Debates of March 7, 2005 (day 50)

Thank you, Mr. Minister. Mr. Hawkins.

Thank you, Mr. Chairman. In other words, I guess we're providing some type of subsidy benefit, and I think it's at least important that we put it on the record. I'm just trying to understand what are we qualifying. How are we going to qualify this number and how are we going to identify it? At this stage, without knowing more information, I can't say I have a concern or I don't have a concern. Yet, it's kind of interesting to find out what type of subsidy are we subsiding this to. At least we need to identify it and not be afraid of the number.

The other thing is how do we set rates in the communities? Do we, for example, just determine whatever the running rate is in Yellowknife or Hay River that is the rate that will run there? How do we determine the rate of what to run at? Therefore, we're obviously running in a deficit in the cost, however, it's perceived as a benefit because it is also treated as a subsidy. So how are we determining these rates? Thank you, Mr. Chairman.

Thank you, Mr. Hawkins. Mr. Minister.

Thank you, Mr. Chairman. Mr. Chairman, for the detail on the pricing that we do come up with, I'll go to Mr. Aumond, but before we do, a number of factors that do come in, and one of the things is the renewal of the contract for whether it's a winter road delivery or barge system delivery, that would take part of it, as well as our own fees in the sense of government tax. But for the breakdown of developing the cost per litre of gasoline in a community, Mr. Aumond will give that detail.

Thank you, Mr. Minister. Mr. Aumond.

Thank you, Mr. Chairman. Generally, the pricing is made up of factors such as the cost of the buying of the product, the freight, the commissions we pay the local delivery agents to deliver the fuel in the community, and our overhead. That's generally what it is. We try to recover that through the price of sale of the product. So it's community-specific rates that, for the most part, reflect the cost of delivering the product in each individual community, and we make recommendations to the Financial Management Board, for their approval, when we want to adjust those rates. Thank you.

Thank you, Mr. Aumond. Mr. Hawkins.

Thank you, Mr. Chairman. Would these rates also be reflected in the true cost of delivery of this product to some degree or not? We're providing this product in the community that, say, no private contractor sees enough flow of product in order to make it economically worth their while; therefore, that's why no one in private industry is doing this. So are we reflecting relative market rates at all that would be fair market rate in these communities? Thank you, Mr. Chairman.

Thank you, Mr. Hawkins. Mr. Minister.

Thank you, Mr. Chairman. Mr. Chairman, the reason we have our stabilization fund is to sort of limit the cost of the product to a certain degree. Then as we start to get to that ceiling, we would put in a request to FMB for a change in the price setup. But the idea is cost recovery, not on the market situation. So as Mr. Aumond stated, some of the issues that we look at as we go forward…But each community, again, the cost of delivery of the product and the commission charges of the contractor are taken into consideration. For example, on October 1, 2004…There hasn't been a big change in that, but let's give you some prices, for example, of community gasoline. Again, is the last information from September of 2004? For example, Tsiigehtchic was $1.03 for a litre of gasoline; Wekweti was $1.24 for a litre of gasoline; Rae Lake was $1.12; Lutselk’e was $.99; Nahanni Butte was $.97. So it fluctuates again. As we review the impacts of the price of the product as contracts are renewed, we would have to look at our stabilization fund to see if, in fact, we were starting to lose too much on that side and bring a request forward to FMB to make changes in those prices. Thank you.

Thank you, Mr. Minister. Mr. Hawkins.

Thank you, Mr. Chairman. I can only assume that we could take somewhat of a profit factor out in order to keep stabilizing this fuel by litre. Because if fuel is set at $1.24 in Wekweti, that would almost seem I couldn't say unaffordable, but I certainly would say that it's cost prohibitive to drive anything that requires fuel, at that rate. Spending about $100 to fill up your skidoo, I don't know…So is the principle of some of this in order to keep the cost down where reasonable where we can, do we eliminate the profit factor out of this? Again, I realize that there isn't tons of factor in fuel, it's the mass quantities where people make their money overall. Is that the principle of the program, in order to help stabilize fuel prices?

I'm surprised that we would allow, for example, Wekweti at $1.24 a litre, and I think I have you down for $1.12 in Rae Lakes; whereas, in Nahanni Butte, we have allowed $.97 a litre. So I'm just concerned on the size of this. Thank you.

Thank you, Mr. Hawkins. Mr. Minister.

Thank you, Mr. Chairman. Once again, the price and how it is established takes into consideration the transportation, the contracts that are in place, and we're aiming at a cost-recovery basis. So there is little to no profit made. In fact, if we were going to try to just make every community pay for the price of delivering the product, some communities would see a significant increase to a litre of gas and a litre of home heating oil. But again, through the structure we've put together here and with our stabilization fund, we try to mitigate some of the increased costs of providing fuel to the communities.

Of course, as prices continue to rise, that has an impact on our stabilization fund and we would have to make adjustments to that to make sure that we kept that as close to a positive side as possible, and not get into a situation where we were before, carrying basically a debt of almost $5 million to try to minimize the impact on residents in the North. So we're working around that issue, as well, from our side, to try to have things not be so long before we have to make some changes to the pricing structure as we're impacted by the price of goods. Thank you.

Thank you, Mr. Minister. Mr. Hawkins.

Thank you, Mr. Chairman. Recognizing that the Minister did commit to getting some information to me and maybe at that time I could further follow up on some of these questions, but I will leave him with one more question maybe he can answer at this time. How often do we…Let me just back the truck up for a second. I will say that I think it is our role to help stabilize these fuel prices. I think that is definitely what government is here for. I certainly do recognize that the cost of fuel to get into Wekweti would certainly be a lot different than maybe in Nahanni Butte. So that being said, I have no concerns about the principle of the stabilization fund and the delivery of the product in order to make it affordable so people can live in those communities, or a litre of oil would probably cost about $10 or something ridiculous. I'm just making that up, of course, but I’m sure it would be very ridiculous.

My last question for the Minister on this page is how often do we review these rates, or how often are these rates adjusted, recognizing that it wasn't that long ago that fuel prices were bouncing around like a hot potato; just home heating fuel, that is. So are these markets adjustment so of on the fly, like no different than trying to get gas at the local Co-op here? This week the market rate has changed by adding 10 cents per litre, or your home heating fuel has jumped by five cents a litre. Are these adjusted in that way? Are these adjusted across the board, reviewed once a month, or reviewed once every four months, or reviewed, for example, once a year and set in principle? Maybe if the Minister could answer that; if not, I would certainly be more than willing to take his notice and he can provide that tomorrow by 8:30 is fine. Thank you.

Thank you, Mr. Hawkins. Mr. Minister.

Thank you, Mr. Chairman. Tomorrow never comes, they say. But in the area of the work and evaluation and keeping a check on the impacts within the GNWT, it's full cost recovery and it’s adjusted on a very regular basis to ensure that we are getting everything from the government facilities that are out there that are using the service.

On the community side, for supply of fuel to the community, individuals, that would be done regularly, but one of the things we do is look at the stabilization fund. Once we start to see it creep up in that area, we would make a decision as to whether we would come forward to FMB for a request for an increase in the prices of selling the product to individuals in a community. Thank you.

Thank you, Mr. Minister. Mr. Hawkins.

Thank you, Mr. Chairman. Assuming the Minister can’t provide that tonight, from the sounds of that answer, if the Minister could provide for the last three years what regular basis means, I would certainly accept that in written form, so he doesn’t have to answer that tonight. I want to know what regular basis means. I would be willing to accept that if he doesn’t have that detail.

Thank you, Mr. Hawkins. Mr. Minister.

Thank you, Mr. Chairman. I guess the Member won’t be satisfied if I told him once in a blue moon.

---Laughter

For the record, Mr. Chairman, I will have Mr. Aumond provide the detail. Thank you.

Thank you, Mr. Minister. Mr. Aumond.

Thank you, Mr. Chairman. Rates, as the Minister stated, for government customers are adjusted after every resupply in the community that is being served by them. So that’s on an annual basis, depending on whether you are on a winter road or barge delivery system. For public customers, we review our costing and our pricing after every resupply and we consider whether we have a surplus balance or a deficit balance in the stabilization fund. Right now, we have a surplus balance, so we would use that surplus to mitigate any price increases for the public. As the Minister stated, the price is rising, so we take that into consideration every time we resupply the communities with fuel and we see what our costs are and what they are projected for the year, then we make a decision based on that. Thank you, Mr. Chairman.

Thank you, Mr. Aumond. Mr. Hawkins.

Thank you, Mr. Chairman. I appreciate the fact that, I assume, when we resupply, we adjust our rates. If that’s what happens, that’s probably the most reasonable way. I could have taken once every blue moon from the Minister and we could go to our calendar and figure that out. That’s a tangible number, but regular basis was not. I am fine for now.

Detail.

Thank you, Mr. Hawkins. Let’s go to page 5-27, committee, petroleum products, operations expenditure summary, $772,000.

Agreed.

Thank you. Page 5-29, lease commitments - infrastructure.

Agreed.

Page 5-30, information item, information and communication technology chargeback.

Agreed.

Pages 5-32 and 5-33, information and communications technology chargeback, active positions by region, active positions, community allocation.

Agreed.

Thank you. Page 5-34, public stores revolving fund.

Agreed.

Page 5-35, petroleum products revolving fund. Mr. Braden.

Thank you, Mr. Chairman. Mr. Aumond indicated that the fund is in a surplus position. If I read that page right, we are anticipating a closing balance of $223,000 for the fund at the end of this fiscal year.

Thank you, Mr. Braden. Mr. Minister.

Thank you, Mr. Chairman. That is our estimate. It could be a little bit better than that, but that is the estimate that we have at this point. Thank you.

Thank you, Mr. Minister. Mr. Braden.

Thank you, Mr. Chairman. So looking at the forecast for the coming fiscal year 2005-06, we are forecasting a deficit of $14,000, which is pretty good bookkeeping on almost $12 million in sales. I will give the department that. I am just wondering why there is a need to plan for a deficit. Can we not amend some prices in there to at least be able to forecast a break-even or a modest surplus here? How tight or fine-tuned can we get at this point? I am questioning why we should see a deficit there. Thank you.

Thank you, Mr. Braden. Mr. Minister.

Mr. Chairman, the fine-tuning is not all that fine when it does come down to the prices and the adjustments we would have to look at. We are hopeful, although we say closing balance for 2004-05 revised estimates, we are hoping with the last contracts and delivery of product, we might see that improve a little bit once the final accounting is done. If it continues to slide, then what I would be looking at doing is bringing a submission forward to my FMB colleagues for an adjustment to ensure we don’t start dipping below the line on a continuous basis. Thank you.

Thank you, Mr. Minister. Mr. Braden.

Thank you, Mr. Chairman. That’s all.

Thank you. We are on page 5-35, petroleum products revolving fund.

Agreed.

Thank you. Pages 5-36 and 5-37, petroleum product revolving fund, active positions - by region and active positions - community allocation.