Debates of February 3, 2006 (day 22)

Thank you, Mr. Braden. Mr. Minister.

Thank you, Mr. Chairman. Mr. Chairman, there is a potential risk here. For example, if the trend was starting to go up and we decided to buy in future markets a year or two years down the road, thinking that this trend is going up and will stay that way, and we purchased at that time and as it got time to deliver that fuel the price actually went below, we would end up paying the higher price. That’s the risk in this. If the trend suddenly drops off, then we would take the hit on that. If we had this in place…We’ll just use the example of this past summer’s experience. We had a very large and fluctuating market. The increase climbed steadily over a number of weeks and months. In fact, daily changes were happening and if we ended up two years prior buying on a future market and hit that price on a high end…It has since come down, as we’ve seen in the private markets. We would be paying that higher price. So that is the danger of that, and we would have to make sure what we put in place, and our estimates used in watching the market would have to be finely tuned. Thank you.

Thank you, Mr. Minister. Mr. Braden.

So then, if I could offer a bit of advice, it’s that you shouldn’t do as I do in the stock market. You should not buy…How does it work now? I can’t even figure that one out. You don’t want to buy high and sell low, for what it’s worth. Mr. Chairman, finally, will the department be able to sort of track its performance once we start using this methodology here so that we can get some sense of have we actually achieved some savings, or potentially have we cost ourselves some money? Would that be able to be measured and reported, Mr. Chairman?

Thank you, Mr. Braden. Mr. Minister.

Thank you, Mr. Chairman. Yes, Mr. Chairman, we will be able to track how purchases are done and how effective this may be. We do tracking already on the existing operations we have just in cost of product and so on, and the trend has been an upward one over the years. But for this purpose, yes, we will have to make sure we put in a good tracking system.

Thank you, Mr. Minister. Mr. Braden.

Thank you, Mr. Chairman. And reporting? The results? Thank you.

Thank you, Mr. Braden. Mr. Minister.

Yes, as well we’ll be reporting to this House as well as to Members. Thank you.

Thank you, Mr. Minister. I have Mr. Yakeleya next. Mr. Yakeleya.

Thank you, Mr. Chairman. Mr. Chairman, I want to make a few comments to the Minister. Mr. Chairman, the Minister in his notes and talked during questions with the other MLAs in regards to this bill here. I’m somewhat concerned, I guess, in terms of the…I want to know if this bill was taken by this department, this government, to competitive market price competitors in terms of competing with other private business in the North or the region in terms of having flexibility now in the market and buying bulk sales. You may have some fuel that could be seen or perceived lower than the private market people out there selling fuel and they’re going to…Yes, poor granny in Nahanni. I guess I want to ask about that in terms of the intent in that where there could be some places where you’re going to squeeze out the market and the government may be going in this direction if it's not careful. Thank you.

Mahsi, Mr. Yakeleya. Mr. Minister.

Thank you, Mr. Chairman. Mr. Chairman, this proposal and the amendment before the Members are not going to change the way we do business in communities on a day-to-day process. What it will give us is, at the time we want to purchase fuel, if we see a trend going up we can use, for example, an 18-month window. That’s sort of the extreme it would do for how far out we might go to a market and say we want to purchase this amount of fuel at this price. That’s all it would do. It wouldn’t give us how we do our dealings in communities. Thank you.

Thank you, Mr. Minister. Mr. Yakeleya.

Thank you, Mr. Chairman. Mr. Chairman, I have no arguments with the Minister about the way they’re looking at living by this new bill here. My question again is that they talked about buying bulk fuel with NCPC and having bulk fuel in the North here and in the regions. This bulk fuel may be used sometimes as a means to sell to other companies that may see that they have lower prices than the private market. I’m scared that this bill may leave some flexibilities here. We are in the business of too bad for the private businessman. Lower the costs. As they call it, sharpen your pencils. As government, we might be heading in this direction. That’s all my concern. Thank you.

Mahsi, Mr. Yakeleya. Mr. Minister.

Thank you, Mr. Chairman. Mr. Chairman, our policy from within government is not to compete with the private sector. If there’s a private sector in the community that delivers fuel, right now we have the process of standing back to see if they’re successful before we would pull out, but there is not privatization initiatives on the books. Of course, the product in the community, it’s for sale. Those that would come and pay the price that we have established, it’s there for them because we would be the only supplier. That’s the way we would continue to operate. Thank you.

Thank you, Mr. Minister. Mr. Yakeleya.

Thank you, Mr. Chairman. Mr. Chairman, I get the intention of this bill and the community that only has the territorial government being the supplier of fuel sales. That’s fine. It’s where there are communities who have other suppliers in the community or region that we are, you know, this bill allows some flexibility, it allows us to be in the market in terms of the sales. Then they stated they’re not in the competition business or competing, but certainly if somebody came to them and said we want to buy some fuel off you guys, I mean, certainly you can say have you checked the other places? You know? That’s what I’m getting at. Thank you.

Mahsi, Mr. Yakeleya. Mr. Minister.

Thank you, Mr. Chairman. Mr. Chairman, this bill does not change the way we do operations. All this bill allows us is the purchasing of fuel. Not on the sales and dispensing of fuel. This only deals with how we would purchase fuel from the market. Thank you.

Thank you, Mr. Minister. Mr. Yakeleya.

Thank you, Mr. Chairman. Mr. Chairman, this bill allows them to purchase fuel. There’s something else that allows them to distribute the fuel or deliver the fuel. This allows them to purchase, and I understand this bill, I guess there’s something more. Maybe I’m reading into it. I’m going to leave it at that right now, Mr. Chairman. The Minister knows my concerns that I’ve raised and I know this bill is something the Minister is working for the benefit of the Northwest Territories. So I’m going to leave it at that right now. Thank you.

Mahsi, Mr. Yakeleya. No question. We’ll move now to Mr. Pokiak. Mr. Pokiak.

Thank you, Mr. Chairman. Just a couple of quick comments. I agree with what Mr. Menicoche referred to earlier with regard to the price of fuel and gas. It is a problem in the small communities. In Sachs Harbour, they’re paying quite a high number, and in Holman, Paulatuk. Also, I might as well say Tuk, although Tuk is privatized, you know, and the cost is very high. I understand what the Minister indicated to me some time back. Once it’s privatized, it’s pretty hard to control the price. But again, it’s something that, you know, Tuktoyaktuk is concerned about. I just want to say that I concur with Mr. Menicoche’s comments earlier, because I heard the responses from the Minister. I just want to ask him, in regard to the regulations and guidelines, are you going to take the present guidelines, or are you going to develop totally new ones? Thank you.

Thank you, Mr. Pokiak. Mr. Minister.

Thank you, Mr. Chairman. Mr. Chairman, the guidelines for using this instrument would be worked through the Financial Management Board and developed with them to get this in place. So it would be a new set of guidelines for this instrument to work. There’s been some work done on it, but we’d have to get approval through the FMB.

Thank you, Mr. Minister. Mr. Pokiak.

Thank you, Mr. Chairman. In regard to the review of the regulations and guidelines, will the FMB present it to us before they put it out? Thank you.

Thank you, Mr. Pokiak. Mr. Minister.

Thank you, Mr. Chairman. Mr. Chairman, I don’t see it being a problem sharing that with Members when the regulations are ready to be put in place. Thank you.

Thank you, Mr. Minister. Mr. Pokiak.

Yes, just one last one. Thank you, Mr. Chairman. In regard to fuel swap transactions, can you give me an idea of when you say “when prudent"? I just need an explanation. Thank you.

Thank you, Mr. Pokiak. Mr. Minister.

Thank you, Mr. Chairman. Mr. Chairman, there would be times when we look at the market and the price would either be in a general increase and that would be the time we would look at using this tool to buy fuel or gasoline on future markets, so that if we look at the trend, the trend would show it’s going up. If our re-supply is happening in, say, six months’ time and the price seems to be going up, we can make a decision to buy at that price for that future time to be delivered. At the same time, we could see the trend would either be levelled off or maybe going down, we would say let’s not use this at this time and wait for that. The spot market might be better than it is at the day when you look at making a decision like this. So it’s not something that you would do at every time we go for re-supply, but we would be watching the market, the trend. If the prices are continuing to climb and we know we’re getting to a heavy time of year for use of products, usually the price of those products climbs accordingly. We would, at that point, look at using this instrument to buy out there and hopefully have a savings when it’s delivered. Thank you.

Thank you, Mr. Minister. Mr. Pokiak.

Yes, thank you, Mr. Chairman. Just on page 2, second paragraph, I wonder if the Minister can give us an example of the potential overall delivery costs of fuel products purchased by PPD? Thank you.

Thank you, Mr. Pokiak. Mr. Minister.

Thank you, Mr. Chairman. Mr. Chairman, I guess a simple example would be if we have this in place and know that a one cent per litre increase in the cost of a product would have an overall impact of $250,000 for us, we would have to transfer that increased cost on to the customer in the community. So if we were able to buy in the future, and if there was a savings of five cents or even 10 cents, that would save us passing that kind of increase on to the customers in the communities. Usually the adjustments would be in the few cent range. But as we found out this last cycle we went through re-supplies in communities, we had significant increases in the 10 to 20 cent range in some places because of what the previous year’s product was delivered at to the new amount, the new fuel delivered at that time. So if we had this instrument, it would have come in very handy, but, unfortunately, that wasn’t in place and this would help us protect against those types of increases. Thank you.

Thank you, Mr. Minister. Mr. Pokiak. Does committee agree that general comments on the bill are concluded?

Agreed.

Okay. No further general comments. We’ll go clause-by-clause review of the bill. Thank you. We’ll go to clause 1 right away and that’s of Bill 13, An Act to Amend the Financial Administration Act. Clause 1.

Agreed.

Clause 2.

Agreed.

Clause 3.

Agreed.

Clause 4.

Agreed.