Re privatization of Yukon Energy Corporation:
There has been a lot of hoopla in the media lately about the sell-off of assets of Yukon Energy to a private company, ATCO, the mother of Yukon Electrical.
What is being left out in this picture is the effect of all of this on the ratepayer, the Yukon consumer of electricity.
With all the political gamesmanship and the whining of possible loss of jobs, the real issue concerning a lot of money being spent on Mayo B and the connection of our north and south grids is being pushed out of the picture.
Make a big issue out of something else to hide the real issue. You know, a diversion.
I will try to explain a bit of history to hopefully help understand what is taking place.
After the Yukon purchased the electrical facilities from the feds, the Northern Canada Power Commission, Yukon Electrical was hired to manage our publicly owned assets as they had the most experience at doing the job.
Some 10 years later, the government saw reason to transfer to Yukon Energy all management rights to their own assets.
The management contract to Yukon Electrical at that time was for $800,000 per year. A lot of money in those days. But it was still far less than what it would soon cost the Crown corporation to run the business … nowadays the top five executive positions of Yukon Energy are payed close to $1 million a year and there are some 60 or more other employees. As well, an active board of directors are hauling in a considerable paycheque each year!
The real issue at the time was not the management costs, but what was taking place in the actual business of running the two companies.
Yukon Electrical was loading its rate base at a phenomenal rate each year and holding Yukon Energy fairly constant.
You see, that is where the real money is made because the corporations can double-dip; the mother loans money to the baby to invest in capital expenditures, so the mother gets interest on this money for many years (sometimes 40 years). Then the baby puts this capital investment on the rate base and receives a very profitable return on this money for a similar term.
In the meantime, the regular operations and maintenance of the infrastructure was being looked after by Yukon Electrical, but the longer-term condition of equipment was being neglected.
The people in the know at this time saw this taking place and soon talks began about some necessary changes. I remember sitting in meeting rooms more than 10 years ago discussing these same issues … the management contract, the rationalization of assets (which I will define later) and even the possibility of privatization.
I will attempt to take these on one at a time.
The management contract was pretty straightforward, as mentioned above. So it was quickly remedied and decided the Crown corporation should run its own show.
The outcome was the proliferation of a Yukon Energy bureaucracy. How can any corporation economize and become more efficient when you have a growing bureaucracy swallowing millions of dollars off the top?
As stated above, the top five management staff take in a close million in their paycheques. The president takes in well over $200,000 himself. Then the other management personnel take in a least another $1 million. This is a couple million bucks before you ever get to the hands-on field workers for Yukon Energy, of which there are 50 or more.
Rationalization of assets is a little bit deeper.
In order to get electricity to our homes, there are three functions that have to take place Ã‰ the production, the transmission and the distribution of this energy.
Rationalization means you have one company handle each of these functions.
In the Yukon we have a mishmash of this. In other words, both Yukon Energy and Yukon Electrical have their fingers in each of these pies. This makes their activities very convoluted and hard to regulate, leading to many inefficiencies and thus greater costs to the consumer.
So talks have been ongoing on this issue for many years and nothing has yet to come from them.
One can only speculate that this is what Premier Dennis Fentie was discussing with Yukon Electrical, which is fine, as long as he was just talking about this issue to see where they stand. But he must not forget a very important step has to take place before entering negotiations. Everyone has to be involved, most importantly the consumer or the Yukon taxpayer. And we need competent negotiators, for which Yukon Energy already has one of the finest lawyers in the subject area.
Last but not least, we have privatization.
It is highly unlikely the premier would be selling the farm to Yukon Electrical. You see, Yukon Energy is a cash-cow for the government. What is more likely happening is that he is talking rationale on rationalization. This would likely mean selling or trading some assets of each company/corporation to make this happen. How else could you do it?
As well, the newly released Energy Strategy recommends an independent power producer and net metering (a meter allowing you to buy or sell energy on the grid) policy be implemented as quickly as possible by this government.
This strategy was carried out with many stakeholders at the drawing board. It is not a perfect strategy, but it is good start.
Formulating these policies would mean smaller projects such as run-of-the river or wind generation. Or a residential entrepreneur could develop photovoltaic (sun energy) or wind power. They would no longer need a battery bank to save the energy as they could buy grid power when the wind isn’t blowing and can become self-reliant with clean environmentally friendly energy.
These small independent producers could also sell excess power (when the wind blows and the sun shines) to the grid for a reasonable price This, to me, means some sort of privatization mix which should be of benefit to ratepayers as the more costly larger projects can be put on hold until absolutely needed.
So let’s get with working together on curing these issues to make our energy cleaner, more efficient and more affordable.
But let’s not forget to proceed with extreme caution on the estimated $170-million Mayo B (projected to come in at 14 cents per kilowatt hour at the above projected cost Ã‰ what about overruns?) and grid connection (raising the cost per kilowatt hour ever more), which is stalking our doorstep!
Roger Rondeau, president
Utilities Consumers’ Group