Splitting YDC and YEC boards could lead to disaster: Phelps

Separating the boards of the Yukon Energy and Yukon Development corporations is a political gimmick that will erode accountability over energy projects, says Willard Phelps.

Separating the boards of the Yukon Energy and Yukon Development corporations is a political gimmick that will erode accountability over energy projects, says Willard Phelps.

Premier Dennis Fentie’s assertion the separation will result in more transparency at the troubled power utility is unsubstantiated, said Phelps, who was chair of both boards between 2004 and this summer, when he resigned over Fentie’s secret negotiations to privatize Yukon Energy.

“I don’t understand why they’re trying to make such a big deal out of having a totally separate board, it’s totally foolish,” said Phelps, who resigned with three other board members on June 8.

The Crown corporations normally share their boards because Yukon Development has little to do beyond overseeing its subsidiary, Yukon Energy.

“There’s no need to have a separate chair at the Yukon Development Corporation,” said Phelps. “Largely, the only issue is whether it should send dividends (from Yukon Energy) to the government.”

Yukon Development acts like a bank for the utility, he said. It collects Yukon Energy profits and then helps manage it to cover the utility’s long-term debt.

“(The Yukon Development Corporation) is essentially a holding company,” he said.

Fentie, who was accused of lying about the Yukon Energy privatization talks by former cabinet minister Brad Cathers, announced in July the boards would be separated.

“To ensure accountability and transparency of both corporations, changes will be made to the governance structures to differentiate the membership between the boards,” Fentie is quoted saying in a July 7 news release.

Ray Hayes, Eric Nyland and Mark Pike were appointed to the Yukon Development Corporation board on October 30 after the Crown corporation sat with a half-filled board for nearly five months.

None of the appointees were appointed to Yukon Energy’s board. Fentie never returned requests for an interview when he announced the separation. His office once again refused to comment after the appointments were made.

As the minister responsible for Yukon Energy, Fentie hasn’t explained the necessity of the separation.

“They’re trying to make a big deal out of a fairly minor thing,” said Phelps.

Yukon Energy, which only has four board members out of its usual eight, isn’t sure who will fill its board.

“There has been quite a bit of talk about there being two separate boards, so that discussion is still taking place,” said Janet Patterson, spokesperson for Yukon Energy.

“At this point, the Yukon Development Corporation has not made decisions about how that’s all going to play out,” she said.

The Yukon Development Corporation is nominally in charge of appointments at Yukon Energy, even if they were the same people in practice.

But if the separation of boards means more independence for Yukon Development, it could herald financial trouble.

When Phelps was hired in 2004, he found that the corporation had squandered its opportunities to run its own projects.

“When we came along, YDC was performing some functions that were really functions that should have been performed by government,” he said.

Most notably, the Energy Solutions Centre was an office created to develop alternative energy options for Yukoners.

But under the auspices of Yukon Development, it was a disaster.

Canada’s Auditor-General Sheila Fraser investigated the centre’s finances and released a damning report in 2005.

Projects were approved without receiving scrutiny from the board. Contracts were negotiated, issued, signed and paid by the same person; contracts were awarded without competition and payments were made without proper invoices, Fraser found.

“It was in a terrible financial mess,” said Phelps.

Phelps and his board members decided to transfer the centre to the Department of Energy, Mines and Resources.

And there were other instances of poor management.

Yukon Development was put in charge of figuring out methods to reduce energy conservation, and again that project went awry.

“There were other funds given to Yukon Development for it to spend on conservation measures and, again, we said we have got to stop doing this because any function that ought to be government, government should do,” said Phelps.

In his view, projects were poorly managed because there was no oversight from the legislature.

“Instead of taking surplus money and having them go through a budget process and spend money on things like conservation and so on, it was doing it directly and thus bypassing the scrutiny of the legislature that you get into during legislative debate,” said Phelps.

“That was really important in our view, and it led to a lot of problems.”

Phelps even recommended shrinking the size of the Yukon Development board because it has so little to do.

“My recommendation was to reduce the number of directors on the Yukon Development Corporation because we made changes while I was chair to make it, in effect, just a holding company,” said Phelps.

Ninety per cent of what the development corporation does is provide financial services to Yukon Energy, he said.

Fentie did move on another piece of Phelps’ advice – the inclusion of bureaucrats from the Energy, Mines and Resources Department on the board.

Hayes, one of the new appointees, is assistant deputy minister of Energy, Mines and Resources.

But Yukon Development could also use someone from the Department of Finance.

“That would make sense, because you’re really just dealing with money,” said Phelps.

Another major issue with separating the board is if two chairs end up giving directions to Yukon Energy’s president, David Morrison.

“If you had the same chair, it leads to better consistency between the corporations,” said Phelps.

“Whereas in this situation, you have the president (of YEC) getting orders from two different masters.”

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