The regulator governing NWT electricity rates says a $48-million GNWT subsidy – designed to keep rate hikes down to 15 percent – cannot go ahead as planned.
The NWT Power Corporation had asked the Public Utilities Board to let it hike rates by an average of almost 25 percent year on year.
The GNWT then announced a $12-million-a-year subsidy in late 2024, lasting for four years, to bring that back down to 15 percent.
But the Public Utilities Board now says directly subsidizing rates in that fashion risks a massive rate shock when the subsidy ends in four years’ time.
Instead, the board is ordering NTPC to separate out “sunk costs” – major one-time expenses like extra diesel during the territory’s drought, wildfire damage, acquiring the Hay River power franchise and cost overruns on big projects – and put them in one accounting column, then apply the GNWT’s $48 million to those.
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NTPC had been lumping most of those costs into its request for a big rate hike. The Public Utilities Board says it’s better to set those costs aside, offset them with the GNWT’s subsidy, then figure out what the rate hike should be to cover other, more routine and ongoing cost pressures.
The expectations the GNWT set when it made the $48-million announcement – such as keeping the rate increase to 15 percent across the board – were, at least in part, “not consistent with the board’s responsibility to set just and reasonable rates,” the board wrote this week, asserting it should have the liberty to fine-tune the rates across different regions rather than be muscled into a uniform, territory-wide shift.
“From the regulator’s perspective, the limitations [associated with the GNWT’s subsidy] present significant difficulties when considering the establishment of just and reasonable rates,” the board stated.
The upshot is that NTPC is being asked to go back, create a “sunk costs” account and move lots of line items into it, then redesign its request for rate hikes with that in mind.
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As of this week, customers still have no certainty as to what the finalized rate hikes will be.
On a longer-term basis, the decision appears to have the effect of establishing a precedent whereby ratepayers are on the hook for gradual increases in NTPC’s costs, but one-off major expenses incurred by the power corporation can’t be placed directly on customers.
“This account for sunk costs is not intended to be funded through recoveries from ratepayers but through GNWT grants,” the Public Utilities Board wrote.
Management pay increase trimmed back
Monday’s decision by the board – which was not publicized, and which was first reported by the CBC – made many requests of NTPC. Responses from the power corporation must be filed in the next five weeks.
Many of the requested changes relate to taking one-time costs and placing them in the new “sunk cost” account.
But the board also disallowed some NTPC requests.
For example, NTPC had asked to spend an extra $306,000 over two years on performance-related pay. The board said no, on the basis that the power corporation had not provided good enough reasons for it.
$183,300 in increased salaries for management was also deleted after some communities intervening in the process – Inuvik, Yellowknife and Hay River – said the increases exceeded inflation.
In all, more than 30 board directions were issued in Monday’s document.
Finalized rates should arrive later this summer. In the meantime, the board has already approved a series of interim rate hikes since the rate review process began.
