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Subsidy scrapped with promise of reduced electricity rates

Electricity bill changes arrive in bundles.When it announced a new $12-million electricity deal between the territory and Sherwood Copper this…

Electricity bill changes arrive in bundles.

When it announced a new $12-million electricity deal between the territory and Sherwood Copper this week, the Yukon government also revealed it’s slashing the rate-stabilization fund by 50 per cent on July 1 and scrapping it one year later.

Environmentalists, the government and the Energy Corp. are applauding the decision as it promotes individual electricity conservation.

And though the subsidy is being scrapped, electricity bills will likely go down because the Minto mine will buy power and those profits will be passed on to consumers, said Yukon Energy Corporation president David Morrison.

“I’m comfortable we’re going to have a rate decrease,” said Morrison. “We think we can get a lower rate in a year or so as a result of Minto.”

The government views the power deal as a “vehicle to reduce rates,” said Energy, Mines and Resources Minister Archie Lang.

The rate subsidy has been extended at 50 per cent for a year, said Lang.

“In that 12-month window, there will be an application before the utility board, as of February of next year, to get a reduction in rates to the consumer,” he said.

Subsidies from the fund max out at $37.15 per month for residential consumers.

With the rate-stabilization fund, a household using 1,000 kilowatt hours of electricity per month pays about $99.

But with the coming 50 per cent cut, that bill will increase to about $117; when the RSF is scrapped entirely in 2008, it will grow to about $136, before GST.

Minto is expected to buy about $4 million in electricity per year, according to Yukon Energy.

The rate-stabilization fund costs the Yukon Development Corporation, which took over the program from the government in 2003, about $5 million per year.

Though the rate stabilization fund’s cost is larger than Minto’s projected consumption, a rate hearing before the Yukon Utilities Board will probably approve lower electricity prices, said Morrison.

The math doesn’t add up, said Liberal energy critic Gary McRobb.

“The two numbers don’t add up, yet the minister is insisting there won’t be a bill increase,” said McRobb.

“It’s a hard-line approach: Yukoners own this grid, and now they’re being forced to pay more on their power bills just because the minister doesn’t understand that the numbers don’t add up.”

The Liberals are pushing the government to keep the fund intact until the rate hearing by the utilities board sees a reduction in electrical costs.

The flipside of that position is that it puts them at odds with environmentalists — a torch the Liberals have been carrying of late.

The main problem with the rate-stabilization fund is the subsidy doesn’t “send the right price signal to consumers,” said Morrison.

Environmentalists agree.

“With the rate-stabilization fund you don’t see the true cost of energy — it’s artificially cheap and people aren’t encouraged to do energy-efficient things,” said Lewis Rifkind with the Yukon Conservation Society.

“So, the cost of electricity shouldn’t be subsidized.

“Now there are also socio-economic issues here, so instead of putting the money into a subsidy, perhaps there should be programs to encourage homeowners to make their homes more efficient,” he said.

The stabilization fund was created in 1998, after the Faro mine closed, to protect electricity customers from increasing electricity prices with the loss of the grid’s biggest customer.

It has cost the government $29 million over the past nine years.

“The RSF was never meant to be a permanent measure,” said Morrison. “It’s not an affordable subsidy, from our point of view.”

In March, the government stayed the fund’s execution for 90 days and committed to create energy conservation programs.

“During this three-month period, the government of Yukon will introduce a number of other initiatives, which address energy efficiency and infrastructure development,” said Lang in a release announcing the fund would be extended for 90 days.

But no programs were announced in that period.

On Monday, Lang said in a release that a number of programs “already” exist.

In fact, Lang and the government have a poor track record on keeping their rate-stabilization fund promises.

In April 2005, the Yukon Party government extended the fund for two years until March 2007.

“Over the two-year period, the department of Energy, Mines and Resources and the Yukon Development Corp. will undertake a review of the RSF program,” said Lang in a release on April 1, 2005. 

“They will make long-term recommendations about the future of this program prior to its expiration on March 31, 2007,” he said.

Those recommendations were never shared.

McRobb has doubts the newest promise of rate reductions will be kept.

“We’ve got to consider the ratepayers against this 30-per-cent rate hike,” he said. “People need help now. Obviously in terms of affordability, it will be the working poor …  they’re having to come up with $400 a year more. It’ll be brutal for them.”

The NDP also has serious doubts.

“The minister is offering something that isn’t within his power to decide,” said NDP leader Todd Hardy in a release.