Atlin hydro expansion could increase electricity rates, says Yukon Utilities Board

The Atlin hydro expansion project could increase electricity rates, according to a new Yukon Utilities Board report which has dominated question period at the Yukon Legislative Assembly this week.

The board's report cites several reasons for the possible energy increases, but perhaps chief among them is that the potential for high rates have been negotiated into the Electricity Purchase Agreement, signed earlier this year by Yukon Energy and Atlin, B.C.'s Tlingit Homeland Energy Limited Partnership (THELP). The agreement allows the utility to purchase electricity generated by the dam.

The board cites a negotiated increase of 50 per cent of the consumer price index. Connected to that, it says that Yukon Energy didn't research other electricity purchase agreements for other nearby projects that have lower rates — for instance, a hydro plant near Pine Creek, B.C.

"The board is of the view that [Yukon Energy] should have known of the existence of this document and its terms and conditions," the board's report states. "The fact that it was not aware of it may have been harmful to [Yukon Energy's] starting negotiation position. As such, in the end, it likely results in higher rates to Yukon electricity customers."  

The report also states that due to Yukon Energy's approach to negotiations, it "may have lost an opportunity to bring some downward pressure on customer rates," noting that it also didn't include forecasted projects, which may have also affected rates.

Last week, a consultant with Tlingit Homeland Energy Limited Partnership told CBC News that the cost of the project has increased to $310 million due to inflation, supply chain issues, higher commodity prices and a weak Canadian dollar. In March, the estimate was at $230 million.

The linchpin is ensuring the territory has a firm supply of electricity during the wintertime.

For years Yukon Energy has grappled with a winter energy shortfall, resorting to a fleet of diesel generators to meet demand.

The hydro expansion project is a plan by THELP to build on existing infrastructure, raising its power output from 2.1 megawatts to 10 megawatts. Electricity would be sold to Yukon Energy, increasing the territory's supply of renewable energy in the winter. This would allow the Yukon to no longer use diesel generators.

Board accepts project as viable way to lower emissions

While the board's report tends to mostly focus on how the project could affect consumer rates, it also states the project is a good option to reduce emissions, noting that it falls in line with the Yukon government's plan to do just that. 

A central aim of the government's 2020 climate change policy paper, "Our Clean Future," is pivoting away from using fossil fuels to generate electricity and heat. Instead, the government wants to use renewable energy derived from, among other things, solar, wind and possibly geothermal. 

The board states that once the electricity purchase agreement is in place, it will displace five diesel generators Yukon Energy rents to sate energy demand during the winter.

The board recommends the Yukon government look to other green options that can increase the stock of electricity generated during the winter months. It says the government should review and amend the independent power producers program, which allows residents, businesses and communities to sell electricity to the utility.

Yukon Party pounces on report

Yukon Party Leader Currie Dixon said the optics of the project are bad, adding that it looks like inflated energy prices will be foisted onto Yukoners for a long time.

"The more we learn about this project, the more concerned we get about it," Dixon told reporters on Monday. "The project is escalating rapidly in its cost, it's delayed and it's underfunded and now we're learning that it's causing rates to go up, so, when we see that trajectory, we think that the government should take a second look at it."

Energy Minister John Streicker said any potential problems with the project are all relative.

He said over the long term, hydro power trumps burning fossil fuels because it'll be cheaper and because it is a renewable resource, which he said is the way of the future.

"We do not want to be committed to fossil fuels," he said. "We need to move in a different direction completely."

Streicker also said that infrastructure dollars are being used for the project to help ensure rates remain low. 

All told, he said rates will be roughly 13.5 cents per kilowatt hour.

"But compare that against diesel and thermal," Streicker said, "that's in the 20-plus cents a kilowatt hour, and it's going up."