A Yukon Energy Corporation facility in Whitehorse pictured on April 9. The Yukon Utilities Board has reviewed the electricity purchase agreement between Yukon Energy Corporation and Tlingit Homeland Energy Limited Partnership. (Dana Hatherly/Yukon News)

A Yukon Energy Corporation facility in Whitehorse pictured on April 9. The Yukon Utilities Board has reviewed the electricity purchase agreement between Yukon Energy Corporation and Tlingit Homeland Energy Limited Partnership. (Dana Hatherly/Yukon News)

Atlin hydro expansion project could result in electricity rate hike: Yukon Utilities Board

Yukon Party drilled down on board’s report in Yukon Legislative Assembly this week

The territory’s energy regulator is weighing in on an electricity purchase agreement underlining the Atlin hydro expansion project.

The Oct. 18 report by the Yukon Utilities Board set out to review the agreement between Yukon Energy Corporation and Tlingit Homeland Energy Limited Partnership (THELP) to acquire power from the project.

The approximately $310-million project builds on an existing hydropower facility in Atlin, B.C., and is intended to export electricity to the Yukon’s grid during the winter through a new transmission line. The project is expected to offset four out of 17 diesel generators the territory relies on for backup. It is being led by THELP, which is owned by Taku River Tlingit First Nation.

In April, Yukon Energy Corporation and THELP filed an amended electricity purchase agreement with the Yukon Utilities Board. On Oct. 18, the utilities board issued a report of their findings and recommendations to the Yukon’s Justice minister on potential benefits, costs, risks and consumer impacts.

In the report, the board found a near-term public need for the agreement under electric load forecasts.

The board is “concerned that within the [agreement], a term that can affect customer rates is the embedded 50 per cent of [Consumer Price Index (CPI)] escalation rate,” which was agreed upon by the energy corporation and THELP at an early stage of negotiations.

The Utilities Board noted that the Pine Creek hydro project in B.C., which resembles the Atlin project in size, only escalated the rate 12.5 per cent. Instead of considering the comparison, Yukon Energy “started its negotiation high,” the board says.

“The board finds that customer rates are likely adversely affected by this term.”

The report continues that Yukon Energy signified it didn’t know about the Pine Creek rate.

The report indicates that without guidance from government through an order-in-council or other legislation, the board does not have a mandate to balance societal concerns in the form of government policies with economic efficiency that is determined through cost-of-service regulation.

In conclusion, the board accepted the agreement as necessary for Yukon Energy Corporation to meet its capacity shortfall and reduce its need for diesel.

This week, the Yukon Party raised questions prompted by the report in the Yukon Legislative Assembly about the impacts of the agreement on ratepayers and the territory’s practice of renting diesel generators.

“This report raises some pretty serious concerns for us about what it’s going to mean for rates,” Yukon Party Leader Currie Dixon told reporters Nov. 7 in the legislative building lobby following question period.

Citing the report, Dixon said Nov. 8 a permanent fossil fuel facility is “complimentary” to renewable projects given the renting of diesel generators will otherwise continue into the 2030s. While acknowledging that liquefied natural gas is not a renewable source, he said that it would be an “excellent way” to displace the rentals.

“We think that if we need to have fossil fuels, we should own those fossil fuels,” Dixon said.

“Quite frankly, in my view, it makes more sense for the environment.”

Minister of Energy, Mines and Resources John Streicker accused the Yukon Party of cherry-picking from the critical parts of the report.

“Yukon has the lowest electricity rates across the world. Why? Because we’re lucky to have hydro. This is another good hydro project,” he said.

“Yes, the costs have been going up, and we need to look at it again, but generally speaking, 13-and-a-half cents a kilowatt hour is a great price.” Streicker said that price could drop to 9.7 cents per kilowatt hour after 2035.

Streicker highlighted a couple of lines in the report just above a section the Official Opposition was focusing on.

“The board notes that the value of this project lies in its ability to offset expensive thermal,” the report reads.

“This project is a necessary part of the supply portfolio for the Yukon Energy Corporation to achieve the 93 per cent renewable generation standard expected to be set by the government.”

Streicker acknowledged the need to rely on thermal energy for backup.

“I expect there will always be a need for thermal,” he said,

“But there won’t be a need for as much as we have right now, as we work through the renewable energy plan.”

READ MORE: Federal budget seeks to power up Yukon

Andrew Hall, president of the Yukon Energy Corporation, said the benchmark is to get electricity rates equivalent to what Yukoners would pay for the next best alternative based on certain assumptions about what future residential and industrial consumption will look like.

“The price we pay is equivalent to what that default option would cost,” Hall said.

“Growth looks to be a lot more strong than what we had anticipated, and in that case, ratepayers will really benefit because they’ll get this cheap energy which would be much more competitively priced than liquefied natural gas or diesel.”

Hall said there are programs for independent power producers, such as in British Columbia, that use the same inflation adjustment.

“Anytime a utility is having to generate and sell more, that can often be a rate driver,” he said.

“I think this deal supports that goal of keeping rate increases manageable and reasonable.”

Overall, Yukon NDP Leader Kate White is in favour of the project going ahead, noting the importance of investing in this type of infrastructure the same way Yukon government should be investing in highways, hospitals and schools.

“If the [Yukon Utilities Board] was directed to look at the environmental cost of projects, and just not the financial cost of projects, what we would see is we would see that switch,” she said.

“The truth of the matter is in Yukon, we have this real, unique opportunity as this isolated grid to do things in a different way, and so by looking at a wide spectrum of small renewable projects, we’re looking at trying to build in back on the gap.”

White criticized the Yukon Party’s track record on energy in the territory when it comes to pushing for oil and gas development.

“When we all understand our commitments, we all understand our own need to switch off of that kind of dependency,” she said.

“To have a political party say well, actually, you know, ‘let’s get back on that fossil fuel bandwagon,’ I think is unacceptable.”

Contact Dana Hatherly at dana.hatherly@yukon-news.com