I am pleased to introduce Bill 13, An Act to Amend the Financial Administration Act. This bill was introduced to allow the government and, more specifically, the petroleum products revolving fund, to use commercial financial instruments, such as fuel swap transactions, when prudent, to limit the impact of movements in fuel prices.

The petroleum productions division of the Department of Public Works and Services administers the petroleum products revolving fund under the authority of the Revolving Funds Act and the Financial Administration Act. PPD provides fuel sales, dispensing and delivery services in 15 NWT communities. PPD's costs to purchase fuel are determined by the Edmonton rack or spot market price at the time of delivery. The fuel market is very volatile and prices change frequently. This price volatility creates uncertainty for financial planning and budgeting.

Fuel purchases are PPD's main expenditures. A one cent per litre change in the rack price has a $250,000 impact on PPD's financial operations. PPD has difficulty predicting its financial position because it does not know the cost of fuel until after it has received delivery of fuel into its tanks.

Purchasing fuel on the spot market exposes PPD to the risk of sudden price increases. The use of commercial

financial instruments, such as fuel swap transactions, when prudent, can limit the impact of fuel price movements.

A fuel swap is a fuel price risk management tool that would allow PPD to balance prepaid versus spot market fuel prices, potentially lowering the overall costs of fuel products purchased by PPD.

Under current legislation, however, PPD does not have the authority to enter into this type of financial transaction. The amendment proposed in Bill 13 would authorize transactions of this nature that are in accordance with regulations and guidelines to be approved by the Financial Management Board. A consequential amendment to the Revolving Funds Act will allow PPD to make expenditures for the purposes of settling financial agreements made under this section of the Financial Administration Act.

Regulations and guidelines will be developed and submitted to the Financial Management Board for approval, to provide the necessary checks and balances for those staff authorized to engage in such transactions.

At the appropriate time, I would be pleased to answer any questions that Members may have.