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Yukon Energy running a tight ship, despite mounting repairs

The Yukon Energy Corporation got a clean bill of health from its regulator last week. The Crown-owned power utility received a green light from the five-person Yukon Utilities Board after several months of being prodded and examined for inefficiencies and wasteful spending.

The Yukon Energy Corporation got a clean bill of health from its regulator last week.

The Crown-owned power utility received a green light from the five-person Yukon Utilities Board after several months of being prodded and examined for inefficiencies and wasteful spending.

In the end, evidence of cost overruns and needless capital projects was minor.

“I like the process,” said Yukon Energy president David Morrison, who had to appear before the board in May. “People get to ask questions and if we can’t justify what we do, then we can’t do it.”

During the spring hearing, a litany of intervenors - from energy experts to consumer groups - questioned the corporation about its fiances and operations.

After 800 or so questions and replies, there was only one expense the board deemed Yukon Energy couldn’t cover with money from ratepayers, also known as the rate base.

Four diesel generators are sitting outside the Minto mine in case the grid shuts down unexpectedly. Yukon Energy bought them from the mine after it was connected to the grid late last year.

Yukon Energy already has about 14 diesel generators that can be fired up during peak hours or an emergency, the board said.

And it doesn’t need the extra Minto diesels, the board ruled in its decision, issued September 8.

“They disagree with our calculation on the size of the backup we need in order to meet the load in the event of a major catastrophe,” said Morrison.

That sounds like a pretty simple mathematical equation. Take the average amount of power, subtract the amount of energy provided by a major power plant, like Whitehorse or Aishihik, and then make sure you’re backup diesels have enough energy to make up the difference.

“You and I would probably think that way,” said Morrison.

An equation called “loss of load expectation,” written by a math professor from the University of Saskatchewan, is what the utility uses to calculate its emergency needs.

“It’s a whole series of numbers and assumptions around those numbers,” said Morrison. “And they certainly make my head hurt.”

Different kinds of damage are evaluated against different impacts, and the results get more and more open to interpretation, said Morrison.

The board’s calculation concluded the Minto diesels weren’t necessary, so Yukon Energy has to pay out of its own pocket for them.

In the grand scheme of things, Yukon Energy’s passing grade was a major hurdle for the corporation.

The power grid is undergoing some of the most expensive repairs in its history to keep up with the stresses of mines and big-box stores weighing down on the system in the last several years.

So there’s more staff, more capital projects and more maintenance to pay for, and Yukon Energy needs permission from the board to charge it to ratepayers.

“The point we were making is that the system here is an older system,” said Morrison.

The Whitehorse dam is 50 years old and the one in Mayo is 52 years old.

“We argued to the board that the capital expenditures are the product of a system of this size, output and age,” he said.

Both Yukon Energy and the ATCO-owned Yukon Electrical Company Limited face a general rate application every few years.

In this hearing, Yukon Energy was approved for revenue needs of $29.217 million for 2008 and $31.599 million for 2009.

There were some minor blips in the board’s order.

Yukon Energy’s construction of a transmission line from Carmacks and Stewart Crossing ended up costing more than it was approved for by the board.

That cost overrun, “in conjunction with the cost overruns of the Mayo-Dawson transmission project, display a trend of underestimation by (Yukon Energy),” wrote the board.

Morrison disagrees.

“I don’t think that we underestimated and I don’t think we had cost overruns we could do anything about,” he said.

The Yukon Environmental and Socioeconomic Assessment Board ordered Yukon Energy to reroute a major section of the line, and that ended up costing another $2 million.

“Other than that, we were on budget,” said Morrison.

Now that Yukon Energy’s costs have been approved, the corporation can now begin working with Yukon Electrical on a cost-of-service study.

The study will figure out the amount of energy used by each of the rate classes - industrial, government, commercial and residential - from the grid.

Then, the corporation will determine which class isn’t paying its fair share.

Residential customers are currently paying less than the amount they take, said Morrison, but it’s been that way forever because government regulations prevent a rise in residential rates.

“There’s a government policy question and there’s a regulatory question,” he said. The cost-of-service study will figure residents’ share of power costs, but government probably won’t accept a hike in rates.

It’s not in Yukon Energy’s plans either.

“I’m not going to do that,” said Morrison.

The study could also simplify the Yukon’s complicated residential power bills.

“The board might say roll this rider into the rate, but I can’t tell you at this point if it will,” said Morrison.

The fuel rider on people’s current bills should already look a little less complicated.

The board approved increasing the forecasted fuel price from 35 cents a litre, set in the 1990s, to 96 cents a litre.

The previous artificial price was offset by the fuel rider on a power bill, which is supposed to pay for the difference.

But the rider should fluctuate a lot less now that it’s updated.

The board gave Yukon Energy and Yukon Electrical three months to present a joint proposal for a cost of service.

A hearing on cost of service will likely happen in the spring, said Morrison.

Contact James Munson at