, the union will find a reason to call a strike.

#10. Posted by Yukon gold electricity on November 11, 2017

Yukon can move away from community-base power rates because hydro-electric and wind turbines help pay for the electricity.

#11. Posted by Benoit Hudson on November 11, 2017

IceClass: wind towers installed down South turn a profit at 5c/kWh. Maybe up here it would cost triple, so 15c/kWh.

It takes more than a quarter-litre of diesel to generate that much electricity. A quarter litre of diesel costs over 20c. And on top of that there’s maintenance when you run the machine.

So regardless of the fixed costs, if there was a wind tower, when there was wind, QEC would save money by paying it for electricity rather than by firing up its diesel plant. And when there’s no wind, QEC would be paying the same as it is now.

The only problem is getting the financing together to build the wind tower.

#12. Posted by IceClass on November 12, 2017

Greenland has six hydro plants.
Why does Nunavut have none.

... and piles of fresh faced southerners pushing wind and solar instead.

The future is increasingly energy intensive. We need to be ready.

#13. Posted by whatever ted on November 14, 2017

QEC is the only utility in Canada that does not have a PPA (power purchase agreement) policy in place. This would allow business to generate power and sell it to QEC. We all know GOV con’t do this as well as business. This will take the pressure off QEC and the ancient diesels used in all communities and at the same time allow for innovation to take place regarding power production in Nunavut

One year after announcing net metering QEC still don’t have this approved. QEC has proven time and time again they can’t do anything other than increase rates when they over spend. Time to look at this issue with a modern touch.

#14. Posted by Northerner on November 14, 2017

#12 because for some reason everything is near impossible to do in Nunavut and Canada. There is probably a report from the 90’s that say so.

Meanwhile other northern countries make it happen.

I would like our news agencies to look into corruption (doesn’t have to be corruption, maybe incompetence) further. The GN contracts, construction, fisheries and so on. When compared to a place like Greenland or Scandinavia it seems way too expensive to make or do anything in Nunavut. We have a fine example of a CEO building a mansion in NFLD with money that was for a community.

A construction company with 2-3 airplanes to fly in their crew, money must be good.

Keeping Nunavut the way it is makes for some very good contracts for a few.

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