Inuvik Gas says it got its numbers wrong when it told the Town of Inuvik earlier this year that the municipality’s gas rates would rise by 44 percent.
In filings to the NWT’s Public Utilities Board this week, the company said all customers – residents, businesses and government – currently pay the same rate of $35.44 per gigajoule. Under its proposal, all would pay $45.44, an increase of $10 or about 28 percent.
Previously, the company thought it was charging government customers like the town $41 per gigajoule, a rate it says the board approved in 2012. Inuvik Gas now says it never actually charged that rate, so the 44-percent increase it quoted earlier was wrong.
“A 28-percent increase is still huge,” said Inuvik Mayor Peter Clarkson.
Inuvik Gas says the 28-percent increase represents the first rate increase since 2012. It argues the old prices were “no longer sustainable given the increased cost of providing safe and reliable energy service,” while costs associated with new storage facilities – after supplies nearly ran out last winter – needed to be recovered.
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The town complained to the board this summer, calling the increase for residents and the municipality a “rate shock” that deserved more scrutiny. In August, the board allowed a smaller, temporary increase of $6 per gigajoule while it investigates.
Answering questions from the board and the town in this week’s filings, Inuvik Gas said it had not carried out a formal study of how its costs should be split between residents, businesses and government. It said that kind of study would be expensive for a utility with about 850 customers.
The company said its rising costs mostly date to June last year, when water problems at the Ikhil gas well meant it could no longer rely on that well to supply the town during periods when the Dempster Highway is closed (such as during poor weather or when ferries can’t run).
Fearing Inuvik could run out of gas without Ikhil as a reliable backup, Inuvik Gas says it spent about $5.8 million on extra propane storage and a second plant that turns propane into gas. It is also paying $1.6 million a year to lease more storage tanks.
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The company argues those expenditures were prudent steps to protect the town’s gas supply.
According to the company, it explored various other ways to save costs – borrowing a storage tank from the M18 well being developed on Inuvialuit land, extending ferry seasons by equipping them with a form of icebreaking technology, building different types of facility – but they either weren’t feasible or weren’t as cost-effective as the options it chose.
The board expects to finish gathering evidence by the end of October before it makes a final decision.
Clarkson says the town has issues going back as far as the rates the board approved in 2012.
Rates that year rose from $19.10 to $35.44 per gigajoule, he said, because the Ikhil well was expected to water out and Inuvik would need synthetic gas made from trucked-in propane. But the well kept producing, Clarkson says, and he alleges customers paid a price designed to cover synthetic gas while receiving cheaper local Ikhil gas.
The town also has concerns about a “multiplier” on Inuvik Gas bills that Clarkson believes has crept up too far without adequate explanation. (In its filings, Inuvik Gas says the multiplier reflects how different forms of gas behave when used.)
Describing some residents whose monthly energy costs outstrip their mortgage payments, the town’s mayor said people “can only tolerate so many expenses” when groceries cost more because of fuel surcharges, power rates go up to cover spiralling diesel prices, and now gas rates are leaping upward.
“When you start to add up all of these things, people say, ‘You know what? They need plumbers, electricians, engineers, nurses, doctors anywhere in Canada. Why am I staying in Inuvik and paying all these extra additional costs?'” Clarkson said.
Looking ahead, Inuvik Gas says it has no idea how proposed major military developments in Inuvik could affect future demand. The company says it has not “received clarity” from the Department of National Defence on that front.
The new price the company is trying to charge has been set on the assumption that the M18 well begins flowing in 2028. At that point, Inuvik Gas says it will review its rates again.
