How much are rates going to increase following the GRA?
The NWT Public Utilities Board will make the final decision on rates following completion of the GRA process.
NTPC’s application proposes different rate increases for different rate zones, based on local and regional factors. Overall, NTPC requires a revenue increase of approximately seven percent to cover the cost of delivering power to customers. There has not been a rate increase since 2019.
These proposed rate increases do not reflect subsidies from the TPSP.
What impact will these rate increases have on customers who qualify for the TPSP?
The Government of the Northwest Territories established the Territorial Power Support Program (TPSP) to ensure that all NWT households can, with modest energy saving efforts, pay the same power rate as households in Yellowknife.
For most residential customers in NWT, the increase to their bill will be 3.5% over two years after TPSP, or 1% per year on average since 2019. This is well below inflation and the rate increases being proposed are consistent with electricity rate increases in other parts of the country.
Residential customers in small communities will continue to be subsidized to the Yellowknife residential rate for the first 1000 kilowatt hours in winter months and the first 600 kilowatt hours during non-winter months.
Residential customers in the Snare and Thermal zones who use less than 1000 kWh/month in the winter or 600 kWh/month at other times of the year will see their bill increase by approximately 3.5% over the next two years.
Residential customers in Norman Wells who use less than 1000 kWh/month in the winter or 600 kWh/month at other times of the year will see their bill increase by approximately 3.5% over the next two years.
Residential customers in Fort Smith and Fort Resolution do not qualify for the TPSP, because they experience rates below the TSSP. Customers in those communities have the lowest rates in the NWT but rates have not been covering the full cost of delivering power for many years. Even after the increase, Fort Smith and Fort Resolution rates will remain lower than other communities in the NWT and below the TPSP rate.
Residential customers who receive their electricity through Northland Utilities (Hay River and Yellowknife) will see increases of 3.7% and 3.5% respectively. This only represents the impact of the proposed NTPC GRA and does not consider future GRAs by Northland Utilities.
Why are rates going up?
NTPC is required to operate on a self-sustaining basis – rates collected must be sufficient to pay for the cost of delivering electricity to customers. NTPC has worked very hard to keep rates as low as possible while providing reliable service and investing in new and refurbished assets such as hydro units, local power plants, transmission lines and power poles.
The key factors impacting the cost of electricity:
- Sales are declining – the assets used to provide electricity service are not easily downsized when sales decline so the cost of the infrastructure is unchanged but there are fewer sales over which to spread the cost. Operation and maintenance costs also do not decline significantly.
- Aging infrastructure – costs to maintain assets increase as they get older and there is a need to invest in refurbishment and/or replacement of critical assets (hydroelectric plants, thermal plants, transmission lines)
- Lack of new industrial sales
- Climate change – extreme weather events (e.g., lightning, flooding, forest fires, high winds, temperature extremes) and receding permafrost.
- Fluctuating fuel prices
- Inflation
- Interest and amortization
Federal funding support for necessary refurbishments and plant replacements will help minimize rate increases. Projects that would otherwise been fully funded through electricity rates that are receiving federal support include:
- Overhaul of Snare Forks Units 1 and 2
- Overhaul of Taltson Hydro
- New diesel plant in Sachs Harbour
- New diesel plant in Lutselk’e
- New LNG plant in Fort Simpson
- Inuvik Wind
What impact will the recent increase in oil prices have on electricity rates?
The fuel costs in the application are based on the December 2021 pricing from the GNWT’s Fuel Services Division. Any future fuel price changes (upwards or downwards) will be recorded in the Fuel Stabilization Fund. Changes may result in an increase or decrease in the Fuel Fund rider in the future.
What is NTPC doing to cut costs and keep rates from continually increasing?
Rate increases cannot be the only solution to challenges facing the NWT electricity sector. NTPC has a Strategic Plan that aspires to reduce the gap between electricity rates in the NWT and the Canadian national average as well as to achieve the greenhouse gas emission reduction targets for electricity generation in diesel-powered communities as outlined in the GNWT’s 2030 Energy Strategy.
Reducing costs and increasing sales has been and will continue to be key areas of focus for NTPC. Already, increased contributions from renewable and lower cost generation sources, such as LNG, has helped offset pressures in the thermal zone. With additional support, there is room to do more.
NTPC has received significant federal and territorial government support for renewal of core infrastructure and is actively pursuing load growth opportunities in hydro zones.
The Corporation is always looking for innovative ways to implement efficiencies in controllable costs, including:
- Striving to increase electricity sales through electric heating, industrial customers and electric vehicle charging stations
- Implementing measures to reduce diesel consumption such as use of summer fuels in road communities, prioritizing engine efficiency in new purchases and signing Power Purchase Agreements with Indigenous governments and Indigenous organizations
- Using GNWT and Federal funding to help keep capital expenditures as low as possible
- Building enhanced estimating and project management capacity in the organization
- We expect to achieve greater economies of scale once we become the electricity distributor in Hay River
As subsidized renewable projects such as Inuvik Wind are commissioned, NTPC expects its generating costs to decrease further due to a reduction in the amount of expensive diesel consumed.
It is important to note that renewable projects that are not funded by other parties, such as the Government of Canada and/or the GNWT, will reduce greenhouse gas emissions but do not significantly reduce costs, if at all.
Does the addition of more renewables help decrease rates or do they contribute to higher rates?
Large scale renewable projects owned by NTPC but paid for by the federal government and/or the GNWT help reduce the amount of expensive diesel that must be consumed to generate electricity – this helps reduce NTPC’s operating costs and keeps rates lower.
Programs such as Net Metering and other self-generation projects help to reduce greenhouse gas emissions but also reduce NTPC’s electricity sales and increase costs for the remaining customer base.
In 2021, the GNWT released a study to estimate the effects of current net-metering and self-generation policy on utility revenues and GHG emissions. The GNWT is considering changes to Net Metering and self-generation policies to reduce the impact of renewable energy projects on rate increases in the future.
Can you explain how renewables push rates up when they push diesel consumption down?
Replacing diesel generation with renewable generation can have both financial and environmental benefits.
Financial benefits are maximized when capital costs to build renewable facilities (solar arrays, wind turbines) are fully covered by third parties, such as the federal or territorial governments. In these situations, capital costs do not have to be recovered through rates as NTPC does not incur capital costs.
When third parties do not help offset the cost of investment, renewables are a higher cost option and difficult to justify when compared to the cost of diesel generation.
The addition of renewables to an electricity system can also lead to an increase in maintenance costs as the cost to maintain the existing infrastructure does not decline – diesel generators, distribution lines and poles still need to be kept in good working order.
How can individuals or organizations participate in the GRA process?
The GRA process is open and transparent and public involvement is encouraged.
The first step is to register with the PUB as an intervenor. Interveners are interested parties who receive copies of the application and all written questions and answers. Interveners may take an active role in the hearing process or they may choose to not actively participate. Registered intervenors receive all formal documentation related to the GRA.
As an active participant, intervenors can submit written questions, give evidence, call expert witnesses, and cross-examine NTPC. In return, NTPC, as well as other interveners, are given the opportunity to cross-examine the intervener and/or the intervener's expert witnesses.
More information can be found on the PUB website (www.NWTpublicutilitiesboard.com).