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Clock ticking on YEC’s proposed grid extension project

A $20-million grid extension Yukon Energy Corporation wants to build between Carmacks and Pelly Crossing must now undergo several reviews.

A $20-million grid extension Yukon Energy Corporation wants to build between Carmacks and Pelly Crossing must now undergo several reviews.

The extension is tied into a plan to sell electricity to the Minto mine by 2008.

The reviews are not good news for the Crown-owned utility.

“We have said all along we’re on a really tight time frame,” said YEC spokesperson Janet Patterson on Wednesday.

“Things have to move along, because conceivably there could come a time in the future where we could say, ‘it’s not financially viable to build this.’”

Enter the roadblocks.

“It is the government’s intention to designate the (Carmacks to Stewart Crossing) transmission line as a regulated project … and refer the project to the (Yukon Utility Board) for review and recommendations,” reads a March 5 letter to the board from Justice Minister Marian Horne.

The government’s designation of the grid extension project as “regulated” will trigger the review and should be ordered in the “next few weeks,” reads Horne’s letter.

It isn’t known how long the review will take.

A second review— by the Yukon Environmental and Socio-Economic Act Board — must also be completed before YEC can build the extension line.

The board started the review on February 13, said spokesperson Rob Yeomans.

How long will it take to complete?

“We generally say a minimum of six months,” said Yeomans.

The utility cannot build the line without the review, he said.

With Minto set to go into copper production this spring, and with Sherwood having declared it will use four on-site diesel generators to create electricity if it can’t get grid power, the clock is ticking loudly at YEC headquarters.

“We really need a response by the YUB by the end of April,” said Patterson.

“There may well come a time when it’s too late, but certainly that’s not something we’ve talked about yet.”

In February, YEC and Sherwood struck a power purchase agreement that would see the utility build a 138-kilovolt grid-extension from Carmacks to Pelly Crossing worth about $20 million and a $3.8-million spur line to the Minto site by late 2008.

That extension is the first phase of a grid line proposed to run through to Stewart Crossing. That plan was laid out in the utility’s 20-year resource plan.

In exchange for building the line and spur, Sherwood agreed to buy $24 million of electricity from YEC over eight years.

Sherwood also pledged to pay YEC, over time, for the spur and to chip in about $7.2 million towards the main line.

Grid power will cut costs by 10 cents per pound of copper and save Sherwood about $4 million per year, said president Stephen Quin in a previous interview.

But the mine can be profitable with diesel generators, he said.

“We don’t have to have grid power: the feasibility assumes we’ll have diesel for the entire mine life,” said Quin earlier.

It isn’t clear if Sherwood can opt out of the agreement if there are delays.

 Quin could not be reached for comment.

It also isn’t known if YEC could face lawsuits from Sherwood if it does not deliver electricity to the mine by 2008.

President David Morrison was busy with personal matters this week and could not be reached for comment.

Government spokesperson Albert Petersen did not provide Horne’s letter or any details of the government’s plans to the News.

Petersen was called to arrange an interview with Horne, but the minister failed to make herself available.

Energy watchdog Peter Percival has been pushing for a review of the extension and the power purchase agreement for months.

The two are connected and cannot be examined independently, he said.

 “There’s no such thing as having the line without a purchase-power agreement, and you can’t have a purchase-power agreement without the transmission line,” said Percival. “The two need to be reviewed together.”

The utilities board has been soliciting comments from intervenors for months.

The latest round is due on March 15.

The board also examined the Carmacks-to-Stewart Crossing proposal in the utility’s 20-year resource plan review in November.

But Horne’s dedicated review of the grid extension will be “redundant” if it doesn’t include the power deal, said Percival.

“If the mine fails under the arrangement they made through the power-purchase agreement, the Yukon ratepayers and taxpayers will be on the hook for quite a bit of money because the utility would extend the service and the mine will not have paid its contribution,” he said.

“If the mine quits, although they say they’ve got take-or-pay, there won’t be anything to pay that $24 million. All you end up with is their assets, and that may not be very much, and you’re not first in line for them.”

But Percival is supportive of the idea of YEC selling excess electricity to Sherwood.

He doesn’t feel Sherwood has grounds to be upset if the line takes more time to build.

“If they (Sherwood) went online in 2008, they’d save something like $18.2 million,” he said. “With that kind of a savings, they’ll still have a savings of $14-$16 million, if they came online in 2009.”

The utility board review of the grid extension will include the power-purchase agreement, according to Horne’s letter.