Power line’s skyrocketing costs blamed on poor estimates

The new transmission line between Carmacks and Stewart Crossing is costing nearly double its original estimate.

The new transmission line between Carmacks and Stewart Crossing is costing nearly double its original estimate.

The 172-kilometre line, which will connect Yukon’s northern and southern power grids, was initially slated to cost $32 million when it was presented in the Yukon Energy Corporation’s 20-year resource plan in 2005.

The final bill is now set to be $69.7 million once the second stage of the line is complete in late 2011.

“We provided that number (the 2005 estimate) based on the best information we had in those early days, but estimates are only as good as the information you have at the time,” wrote Yukon Energy spokesperson Janet Patterson in an e-mail.

No engineering or design work was done for the initial estimate. Yukon Energy didn’t have a firm cost estimate until 2007, after it received contract proposals to build the line.

Despite appearing in the 20-year resource plan, the decision to proceed with the line was based on the 2007 estimates, said Patterson.

“We weren’t going to set our budget until we knew for sure what the real tendered prices were,” she said.

The original explanation for the cost hike was attributed to construction expenses.

“It was a boom time,” said Patterson on Monday, citing the rise in construction costs between 2005 and 2007.

But the national average for transmission line construction costs only rose by nine per cent between those years, according to Statistics Canada.

“I can’t speak to that nine per cent because I don’t know about that,” said Patterson.

“I don’t know what to tell you.”

Patterson later replied that the estimate hike had more to do with sketchy numbers in 2005 rather than an inflation in the construction industry.

There were other unforeseen costs along the way.

The Yukon Environmental and Socioeconomic Assessment Board forced the power utility to alter the line’s route during the regulatory process, adding $2 million to the price tag.

Roger Rondeau, president of the Utilities Consumers’ Group, questioned the line’s cost in a letter to the editor last week.

“Even at inflation from 2005, is this not an extreme cost overrun (from $32 million to $68 million)?” wrote Rondeau.

Overall, the assessment board found that the line provided a net economic benefit to Yukoners because it allows the Minto mine to pay for electricity, replied Patterson.

The mine contributed $7.2 million to help build the first stage of the transmission line between Carmacks and Pelly Crossing.

Another $17 million came from the Yukon government and the Yukon Development Corporation, while the rest is being covered by ratepayers.

The total cost for the first leg was $29.7 million and the second stage, between Pelly Crossing and Stewart Crossing, will cost $40 million.

Yukon Energy began survey work this summer for the second leg and it expects the line to be complete in late 2011.

Ottawa provided $18 million for the line in a grant from the Green Infrastructure Fund.

Yukon Energy is still finalizing contributions from the territorial government and the development corporation.

The First Nation of Na-Cho Nyak Dun is also jockeying for a money-lending deal with Yukon Energy.

“By investing, we’re not talking about them owning a piece of the project,” said Patterson.

Rather, the First Nation would lend money to the power utility and collect interest, much like a bank.

Another portion of the second leg will be covered by ratepayers.

“The percentage (covered by ratepayers) would be small enough and it would be spread out over a long period of time,” said Patterson. “Because of that, you wouldn’t see a jump in rates.”

If the Carmacks Copper mine comes online before the line is finished, it will also have to contribute to its construction, she said.

The mine, which is still applying for a water licence, might start construction by the line’s completion, said Claire Derome, vice-president of government and community relations for Western Copper.

“We may start construction going into 2011,” said Derome.

The company is hoping to finalize its regulatory work by the second half of next year, she said.

Contact James Munson at

jamesm@yukon-news.com

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