By Piers McDonald
Recent open letters to the Yukon Energy Corporation have suggested that there are “insufficient controls” on spending within the corporation.
In particular, investments in assessing the viability of next-generation electrical supply options and the proposed investment in liquefied natural gas (LNG) back-up generators have been cited as examples of profligate spending. Nothing could be further from the truth.
Yukon Energy is the most scrutinized company, public or private, in the territory, starting with detailed internal board of director reviews of budgets. The business plans which outline company spending practices are posted publicly on the web, audited annually by the auditor general of Canada and reported to the legislature.
There are also regular appearances before the independent Yukon Utilities Board, which regulates the activities of the corporation. It assesses, in as much detail as it wishes, the reasonableness of the corporation’s spending practices.
For example, the most recent rate hearing before the board saw Yukon Energy answer over 1,000 written questions and participate in three full days of detailed verbal questioning – all done in public with interveners joining in.
Yukon Energy’s obligation is to answer as many questions as are put forward and to do so as fully and fairly as it can. The Yukon Utilities Board then decides how much Yukon Energy can charge ratepayers to supply electricity.
It is well known that last year 99 per cent of Yukon’s electricity was supplied by the hydro system. It is also known that the demand for electricity, even excluding industrial demand, is beginning to exceed the existing capacity of the hydro system.
Yukon Energy is examining the source of the next generation of electrical supply and has been investing in technical studies to assess the viability of various options throughout the territory: small hydro, geothermal, bio-mass, waste to energy, wind, etc. This work is not an “extra-curricular” activity, as described by some, but rather the corporation’s core business. Yukon Energy needs to plan and build new electrical supply before the current system runs out. It is the prudent and responsible thing to do and has been supported by the utilities board at previous public hearings.
When Yukon Energy seeks to have costs covered relating to the assessment of new supply options and the building of new electrical supply projects, it will apply to the independent Yukon Utilities Board. It is this board, not Yukon Energy, that will determine what costs are reasonable and what will be charged to ratepayers.
It has been noted that, in hearings before the board, Yukon Energy does not have all of its requests approved. In particular, some of the expenses incurred in order to file rate requests and participate in hearings are not approved, requiring the company to absorb them.
This is not an uncommon occurrence and Yukon Energy does not take such approval by the regulator for granted. Neither should interveners who appear at public hearings. They, in fact, have had their expense claims significantly modified by the board as well.
Yukon Energy does not take for granted the approval of the Yukon Utilities Board on any matter and consequently reviews its practices, rate requests and expense claims to try to reflect what is reasonable and, in particular, what the board considers reasonable.
The other example of supposedly “unreasonable spending” by Yukon Energy is the proposed expenditure to replace backup diesel generators that have seriously exceeded their useful life.
Yukon Energy operates an isolated electrical transmission grid without connection to the south and needs a reliable back up service in the event of a system failure. This backup service needs to be reliable. Yukon Energy’s board of directors has carefully assessed the options and has determined that the one that best meets the test of reliability and also meets the cost expectations of Yukon ratepayers is to install new LNG-fired generators to replace the old diesel generators.
While the suggestion has been made to replace the “end of life” diesel generators with used diesel generators once located at the Minto mine site, the board has concluded that this option does not meet the test of reliability and would be more costly than the LNG option in the long term.
Yukon Energy, of course, knows that it must, as usual, seek approvals from a number of regulatory agencies, including the Yukon Utilities Board, in order to see this project through to completion. It takes nothing for granted but believes that it has a compelling case to present and is hopeful that approvals will be granted and electrical ratepayers will benefit from the effort.
I would conclude by saying that Yukon Energy operates as a fully accountable corporation providing an essential public service. It is continually looking for ways to operate as cost effectively as possible and strives to provide electricity in an environmentally sensitive way.
Balancing these objectives is often a challenge, and we welcome suggestions from anyone and everyone as we work to meet the current and future needs of Yukon people.
Piers McDonald is chair of the board of the Yukon Energy Corporation.