Power corp’s bid for 10% rate increases in some areas is rejected

The NWT Power Corporation will not be allowed back-to-back 10-percent rate increases it had sought in some areas of the territory.

Regulator the Public Utilities Board, in a written ruling this week, said the proposed increases in Fort Smith, Fort Resolution and Norman Wells would mean “an unacceptable level of rate shock.”

The board says rate increases for residents in those areas can only be one percent higher than the increases for everyone else.

The full impact of the ruling is not yet clear. The power corporation, instructed to return with a fresh proposal by January 27, has instead asked for a month to come up with a revised plan.

Dennis Bevington, the former NWT MP who had lobbied against the 10-percent annual increases, said the Public Utilities Board’s decision was “good news for everyone.”

“They’ve really cut back on the power corp’s demands,” Bevington said by phone on Friday.

“It goes to show how important the Public Utilities Board can be.”

The NWT Power Corporation said it was “continuing to review the decision in order to fully understand the impact on NTPC’s financial situation and the impact on rates.” The corporation has repeatedly stressed it needs money to maintain ageing infrastructure and meet the high costs of delivering power in the territory, whereas critics say NTPC is missing opportunities to evolve and residents can’t afford higher prices.

The towns of Hay River and Fort Smith, which had joined together to oppose the power corp’s rate proposal, said they were studying the ruling and its consequences.

Why did the PUB say no?

If the power corp’s application had been successful, rates in Fort Smith and Fort Resolution would have risen by 20.78 percent over two years.

In Norman Wells, a similar increase would have been mostly offset by a GNWT program that does not exist in the South Slave.

The power corporation argued big increases were necessary in those communities because “significant pre-existing shortfalls” had built up – in part because previous requests for rate hikes were denied or reduced by the Public Utilities Board – and rates in communities like Fort Smith were, as a result, lower than they should be compared to other areas.

NTPC requested smaller rate increases, of around 2.5 percent each year, in other parts of the NWT. (Because of the time taken to process the application, the Public Utilities Board granted an interim increase of around that size last year.)

In this week’s written decision, the board said that applying a large rate increase in some areas and a smaller one elsewhere amounted to “rate rebalancing,” a key concept.

The GNWT published a document known as a policy direction in 2017 that placed limits on rate rebalancing. If you’re trying to rebalance rates between communities, that document states, the impact on residents “arising from the realignment of rates between zones and customer classes should not exceed one percent per year.”

The power corporation argued that it wasn’t engaged in rate rebalancing, so that statement did not apply. Hay River and Fort Smith said this was clearly rate rebalancing and the cap had to be one percent per year, meaning 10 percent was out of the question.

The Public Utilities Board sided with the towns, calling the proposals “significant rate rebalancing adjustments.”

This week’s ruling instructs the power corporation to come up with a new plan that limits the rate rebalancing impact to an extra one percent annually – on top of whatever the baseline rate increase is for most of the territory – for residents of Fort Smith, Fort Resolution and Norman Wells. (The extra one percent becomes an extra three percent for government customers in those communities.)

The impact elsewhere

What does that mean for the rest of the territory?

That’s not easy to immediately answer.

The power corporation, having been denied its 10-percent annual rate hikes in three communities, could seek to recover some of that revenue by raising its proposed rate increases elsewhere.

But Bevington argues that is unlikely, firstly as the three communities don’t have that many customers in the grand scheme of things, and secondly as the Public Utilities Board also deleted some expenses from the power corporation’s application, meaning it now cannot try to bring in as much revenue from rate increases.

For example, the amount of money the power corporation wanted to spend on power poles was sliced in half by the Public Utilities Board, cutting $1 million from the revenue the power corp needs to find. Around half a million dollars for an electric vehicle charging station was also axed – the board said NTPC should allow somebody else to build it, rather than trying to do the work itself.

“There are a number of things they’ve said no to that will reduce the revenue requirement for NTPC,” Bevington said. He forecast rate increases of 2.5 percent annually for most of the territory, as initially proposed by the power corporation, with an extra one-percent annual bump as instructed by the Public Utilities Board for Fort Smith, Fort Resolution and Norman Wells.

The power corporation has so far issued no suggestion of what it might do in its revised application. If the board allows NTPC a month to draw that up, it can be expected by February 18.

Bevington cast the Public Utilities Board’s verdict as a victory for fairness, accusing the power corporation of suggesting that residents in his hometown, Fort Smith were not “paying their fair share” for power.

“Fairness is the sole responsibility of the Public Utilities Board. It says that right in the act,” Bevington said, referring to the legislation that creates the board and its regulatory powers.

He praised the board for “making sound judgements, reducing excess revenue requirements, and ensuring there is something fair in the system.”