a dodgy power deal

Through slight of hand, the government and its Yukon Energy Corp. have struck a deal with Sherwood Copper.

Through slight of hand, the government and its Yukon Energy Corp. have struck a deal with Sherwood Copper.

Officials say it is a good deal for ratepayers.

The Crown-owned Yukon Energy Corporation will get its grid extension from Carmacks to Pelly Crossing. And its customers won’t have to assume any of the risk.

That’s a good deal for ratepayers, say officials.

But it raises a question: who is assuming the risk?

Well, Yukon citizens are.

And, while it’s a bargain for ratepayers, that doesn’t guarantee it’s a good deal.

A couple of weeks ago, the Yukon Utilities Board reviewed the initial $24-million deal Yukon Energy struck with Sherwood.

The board rejected it. It had sound reasons. The system worked as it should.

Under the rejected deal, the utility would build the power line. Sherwood would pay back the utility.

If the cost of the power line increased, Sherwood’s costs wouldn’t. The utility would eat the difference.

That put the ratepayers at risk, said the utility board.

As well, the mine was guaranteed power at 10 cents per kilowatt-hour. The utility board said it should pay a floating rate like everyone else.

The utility’s decision to buy the mine’s old diesel generators was rejected. The board wasn’t convinced the units were needed.

Finally, it took exception to the mine monitoring its own power use. It felt the utility should put measures in place to monitor the mine’s power usage.

All this amounted to a bad deal for ratepayers.

What was the mine giving back?

It would put $7.2 million toward the cost of the $23 million power line. It would also pay $4 million to connect its mine to that line. And it agreed to pay $24 million to the utility over eight years.

But that deal was tossed out and in the last two weeks, or so, the deal was renegotiated.

There are tweaks that improve it.

The mine will still pay $7.2 million towards the power line. It will pay the full cost of the spur line to the mine so, presumably, cost overruns will be covered by Sherwood.

The government will still buy the unnecessary diesels.

And, while the mine will pay a set price for power — something the board frowned on — a cost-of-living escalator will kick in, but only after 2010.

In return, the mine is only committed to paying $12 million for power, half the original deal. And it is only committed to the deal for four years, not the original eight.

As well, the Yukon Development Corporation will fund the project, taking away all risk to ratepayers.

Is it a good deal?

That’s hard to say.

The deal won’t be reviewed by the utilities board now that it is spearheaded by the Yukon Development Corp.

In fact, there won’t be any review at all.

As well, because the government is guaranteeing the mine 10-cent-per-kilowatt power, it’s now in the business of setting power rates. The board can’t review that either.

Utility experts say it’s a bad idea for the government to set power rates. It establishes a precedent that must now be offered to other corporations.

Who gets such a deal? Just mines? Or will other corporations get that opportunity?

Frankly, this is not the way the system is supposed to work.

The board, composed of experts appointed by government, is supposed to review power deals and rates.

The government has executed a dodge, circumventing any oversight of its deal.

And that should make all Yukoners nervous. (RM)

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