Bellekeno’s steep price spread among all customers

The Bellekeno mine is pushing up Yukon Energy's costs, and residential customers are footing part of the bill.

The Bellekeno mine is pushing up Yukon Energy’s costs, and residential customers are footing part of the bill.

Heavy power usage on the energy-strapped Mayo-Dawson City grid is forcing the public utility to burn 550,000 litres of diesel this year.

Normally, the grid only requires around 120,000 litres a year.

Turning on the diesel generators to help the Mayo dam can do some serious damage to Yukon Energy’s pocketbook.

It costs around 10 cents to produce one kilowatt/hour of hydropower, and 30 cents to do the same on diesel.

That may have you wondering whether residential customers are subsidizing the mine’s steep price.

The problem is Yukon Energy doesn’t calculate whether the mine turns a profit for the utility, or whether the mine costs more than it pays, said Ed Mollard, Yukon Energy’s chief financial officer.

But there are times where the mine’s power is being paid for by other customers.

“It depends on the circumstances of the system,” said Mollard.

The difficulty in determining the cost impact of the Bellekeno mine lies in the way Yukon Energy calculates the price of making power.

When it designs the rate system that determines the price of power, it doesn’t look at specific customers. Instead, it looks at customer classes, said Mollard.

There are four classes – industrial, commercial, government and residential.

Every two to five years, Yukon Energy and Yukon Electrical Company Limited go before the regulator, the Yukon Utilities Board, and tells it what each class costs and how much of the corporations’ revenue each class provides.

The utilities are allowed to change who shoulders the price burden during these hearings.

Before the Bellekeno mine came online, the Minto mine was the only customer in the industrial class, said Mollard.

“They were actually paying more than it costs to service them,” he said.

Minto was paying between 109 per cent or 111 per cent of the cost to provide it with electricity, he said.

He doesn’t expect Bellekeno to push the industrial class under 100 per cent.

“I don’t see anything coming on the system that should move it a whole bunch,” he said.

Something to keep in mind is the growth of residential power usage in the last decade, said Janet Patterson, Yukon Energy’s spokesperson.

That rising cost gets put onto industrial customers’ rates, she said.

Bellekeno’s power purchase agreement, which dictates the price the mine pays for power, is determined from the same numbers used to figure out the cost burdens among customer classes, said Mollard.

If a single customer does rapidly shoot up their costs, they won’t have it all pushed on them.

“Our mantra is, all load is new load,” said Mollard. “So everybody is treated equally to the extent that, if I have to burn diesel to make electricity, everybody has to help pay for that.”

It’s the “rate-making philosophy in the Yukon,” he said.

In other jurisdictions, living in a small isolated community will mean a steeper power price.

But in the Yukon, we all subsidize each other because of the “all load is new load” mantra.

“It’s an equality thing between all customers,” he said. “Old Crow has very high costs, but they get the same rate as Whitehorse.”

The only thing a new customer has to pay for is the transmission infrastructure to their site, he said.

Contact James Munson at

jamesm@yukon-news.com

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