NWT board approves low water deferral account but leaves recovery undecided

The Northwest Territories Public Utilities Board approved an Extreme Low Water Operating and Maintenance Expense Deferral Account in Decision 11-2026, dated October 9, 2026, on application 2026-011. Northwest Territories Power Corporation (NTPC) may record expenditures for later review, but that permission does not establish that the costs were prudent or recoverable from ratepayers. The decision did not approve a rate increase.

Drought drove the request for more thermal generation

Reduced hydroelectric generation available to the Snare system meant greater reliance on thermal generation. NTPC forecast about 64.2 GWh of diesel generation for the Snare system in 2026–27 and 77.5 GWh in 2027–28, compared with about 5 GWh in the approved 2025–26 test year. It argued that the drought’s severity and duration were beyond its control and required operations substantially different from those contemplated in that test year.

For 2026–27, the utility forecast approximately $5.575 million in additional spending, including $2.250 million for equipment rental, $1.348 million for consultants and contractors, and $736,000 for salaries and wages. Those figures were estimates, not approved recovery amounts. The approved Snare thermal-generation O&M budget for 2025–26 was approximately $3.089 million.

NTPC said it needed four additional 1.6 MW rental generators to meet Snare Zone demand and provide backup during servicing of other units. It anticipated using them through late 2027 or into 2028 and was adding diesel generation to its five-year capital plan. Contractor costs included preventive and corrective maintenance for continuously operated Jackfish diesel units and maintenance of the rentals; increased operation also required staffing and overtime.

Prudent planning sets the baseline

The board accepted the low-water conditions as unusual and material, and acknowledged that individual droughts cannot be predicted precisely. But deferral treatment is an exception to test-year regulation: NTPC ordinarily bears normal differences between actual O&M spending and amounts reflected in approved rates. Minor low-water events manageable with existing equipment and staff normally remain within general rate application budgets. Spending above budget or assigning a separate project code therefore does not establish eligibility; the budget serves as a cross-check on whether costs are incremental.

Significant low-water conditions in 2023 and 2024 sharpened the planning issue. NTPC acknowledged recurring events, with the latest following the previous event after roughly a year. The board distinguished exceptional drought severity or duration from foreseeable risks to hydroelectric supply that an isolated system must plan to manage. Only demonstrably incremental costs caused by the present event’s exceptional severity or duration could qualify, measured against what prudent planning, maintenance and operation would reasonably have required. The planning concerns were not findings that NTPC had acted imprudently.

Rental costs would not automatically pass through to customers if timely installation of permanent capacity should reasonably have avoided them. The board could compare rental and associated O&M spending with the annual revenue requirement of appropriately installed and maintained permanent capacity, including depreciation, return and operating costs. It also required scrutiny of whether limitations in existing generators arose from extraordinary demands or their age, condition, maintenance, capacity or replacement timing. Normal and lifecycle maintenance had to be separated from genuinely incremental drought-related work.

Six conditions govern recovery eligibility

For each material category of expenditure, NTPC would have to demonstrate that the spending:

• Resulted directly from extreme low water and would not otherwise have been incurred.
• Was additional to costs already reflected in approved rates.
• Was not normal operating, maintenance, staffing or capital-related spending reasonably required without the event.
• Could not reasonably have been avoided or reduced through prudent generation planning, maintenance, overhaul or timely asset replacement.
• Was a prudent, cost-effective response when the commitment was made.
• Had sufficient contemporaneous documentation to establish causation, incrementality and prudence.

Planning evidence and reporting remain mandatory

NTPC was directed to provide its Snare generation-planning and reliability criteria, including reserves, largest-unit contingencies, maintenance allowances and sustained backup-generation capability during prolonged hydro constraints. It must explain how those criteria informed earlier generation and capital planning, and identify departures.

The board also supplied two uncompleted reporting templates that NTPC must fill in when requesting recovery. Table 1 requires unit-level capacity, sustainable operating hours, O&M, staffing, maintenance and rental information, with budget reconciliation and explanations of cost variances and differences from planning assumptions. Table 2 requires reconciliation of capacity and operating hours, with explanations of differences between identified shortfalls and rental provision. Neither table awards costs.

Operating evidence must support the account dates

NTPC proposed starting in July 2026, when diesel coverage rose from about eight to 17 hours daily, additional staffing and overtime began, and the first rental unit became available. The board instead required objective evidence of operations materially beyond resources reasonably maintained for normal and foreseeable contingencies. Relevant indicators included March snow-water equivalent at about 75 per cent of average, a below-normal freshet by June 16 and June forecasts of low inflows and greater diesel needs. NTPC must substantiate the date those conditions first existed; costs incurred after it still face the eligibility tests.

Recording must end when the extraordinary operating need ends and NTPC can again meet system requirements with resources ordinarily needed for normal and reasonably foreseeable conditions. The board rejected an undefined return to approximately normal water flows as the stopping test and required supporting hydrological and operating evidence. The amount, if any, recoverable from ratepayers was reserved for a subsequent disposition proceeding.