better them than us

Everyone likes to complain about the electricity company. That's when they aren't whinging about surprise internet surcharges by our other friendly neighbourhood monopoly, that is. But a news item on CBC North recently put Yukon Energy in perspective.

Everyone likes to complain about the electricity company.

That’s when they aren’t whinging about surprise internet surcharges by our other friendly neighbourhood monopoly, that is.

But a news item on CBC North recently put Yukon Energy in perspective. “City approves permit to expand power plant. Cost expected to be about $30 million.”

More diesel? WTF! (as they say in elementary school these days.)

This counts as excitement in an economist’s life, and I immediately cleaned the coffee off the ceiling and clicked on the story.

Fortunately, at least for us, it turned out to be Iqaluit city council and Nunavut’s power company, Qulliq Energy. They plan to install two big new diesel generators, called “gen sets” by the cool kids, with another 10 megawatts for Baffin Island’s principal city. The news story said the objectives were to make the system “more efficient and reliable.” No mention of cheaper, you’ll notice.

It is really interesting to compare power across the three territories. Back in the day, the feds set up the Northern Canada Power Commission (NCPC) to provide electricity across the North. This was then broken up into Qulliq Energy and the more boringly named Yukon Energy and NWT Power.

It is the kind of natural experiment that management gurus love. You have three new energy companies with a common heritage, each inheriting some valuable assets from the feds before being set loose to chart their own paths. When the Discovery Channel stops filming Gold Rush Alaska, they can start “The North’s Next Top Power Company” and get Donald Trump or Simon Cowell to ridicule the territories’ electricity executives on TV.

It would make utility board meetings more interesting, anyway.

If you dig deeper into how Qulliq, NWT Power and Yukon Energy have done since NCPC set them free, you see some dramatic differences.

It’s clear that “The Donald” would be most interested in shouting at Qulliq Power. According to their website, homeowners in Iqaluit pay 52 cents per kilowatt hour (kWh). The Nunavut government provides a subsidy of 26 cents. All in, a house using 1,000 kWh a month pays $275.

My most recent bill here in Whitehorse showed a basic power rate of 13 cents per kWh. That’s before the Yukon government subsidy of about three cents. When you add in all the confusing riders, rebates and customer charges, my total bill for around 1,000 kWh was about $120. That’s less than half the figure in Iqaluit.

The Donald would also be all over Qulliq’s executives about this new scheme to spend $30 million on new diesel generators. I can see his hair quivering as he shouts, “Haven’t you read Yukon Energy’s report that diesel costs over 30 cents per kWh while liquefied natural gas is less than 15? Don’t you care about climate change? And why don’t you people have a dam?!”

It makes NWT Power look good, at least relatively. Even after their application to raise rates almost 30 per cent over the next four years, in part due to spiralling cost estimates to rebuild the Bluefish hydro dam, power in Yellowknife will still be much cheaper than in Iqaluit. According to CBC, Bluefish is coming in more than $20 million more than initially estimated.

But we can’t be too hard on Qulliq’s executives. They inherited a tough situation. Unlike Whitehorse, NCPC didn’t leave Iqaluit with two dams with cheap power and lots of spare capacity. Iqaluit’s old diesels are really old and demand is up. They even had a few days of third-world style rolling blackouts last year when one gen set went down while another was being repaired. According to Up Here magazine, 17 Nunavut power plants are near the end of their design lives and six are more than 40 years old. And Iqaluit is still working on replacing the antiquated five-kilovolt power lines installed by the US Air Force in the 1940s.

Their plan to build a big hydro facility near Iqaluit has bogged down since the cost is likely well over $150 million and the Nunavut government already has a lot of debt.

But it does show how poor decisions can catch up with you in the long-run game of power infrastructure. Instead of skimming $10 million a year off their billion-dollar transfer payment to save up for big investments in dams or micro hydro, they just subsidized people’s monthly bills. Now they have neither a dam nor a pile of money in the bank to build one. Nor did they plan far enough ahead to have a fleet of windmills and micro hydro to help out, or an LNG plant to manage the risk that diesel prices would get high and stay there (which they have done).

So Qulliq’s current executives have found themselves in the situation where they have to spend scarce investment capital on new diesel capacity just to keep the system running. Iqaluit’s rate payers will be paying for this for decades.

So even though Whitehorse power prices are higher than southern Canada, we are actually doing very well compared to Yellowknife and Iqaluit. Yukon Energy’s recent request for a 13 per cent increase may seem steep, but remember that they last asked for an increase in 1999. What else has gone up just 13 per cent over that period?

But Iqaluit’s story is a lesson to us. Demand is growing and our NCPC legacy dams are running out of spare capacity. We got lucky that the feds were willing to subsidize such a huge part of Mayo B’s cost. If our power costs spiral up to Yellowknife levels over the next decade or two, that will be bad for Yukon businesses, Yukon families (especially low-income ones) and your wallet.

Yukon Energy has been flagging its decreasing spare capacity since its strategic plan in 2006. The Yukon government now needs to accelerate its planning to identify and build more megawatts of cheap power. Emphasis on cheap. Or we’ll end up like the folks in Iqaluit, being forced to spend millions on quick solutions that will cost us millions more in the long run.

Keith Halliday is a Yukon economist and author of the Aurore of the Yukon series of historical children’s adventure novels.