Thank you, Mr. Speaker. I might not be as professional as my colleague, Mr. Picco in reading, but I will give it a good try. Mr. Speaker, the Unanimous Shareholder Agreement as mentioned earlier in this report of the Standing Committee on Government Operations recognizes that it is not technically within the committee's purview to provide recommendations on the proposed Unanimous Shareholder Agreement. The standing committee has always held the view, however, that the successful passage of the Power Corporation Act is contingent upon the negotiation of a mutually acceptable Unanimous Shareholder Agreement between the governments of the NWT and Nunavut.
The NWT Power Corporation's reasoning for the 50/50 split on the $43 million in equity between Nunavut and the Northwest Territories is that under NCPC ownership, the costs of assets in each community were not specifically recovered through the rates set in that community. This means that although NCPC records indicate in which community the assets were acquired, the cost was being recovered on a territorial-wide basis from all customers. In the opinion of the NWT Power Corporation, this makes it impossible to verify that the customers in a particular community, in fact, paid for the assets in that community, and the fairest way to allocate the common stock of $43 million is to divide it equally between the customers in the East and the West.
The NWT Power Corporation forecasts that 31 percent of the rate base will be located in the east and 69 percent in the west. This same rate of allocation would be applied to the retained earning forecast of $56 million as of March 31, 1998.
Combining the above equity factors, the NWT Power Corporation proposes that 40 percent ($39.1 million) of the total equity be allocated to the east and that 60 percent ($60 million) be allocated to the west. The Western Coalition does not agree with the share split as proposed and believes the split to be unfair to the residents of the new Western Territory. The coalition suggests two alternate approaches to the $43 million in equity. First, because the $43 million was a gift from the federal government to the residents of the NWT, one can argue that this gift should be distributed on a per capita basis. Based on the 1991 census, approximately 63 percent of NWT residents lived in the west and 37 percent in Nunavut. Secondly, the Western Coalition argues that the $43 million in equity has been earning a return on equity since 1988. Since the return on the equity has been paid by customers through their rates and since contributions to this return on equity have been generally made according to the rate base, the Coalition believes that the formula for the share split should be based on the 1997/1998 rate base of 69 percent for the west and 39 percent for Nunavut.
The Western Coalition calculates that if the original $43 million in equity is distributed on a per capita basis and the remaining equity is split according to the rate base of each territory, the Western Territory would hold 66 percent and Nunavut would hold 34 percent of the shares in the new Power Corporation. The Western Coalition asserts that the formula for the share split must be determined using past performance and cannot be based on future possible mitigating factors, such as the closing of Giant Mine or projected population growth in Nunavut. The MLA for Yellowknife Centre, Mr. Jake Ootes, also supports a share split that allocates a greater proportion to the Western Territory. The town of Hay River believes that this is an issue that can be worked out within the USA negotiations by the two parties.
The Office of the Interim Commissioner does not agree that the proposed share split is fair to the residents of Nunavut. The share split is similar to the proposed membership structure of the Board of directors and that does not guarantee the people of Nunavut an equal say in the affairs of the proposed continued Power Corporation. The Interim Commissioner's Office feels that there is insufficient data to recommend the adoption or approval of the proposed share split model or any other model for that matter.
Nunavut Tunngavik Incorporated also has concerns with the proposed 60/40 share split because the model does not take into account that three-quarters of the accumulated debt is for projects in the western NWT. NTI also notes that the model does not take into account the fact that future growth of the NWT Power Corporation will be steady in Nunavut and will follow measurable population increases. In the Western Territory, NTI suggests future growth is tied more directly to industrial growth. Due to the uncertainty of industrial growth projections, NTI maintains that the assumption that the Western Territory will increase at the same rate as in Nunavut cannot be relied on. NTI also argues that the future expiration of franchise power distribution agreements in the Western Territory could lead to reduced revenues should any of the franchises decide to generate their own power. NTI can see the case for an unequal profit split but can see no case for anything less than a 50/50 voting share split.
The joint presentation by the Baffin/Iqaluit Chambers of Commerce call for the share split to be based on revenue and not assets. This would work out to 46 percent of the shares for Nunavut and 54 percent for the Western Territory. However, the Chamber is convinced that a 60/40 share split is doomed to failure because minority shareholder rights cannot be adequately protected. The Chambers believe that there must be an element of trust in the sharing of the Power Corporation by the two territories and that a 50/50 share split would show this trust. The Chamber stated that the Power Corporation must be equally owned and operated. Anything less than equal ownership and control means that there should be two Power Corporations. The MLA for the High Arctic, Mr. Levi Barnabas stated that the proposed 60/40 share split would be unfair to the residents of Nunavut and that the distribution should be 50/50.
Mr. Speaker, I will now ask Mr. O'Brien, MLA for Kivallivik, to continue. Thank you.