Thank you, Mr. Chairman. Mr. Chairman, you have received the 1995-96 operations and maintenance draft budget and this package, which includes the corporation's goals and objectives, is in the same format provided to the committee the last two years. the government's. The 1995-96 budget will be approved by the corporation's board of directors in March 1995. This draft budget has now been reviewed by the corporation's senior management.
The draft budget estimates 1995-96 net income at approximately $7 million and is based on the application to the Public Utilities Board (PUB) for an automatic fuel adjustment clause. If approved, it will automatically pass on fuel price increases or decreases. A decision on this application is expected by May 1995.
The corporation has reviewed the need for a general rate application for the 1995-96 year to increase rates. The need for this increase is dependent on the water levels in the Snare/Yellowknife system. If water levels are low again in 1995-96,the corporation will apply for a rate increase to recover the increased fuel costs. This will allow the corporation to earn its full rate of return of approximately $10 million.
The current low water levels in the Snare River system, caused by unusually dry conditions last spring and summer, unfortunately added to the Yellowknife/Rae Edzo diesel dependence. It means that approximately $4.3 million in extra fuel will be burned to supply needed power in 1994-95. The PUB decision to spread $1 million of this extra cost across the north, while collecting the remaining $3.3 million directly from the Yellowknife system, was fair. It has been met with disappointment, but acceptance from most outside regions.
In order to continue to be able to pay a dividend to the GNWT to fund the territorial power support program and continue to be able to reinvest in equipment, it is essential that the Power Corporation earn its full return on equity and this necessitates rate increases from time to time. Based on present estimates, this will require an increase of approximately three per cent in 1995-96. The corporation was involved in Public Utilities Board hearings in Iqaluit and Inuvik in January to address concerns and information requests about a more equitable system of power rates across the NWT. In response to these hearings, the corporation has proposed that, as an interim measure, rates should be adjusted to the cost of providing power in each community and that an additional study of options be undertaken before finalizing how rates will be set.
The Public Utilities Board has yet to make its decision on how this should be done. The PUB's decision, when received, will likely see rates beginning to be adjusted in May 1995. Rates will both increase and decrease to better reflect the cost of providing power. These rate changes will not result in the corporation earning any additional revenue. The corporation is spending a considerable amount of time and resources in helping to gather all the information to determine how rates should be set. Our common objective, Mr. Chairman, is to see a system of rates that is fair and stable across the north.
Mr. Chairman, the corporation hopes to see progress soon in the long-standing compensation issue for Treaty 8 members over impacts of the Taltson River hydro project. Last year, the corporation was directed by the NWT Water Board to address the matter along with environmental studies, as conditions of its water licence. Meetings were held this week, and have been planned for later in March, with Treaty 8 chiefs and affected residents, to resolve impacts during the term of our licence and perhaps beyond.
The ceremonial ground breaking late in August at the Snare Cascades hydro site was an historic event for both the corporation and the Dogrib Nation. Their 4.3 megawatt, $27 million plant will pay a dividend to the Dogrib people through a 65 year operating lease with the Power Corporation, and provide about 100 jobs before it is commissioned in the summer of 1996.
The Legislative Assembly will be requested to guarantee a borrowing bill by the NWT Energy Corporation Ltd., a wholly- owned subsidiary of the Power Corporation, to finance this project. This guarantee, which is similar to guarantees given to the Power Corporation for their borrowing, will allow the Energy Corporation to borrow money at the most favourable rates. The financing raised by the Energy Corporation will be used to finance the Snare Cascades hydro project. There will be no cost to the Government of the Northwest Territories for this borrowing, as the debt will be repaid with proceeds from the agreements between the NWT Power Corporation and the Dogrib Power Corporation.
An I announced in the Legislative Assembly in the previous session, the government has decided to postpone the privatization initiative. It will be up to the newly-elected Legislature, after the election this October, to decide on further action.
The Standing Committee on Finance's report expressed concern in the corporation's planning and sensitivity to dramatic rate changes. Let me assure the committee that the Power Corporation is sensitive to the effects of rate increases, and appreciative of the need for prudent planning. The corporation has addressed a number of areas over the last six years and will continue to do so in the future.
Thank you, Mr. Chairman. I am ready to address any questions your committee may have.