Be warned: your electrical rates are likely to go up sharply in the years ahead.
There are some big and inexorable trends converging on your wallet. We are already running out of cheap hydro from the dams the previous generations built. Yukoners have more gadgets and are using more power. And some big mines might start to suck power off our grid.
It’s important to understand how the price you pay for electricity is calculated. And why Whitehorse’s grid electricity costs half what it does in Yellowknife, and a fraction of what power costs to generate in Iqaluit.
The simple version of the story is that, back in the day, our ancestors built big hydro dams at Schwatka and Aishihik. According to what Yukon Energy told Whitehorse media last month, these big old dams churn out power for around six cents per kilowatt-hour. After paying for overhead and the wires to get it to my house, and after all the confusing extra charges and “riders,” I paid around 14 cents on my last bill.
According to Yukon Energy’s handy online power meter, in the last year the Whitehorse grid got an impressive 99.5 per cent of its power from hydro. Most of that was from our big low-cost dams.
Electricity pricing is regulated. How it works – again, a simplified version – is that the costs of production and distribution are marked up with a regulated profit margin. So if the cost of power generation goes up significantly, then eventually your rates will too.
This is where the problem starts. In winter months, power demand is high and we are already burning diesel some of the time. Yukon Energy tells us that costs 30 cents per kilowatt-hour. As Yukon power demand grows over the next few years, more diesel will be burned.
Right now our mix is 99.5 per cent cheap hydro and 0.5 per cent from other, more expensive sources. What happens when that mix becomes 98:2? Or 90:10? Or 70:30? This is the kind of weighted average problem that made Math 8 so much fun.
For readers without a Math 8 student nearby, the numbers work like this. If your power mix is, say, 99.5 per cent six-cent hydro and 0.5 per cent 30-cent diesel, then your weighted average cost is 6.1 cents. If your mix is 70:30, your average cost becomes 13.2 cents.
Ouch. That’s more than double, and not good for any families, businesses or charities that use electricity (which is to say, everyone).
If we don’t build more cheap hydro – emphasis on cheap – then gradual growth in population and iPod usage will get us to 70:30. If the Victoria Gold mine goes into production and connects to the grid, that would boost energy demand by a whopping 25 per cent. That’s according to Yukon Energy estimates. That kind of boost would quickly move us toward 70:30 territory.
There are proposals on the drawing board to use liquefied natural gas (LNG), which people think could generate power in the 15-cent range. That’s more than double Aishihik and Schwatka, but less than diesel. For those following the fracking controversy, this gas would presumably come from giant fracking operations in northeastern B.C. Or potentially from future Yukon wells closer to home, either conventional or fracked.
LNG at 15 cents would lessen the cost increase. The 70:30 scenario would end up with the weighted average around nine cents.
The folks at Yukon Energy have been pointing out these trends since their resource plan in 2006, and they’ve just updated their analysis in the most recent version on their website.
More expensive power is bad for the Yukon. It eats into the wallets of Yukon families, hitting lower income Yukoners particularly hard. It discourages heat pumps and electrical heat, thus encouraging continued use of carbon-heavy fossil fuels for home heating. It adds to the costs of Yukon businesses, which they have to pass on to their customers.
High energy prices also discourage new business from moving here, if they can get much cheaper energy other places. This applies to businesses from mining to knowledge workers deciding if they should blog from Canmore or Whitehorse. This is not good for jobs and building a robust private sector here.
So the question is what the Yukon government should do about this.
Option one is to go with LNG and just live with higher electricity prices. It will be a burden on families and business, but it is easy to implement. There is a risk that gas prices will rise in the future as more Canadian gas is exported to Asia, but politicians can count on it being after the next election before anyone notices.
Option two is to take a page from people like legendary Yukon commissioner Jimmy Smith: show some leadership, and build some cheap new hydro facilities. Yukon Energy’s latest plan shows a number of hydro options around half as expensive as LNG.
This is why Alaska Governor Parnell, now that Sarah Palin is out of his hair, is pushing a big dam proposal between Anchorage and Fairbanks.
However, big dams are controversial. They require politicians to stick their necks out. And designing one so that its negative impacts are minimized and it can pass muster with voters and regulators is not easy.
So we can now watch our cabinet. Will they actually do something, or live up to their reputation for never missing an opportunity to miss an opportunity?
Keith Halliday is a Yukon economist and author of the MacBride Museum’s Aurore of the Yukon series of historical children’s adventure novels.