NTPC tries again to hike rates over increased diesel costs

The NWT Power Corporation is filing fresh paperwork with regulators to have customers pay more to cover the increasing cost of diesel fuel.

This is NTPC’s second attempt in quick succession.

The power corporation applied in February but regulator the Public Utilities Board didn’t accept much of the methodology NTPC used at the time, sending it back for the power corp to try again.

This time, the power corp says it is asking for the same amount of money but changing the share different customers pay to meet the regulator’s request. Basically, customers in communities reliant on diesel will now pay more.

Meanwhile, customers in the Snare zone – some North Slave communities – began paying a separate rider this month designed to help the power corporation cover costs created by low water that aren’t fuel-related, like extra maintenance and staffing.

The overall effect of both the low-water rider and the diesel application, if the Public Utilities Board accepts it, would be around a 10.5-percent increase to the bills of power corporation customers in Yellowknife and Behchokǫ̀, and around a 15-percent increase to bills in diesel communities – an increase brought down to just under 10.5-percent for residential customers by GNWT subsidies.

The picture is further complicated by how power is provided to residents.

In Yellowknife, for example, NTPC generates power and sells it to Naka Power (formerly Northland Utilities), which distributes it to residents. So NTPC price changes in Yellowknife initially affect Naka Power, which might then pass on the change to its customers.

Fort Smith opposed February application

One of the big changes in the new application, compared to February, is how Fort Smith and other communities on Taltson hydro are treated.

In February, NTPC applied for increases of 13.6 percent in the Taltson region – Fort Smith, Hay River and a few other communities – and just over 12 percent elsewhere.

The Town of Fort Smith’s mayor wrote to the Public Utilities Board in March, fiercely objecting to that application.

Mayor Fred Daniels argued that Fort Smith and nearby communities were responsible for one percent of NTPC’s cost overruns through high diesel prices, but were being asked to cover 10 percent of the bill.

“The Thermal zone caused 95 percent of the diesel cost overrun problem. Yet, the Thermal zone is required to repay only 25 percent of the recovery,” Daniels wrote.

He described NTPC’s application as “the perverse subsidy of dirty, high-carbon diesel generation by clean, low-cost hydro.” (For the past year, Fort Smith, too has been powered by diesel because the Taltson hydro system has undergone renovations lasting twice as long as planned. Ordinarily, the town is powered by hydro.)

The Public Utilities Board agreed that NTPC’s proposed rates “increasingly stretch the relationship between cost causation by zone and corresponding rate recovery,” asking it to adopt a different approach.

This week’s announcement of a new application represents that modified approach.

In the new application, NTPC says Taltson residential customers will face a 4.7-percent increase, less than half the increase requested elsewhere.

NTPC’s chief financial officer, Paul Grant, told Cabin Radio: “When we applied before, we applied using a formula … which is more-or-less evenly spread by kilowatt hour across the whole territory. But the PUB didn’t agree with that and they wanted the fuel price increases to be reflective of the zones driving them.

“When we did that, as you can imagine, most of the costs resulting from the increase in fuel price are really borne by the Thermal zone. And that’s why you see the Thermal zone go up so much, because they’re the ones that are driving the bulk of the fuel price increase. And that’s why the Taltson zone is now low.”

Communities in the Thermal zone include Aklavik, Colville Lake, Délı̨nę, Fort Good Hope, Fort Liard, Fort McPherson, Fort Simpson, Gamètì, Inuvik, Jean Marie River, Łútsël K’é, Nahanni Butte, Paulatuk, Sachs Harbour, Tsiigehtchic, Tuktoyaktuk, Tulita, Ulukhaktok, Whatì and Wrigley.

NTPC has said diesel is nearly 50 percent more costly now than it was when base power rates across the NWT were last set in 2022.

As a result, the power corporation says it’s spending millions of dollars a year that it can’t get back from customers under the current rate system, which is why a change is needed.

More changes may be ahead

The Public Utilities Board will now review the latest NTPC proposals before deciding whether to accept them or send them back to the power corp once again.

The dance being performed by the power corporation and Public Utilities Board is a complex one involving different kinds of filing to address different issues.

Technically, this week’s proposal is an interim application for rate changes ahead of a bigger refresh of rates – known as a general rate application, or GRA – that the regulator has ordered NTPC to propose by the end of this year.

In other words, by December, you can expect the power corporation to put forward a whole new set of proposed rates for the territory.

Those rates could theoretically go down if diesel prices drop, but they could also rise yet again if the price of diesel keeps going up, or if this summer’s low water levels mean increasing reliance on diesel or more maintenance.

While the NWT’s communities are divided into zones based on their use of diesel, in reality even hydro communities like Yellowknife, Hay River and Fort Smith are currently using huge amounts of diesel because hydro is either offline for servicing or not providing enough energy.

For example, NTPC said this week that power generation in the North Slave is still sitting at around 50 percent hydro, 50 percent diesel, which has been the case for almost two years.

“The GRA would look at at all those things,” said Grant of the bigger application ahead.

“We’re only dealing with one specific issue with the interim rates,” he said, referring to this month’s application regarding diesel prices, “but there are a lot of moving parts that will be affecting the final GRA that comes out in December.”

Is this sustainable?

The power corporation says it needs more money from customers because covering higher diesel prices by taking out loans, which it had been doing, is not sustainable.

But northern residents have been saying for years that continuing to charge higher prices isn’t sustainable either.

“We definitely recognize that electricity rates are already high and that northerners are facing increasing cost pressures in all sorts of areas,” power corporation spokesperson Doug Prendergast told Cabin Radio.

“It is unfortunate, but we need to raise sufficient revenue to pay for the cost of generating and delivering power to our customers. As I say, it’s unfortunate, but that’s the situation we face.”

Prendergast said NTPC is “looking at a whole number of options” to deal with the situation in the longer term. While the NWT has time and again reiterated a commitment to moving away from diesel – and some projects, like a wind turbine in Inuvik, have gone ahead – actual progress toward cleaner or cheaper fuels hasn’t been quick.

“We’re definitely looking at what the situation looks like moving forward,” said Prendergast.

“Are there ways we can generate electricity in the North Slave through other means during low-water years? Because they do occur every decade or so, we’ve been through this situation before. We’ve also been through situations where there has been a large fluctuation in the price of diesel.

“So yeah, we recognize that we need to look at all options and try to determine the best path forward, because we are committed to reducing that gap in the average price of electricity between the North and the rest of Canada.”