Whitehorse, Yukon
Wednesday, April 9, 1997 - 1:30 p.m.
Speaker: I will now call the House to order, and we will proceed at this time with prayers. I would ask members if they would take a few moments in silence.
Prayers
DAILY ROUTINE
Speaker: We will proceed with the Order Paper.
Tributes.
TRIBUTES
Tribute to Vimy Ridge
Hon. Mr. McDonald: "As far as I could see, south, north along the miles of the ridge, there were the Canadians. And I experienced my first full sense of nationhood."
Mr. Speaker, these words, written by Lieutenant Gregory Clark, Military Cross, 50 years after the Battle of Vimy Ridge, say eloquently what many historians and members of the public have long thought - that the nation of Canada was born on Vimy Ridge.
On April 9th, 1917, the Canadian Corps launched its assault on the German positions defending Vimy Ridge, a long, low ridge near Araas, France, forming a key position in the Hindenburg line. Both British and French forces had tried unsuccessfully to take the ridge and their losses had been staggering, with the French alone suffering 150,000. Both knew that the ridge simply could not be taken.
Finally, the job was given to the Canadian Corps. It would mark the first time that the corps would fight as a separate and distinct unit and its achievement would be enormous, for the enemy was swept from the ridge in approximately five days.
Supported by almost 1,000 pieces of artillery, the Canadian Corps attacked along the 6.4 km front. By the 14th of April, the Canadians had gained more ground, more guns, more prisoners than any previous British offensive. Casualties were severe, amounting to 10,602, of whom 3,598 were killed in battle. However, the sense of achievement and national pride created by this success gave the Canadians a great sense of self-confidence and distinction as an elite corp.
Mr. Speaker, even today, 80 years afterward, Vimy Ridge remains an enduring Canadian myth, marking in most minds a turning point in Canada's relations with the world and the image of Canadians and the image that Canadians had of themselves. It would become the historic milestone in our emergence from the colonial shadows as an independent nation.
I ask all of us in this House to remember the veterans of that event and to reflect, along with those who gathered this morning at the city hall, upon the thousands who stayed behind.
Thank you.
Mr. Ostashek: Mr. Speaker, we too, on this side, rise to pay tribute to those Canadians who fought and gave their lives at Vimy Ridge.
Vimy Ridge was a turning point in World War I, and it was the first time that Canadians fought together as a unit. Canadians fought and won where the French and the English had failed. It was a tremendous victory and brought international recognition to Canada as a nation.
Mr. Speaker, we must never forget those Canadians who sacrificed their lives for freedom and democracy, and who have helped to make Canada the country that it is today. On this 80th anniversary, we Yukoners will remember them. Thank you.
Speaker: Introduction of visitors.
Are there any documents or returns for tabling?
Are there any reports of committees?
Petitions.
Are there any bills to be introduced?
Are there any notices of motion?
Are there any statements by ministers?
MINISTERIAL STATEMENTS
Cabinet commission on energy workplan
Mr. McRobb: Thank you, Mr. Speaker.
I rise today to inform the House about the workplan of the Cabinet commission on energy. The Energy Commission was created in response to the wishes of Yukon men and women who informed us about specific energy-related issues of importance to the territory.
Our government recognized the need to place a high priority on resolving such issues and, on a broader level, to develop the Yukon's first comprehensive energy policy.
In keeping with our government's commitment to public participation, the commission is committed to achieving these goals through meaningful consultation with Yukon people. At the request of the Yukon Energy Corporation, the deputy commissioner provided expertise in the negotiations leading to an agreement in principle on a new operating arrangement for the management of publicly owned energy assets. When it is ratified, this new agreement will benefit Yukon women and men in many ways, including a $2 million reduction in the amount paid to Alberta Power Ltd. over the next five years.
A review of the electrical bill relief and other forms of rate subsidy is now underway. We expect to release a discussion paper on rate relief soon to provide focus to our consultations with stakeholders and the general public. Our government is committed to working toward stabilizing electricity rates and developing a need-based subsidy program that respects conservation goals.
We have also been busy meeting with a number of stakeholders to discuss general energy issues. These informal meetings also provide an opportunity for us to receive preliminary feedback from various projects that we are undertaking.
This spring, we will be surveying a broad spectrum of Yukon women and men on their basic goals for energy management. A questionnaire will allow them to identify energy issues, priorities and concerns of importance to them. It will also acquaint Yukon people with the work of the commission. The questionnaire is part of a consultation plan that combines this type of polling with focused stakeholder consultation.
During the next year, the commission will also offer recommendations to Cabinet on the governance relationship and practices between the Yukon government and the publicly owned Yukon Energy Corporation.
In conjunction with energy stakeholders and interested parties, the commission will undertake two other specific policy development projects this year: a review of the Yukon Utilities Board streamlining plan, with the goal of introducing cost-effective measures to increase interest in participation by members of all rate classes in YUB processes; and, a review of energy supply options, including microhydro, wind, waste wood, coal, gas, oil and solid waste, in order to set priorities for how the Yukon can meet its own energy needs.
The commission's work will be guided by three fundamental goals - Mr. Speaker, I notice the Leader of the Official Opposition finds this amusing. Perhaps he's embarrassed that his government failed - failed miserably to provide any long-term energy planning and policy to help resolve some of the problems of importance to Yukoners today.
The commission will be guided by three fundamental goals: energy conservation and protection of the environment; substitution of imported fossil fuels for local energy sources; and, sustainable development of Yukon's energy resources, consistent with the above principles and sound economic planning and practice.
All of the commission's efforts, Mr. Speaker, are aimed at developing the Yukon's first comprehensive energy policy that recognizes the right of Yukon people to have reliable, reasonably priced energy available for transportation, domestic heating and electricity.
We believe that Yukon men and women need such a sound energy policy to work in concert with this government's sustainable environmental and economic development initiatives.
Speaker: Are there other statements by ministers? I'm sorry - leader of the third party.
Mr. Cable: I was just holding back, waiting, Mr. Speaker.
You know, Mr. Speaker, last week we heard that the energy minister was helping the Energy Corporation set up a procedure for preparing rate applications, so I'm particularly pleased to see that the commissioner will be addressing the issue of the governance of the corporation and its relationship with the Yukon government.
I do have some questions for the commissioner. Part of the agreement in principle that was reached with Yukon Electrical sets out 20-year franchise agreements with Yukon Electrical. Now, this effectively cuts out the municipalities and First Nations from the distribution business, and anyone else, for that matter. That's a major policy issue. Perhaps the commissioner can tell us whether that major policy move was made with his approval and with his input.
It appears from the statement that the energy policy, despite the name that's attached to it, "comprehensive energy policy", is going to be developed segmentally with some vague time lines attached to the various segments.
When he replies, would he be good enough to tell us why the whole of the comprehensive energy policy is not being moved forward as a package, so that the policy can be integrated? Perhaps he could also tell us what the energy minister has just written to him by way of helpful hints?
Mr. McRobb: Thank you, Mr. Speaker. I note that the Leader of the Official Opposition would rather choose to sit in his seat and heckle than stand on his own two feet and put on record his comments, and I want to thank the leader of the third party for having the courage to do that.
In answer to the leader of the third party's questions on franchising, let's deal with that one. The new operating agreement in principle certainly does not cut out municipalities and ownership of energy transmission or distribution. This question was dealt with last week in Question Period. I refer the member to Hansard. If the member would like a more detailed explanation, I invite him to call me and, outside of Question Period, we can sit down and discuss exactly what has taking place.
As a former member of the legal profession, I imagine, Mr. Speaker, the member is also aware of the legal rights that the Yukon Electrical Company would have, being the owner of distribution facilities in many of the Yukon communities and, rather than engage in long, lengthy and expensive legal processes, that was dealt with in this new operating agreement.
Secondly, the member had questioned why the comprehensive energy plan was not submitted all at once. Quite simply, Mr. Speaker, there are a number of components we are dealing with in the first year that need addressing within the first year. We heard last week the Energy Corporation is considering approaching the Yukon Utilities Board with a general rate application this fall. For that reason, we want to review the process used by the Yukon Utilities Board to enhance participation on behalf of consumers of electricity in time for that process.
We also recognize the need for additional generation options in the territory. There's no need to further delay that by a number of years, as is suggested by the member, when we can deal with it sooner than the time the comprehensive energy policy becomes available.
Thank you.
Canada/Yukon Business Service Centre
Hon. Mr. Harding: I rise to announce that the Canada/Yukon Business Service Centre opened today to assist the small business community in the Yukon. The Canada/Yukon Business Service Centre is a joint partnership between the Yukon Chamber of Commerce, Industry Canada and the Government of Yukon and exemplifies our government's policy to assist and work effectively with the business community.
The centre will offer a one-window access to government programs and services and comprehensive electronic data bases for research and business planning. The many resources available will help businesses to expand operations by identifying new markets and products. The services are of particular importance to rural businesses which have had more difficulty in the past accessing information quickly. The Canada/Yukon Business Service Centre will allow Yukon businesses to become more involved in the business community and holds the potential for extending their customer bases around the world.
The Yukon government will provide $55,000 to the Business Service Centre: $30,000 as a direct contribution and $25,000 in support and services from the Department of Economic Development. Our government's support of the Canada/Yukon Business Service Centre is also recognition of the critical and valuable role small business has as a major employer and player in the territorial economy.
With the resources it offers and its ability to assist Yukon small businesses identify new markets and products, the Canada/Yukon Business Service Centre is one tool to assist small businesses to expand and new jobs to be created. I am proud to fund this initiative and believe it is a wise investment in the future of the Yukon's small business sector.
Mr. Ostashek: Thank you, Mr. Speaker. I thank the minister for his statement today. The Canada/Yukon Business Service Centre was born out of the federal Liberal government trying to stoke small business after killing the EDA programs that they had in the north. It was put out, hopefully, to diffuse some of the criticism.
We talked about this in general debate the other day and the problems of getting into pilot projects with the federal government and then having businesses become dependent upon them. I believe that there probably is some use for this centre and it can probably contribute to small business in the Yukon, but I have a great concern that, three years from now when this pilot project is over, the federal government is going to close the door and say, "There you are, territorial government, it's a good deal; you pay for it."
When the minister gives his summation, I would just like to ask a couple of questions. Is the contribution that is being provided by the territorial government a one-time only contribution, or is this an annual contribution for the three-year period in which the pilot project is going to take place?
Ms. Duncan: I would like to rise, and I believe it is actually in tribute to the partners in the Canada/Yukon Business Service Centre. It is an important new addition to this business community. The Whitehorse Chamber of Commerce president said it today briefly, and he said it, I believe, best: "The Canada/Yukon Business Service Centre is visionary." This visionary achievement is a credit to the people involved. I, for one - and I believe I am not alone in this House - am familiar with many of the volunteers in the business community, and the countless hours that they devote to Whitehorse and the community chambers and their projects that benefit the entire community. Behind every board, there is a great executive director, and I would like to congratulate Mary Tooley with the Yukon Chamber of Commerce. It isn't always easy meeting the dreams of the board and I congratulate her and her staff on their achievement today.
I join with all Yukoners in welcoming this addition to our community and wishing the service centre much success.
Hon. Mr. Harding: Thank you, Mr. Speaker. With regard to the Official Opposition's comments, I thank the member for them. I, too, share some of his concerns about the federal government and the rationale that led to the development of this particular project, and the potential for them funding the two years and then pulling out, leaving the territorial government on the hook. We've already seen many Yukon citizens have made a request to both his government and our government to pick up federal programs that were brought forward as pilot projects and taken as good ideas and eventually, people end up at the doors of the Yukon government to pick that up.
We would hope that the federal Liberals would not do that if they're around after the next election, that they would continue to participate to the level that they are now. Mr. Speaker, our commitment is for two years. We have indicated to the chamber that we are not going to be picking up the funding if the federal government pulls out. We cannot do that all of the time when the federal government decides that they're going to start something up, come up here as they did today and sell it to the public as a good idea and then pull away. So, I made that clear actually as I was having lunch today with the people from the federal government, that they had better be boning up on how they were going to assist the Chamber of Commerce here locally and ensuring that they could make this Yukon/Canada Business Service Centre pay more for itself and also to find other funding sources for this particular centre.
I'd like to thank our MP, Audrey McLaughlin, for her lobbying not only of our government, but also of her lobbying of the federal government and working with the Yukon Chamber of Commerce. I'd like to thank the Yukon Chamber of Commerce as well and, Mr. Speaker, I'd also like to thank the federal government. I think there is some benefit in this initiative. And I'd also like to thank my department who put quite a bit of work in this over the period of not only the Yukon Party administration, but also the New Democratic. Thank you.
Speaker: This then brings us to the Question Period.
QUESTION PERIOD
Question re: Taylor House, preservation
Mr. Phillips: My question today is for the Minister of Tourism, primarily dealing with the heritage side of tourism.
This morning the Yukon Chamber of Mines issued a press release where it has offered the Taylor House to the City of Whitehorse for $1 as it plans to move the house off the property and sell the land. I would like to ask the Minister of Tourism if he will take whatever steps are necessary to ensure the preservation of the Taylor House?
Hon. Mr. Keenan: Thank you very much, Mr. Speaker.
This is a city issue and I have talked with the mayor, as early as lunchtime. Why I cannot find my notes, I do not know, but I can certainly assure the member opposite that the city will be working with due diligence for the preservation of the Taylor House, and are going to be meeting on Thursday the 21st, I believe it is, for a decision. Thank you.
Mr. Phillips:
Well, Mr. Speaker, I'm a little surprised at the position that the Minister of Tourism has taken on this one, because on July 30th of 1996, the present Government Leader - who was the Leader of the Official Opposition at the time - said that he wants the Yukon government to intervene to make sure that Taylor House, currently the home of the Chamber of Mines, doesn't fall to the wrecking ball.
My response was the same as the Minister of Tourism's, that the city will deal with it because of the Historic Resources Act, and he asked me to intervene regardless of the position we took. Is he now saying the position of the government is - now that they're in government - that they've flip-flopped on this issue, and it's not their position to intervene or even be involved in this thing, and it really is the responsibility of the City of Whitehorse, and they're not going to do much about it?
Hon. Mr. Keenan: Flip-flop, TROY, buzz words for me certainly, but, I am a calm person.
No, Mr. Speaker, we are not flip-flopping on this. We are just using due process, and I do believe that's what any government should be doing, is following the process as they go along.
Mr. Speaker, not only by following the process do you get good decisions, but you build partnerships with other jurisdictions, something that my government is going to do and going to follow to do.
As far as flip-flopping, no, Mr. Speaker, there's no such thing as flip-flopping on this side of the House. We are here to work with the municipality and to respect their jurisdiction.
Mr. Phillips: Thank you, Mr. Speaker. Well, Mr. Speaker, the minister didn't answer the question.
The question was about the position his party took prior to the election is that the Government of the Yukon should take steps - whatever steps are necessary - and make the Taylor House a priority, and take whatever steps are necessary to ensure that the capital city does not lose a significant landmark.
What I'm asking this minister is, regardless of what the city does on this, if the Taylor House is at risk, is the position the same, that this government will step in and rescue the Taylor House, as it asked us to do back in July of 1996?
Hon. Mr. Keenan: I certainly thank the member opposite for bringing up dates, et cetera, and following the record, and what their good work is going to do. I must remind the member opposite that I do believe this piece of legislation was left inactive for four years, for whatever reason. They had the opportunity to certainly move that forward and maybe solve this problem much sooner than is arising now.
Mr. Speaker, I will stick with my answer and say that I'm working in respect of the community of Whitehorse and their decision-making authorities, and I will continue to work with them on their authorities. We shall leave it to the process and, at such time, we will make decisions based on what the process offers us.
Question re: Taylor House, preservation
Mr. Phillips: Well it's interesting, Mr. Speaker, that before the election, when they were in Opposition, regardless of what the city was going to do, the government should step in. But today, because they are government, it's in the city's hands and we're not going to make any decision on it yet.
Mr. Speaker, I'd like to table the news release and a letter sent to me by the then Opposition Leader, who states that the government should ... in fact the press release is titled, "The government should act to protect the Taylor House," and I agree with the press release that he's got there. They should at least stand behind -
Some Hon. Member: (Inaudible)
Speaker: Order. Order please.
Mr. Phillips: They are the government now. In Opposition, they said the government should intervene. I want to know if they've flip-flopped on the issue. Are they now saying the government shouldn't?
My next question to the minister of heritage: before the election, the NDP said, in relation to the Taylor House and other heritage issues, that heritage was a priority. In fact, they were the heritage party. In fact, that is not reflected in their budget. Capital expenditures are down in this budget, significantly. The historic resources centre is gone completely - not in the budget, not even given a mention in the budget speech. Museums assistance is down -
Speaker: Order please. Would you come to your question?
Mr. Phillips: Yes, I will, Mr. Speaker. Museums assistance is down 16 percent, and exhibits assistance for museums is down 25 percent.
Why did your government say heritage was a priority before the election, and then strip the funds out of the budget for heritage?
Hon. Mr. Keenan: Well, Mr. Speaker, I will certainly be able to talk about our alleged flip-flop. Let me clarify that. My government has not flip-flopped on any such thing again. We are here to work with the city, respect their jurisdiction and follow due process. As far as protecting the house, of course I want to see the heritage of the Yukon protected in any way possible. I do believe that just my initial contact with the mayor today at lunchtime proves that. I don't know what more to say.
Now to get to the real question, I guess, that was being alluded to but finally poked its way forth, this year, we will be addressing this during line by line and we'll have ample opportunity to do that when we get to Tourism, and I certainly encourage you to ask all the questions and inform yourself and the general public through these discussions. We were left with a very tough decision-making process, thanks very much to the previous administration and their default or maybe their all-consuming desire to do other things outside of helping preserve museums and helping to preserve anything to do with heritage but to build a lot of road.
This is a balanced budget and I will be more than happy to elaborate that when I get to line by line in the Tourism debate.
Mr. Phillips: Thank you, Mr. Speaker. Well, that was a nice speech but he certainly didn't answer my question. The question to the minister is: if heritage is so important and such a priority to the New Democratic heritage party over there who claim that heritage is a priority, why did they slash and burn the heritage budget on the capital side from the historic resources centre to the capital grants going to the museums? We are moving up to the anniversary years and many of the museums are preparing and planning exhibits for the anniversary years, and this government has slashed the budget significantly.
Why, Mr. Speaker, have they done that? Was this minister too weak in the arguments when they were debating the budgets within his own caucus that he couldn't get enough money for heritage?
Hon. Mr. Keenan: Well, Mr. Speaker, not only did I meet with the - or not meet, excuse me. Not only did I contact the mayor at lunchtime, but I also talked to the curator of the MacBride Museum and explained to the curator of the MacBride Museum the tough decision process that we are in this year, and I am certain that he was accepting of the explanation. The explanation was such that we were left with significant shortfalls in all areas and that our budget is working to balance that. He accepted that, and if he can accept that, then I certainly understand that maybe the member opposite could accept that and then the member opposite would - what does that mean? I guess that just means think back to their opportunity and the time they had when they were in administration to be able to work towards those ends which he is saying now.
Mr. Speaker, it's called a balanced budget and I will be happy to explain that when I get to the line-by-line item.
Mr. Phillips: Thank you, Mr. Speaker.
First of all, it's not a balanced budget. It's a deficit budget. Secondly, the Government Leader himself has risen in the House and told us that he expects lapses similar to other years, so we all know that we're going to have between a $20-million and $40-million surplus at the end of this fiscal year, and yet, in their budget they chose - after speaking out loud and clear in the general public that heritage was a priority and that if they were in government they would do something about heritage - the first thing they did is that they slashed and burned the heritage budget.
I'm asking the minister why did they do that? Heritage is important to Yukon people - the First Nations people and other people - and yet they slashed and burned the budget. Why did the minister do that, and why did the minister let it happen?
Hon. Mr. Keenan: Mr. Speaker, it's certainly good that we have passion in the House on such things as this, and I would certainly encourage that that passion be carried forth in the every day life, 365 days a year, and certainly not at this deliberation time in the budget.
But, I can certainly answer with passion also. We chose to be a responsible government, Mr. Speaker. We chose to do things in a balanced effort. Whether you call it a balanced budget or not, it is balanced in my mind, because we are working with what we were left. That was nothing. That was absolutely nothing, so the community at large is willing to take initiatives so that we might be able to come forward, we'll be able to stand on our own two feet, and to move forward into the future with what we have, and heritage will definitely be a major part of that. I do not know what more I can say to that in Question Period, other than I certainly look forward to an invigorating talk and discussion, line by line, when it comes to that time.
Question re: Business education partnership program
Ms. Duncan: Thank you, Mr. Speaker. My question is for the Minister of Education.
The business education partnership program, which began some five years ago between the Whitehorse Chamber of Commerce, the Department of Education and First Nations, has fostered a strong relationship between the business community and the Department of Education. Does the Minister of Education believe this partnership is valuable and should continue?
Hon. Ms. Moorcroft: Thank you, Mr. Speaker.
The Department of Education has ongoing work with the business community. There are a number of programs such as the cooperative education project that we do believe are important.
Ms. Duncan: Mr. Speaker, we heard today from the Minister of Economic Development that this government is interested in supporting small business. Dana Naye Ventures has secured $500,000 from the federal government to support native youth at risk and assist young First Nations entrepreneurs. Dana Naye is committed to using this funding for the business entrepreneurship program. The stumbling block is the Minister of Education. The department has been asked to come to the table with one full-time equivalent position. If the minister and this government truly support partnerships with the business community, when is the minister going to direct her department to find one staff person in support of this program?
Hon. Ms. Moorcroft: Mr. Speaker, I have had meetings with the business community, including Dana Naye Ventures and the group who are advocating for the new business entrepreneurship centre. We are working with them. We have not, at this time, approved that particular project.
Ms. Duncan: It is not a particular project; it is one full-time equivalent person. This program also has the additional support of the federal government to the tune of $100,000 in lapsed funding from the Canada/Yukon economic development agreement. It has the support of the business community who have prepared to contribute $36,000 and untold hours, and volunteer support, for this program. Would the minister state when she and her department will find one full-time equivalent, which is all this program is asking for?
Hon. Ms. Moorcroft: Mr. Speaker, we have not made the decision to support that program and are still evaluating whether it is the best use of resources. The members opposite are coming forward on a daily basis with more requests for where we should spend money, and we have a limited amount of funding. Now, the member opposite is saying it is one person. The fact is, every individual funding request has to be dealt with in looking at the overall picture of where we balance our funding.
Question re: Schools, capital planning process
Ms. Duncan: Thank you, Mr. Speaker. My question is again for the Minister of Education.
The minister has committed to consulting with school council chairs about the capital planning process for schools, and has proceeded to make it as difficult as possible for the chairs to do so. An all-day meeting for February 14 was cancelled at the request of the school council chairs because this meant that they had to take a day off - unpaid day - from their work to attend a meeting. In the case of rural school council chairs, it would have been two days.
Yesterday, she told this House that the school council chairs would be meeting May 2 - another work day - and May 3. If the minister is truly interested in hearing from school council chairs, why does she continue to schedule meetings around her convenience instead of the school council chairs', who, again, will have to take time off work to attend.
Hon. Ms. Moorcroft: Thank you, Mr. Speaker. I would dispute the member's assertion that this meeting has been arranged for the convenience of the minister and not for the convenience of the school councils. The fact is that this meeting has been arranged, working with school councils, to accommodate them as best we can. When I met with the Whitehorse school council chairs, we had a discussion about scheduling meetings for Friday or for weekends. We came up with the decision to schedule this meeting over both Friday and Saturday. One member from each school council is attending, and school councils have the ability to designate someone who is able to get away for Friday to come to the meeting.
I believe that school councils are looking forward to the opportunity to discuss agenda items that they have put forward.
Ms. Duncan: The minister believes school council chairs are happy to be respected and happy to be consulted - the minister just told us so. In fact, Mr. Speaker, they feel like targets walking into this meeting. They feel that this process will not foster cooperation among school councils. In fact, they feel quite the opposite, that it is a divisive process. They know that this meeting is going to pit one school council chair against another.
What steps has the minister taken to ensure that school councils work toward reaching consensus, instead of working against each other? For example, has she hired a trained, independent facilitator to help school council chairs reach consensus on the capital planning for education?
Hon. Ms. Moorcroft: Mr. Speaker, the member is wrong. This is absolutely not a divisive process. I would submit that it's the member opposite who trying to stir up division here with her line of questioning.
Mr. Speaker, for the member's information, the topics that are being discussed when the school council chairs come together are a number of items that the school councils themselves want to have an opportunity to talk about: the formation of a chairs group and working with the department; health-related issues in school. The capital planning process is one item on the agenda and I think the member is absolutely wrong that this would be divisive.
I have a lot more respect for the ability of school councils to act in the best interests of the school children of their communities than the member opposite.
Ms. Duncan: Mr. Speaker, I have so much respect for school council chairs - I've listened to what they had to say to me. It's their words, not mine, that I'm using.
Contrary to what the minister says, the capital planning process for education has been a political process and it will continue to be one under this government. This type of meeting will do nothing to change that. I have asked her three times in this House to table the process for reaching consensus and I'll ask her again: will you table the process by which you intend to reach consensus among school council chairs?
Hon. Ms. Moorcroft: Mr. Speaker, I'll be happy to come back for the member with an outline of the agenda items that the school council chairs will be discussing on May 2nd and 3rd, including planning for capital expenditures.
I think that the school council chairs are able to take a look at the rural and the Whitehorse school facility studies, they're able to represent not only the interests of their own school community, but the interests of the Yukon education community as a whole, and we are going to give them an opportunity to do that.
Question re: Ministerial travel
Mr. Phillips: I have a question for the Government Leader regarding ministerial travel. Yesterday in the House, the minister said he did not want his ministers travelling business class, and, he said, particularly on the Vancouver to Whitehorse run, a short two-hour flight. He went on to agree that the optics are bad and that his ministers should ride with the rest of Yukon travellers in the coach section.
I'd like to ask the minister what he plans to say, or what he'll tell his Minister of Economic Development, who travelled from Vancouver to Whitehorse on March the 13th in the business class section of the aircraft, while his own constituents were being thrown out of work and on the unemployment lines in Faro.
Hon. Mr. McDonald: Well, Mr. Speaker, the member is referring to, I presume, the private vacation of the minister, who was paying for his own flights and was in the plane at his own expense. I indicated yesterday, in response to questions by the Leader of the Official Opposition, that the policy of the government is to pursue a policy where all members should fly economy class on domestic flights. The Leader of the Official Opposition, at the time, indicated that he felt that MLAs should always fly, even if it is at their own expense, only economy, because it looks bad to the public if they're flying in business class, even if they're paying for it at their own expense. I allowed that that was probably good advice. But the policy of the government is that, for domestic flights, ministers will travel economy.
Mr. Phillips: Well, I hadn't realized the Minister of Economic Development had taken another Mexican vacation. I know he's been working pretty hard for three or four weeks now, and maybe he's due for one, in his mind.
My understanding is that this happened on March the 13th, and he was back from Mexico. I think his Mexican trip happened in January sometime. He was sitting in the business class section of the airplane, riding back from Vancouver. I know the Minister of Economic Development thinks he's a big shot, but he's got a lot of constituents that are out of work and can't even afford to fly on an airplane right now.
Speaker: Order.
Mr. Phillips: I'd like to ask the minister -
Speaker's ruling
Speaker: Order please. Aspersions shouldn't be made on the reputation of members of this House.
Mr. Phillips: Mr. Speaker, there's no aspersion on the reputation of the member of the House, but quite frankly, Mr. Speaker, his constituents are out of work.
Speaker: Order.
Mr. Phillips: The policy of the Government of the Yukon -
Speaker: Order. The reference to the member being a big shot, that's not called for. That's unparliamentary.
Mr. Phillips: Thank you, Mr. Speaker. Well, I'll change it a little. The Member for Faro obviously thinks he's a very important person by riding business class, but I don't think his constituents, and other constituents in the territory, think that's proper.
The previous government had a policy where on domestic and North American flights, we rode coach with everyone else. The Minister of Finance has been crying poverty. He said here today that that is going to be his policy as well. I wonder if he can tell us what action he's going to take against his Minister of Economic Development, who thinks he should ride in the front of the airplane, as opposed to the back, where all Yukoners who do fly back and forth from Vancouver usually ride?
Hon. Mr. McDonald: Well, Mr. Speaker, every time I get up and answer a question from this member, the member is asking me to take action against somebody, either somebody in the public or to carry on some sort of attack against some individual. He's got a single-track mind and I find it very, very unfortunate. Very seldom do we ever tackle policy issues; we're always attacking people when this member asks questions.
With respect to the policy of this government - and it was the policy of the previous NDP government, too - ministers travel economy on domestic flights. That's the policy.
I indicated to the Leader of the Official Opposition yesterday that I allowed that it was probably good advice, but I did not tell my colleagues, if they wanted to pay for it themselves, that they could not fly or they could not upgrade their tickets at their own expense. I did not say that. I said that it was probably good advice for appearances sake because the Leader of the Official Opposition was making the perception argument. He wasn't making a policy substance argument, but was making an argument about perceptions. And so, I indicated that it was probably good advice and for anybody listening, they should probably take heed; I agreed.
With respect to the commandments to tell people what to do, I indicated that I would not tell people what to do with their own money and I'm not going to attack anybody, either in the public, or my own colleagues, or even members in the Opposition benches at the insistence of that particular member.
Mr. Phillips: Thank you, Mr. Speaker. Well, the point is that it is about optics. It is about a minister travelling on government business. It is about a policy this government has and I don't care whether the minister pays for it himself or not. The minister should not be riding business class. The other people that are riding in the aircraft do not know that and the minister should ride with everyone else in the aircraft to set an example. We have 15-percent unemployment in the territory. Every one of the minister's constituents are laid off in his own riding and this minister is riding in the front enjoying the luxury of business class and I think that's a very, very poor example for him to be setting for this government that's crying poverty.
In fact the Minister of Tourism cried poverty here today for the huge burden we left him, but his ministers are travelling around like they're the most important people in the world. I think they should...
Speaker: Is there a final point?
Mr. Phillips: ...fly the way everyone else does.
Speaker: Is there a final supplementary?
Hon. Mr. McDonald: Mr. Speaker, I would remind the member that the expenditures made here are not from the public purse but from people's own pockets. So, the member is making an argument that the optics are important and the substance is not necessarily critical. I'd say substance is important. I allowed, as a matter of personal advice, that the optics are a consideration, but substance is important to this government. As far as all the cheap shots that the member has made both before and now regarding the work of the Minister of Economic Development - this minister has worked very hard indeed to not only provide for good leadership on the economic development front, but also to deal with the mine closure in Faro, which the member has raised, and done it so sensitively that the people of Faro have not come stomping into this Legislature to complain as they did when the mine shut down previously under the Yukon Party government.
Question re: Animal protection legislation
Mr. Cable: I have some more riveting questions here. I have some questions for the Minister of Justice on animal protection legislation.
In December, my colleague, the Member for Porter Creek South, asked the minister whether she anticipates bringing animal protection legislation to this House, and the minister at the time indicated that animal protection legislation may be part of the fall legislative session but she wasn't sure. Now, this issue has been a sore point with the animal protection community around the Yukon for quite a while.
Has the minister decided whether to bring this legislation forward and, if not, would she now tell the animal protection community, through this House, when she intends to bring that legislation forward?
Hon. Ms. Moorcroft: Thank you, Mr. Speaker. In response to the member's question, we are considering the options that are available to us to improve animal protection in the Yukon. We have not yet had an opportunity to discuss this in Cabinet and so have not set a schedule.
Mr. Cable: The Yukon legislative backdrop to animal protection is sort of a mishmash of unintegrated statutes. Would the minister confirm that she intends to bring forward an omnibus bill that will cover all animal protection issues in the Yukon? Outside the Criminal Code, all issues over which this government has jurisdiction can be dealt with by integrating all these statutes. She's clearly not prepared to tell us when she's prepared to bring this legislation forward. Would she tell us if she is prepared to bring this legislation forward?
Hon. Ms. Moorcroft: Mr. Speaker, there are a number of options available to us which include an omnibus bill and include better enforcement of the existing legislation. As I said in response to his first question, we have not discussed this item in Cabinet or made a decision yet.
Mr. Cable: Well, that's the same story we got back in December, which is three or four months ago.
Now, there has been an interdepartmental committee struck by the previous administration to deal with the issue, and this was the better part of a year or so ago. The committee was to be coordinated by the Department of Justice. Has this committee reported to the minister as yet?
Hon. Ms. Moorcroft: Thank you, Mr. Speaker. I have looked at work that the Department of Justice has brought forward on this subject. I am sorry that the member is disappointed that we have not been able to come forward with legislation in the last six months. I can tell the member that we will consider the options available to us and, when we have made a decision regarding timing and what action we are going to take, I will be very pleased to announce it in the House.
Speaker: The time for Question Period has now elapsed. We will proceed to Orders of the Day.
ORDERS OF THE DAY
OPPOSITION PRIVATE MEMBERS' BUSINESS
MOTIONS OTHER THAN GOVERNMENT MOTIONS
Clerk: Motion No. 54, standing in the name of Mr. Ostashek.
Motion No. 54
Speaker: It is moved by the Leader of the Official Opposition
THAT it is the opinion of this House:
1) the Yukon government should reconsider the agreement in principle reached between the Yukon Energy Corporation and Alberta Power Ltd. which includes the sale of $4 million of Yukon Energy Corporation assets in contravention of a long-standing commitment by the Yukon New Democratic Party to oppose the sale of such assets to southern interests;
2) the agreement through such provisions as a 20-year franchise for the Yukon Electrical Company Ltd. for residential and commercial customers will seriously impede the government's ability to use energy as a tool for economic development; and
3) the agreement will lead to the increased use of expensive and environmentally harmful diesel for energy generation and will do nothing to reduce the high energy costs to Yukon's electrical consumers.
Mr. Ostashek: Mr. Speaker, this
is a very important and very timely motion in light of what has been happening with energy in the Yukon, and what we believe on this side to be a crisis situation, even if the minister doesn't believe it's a crisis situation.
The motion is not a hostile motion in any manner whatsoever. We're merely asking Cabinet to go back to the drawing boards and seriously consider what position they are putting Yukon ratepayers and Yukon taxpayers in by divesting themselves of some assets.
I have some difficulties with the position that was put forward by the NDP prior to the election and the position that the NDP government is taking today. Mr. Speaker, I could probably say that the NDP party prior to the election led Yukoners down the proverbial garden path, because their position has changed quite dramatically now that they are in government.
In order to fully debate this, and so Yukoners fully understand what our concerns are and why we put this motion forward, I think it's important that we go back and put on the record one more time comments made by members opposite when they were in Opposition, and to the position they took on divesting themselves of any assets of the Yukon Energy Corporation, and then I want to talk about the crisis situation that we're in in the Yukon today. And then I would like to offer some options that the minister ought to consider to try to get this thing back on track.
During the last administration, when we were in government, there was a motion put on the floor by the Member for Riverside in regard to a comprehensive energy strategy initiative - a motion that was never debated. But, I did prepare for the motion and I have some speaking notes. I just want to open by going through the first couple of paragraphs of the speaking notes, because they pertain to the issue today, as well as they did when the member put the motion on the floor, because this is referring to eight years of NDP administration, up to 1992, and where they were with energy in the Yukon when the Yukon Party took over government.
I think it is very important that we set the record straight on that former NDP administration's perspective regarding the energy sector and the development of a comprehensive energy policy. Now we are faced with a new NDP administration, after doing hundreds of thousands of dollars of work on a comprehensive energy strategy, spending hundreds of thousands of dollars again by appointing an Energy Commission to go back to what I believe is square one and start over again. I think this is a great expense to taxpayers.
This was the government - the NDP government - that, after buying the assets of NCPC, found out that the system was in such poor repair that it required over $40 million in upgrading during the first five years of operation. This was the government - the previous NDP government - that agreed to subsidize rates to the Curragh mine by raising rates to other customer classes, an action that has caused rate structure problems that we are still dealing with today. Even four years after they were out of office, we were still dealing with it. We are still dealing with the problems of that subsidy.
This was the same NDP government that created a regulatory regime that was total disproportionate to the size of the utility being regulated, at a cost to Yukon ratepayers of more than 10 times, on a per customer basis, any other province in Canada. This was the regulatory system that was put in place by the previous NDP administration. Now we hear in the throne speech that they are going back to review the streamlining that was done by the Yukon Party government; one that was done on a consensus basis and reduced the cost of the hearings dramatically.
This previous NDP government zealously preached the virtues of renewable energy, but, in eight years in power, they did not add one single kilowatt of hydro-based energy to Yukon's electrical system.
It was the same NDP government that took pride in its support of alternate energy, yet, again, in eight years they never added one single kilowatt to the grid. But, during that same eight years, that same NDP government approved the installation of new diesel generators in Whitehorse, Faro and Dawson City.
But, let's be fair to that previous NDP administration, Mr. Speaker, and I will grant that it's true, that as the Member for Riverside suggested in his motion, the former NDP administration did launch into a two-year planning initiative designed to produce an energy strategy for Yukoners.
Staff from the Department of Economic Development conducted consultation in most Yukon communities, an energy strategy was drafted and reviewed by all stakeholders, then it was redrafted and sent to Cabinet for approval - and there it sat.
Two years of planning and consultation wasted, because the government of the day, the previous NDP administration, didn't like what Yukoners had to say about energy.
And, what did Yukoners have to say about energy, Mr. Speaker? They said, "Give us affordable electricity." They said, "Give us power for industry", and, Mr. Speaker, the crux of the motion we're debating today, "Give us a chance to buy in."
With the AIP that's in front of Yukoners today, they don't have a chance to buy in. We have Alberta Power being given the chance to buy in, but not Yukoners.
So, Mr. Speaker, those words then are just as valid today as they were when they were drafted, and I will refer to this document further on, on some of the actions that we took when we were in administration to try to pull this all cohesively together and now why we're so dismayed to see this administration basically going back to square one, with a very costly process of consultation, when it's all been done before. There have been years and years and years of consultation. Yukoners now want some action.
We, during our mandate, released an energy plan, and it was criticized by members opposite because it was being done on a sector-by-sector basis. Yet, I sit here in this Legislature today and I hear the commissioner get up and promote the very same thing - the very same thing, to do it on a sector-by-sector basis. Yet, in Opposition, that was just not acceptable to the members opposite.
The Member for Kluane says he wasn't in Opposition, but he was certainly on the soapbox of a lobby group with the Friends of Aishihik, Mr. Speaker.
I believe it's very important that the position that members opposite in the NDP took when they were in Opposition goes back on the record, and I want to go back to comments made by the Member for Faro, the Member for McIntyre-Takhini, the former NDP leader, Mr. Penikett, and probably other members who sit here, too. A lot of these comments are on debates that were in this Legislature when they were accusing us, in government, of the very actions that they are promoting today: divesting the Yukon Energy Corporation of assets to a "southern-based millionaire", as Mr. Penikett put it.
I just find this mind-boggling.
Then, along with all this, we hear Yukoners waking up every morning and wondering what's happening, because every day or two there's a new statement by the minister. First we have a $4 million shortfall, then we have a $6 million shortfall. My God, this morning, we're going to have a $10 million shortfall.
God, I mean, we had better quit asking questions in Question Period, because every time we ask some questions, it goes up another $2 million or $3 million.
I don't think the minister has told Yukoners the whole story yet, because in a briefing by the president of the Energy Corporation, I believed he relayed to us that there was $14 million in outstanding bills and liabilities that potentially could happen over the next year, and the profits are only going to be some $6 million or $7 million. It isn't going to be able to cover it.
So I suggest to this Legislature, and to all Yukoners, hang on to your toques, because the increase isn't going to be 20 percent. It's going to be 50 percent or 60 percent by the time this administration is done.
Mr. Speaker, I want to refer to A Better Way, the NDP campaign document. New Democrats believe that energy is a key to the development of the Yukon, and a major tool for Yukon energy supply is the Yukon Energy Corporation, and it is its responsibility to develop the Yukon. That's right from their Better Way document.
They go on to say that Yukon homes and businesses need reliable, reasonably priced energy, and New Democrats are committed to providing it through a strong public utility and better ways to create energy.
It goes on to say that an NDP government led by Piers McDonald will stabilize electrical rates to keep them affordable for residents and small businesses and improve the rate subsidy program to Yukoners so Yukoners can have a greater share of the profits of the Energy Corporation.
Laudable goals, Mr. Speaker, had they acted on them.
What have we seen in six months of an NDP administration? We've seen energy rates go up by almost 10 percent - nine-point-some percent - and now we hear that they could go up another 50 or 60 percent before this administration is finished.
Mr. Speaker, they go on to say in here, "Maintain local control of energy resources through public ownership of the Yukon Energy Corporation while exploring investment opportunities with Yukon First Nations and municipalities." Then they go and announce an AIP, which, regardless of what the Member for Kluane says, has given a private Alberta corporation - one that that member despised when he was in the private sector and fought bitterly against at every rate hearing there was in the Yukon-
Point of order
Mr. McRobb: Point of order, Mr. Speaker.
Speaker: The Member for Kluane, rising on a point of order.
Mr. McRobb: Mr. Speaker, the Leader of the Official Opposition is promoting innuendo and aspersion against me at a time when I was a private member of the territory, and he is alleging that I had great hatred for an investor-owned company, which is certainly not true. I would challenge the member to make those statements outside of this Legislature, where he does not have the legal protection to do so.
Speaker: On the point of order, please.
Mr. McRobb: Mr. Speaker, the member should apologize for the remarks he has made.
Mr. Ostashek: On the point of order, Mr. Speaker, it is a known fact in public, in documents, in news documents, that that member fought bitterly against YEC and YECL on every rate increase that was put forward in the territory. He was on a mission. And this is not an aspersion of any kind. This is a statement of fact, that that member is on the public record as being against anything that those corporations tried to do.
Speaker's ruling
Speaker: Order please. Order. The remarks that I have been asked to make a ruling on really fall into the class of remarks that represent one perspective, and indeed I would rule that the remarks are of a nature of a matter of being a dispute, I guess, of perspective between various members in the House. They are the kind of remarks that are going to occur from time to time. I would caution against the use of particularly strong language, nevertheless, and ask that the debate proceed.
Mr. Ostashek: Thank you, Mr. Speaker. I was relaying, when I was interrupted by the point of order, commitments made by the NDP in their campaign platform, A Better Way. They also stated in there not to undertake any high-cost, high-risk, high-debt projects without major customers to pay for them. Now we hear quite the opposite. We hear that they may even be amenable to subsidization for the Faro mine. So, we don't really know where this minister is coming from.
I want to go back now, because it's important that Yukoners decide for themselves if, in fact, this government has changed their position from when they were in Opposition to what they're telling the Yukon public now. So, I need to go back through some of this debate and I won't try to bore the Legislature with the entire debate, but I'm going to pick out key clauses and read them into the record, Mr. Speaker.
I go back first of all to November 22, 1993, on a motion for the production of papers by the hon. Mr. Penikett of the day, and it was in relation to papers drawn up between the Energy Corporation and the Development Corporation Board. What the hon. member, Mr. Penikett, the Leader of the NDP, said at the time was, "The minister's pronouncements are in the form of statements of government policy since the takeover bid by Yukon Electrical Company." And he says those takeover bids were not new. He says, and these were his words, Mr. Speaker, "They tried it when the NDP was in power." He wanted to know from the minister who initiated the secret but informal discussion. It was very similar to the secret discussions that are going on now in regards to the AIP, but the government had campaigned on open government and transparency.
Yet, they didn't consult with anybody on it.
At that time, they were accusing us, as I said earlier, of divesting ourselves of assets of the Energy Corporation - not all of the assets; some of the assets. Mr. Penikett went on to say at that time, "For the record, my bias is in favour of northern people owning the electrical utility, rather than a southern corporation. Since the Yukon Party has no mandate whatsoever to give away control of this valuable public property, not to a Calgary multi-millionaire, will the Government Leader assure us that the Yukon Energy Corporation's assets will not be privatized without the Yukon Party first receiving either a mandate from the Yukon people by way of an election or a referendum on the question."
Mr. Speaker, I do not recall anywhere in the documents by the NDP, prior to the last election, that they were going to move even a very short distance towards the privatization of the assets of the Energy Corporation. They didn't tell the Yukon public that and they didn't receive a mandate from the public to do it.
We said that if a deal was struck between Yukon First Nations - another level of government that we were talking about at the time, not privatization - that our government would consult with Yukoners on the arrangement. This minister and this government today did not consult on the AIP. They are going to consult after the fact.
The Leader of the Official Opposition at the time, Mr. Penikett, said, "I am pleased to have extracted that small concession from the Government Leader." And, he went on to say, "I would like to ask him this:" and he says, "Mr. James, a respected citizen and a former commissioner and a former chair of NCPC has argued that before disposing of such valuable public property there should be a public inquiry", and he asked me if I would consent to that.
Mr. Speaker, we also know that this government, in reaching an AIP, did not follow the terms of reference of the umbrella final agreement. They did not consult with First Nations. They are going to consult with First Nations after the fact that they have reached an AIP. We do know, also, that First Nations representatives at the board were very vocal and very concerned about the actions of this government. We know that for a fact. I believe that this is an area where this government has really gone off track when they told Yukoners that they would provide an open and transparent government, and Yukoners would be consulted in major decisions.
The issue of rationalization is not new. It was started by Mr. Penikett back in 1987 when they took over NCPC, but he also backed away from it. He wouldn't go through with it, because he said it was wrong and, you know, the debate went on and on and on here in the early days of our mandate, when Mr. Phelps was the minister of energy, about privatization or divesting any assets from the corporation to private hands.
Mr. Speaker, the point I'm trying to make here is that if you go back through all of the record here, no matter which debate you get into, you'll find clauses that the NDP have been very vocal and adamant, including the Member for Faro, and including the now-Government Leader, that there ought not to be any assets of the Energy Corporation disposed of.
The minister is shaking his head, but I will find the clauses in here in the debate today, Mr. Speaker.
They even went on at the time the Faro mine shut down, and Yukoners were faced with a rate increase, and we did bring in the rate subsidy program - regardless of what the minister says today - and we did make a commitment prior to the election to extend it - regardless of what the minister says today. They put a motion on the Order Paper and debated that motion that in fact they should cut the rate of return to five percent for the Energy Corporation. Then, we hear the minister saying in January and February of this year that the corporation needs to have funds coming in, because they have obligations to meet and cannot continue to operate the utility.
So, I mean, there's been no consistency in what the members opposite have said about their position on energy. Now, the minister states that - he has stated so many different things, I really don't know what he means any more or what the final figure is. There's a large discrepancy between what he is telling the public and what the president of the corporation told us in a briefing.
Mr. Speaker, they now are going to go to another rate hearing, is what they're saying they want to do, because it'll probably end up being 50 or 60 percent, the way this government is moving and the string of announcements that's coming out, first by the minister, then by the president, then by the minister, as to what the financial shape of the corporation is.
I heard the minister in Question Period here the other day chastise the Member for Riverside, saying that he was overreacting, that there wasn't a crisis at the Energy Corporation. There was a little bit of a cashflow problem, yet twice since then, the minister's made announcements that the problems got bigger and bigger and bigger. And I suggest to you, as I did earlier, Mr. Speaker, that it's going to get bigger yet, before the final figures are in.
Some Hon. Member: (Inaudible)
Mr. Ostashek: Oh yes, you wish my time was up. Mr. Speaker, he wishes my time was up.
Some Hon. Member: (Inaudible)
Speaker: Order.
Mr. Ostashek: Thank you, Mr. Speaker.
Again, on the Energy Corporation, Mr. Penikett got it right. Yukon people have not been involved in these discussions at all, and yet we know that the minister has had private conversations with the Energy Corporation. These guys are doing exactly that now.
I mean, it's no different. They were very critical with us. Mr. Penikett again: "The Yukon Party and the government opposite has no mandate to integrate the management of the electrical company and the Energy Corporation."
I say this government doesn't have any mandate to dispose themselves of any of the assets of the Energy Corporation, Mr. Speaker. They didn't campaign on it. If they felt so strongly about it, why didn't they tell the Yukon people that they were going to do that?
Mr. Speaker, the then Leader of the Official Opposition, Mr. Penikett said, "I would like the Government Leader to show me a single instance, anywhere in the world, where privatizing the utility has lowered power rates for the consumers."
Well, I'll say to the minister now, he may not have privatized the whole utility, but he's certainly moving in that direction, and what he is doing by the actions he has taken is allowing the private corporation, the multi-millionaire that they so disliked in Alberta, they're giving him a rate of return on another $4 million worth of Yukon ratepayers' assets.
That's what they're doing, Mr. Speaker - something that they were totally against when they were in Opposition, and not only when they were in Opposition, but when they were in government before, from 1985 to 1992, they wouldn't carry through with rationalization of any kind.
So, Mr. Speaker, I will just go through these and I will get down to where we have statements by the Member for Faro and the Member for McIntyre-Takhini on this very issue.
There are some areas that I just find mindboggling because, as we heard the Member for Kluane say in his presentation today, even though they were giving YECL a 20-year franchise, they could still deal with the municipalities for distribution. I find that statement mindboggling. If we're going to give one private corporation a franchise for 20 years, that's a licence to print money for 20 years on the backs of Yukon ratepayers, a guaranteed rate of return, and they've done this, and the only part of the asset base of the corporation has grown -
Some Hon. Member: (Inaudible)
Mr. Ostashek: The minister's trying to hide behind the board again, Mr. Speaker.
We know, and the minister knows, whose decision it was to put us in this position. It certainly wasn't the board's decision.
Some Hon. Member: (Inaudible)
Speaker: Order.
Mr. Ostashek: At that time, even though we weren't privatizing the assets of the Energy Corporation, we were trying to merge them into one corporation, a Yukon corporation, and the NDP Opposition spun it that we were trying to divest ourselves of the assets, and they were against it. They were against divesting themselves of any assets.
Some Hon. Member: (Inaudible)
Mr. Ostashek: Now the Member for Kluane is saying, "Sellout." I'm saying the same thing to him. It's a sellout. It's a wholesale sellout.
AYC even said that they didn't believe that that was a proper way to go, that we needed to explore other avenues as to how we could reduce the cost of energy, and this is what we were trying to do, Mr. Speaker. The merger of the corporation into one corporation in the Yukon was to have lower costs for ratepayers. I see nothing in the agreement in principle that has been negotiated by this administration that's going to have an impact on lower energy rates for Yukoners.
I hope the minister, when he gets up to respond in this debate, will lay out quite clearly and succinctly for Yukoners how this is going to lower their power bills.
Some Hon. Member: (Inaudible)
Mr. Ostashek: I will speak of that $2 million later in my debate, Mr. Speaker, because that's a fantasy in the minister's mind.
Some Hon. Member: (Inaudible)
Mr. Ostashek: Hours and hours, Mr. Speaker.
I do have unlimited time.
Mr. Speaker, Mr. McDonald, in speaking to the same issue of YEC and First Nation and YECL merger -
Some Hon. Member: (Inaudible)
Mr. Ostashek: What I am doing is putting on the record things that members opposite said so that the public is fully aware of how they have changed their position now.
Mr. McDonald, the Member for McIntyre-Takhini in this Legislature, asked, "Can the minister give us a commitment that no final arrangement will be struck and no agreements will be struck before the Legislature has had a chance to review the terms of the arrangement and the principles behind the arrangement and whether the agreement between YTG and CYI or between YTG and AYC or Alberta Power and YECL... Will the government give us a commitment that they will discuss and debate this agreement before any agreements are signed?"
Well, Mr. Speaker, this government didn't give this Opposition that opportunity, yet that's what they were asking for in Opposition. They were asking for a full debate.
Why two different positions? This is not that long ago. This was on February 15th, 1996. If this is the way they intend to go, then I believe they ought to have given the courtesy to this Legislature that is sitting now a chance to speak on the AIP before they signed it. They ought to have done as the now Government Leader, who was the Leader of the Official Opposition said we should do on August 8th, I believe, last year when he wrote me a letter and said that there needs to be more public consultation on this. He said that the consultation that I did last summer with the Department of Economic Development and Yukon communities was not enough, that we needed more debate on this issue. Yet, they haven't done it. Why?
Why have they not done it, Mr. Speaker?
Mr. Speaker, what we have happening here now - what I believe happened - is that they had a management agreement that my administration wasn't too happy with. I don't believe the NDP administration was too happy with it either or they would have just signed it. They had that opportunity. They could have signed it. They were looking for a better deal, but I'm sorry, I don't believe they got a better deal. I think they got a far poorer deal than Yukoners had before.
And, as a result of that, we're going to see more and more assets ending up in the hands of the private corporation, because the distribution system is growing much faster in the Yukon than what the generation system is, and it will continue to do that. So, by divesting themselves of $4 million worth of, as the Minister likes to put it, poles and wire - downplaying the ramifications - it's just not accurate, because they're also talking about divesting themselves of the diesel generation in Dawson City. They're talking about divesting themselves of the backup diesel in Mayo.
So, what will be the final amount of assets they divest themselves of? It will certainly be far greater than $4 million. My understanding is, from the briefing we've received - and I'm sure that we will have many more questions for the president tonight - is that this agreement of principle is contingent upon a couple of other things, and one of them is a 20-year franchise for this multi-millionaire in Alberta.
I think the ironic part about this, Mr. Speaker, is it's given to him by an NDP government - given to him by a multi-millionaire - I'm sorry, I didn't mean to say that the minister was a multi-millionaire. I meant to say that it's given by a minister to a multi-millionaire businessman.
There's just no consistency to what this government stands for. We've seen it on other issues since this administration's taken over. I think that they've got a real credibility problem that they're going to have to overcome with the Yukon public to find support for their actions. I just find it mind-boggling that we would have an NDP government taking these kinds of steps.
I don't think there's anybody in the Yukon public who would have thought that the NDP government would even consider selling $1.00 worth of assets of the Energy Corporation, let alone $4 million, and probably $7 million or $8 million by the time we get rid of the diesels in the two communities.
Some Hon. Member: (Inaudible)
Mr. Ostashek: I hear the Member for Whitehorse West talking about rationalizing assets. We'll speak about that a little bit, because there is nothing left in here that's rationalizing assets. This is selling out assets. This is what this is doing.
On April 3rd, 1996, there was a motion in this House by the Opposition that was talking about a current energy policy and things we were doing, and I just want to put on the record some of the comments made by the now leader of the government, and I believe there are some in here that are attributable to the Member for Faro.
The Member for McIntyre-Takhini, when speaking first to the motion said, "The only thing we have seen happening - into which there has been any real political energy invested - was the initiative early in the mandate of the Yukon Party to privatize our utility. Having backed off from that particular initiative and having found no obvious partners in seeing to it that our utility is sold off to other interests - we are obviously expressing the most concern about selling it to southern interests..." Here we go again. Then he goes on to say that we see that - this is the point that I'm trying to make in here, Mr. Speaker, because I've spoken several times in this debate to what the Member for McIntyre-Takhini said - "We see the manager for Yukon Electrical Co. Ltd. signing in the signature block for the Yukon Energy Corporation on letters that are also on Yukon Electrical Co. Ltd. letterhead. We see the rate base of Yukon Electrical Co. Ltd. skyrocketing from around $12 million in 1987 to $40 million-plus - an increase", as he puts it, "of almost 300 percent - since the time the NCPC assets were transferred."
"We see the Yukon Energy Corporation's rate base only increasing marginally."
"We see a so-called rationalization of the Yukon Energy Corporation's assets and respective responsibilities, both in how it is managed and in its asset base."
"On another point, we have seen a lack of leadership when it came to the whole subject of energy rates. What have we heard from the government?"
Mr. Speaker, again, here is the now-government pointing out that the asset base of the private corporation grew at a rate of 300 percent from the time we took over NCPC while the asset base of YEC only grew a very small amount.
Mr. Speaker, those are the areas where we have the greatest concern with the position that is now being taken by this government when they were so vocal in Opposition. And I have now a few statements attributable to the minister responsible for the Energy Corporation - when he was in Opposition as the Member for Faro - on April 3rd in this same debate saying that they had invested heavily in conservation programs and, in fact, the fact could not be ignored that they actually devolved control "- Yukon for Yukoners - of the power corporation." Now they're giving it away.
"Let us look at the Yukon Party's vision ... where ... "it saw two extremely large power rate increases for residential consumers..." Well, Mr. Speaker, here we are six months into this government's mandate and we've already seen two huge increases, even along with rate relief. Thanks to us, he says. Thanks to us, Mr. Speaker.
The minister, when he was in Opposition, had all of the answers for what we should do and now that he's in government, he hasn't got any answers.
That's what we were hearing from him on the Opposition benches; it was nothing but political rhetoric.
Some Hon. Member: (Inaudible)
Mr. Ostashek: Yes, the minister responsible for power rate hikes is right.
"It is clearly apparent that Yukoners are not interested in giving away the hard-fought-for power corporation to the Yukon Party's southern friends." Wow, Mr. Speaker.
I wonder if you asked Mr. Southern now who his friends are, who he would say, because the Yukon Party was fighting a hard fight to retain those assets for Yukoners. We were going to retain those assets for Yukoners, while this government is selling them off.
Some Hon. Member: (Inaudible)
Mr. Ostashek: Sellout is right. So, for the minister to now come along and say to us that they're not changing their position, they've committed to stabilizing power rates at affordable levels, well, I guess maybe he's going to stabilize them at an affordable level that he feels is affordable to people who ride business class in airplanes. I don't know, it's certainly not Yukon consumers that can afford them.
Some Hon. Member: (Inaudible)
Mr. Ostashek: It's certainly not going to... Well, he's committed to stabilizing them somewhere, but he's never-
Speaker: Order.
Order please.
Mr. Ostashek: Yes, thank you, Mr. Speaker, there is quite a bit of kibitzing from the Opposition benches.
I know this hurts; I know this hurts them, because they have taken such a different view now that they're in government from where they were in Opposition and where they were when they were previously in government. They did nothing for eight years to try to relieve the Yukon ratepayers of getting off the very expensive diesel fuel.
The Member for Kluane will get his turn to speak, Mr. Speaker. We moved a long way ahead. We see that even the cartoons have got him in the dark now. See? They're starting to pick it up. People aren't going to be able to afford to pay their power bills.
You know, it's probably pretty interesting for us over here. We can sit here and joke a little bit because we know how hard the Member for Kluane fought to keep power rates low in the Yukon; now he's part of a government that's raising power rates. It's quite ironic.
Some Hon. Member: (Inaudible)
Mr. Ostashek: No, now it's not the government that's responsible, it's the Energy Corporation now, but it was always the government's fault before.
I have laid out enough of what they said in Opposition. I think anybody who reads Hansard or is listening to the debate will be able to make their own decision as to whether the NDP of the day has changed their position from what they campaigned on a mere seven months ago. I don't think it would take a rocket scientist to figure out that the position has changed quite dramatically.
I do want to carry on to where we're at today and the problem that is really facing Yukoners and why I see this as such a serious matter. As I said, as I was having a cup of coffee this morning and listening to the newscast at 7:30 a.m. I heard the minister come on there and say, "Well, it probably won't be $6 million; it could be $10 million that we're short."
Some Hon. Member: (Inaudible)
Mr. Ostashek: That was this morning. Tomorrow, well...
The minister is responsible for the Energy Corporation, no matter what he wants to say. Regardless of the shortfall at the Energy Corporation, the minister is briefed, I know. If he isn't, it's because he doesn't want to be briefed. For a minister to make so many contradictory statements in the last week is mind-boggling. He doesn't know the extent of the problem. He criticized the Member for Riverside for being an alarmist, and then he comes out every second day and says, "Well, they may have to go up more than 20 percent."
Unbelievable.
If the minister was doing his job, he would have had a full - Mr. Speaker, the president told us at a private briefing that it could be as high as $14 million. I'm sure he told the minister that. Why doesn't the minister just come clean and tell the public all at once how big the problem is and let's work on solving it?
Now, he says he doesn't know what we're talking about. I can understand that, Mr. Speaker. I can understand that he doesn't know what he's talking about, because he keeps changing his position.
He said the other day, when I said something about using the $10 million reserve that was in YDC, that there is no $10 million. That's what he said in Hansard here, on April 7th, 1997, "There's no $10 million", yet the president of the Energy Corporation told us it was there.
Some Hon. Member: (Inaudible)
Mr. Ostashek: Okay, so $8 million. Is that what you're picking about? Eight or $10 million.
Some Hon. Member: (Inaudible)
Mr. Ostashek: "Oh, we just made $2 million profit by selling the assets of YEC," he said. There's a substantial amount of money in YEC that was there for infrastructure development and this minister is going to use it up to try to avoid raising rates, and he's going to get Yukoners into a bigger problem yet.
I want to talk a little bit now about that $10 million. Back on January 20th, 1997, and this was the same minister, Mr. Speaker, in an interview with CHON-FM, number 2 story today: "Meanwhile, Yukon Electrical Ltd. has been told it cannot have the last two feet of water in its licence that it allows it to take from Aishihik Lake." Political interference in my opinion. A perfectly valid water licence that this administration politically interfered in, at a cost of - the last figure we had was $4.7 million - and it's probably going to be a lot more than that - to the ratepayers of the Yukon. But the minister went on to say that day that that was an environmental promise they made. He said, "The electrical company may lose up to $3 million." Well, again, the minister was inaccurate in his statements because the briefing we received from the president a week ago was $4.7 million.
Now, this is January 20th, Mr. Speaker. It's not that long ago.
But they can't use the water. But the minister promises consumers won't be hit for the difference. Instead, he says it will come out - and, Mr. Speaker, I want the minister to listen to this - of approximately $8 million the Development Corporation has socked away. That's what the minister said here. Then he says, the other day, there is no money there. That's what he said. That's what he said; splitting hairs, Mr. Speaker, splitting hairs.
Again, in an open letter he wrote to me in the paper on March 3rd, he goes on to state, "I would like to remind you that electricity rates are set by the Utilities Board following public hearings, not by the government. The Yukon Energy Corporation has not sought higher rates from the board because of increased diesel use." These words will all come back to haunt the minister.
Mr. Speaker, the decision not to use the allowable water in Aishihik Lake was a short-term fix for this government that was very, very costly for the ratepayers of the Yukon. As I related, I believe in Question Period during debate here the other day, six inches of water in Aishihik Lake relates to $2 million worth of power.
Some Hon. Member: (Inaudible)
Mr. Ostashek: "It's not costing the ratepayers," the Member for Kluane said. Come on, I can't believe this. I can't believe this.
Speaker: Order please. Let's let the member proceed with his debate.
Mr. Ostashek: Mr. Speaker, here's the member saying that profits are not a cost when in fact he intervened, I believe, on every rate application there was here and did say, in fact, that profits were a cost. My God.
In an interview here that the minister made with Greg Ralston of the Yukon News, he says, in talking about the decision to use more diesel and not to draw down Aishihik Lake, "Paramount in this decision is a commitment that ratepayers will not bear the brunt for this decision," the minister said. My God.
Mr. Speaker, I just want to again point out the inconsistencies between what this minister says one day and what he says the next day or what his president of the corporation says, because I believe this goes back to the minister saying that it was a board decision not to drain Aishihik Lake.
Well, I'll refer the minister to Friday, January 17, 1997, where the president was being interviewed on CBC, on the 7:30 news, the president of the Energy Corporation, Rob McWilliam, says, "He's turning the issue over to the government, with a list of pros and cons of lowering the level."
Mr. Speaker, the decision not to lower Aishihik Lake was a political decision, and maybe the board endorsed it after the fact, but the board didn't do it first. It didn't come from the board. It came from the government.
I'll go back to December 27, when Roger Rondeau says that, "They've been taking it and then they're going to have to give it back. That would be a decision for the Yukon government." YEC President Rob McWilliam said Tuesday. Again, that's referring to the draining of Aishihik Lake. So, you know, there's no doubt it was a political decision and the members opposite ought to accept responsibility for it. This was February 27 - power rates will jump in February. That was the second increase.
As a result of that, Yukoners have been faced with two increases now and many, many more are going to happen because of the actions taken by this government in negotiating the AIP with the southern-based corporation, Alberta Power.
Again, Mr. Speaker, just in summing up where this government came from, I think it's all encapsulated in the letter I received on August 8th, from the now-Government Leader who was the Leader of the Official Opposition at that time, saying that there ought to be full, public debate before any decision is made. He did not feel that the assets should be sold off. In fact, he goes on to state in this letter, "The publicly owned utility YEC initially owned 91 percent of Yukon's energy-related assets, with the remainder held by the privately owned YECL. YECL's share of Yukon energy assets has since risen to approximately 22 percent, while YEC's has gone down to 78 percent." All the more reason why government ought not to be divesting themselves of any more assets.
If, in fact, this agreement stands up, we're giving a private corporation a 20-year franchise that will stop anybody else from distributing power in the Yukon - or we're going to have to expropriate them at a very, very, high cost - except that we do have the five-year escape clause for the three communities that they've sold off now.
At that, five years from now, I can assure the members opposite that that asset base will be quite a bit larger than what it is today. So we'll be paying more money for it when we buy it back.
What they've basically done by selling that $4 million worth of assets is taking the regulated return on investment that Yukon ratepayers were getting for that $4 million and giving it to a private corporation that's going to take the profits south, as the NDP has always said in the past. That's what they've done.
Now the member says we're going to reinvest it. Well, it's going to take some time for them to reinvest it.
Some Hon. Member: (Inaudible)
Mr. Ostashek: Maybe not too long, though, because we now hear the Member for Kluane saying they're going to be exploring coal. I said that the other day: it wouldn't be long until they'd be promoting coal. I just can't believe it, the flip-flop of this government.
Some Hon. Member: (Inaudible)
Mr. Ostashek: I think it'd be great if they explored coal, because there are many jobs for many Yukoners there; many investment opportunities for First Nations and everybody else.
Some Hon. Member: (Inaudible)
Mr. Ostashek: Come on. I mean, this is just so mind-boggling to the Yukon public.
Again, Mr. Speaker, I just want to say that it's all summarized in this letter of August 8 - I won't bother tabling it because it was tabled the other day - that this government has consistently maintained when they were in Opposition and when they were in government before, that absolutely none of the assets of the Energy Corporation should be sold off to private interests. That's what they've told Yukoners, Mr. Speaker, and now they have decided not to go ahead with that position that they so firmly campaigned on and told Yukoners that that's what they stood for. They have now taken a different position.
What I want to say here, Mr. Speaker, when I watch the actions of this minister and the YEC saga over the last two weeks, it makes the Bre-X situation look like kid's play. I would suggest to the minister that he not take any helicopter rides in the next few weeks.
Some Hon. Member: (Inaudible)
Mr. Ostashek: So, Mr. Speaker, what are we faced with? We're faced, from what I can understand, with possibly as much as a $14 million shortfall in the Energy Corporation. The minister does not call it a crisis. The president of the corporation came out and thought it was a very serious situation. He said we need a rate increase; the sooner the better. Those were his words in public.
Now with the Faro mine down and owing - what is it now? Is it $5 million yet, or is it going to be $5 million tomorrow? It was $4-point-something million this morning, so I think that probably by tomorrow it'll be $5 million or something.
But not only that, we hear from the minister, we hear from the Government Leader and we hear from members on the benches about the Faro mine going back into production very quickly, yet, from what I understand now, they are no longer a customer of YEC at all and they are going to generate their own power. That is what we understand now. They are no longer buying power from YEC. They are going to go back to generating their own power, as they did during the Curragh shutdown. It is because of the demand charges that are paid. Well, the minister can correct the record if he says I am wrong in that, if, in fact, he knows that Anvil Range is still buying power.
Some Hon. Member: (Inaudible)
Mr. Ostashek: Mr. Speaker, the members opposite are saying we did nothing. We did a lot of things to put Yukoners in a position where they could deal with the situation. There are only two things that are going to solve the problem in the Yukon. Rate subsidy isn't going to do it. Using up the $8 million or $10 million from YDC is not going to do it. NDP governments have been notorious for using up those dividends from YDC. Selling off the assets is not going to do it. None of these things are going to do anything to reduce power rates to electrical consumers in the Yukon.
I suggest to the minister opposite that there are two things we need, something that he ridiculed severely during the election, and that is grid expansion. We need to invest. We need to make long-term investments.
I don't know if we have to draw a diagram for the minister or what. We've got $1 million worth of diesel fuel going over the dam every year at Mayo, since 1989. That is eight years.
Some Hon. Member: (Inaudible)
Mr. Ostashek: Well, we were in a position - we said we were going to build a grid. We said we would. There was a commitment, Mr. Speaker. We said in the election campaign that we were going to build a grid to the Mayo dam. They ridiculed us.
If they had any business knowledge at all, a grid, amortized over 50 years - which should last longer than that - even amortized over 30 years, that is about what the cost of the grid to Mayo is. Just the savings on diesel fuel alone over a 30-year period would pay off the grid. That is not a big figure. Besides, they would have taken two more communities off diesel fuel.
You don't do it all at once, but had a previous NDP government started putting in a little bit of grid instead of spending the money on adventures into the private sector when they were in power before, they could have build quite a few miles of grid at a lot cheaper price than what we would have had to pay today.
I think it's a good investment, and it's also a way to start looking at reducing the cost of power, but in order to reduce the cost of power, we have to get off diesel fuel. As long as we're at the mercy of the world price of diesel fuel, we are going to be paying high power rates in the Yukon. We are going to be putting out a disincentive for businesses to locate here. There is going to be no major expansion because of the high cost of power.
Every business you talk to says they need three things: good highways, good telecommunications and reasonably priced power. The one thing we are lacking in the Yukon is reasonably priced power, and I don't think the members opposite over there can sit there and say that they believe that the power is reasonably priced now. In fact, governments in the past - and my government is just as guilty of it because of pressure from the public and pressure from the Opposition to put in rate relief - have been guilty of hiding the true cost of power to Yukoners. As long as we continue to do that, there's going to be no pressure on government or the Energy Corporation to find a cheaper source of power. We not only provide rate relief, we have hidden subsidies where the government, I believe, pays 145 percent of the cost of service. Well, those realities just cannot go on, and we cannot - I don't care what short-term actions the minister takes, what little pools of money he draws from that he has now for a quick fix - solve the problem. We need to look at some long-range investments in energy.
I go back to the three things that Yukoners said to a NDP government in 1991, when they did their energy policy. They said, "Give us affordable electricity, give us power for industry, and give us a chance to buy in." Now, Mr. Speaker, in this new arrangement with Alberta Power, Yukoners are not getting any of those three things - not one of the three things are they getting.
We have heard the kibitzing from the members opposite that we didn't do anything. Well, we did a lot of things to try to set the stage to where - had we got another mandate - we would have been moving very, very quickly to do some things that would eventually bring down the cost of power in the Yukon. One of the first steps we took was to redefine the mandate of the Energy Corporation and limit its operation to energy-related matters. As a result of that, we were able to utilize - give the minister his figure - $8 million over a period of four years as well as provide for rate relief - a substantial move in a very short period of time.
And we promised we'd change the mandate of the Development Corporation. We promised Yukon people that the earnings of the Energy Corporation would be used either to make improvements to the electrical system or would be used for rate relief. We did that.
The other priority we saw in the energy section was the need to ensure that there was an adequate supply of affordable electricity for the mining industry and for Yukoners in general. We were working towards that, Mr. Speaker, and we were investigating it.
I'm not saying we went with the coal project, but we were positioning the Energy Corporation to be in a position to go out to the general public with one or two options and say, "This is what you've got. Do you want to dam another river? Do you want a coal project? Do you want a gas project? What do you want? Go out and have a debate on that issue." That's what we were positioning the Energy Corporation for. In fact, as I said to the minister the other day here, he has - I don't know if he's had a chance to review them or whether the Energy Corporation has brought him up to date on it - but we went out for expressions of interest in August of last year. I believe it was for 20 megawatts of power under the non-utility generator policy that we brought in, which would allow private corporations to produce energy and sell it to the utility.
My understanding is that there have been some pretty interesting proposals put forward to the Energy Corporation. What has happened to them? We've heard no more about it. Nothing whatsoever. But we did take those actions.
We also looked at the grid expansion north, hoping to pick up Carmacks Copper, if they went into production, and on to Pelly and on to Mayo. We go back to what the NDP did when they prebuilt in Dawson for the 1989 election. That didn't do anything to help us get lower-cost power.
We did a major review of the regulatory system, Mr. Speaker, and this is where I really want to be on the public record because I just find it mind-boggling now that, after this review took place, and we've had one GRA since the review -
Hon. Mr. Harding: Point of order, Mr. Speaker.
Point of order
Hon. Mr. Harding: I'd like to draw the attention of the Speaker to the lack of a quorum.
Quorum count
Speaker: A quorum count has been called for.
Bells
Speaker: We now recognize a quorum and debate can proceed.
Mr. Ostashek: Thank you, Mr. Speaker. I needed to get a little rest and get my wind so I could carry on here. So, I thank the member for that.
Some Hon. Member: (Inaudible)
Mr. Ostashek: Mr. Speaker, when we were so rudely interrupted there by the minister calling a point of order, I was speaking about - I don't know if it was in the budget speech; it was in one of the speeches that was given in this Legislature, in this session - where this government is looking again, at restructuring the Utilities Board.
Well, Mr. Speaker, that's a process that we just went through, prior to this last rate application, and it was a consensus agreement by all stakeholders. The Member for Kluane was involved in it and he may be one of the few that didn't agree with it, but I was part of those meetings. I was briefed on them all the time. We did, Mr. Speaker, exactly what the Member for Porter Creek South recommended to the Minister of Education this morning. We brought in an outside facilitator so that there could be no perceived bias on the part of government.
We brought in an outside facilitator who pulled all the groups together. We had several meetings. It was agreed to try the process and it worked. I'm not exactly sure what the total cost of the rate hearing was, but I believe it was a few hundred thousand dollars, compared to a million dollars for the rate hearing that was held in 1992, that ended up in the courts, which the ratepayers are still paying for today with the surcharge.
Mr. Speaker, the point I'm getting at here is that the Yukon - and I said that in the opening comments that I made in the speech for the Member for Riverside's motion in the last session - we set up a regulatory process that was totally out of sync with the number of ratepayers we have in the Yukon. It was $2 million for the 1992 rate application, two percent on the power bills in the Yukon; that's what it cost Yukoners. Now it's costing them more than that because we have a court decision on that that is going to give them some more money - saving 35 percent.
Mr. Speaker, I want to relate to you here today that we have put a process in place that is working. Maybe it did take a few people's soap-boxes from them, but it worked and we didn't have all of the interveners intervening on the same issues. They were divided up among the interveners. We didn't have a whole bunch of high-priced lawyers and consultants arguing for days and days and days. The system worked. Not only did it work, but the system we had in place before, as I said earlier in the debate, was far more costly than any provincial rate hearing that was ever held.
Mr. Speaker, the last rate hearing that was held in Alberta, where there are several million ratepayers, cost less than $500,000. Now, there is something wrong with a system that was costing $2 million for the few ratepayers we have in the Yukon. So, I would urge the members to seriously reconsider before they start tampering with a system that's working fairly well now.
But I will give them another alternative if they believe that it is costly. I don't believe it is. I think it's pretty cost efficient now, but they may want to consider getting rid of that regulatory process completely. Get rid of the YUB. It's not necessary and this would not be a first. In fact, Mr. Speaker, the Province of Prince Edward Island just did it a couple of years ago. They got rid of the public utility board and they set the rates on the floor of the Legislature. I would suggest to the minister, if he's looking for some real cost savings - we don't know, but we're pretty certain that the minister has been politically interfering in the operation of the utility - let's bring the utility back into Economic Development. Put it in there and use it as an Economic Development tool.
Put it in there, because that way the minister would be held accountable on the floor of the Legislature and we wouldn't have to worry about it. Set the rates on the floor of the Legislature - the transparency there for the Yukon public. This is what they're doing in PEI. A small utility like this cannot afford an expensive regulatory process. There are some real savings there that the government may want to consider.
Some Hon. Member: (Inaudible)
Mr. Ostashek: Why we should do it? Because we made a commitment not to do it. I'll tell you something I seriously considered, though. The previous minister, to me, made a commitment that we wouldn't do it during that mandate, but I will tell you, and I will tell the minister here, Mr. Speaker - and I have no qualms about doing it - that I did tell the Energy Corporation and people that were involved that if the new process that we put in place still turned out to be an expensive process, it is something that we would seriously consider, because there are substantial savings there, and there's transparency in setting those rates on the floor of this Legislature.
Some Hon. Member: (Inaudible)
Mr. Ostashek: The minister figures he may be condemned for raising taxes, but he's being condemned for politically interfering anyhow, so what's the difference? It's a very serious situation, and I'm just trying to offer some alternatives to the minister that he wants to look at.
So, the things that I see we need to do is we need to have - and these are things we were working toward; that's what the expressions of interest are, sitting there, for 20 megawatts of power. They're at the Energy Corporation now. I ask the minister to review them. He may find something in there that will help to reduce the cost of energy, as long as we're going to keep being dependent on diesel fuel. Everybody in this Legislature, whether they are on that side of the House or this side of the House wants to put Yukoners to work.
If we develop our own energy resources, we will put Yukoners to work. We will not be putting people to work in the Alberta oil fields and the Alberta refineries. We will be producing the energy in the Yukon.
On the environmental side of the equation, we don't solve an environmental problem of Aishihik by turning on more diesel engines. We don't do that.
Some Hon. Member: (Inaudible)
Mr. Ostashek: Well, we would have. I'm glad the member brought that up. Let's face the reality of it. The licence is good until the year 2002. There were hearings being held, there were environmental studies being done. We believed that we had that period of time before the new licence was to take effect where we could mitigate the damages at Aishihik Lake and find an alternative source of power and get it on stream by then. I don't think that you need a knee-jerk reaction of immediately pulling the plug - or putting the plug in at Aishihik - at great expense to Yukon ratepayers.
The damage has been going on, to a certain extent. Nobody knows for sure what the damage is because the jury is still out. Environmental studies are being done. What this minister and this government have done is circumvent those studies by unilaterally making a political decision not to draw down the lake.
Some Hon. Member: (Inaudible)
Mr. Ostashek: What do you mean, "tag"? The reality of it is, why do we have a Water Board that issues water licences if we're going to make political decisions? That's what I'm saying to the members opposite.
Some Hon. Member: (Inaudible)
Mr. Ostashek: We were working on it. You can't do these things overnight. What the minister did is cause a financial crisis at the Energy Corporation. One of the major contributors -
Some Hon. Member: (Inaudible)
Mr. Ostashek: Mr. Speaker, the minister said, "losing Anvil." The minister knew he had lost Anvil when he made the decision to pull the plug on Aishihik. Anvil announced before Christmas that they were closing down. The Aishihik decision wasn't made till January.
I think the minister needs to look a little further ahead than the next year or the next six months. We need to find some long-term solutions to this, and until such time as we get off diesel fuel, we're going to have a very serious situation in the Yukon.
Mr. Speaker, I have not heard anything from this administration on this, what they are calling a rationalization of assets and I'm calling a sell-out, that is going to lower energy costs to Yukoners. I thought that was what we were all trying to do. I know we're all concerned about it. We all have different ideas on how to get there, but I don't believe the ideas are to give away the assets at a book value, that we can buy back five years from now at an enhanced book value. We only need to look at what the private corporation did with their assets since 1987. They've enhanced them tremendously and they're getting a rate of return on that.
The minister says he has $2 million in savings with this. Well, I'm sorry, I can't agree with him, Mr. Speaker. He says he has $2 million in savings in the management agreement, but that is offset by the fact that he has given away $4 million in assets that he no longer gets a rate of return on for Yukon ratepayers, which is probably, in round figures, $500,000 a year. That's what he's given up. He says they're going to be reinvested. There is going to be a time lapse. The money will be put in the bank, drawing two- or three-percent interest, instead of the 11.5- or 11.75-percent return that the utility gets.
The second part of that is, not only have we given up that rate of return, but we have given it to a private corporation that will take the profits out of the Yukon.
That is everything that the NDP in the Yukon has stood strong and fast on for years and years and years, and I know there must be many of their supporters must be very disappointed with the position they have taken now, because it just doesn't make logical sense to me.
So, what are we going to have? We've got a $14-million shortfall - maybe more by the time we get talking to the president tonight, but while in the House last week, there could be a $14-million shortfall. We're going to use up the $8 million or $10 million that's sitting in the Development Corporation that was put there for further infrastructure development, which we could have got a regular return on. We're going to put that into the Energy Corporation. I'm not sure exactly how we're going to do that yet, because the Energy Corporation is a regulated utility. I don't think you can just give it a cash infusion without going to the Utilities Board. It has to be on their books somewhere, somehow. So, that's an issue to deal with yet.
What's going to happen with the $4 million? The way I see things happening right here is that that's going to be used up, too, to keep the rates from going up as dramatically as what they look like they're going to have to go up. So, at the end of a year from now, we're going to end up in a situation where we're still faced with high energy prices, we're still faced with a cash crunch in the corporation, and we have gotten rid of any extra cash that we had lying around to use for infrastructure development or a major energy infrastructure development. I don't follow the logic in that at all, Mr. Speaker.
So, in closing, Mr. Speaker, I just suggest to the minister that he seriously consider a long-range plan rather than a knee-jerk reaction that's going to take the political heat off them for a few months, because I can assure the minister, unless he comes up with a long-range plan, the political heat will not be off them for very long.
We were criticized severely by members opposite about the rates going up when the Faro mine shut down - the member is rubbing his hands over there, and I just want to tell him he has unlimited time. He can talk until 5:30, if he likes.
I lost my train of thought there.
Mr. Speaker, we can joke and kid around here, but this is a very serious issue that is facing Yukoners. There are no easy answers. I think the minister is finding that out; it was very easy to sit on this side of the House and criticize, but when you're in the political hot seat that the minister is in now and has been for the last few months because of increasing energy prices, it is not very nice. I know, I've been there.
I urge the minister and his government not to go with knee-jerk reactions. I urge them also, through the Energy Commission, to not embark upon a long, convoluted, drawn out consultation process when most of the consultation that has been done over the last 10 years is all documented at the Energy Corporation. It's on file. There is absolutely nothing changed except that the assets of the Energy Corporation have gone down and the assets of the private utility have gone up. So, we don't need a knee-jerk reaction.
I just want to say that we heard the minister responsible now, and his party, criticize us severely for the increase in power rates when the Faro mine shut down. We heard him criticize us severely because the rates didn't go down when the mine started up again. Now, the mine is going down and the new government is going to raise the rates again. It is in total contravention to what they said in Opposition.
They said that the corporation was getting windfall profits when the mine started up. Well, Mr. Speaker, if they were getting windfall profits, why do we have a financial crisis at the Energy Corporation today? Why do we have to have a huge rate increase - the third rate increase since this administration took power?
I hope that the minister has listened carefully to the debate today. We will review Hansard and we'll listen to what I had to say and we'll listen to what my colleagues have to say on this very, very important issue that is facing Yukoners today. Thank you, Mr. Speaker.
Hon. Mr. Harding: Thank you, Mr. Speaker.
Well, it's a pleasure to get an opportunity to respond to a somewhat enlarged jumble of contradictions from the Official Opposition than we get in Question Period. I guess the longer they have to talk, the more they contradict themselves.
But, Mr. Speaker, I heard the
member say today that we shouldn't do anything about proposed power rate increases, but just yesterday in Question Period we were being blamed consistently for two power rate increases that had nothing to do with decisions of this administration.
Then we had the Member for Klondike saying that we should do something about the newly proposed power interim rate hike that YEC has been talking about, and, today, the Leader of the Official Opposition stands up and says, "You shouldn't do anything about it; you should just let it happen." They want us to, as he put it "Hang on to everything in the YDC reserves."
So, what I can only infer from that is, one, that he is in favour of raising the rates or, two, he's looking to the taxpayers for a solution. There are no other choices.
Mr. Speaker, with regard to many of the issues raised, and there are so many, I'm going to start with a history lesson.
First of all Mr. Speaker, when we were in Opposition the Yukon Party government decided, with their famous bagman from Carcross, the former Member for Ross River-Southern Lakes, that they were going to privatize the Energy Corporation wholesale, sell it to private interests. They gave some backroom deals to Mr. Terry Boylan. They wouldn't tell anybody in the public what they were up to. It was clear that their agenda was to privatize the Energy Corporation wholesale.
Mr. Speaker, we consistently fought that position. We felt that it was important that the Yukon Energy Corporation maintain its asset base, maintain control of the Energy Corporation over its future and remain in public ownership. So, we fought them selling off the Energy Corporation wholesale to Alberta Power with no benefit for Yukoners. Mr. Speaker, we put up a very strong fight against that and eventually backed them off.
Mr. Speaker, when it came to the issue of our fights, through petitions and other methods in the Legislature for the ratepayers of the Yukon, the problem that we had was it was clear - and we heard it again today from the former Government Leader; he does not believe in rate relief. He calls it a knee-jerk reaction. He says its not sustainable and that is why he refused to agree to extending the rate relief program.
We put a lot of political pressure on him through petitions and other means to get him to concede, then he had some deathbed repentance during the election campaign, to a new electrical rate relief program. And the Liberals also agreed to that as well.
Mr. Speaker, one of the first things we did when we came into government was extend that rate relief program to make an effort toward rate stabilization. That was an appropriate response. That was what we felt what we could do, and that was what we felt we should do, and that is what we did.
When it comes to the issue of rate stabilization, Mr. Speaker, I don't think we committed to rate stabilization overnight in the face of a 1993 court decision on reimbursing the cost of a 5.5-percent temporary rate increase. We face a 30-percent rate increase as a result of world diesel prices increasing. That was something that was in the bailiwick of the Yukon Utilities Board. They approved the ability to establish those rate riders based on increasing world diesel prices before we ever even came into office.
Then, Mr. Speaker, the financial community and the Government of the Yukon were thrown the ultimate curve in November when we lost our major customer. What happened in 1993, when the Yukon lost its major customer? What did the Yukon Party do? What they did was take $3 million of taxpayers' money, flowed it through to Curragh Resources and paid off relatively six months' worth of bills for Curragh Resources out of the taxpayers' pockets so they wouldn't have to face the political heat of the Curragh property, which had to pay demand charges.
The Curragh property never came back on stream because the company went bankrupt, and eventually that money, or some of it, was recouped, but a lot of it was still lost to the taxpayer. So we didn't go down that route this time and take $3 million of taxpayers' money and throw it into paying off the demand charges, because we felt that all that did, in the absence of a firm production decision, was delay the inevitable.
But what else did the Yukon Party do, Mr. Speaker? They had a 58-percent proposed rate increase that they brought when the mine shut down in 1993. The rate increase that was proposed by the Yukon Energy Corporation is still high - it's 20 percent - but by their own standards, even with that big increase, we've gone beyond what they could produce after they were elected for a few months by 38 percent.
So, our record, when it comes to handling these types of tough issues, is equally as good, and much, much better, than the Yukon Party.
I don't profess to say that this is an easy equation when you lose your major customer, but now, some time ago - actually on March 24th - their power bills had been approaching the $3.6 million level, and they had not been paid. The company feels that there's some problem with the payment. They don't like the cost of service they're being charged and, among other things, they have a lot of problems with the energy system.
The bill, as of March 31st, as I understand it - the final reading was done a couple of days ago - is about $4.1 million. So there's a substantial accrued liability there to the Energy Corporation.
That is a significant amount of money, and the reason I believe it is is because the word "insolvency" has been brought up to the corporation. Insolvency usually pertains to when a corporation does not have enough current assets to meet its current obligations and therefore it becomes insolvent.
So, I figure it's a significant pressure reducer to have Anvil Range pay their bills and, concurrent to that and in terms of action, the Energy Corporation has filed the miners lien against the company. We've been in contact with them. They're resisting paying, obviously. They've said that they're going to pay their bills, but as of now, there is no formal payments schedule. They obviously want to talk more about energy issues and we'll have to work through them, but certainly that would take the pressure off the financial position of the government.
Mr. Speaker, after being faced with that eventuality of the Anvil Range announcing their shutdown and, although at the time they announced it was on a temporary partial basis, we, even though we had extended rate relief, knew that there was going to be some tough sledding ahead. We were faced with a request. The only directive we've ever given to the Energy Corporation was with regard to the Aishihik Lake decision.
Mr. Speaker, we committed to the Yukon public that we would work to mitigate the environmental impact on Aishihik Lake in the election campaign. We laid it out there for the public and we received requests from a technical advisory group that was established out of a former Utilities Board process that it was not wise, given the studies were not complete, to draw down the bottom two feet of water. That cost for that decision we knew was going to be extensive. It was based on the in-flows, it was based on the world price of diesel and it was also based on how long Anvil Range stayed in production over the winter, because nobody was sure how long they were going to continue to run the mill.
So, the first figures we had were upwards of $3 million. Anvil Range ran right through March 31, the time when the charge would be the absolute highest on the increased use of diesel, as well as the fact that there were 30-percent world diesel price increases. So, we didn't want that reflected on the ratepayers' bills. We wanted to ensure that that didn't happen, so we, at the time of the announcement, announced that it would go through the Yukon Development Corporation's reserves. That's how we funded it; not out of the ratepayers.
Now, Mr. Speaker, I think it's interesting when you listen to the members in the Official Opposition talk about their views on energy. We never quite know. You're always buying a pig in a poke, because they talked a lot about coal; they talked a lot about stabilizing rates; they talked a lot about increasing infrastructure; they talked about interlocking power grids between Alaska, B.C. and the Yukon. They talked about all this big-picture stuff: big dams, big bucks mentality. But what did we see from this government? Well, what did we see from the Yukon Party government? We saw a 58-percent rate increase when the mine went down. We saw rate relief programs. We saw no infrastructure growth whatsoever. We saw increasing use in diesel and really no answers.
The political courage was not there for them to make the tough choices. And, Mr. Speaker, we also saw that they promised in 1992 to do something about mitigating the environmental impact on Aishihik in their four-year plan, and in four years did nothing - squat.
So, Mr. Speaker, we're trying to deal with a very tough situation. The Yukon public does not want to pay higher rates and they've hung the fact that rates have gone up and are proposed to go up by a 20-percent increase, as I understand it, squarely around the neck of the government. That's fair ball. I don't blame them. I pay power bills, too, and I've seen them go up.
What we did was to extend rate relief, which the Yukon Party government had refused to do, to try and stabilize rates.
I would have really liked to have directed the Energy Corporation to write off the $1.1 million that they obtained from the courts to ease the burden this winter on ratepayers. I was lobbied very, very hard by the Utilities Consumers Group, by AYC, and by the City of Whitehorse to do that. I took a beating in the media because that was not done, but the reason I didn't do it was because I knew precisely what the picture of the Energy Corporation was. With the situation affecting Anvil Range and the increased costs due to the decision not to use the Aishihik water, I was worried that to write off another $1.1 million would only be more painful for the ratepayers later. I'm glad, in hindsight, that we did not make that decision in the face of a lot of lobbying to do it.
We were accused then and there, by not writing this off, of breaking a rate stabilization commitment. Well, I felt that the bill relief program, which was the context of the debate when the Yukon Party was refusing to do it, was how we promised to work towards stabilizing rates, and that was one of the very first acts we took. But the Yukon public, I guess, or some members of the Yukon public, had come to expect that rate relief would be part of it, so there wasn't a lot of obvious fanfare when we did make the decision to extend rate relief. But such is life, and such is politics, Mr. Speaker.
So, there have been a lot of tough choices and -
Some Hon. Member: (Inaudible)
Hon. Mr. Harding: Yes, the Clerk has started to cry.
Mr. Speaker, we are trying to lay out for the public the situation that we face. There are tough choices ahead and we are making tough choices, but I'd rather be here than on the other benches because I think we're making the right choices, but they are tough and I think it's important that the Yukon public has the equation. They'll say to us, "Well, deal with it," and we will deal with it and we give them that commitment wholeheartedly and we will make the best choices that we can.
We will work with the Energy Corporation Board. We will support their decisions as much as we can, and we have done that, with the exception of the one directive on Aishihik, which they did support by resolution. But the Leader of the Official Opposition is correct. It did come after the Cabinet had asked that the level not be drawn down.
I want to talk a little bit about the basis for the motion today, and the whole basis of the motion today is that, number one, the Leader of the Official Opposition says the Yukon New Democrats have broken their long-standing commitment to the sale of any assets to Alberta Power.
Mr. Speaker, when we were in the Opposition, we faced a Yukon Party government that was hell-bent on selling off the power corporation, privatizing it for a quick fix. We felt that was inappropriate for Yukoners, and they had no mandate to do it, and we resisted it. Well, the deal that has been approved by the Yukon Energy Corporation Board of Directors is not a sell off of assets, but rather it is a transfer from distribution to generation with the maintenance of the asset base of the Yukon Energy Corporation. It will not change the asset base, and we believe that's important, because it will allow us to make more targeted investments on behalf of Yukoners, - Yukon ratepayers, Yukon taxpayers.
Distribution was about three percent of the assets of the Yukon Energy Corporation. There were very few economies of scale with the distribution system. If Yukoners want to consider, in the future, direct management as a viable option - and I'm not saying that it's not viable now, but it is more difficult with the small portion of business that's distribution - this rationalization allows us to transfer assets from distribution to generation and transmission to allow us to invest the monies obtained in new asset infrastructure, maintain a good solid asset base, and also it allows us to maintain control of the public utility.
What we were opposing were the attempts of the previous government to wholesale privatization, and I know that the Yukon Party - they've become quite holier than thou these days - they say that they were resisting the sale of any assets. All you have to do is look at the discussion papers, and I understand my colleague will be tabling them later - from July, 1996, and it's entitled "The Next Step in Managing Yukon's Power System." One of the options identified in that is clearly the sale of some of the Yukon Energy Corporation assets. It was still on the table.
In the very first meeting I had with Dick Fry from Alberta Power, just after the election when I sat down with him, he said, "Is the merger still on the table?" And I said, "Well, the merger is on the table but only on our terms." Of course, that came off the table quickly, because the Yukon Party was prepared to merge and give direct control to the Yukon Electrical, and he was very, very disappointed that the New Democrats had come along and said, "No, we want ownership. We want control."
We reigned in the Yukon Party direction on giving away the Energy Corporation, and what we've said is that we had to rationalize some of the assets of the Energy Corporation. We think it paved the way for a brighter future.
I want to say also that this deal is an agreement in principle, and there are issues that still have to be addressed, and some of them have been pointed out by the Opposition. Most of them have been pointed out by the government.
Mr. Speaker, by the end of this month, the final details have to be drafted on this arrangement, if it's going to come to pass. We will continue to have the Energy Corporation, as will the board, negotiate very tough, to try and ensure that the terms of the agreement are nailed down to a letter.
Mr. Speaker, with regard to the franchising, that is the same principle that will be in effect - they have to June 30th to conclude that agreement. If the concerns about the Energy Corporation not being able to partner in any distribution by YECL, no matter what, are not dealt with in those franchising agreements, which will not be concluded until June the 30th, then the deal is off. It's an agreement in principle. The t's are far from crossed and the i's are far from dotted, and those concerns that we've expressed, and that the Opposition expressed, have also been expressed by the board of directors and they want to know what the fine print says, and so do we.
So, Mr. Speaker, on the face of it, we think we have a reasonable deal. There's more work to be done. The alternative to the deal we have is direct management. Now, I can just imagine what the former Albertan, the Leader of the Official Opposition, would be saying if we would have taken over direct management of the corporation, when, just in December, the Member for Dawson was standing up saying, "Boy, you've got the best of both worlds. You've got the private sector managing it, the public assets and it's the greatest thing since sliced bread." I dug out those quotes. He thought that the combination of public/private was the best thing that ever existed.
Mr. Speaker, if we would have went direct management, we would have heard from the member from Alberta, "Oh, my God, look at what the socialist hordes did. Look at what they've done. They couldn't wait to get their hands on the power corporation and take it all over." That's exactly what he'd be saying.
So, Mr. Speaker, it doesn't matter what decision the government would make, or what the board would make. And, I want to also point out to him that the board that we're talking about here - I'm going to read out, just so the member knows - there's an eight member board and I want to read out what the record was on the vote on this. With the exception of the chair, I've not named anybody, but these people, because it's a matter of public record - I won't say more about them other than to say what the voting pattern was.
Mr. Archie Lang, appointed by the Yukon Party, voted for the AIP; Mr. Barry Ernewein, the chair appointed by the Yukon Party, voted for the AIP; Mr. Freddie Blanchard voted for the AIP - I believe he's a CYFN representative; Ms. Jean Gleason did not vote for it; she's a CYFN delegate; Mr. Ed Chambers did not vote for it; he again, is a CYFN delegate; Mr. Pat Irvin, appointed by the Yukon Party, voted for the deal and the president voted for the deal that he negotiated, and of course, Mr. Ernewein, the chair of the board appointed by the Yukon Party, voted for the deal.
So that's what happened. That happened on Wednesday. Cabinet approved it.
Some Hon. Member: (Inaudible)
Hon. Mr. Harding: Who'd I forget?
Excuse me, then there was Mr. Haakonsen from Klondike, who voted against the deal. So the results were five yea and three nay. One of the members on the board from CYFN called me and said she wasn't opposed to the deal in principle. She just felt she didn't know enough about the legal aspects and was concerned about UFA implications, so she would not, until she was clear, vote for the deal.
We took the position at the Cabinet table that we would give our approval -
Some Hon. Member: (Inaudible)
Hon. Mr. Harding: The member raises a question opposite. I'll explain that to him.
They were -
Some Hon. Member: (Inaudible)
Speaker: Order please.
Hon. Mr. Harding: Well, I got a call from one of the board members to talk about the arrangement. She asked about the concern about the UFA, in which case I said to her that we would only be supporting something that was in congruence with the UFA.
Some Hon. Member: (Inaudible)
Hon. Mr. Harding: How is that political interference?
The members opposite are absolutely out to lunch with that one. What should I have done? Slam the phone down and said that it didn't matter whether it was concurrent with the UFA or not? That's ridiculous.
Some Hon. Member: (Inaudible)
Hon. Mr. Harding: She voted against the deal. The place where the logic falls down is that she voted against the deal, okay?
Let me explain. I'll speak slow to the member.
Some Hon. Member: (Inaudible)
Hon. Mr. Harding: That's the facts of the matter. We had two choices. Now, Mr. Speaker, we still believe direct management can be a viable option, and if the agreement does not fall apart, I'm sure the board will be considering it further.
I also want to point out to the members, as we're going through this, that after I had the first initial meetings with Alberta Power and Mr. Dick Fry, the president, who asked me if he could still have a merger, and I said only on our terms, we got into a discussion about the agreement. The negotiations started essentially in December, and it was pretty clear that they were going to be a fairly tough series of negotiations. We would have loved to have had more time to consult with the stakeholders, I concede that, but unfortunately we had a three-month window. The way that the arrangement was negotiated, if you did not cancel the agreement by March 31st, there was another five-year roll into a new agreement with the existing terms.
So we had a very short window to try and negotiate the deal, and that's what the Energy Corporation president was dealing with. The issues were extremely complicated, and that's why it was difficult to involve, in a broad sense, the general public. There were some consultations taken in July and August of 1996, and it was clear from those discussions that the options that were being discussed by the board of the Energy Corporation would be acceptable to the general public if they were done in an appropriate fashion.
What we could not do was extend the deal. The Yukon Party were experts. They talk about being great negotiators. What did they ever negotiate? In four years, there was no progress on land claims. In four years, there was no progress on devolution, and in four years they couldn't come up with a new deal with YECL. All they did was say, "Oh, we're sorry, we can't come up with a new deal. We'll just have to extend the deal for another year and cost the ratepayers $800,000 in management fees." That was the only thing they did - extend the deal for another year and cost Yukoners $800,000 more.
Mr. Speaker, we were glad they did that, though, because we knew that their agenda was to sell the whole power corporation off to the southern interests. So we supported their decision to extend it for a year, given the choices of their selling off the Energy Corporation to southern interests.
Some Hon. Member: (Inaudible)
Hon. Mr. Harding:
It's true they did do some things. They cancelled Taga Ku and they shot a bunch of wolves, so they have that to be proud of and, Mr. Speaker, I think there are some good reasons why they have the number of members that they now presently have.
Now, Mr. Speaker, I want to go into some of the other aspects of the deal. As it comes down to municipal, the members opposite have been saying the municipalities should get into franchising. Where were they for four years? The Member for Klondike talks about municipal franchising. He doesn't have a clue what the subsidies are. He compares us to Alaska. He doesn't have a clue what the States' subsidies are to the municipalities. He doesn't have a clue what the costs of power are in those jurisdictions, and he obviously doesn't care about rate stabilization because if the City of Whitehorse goes into the municipal franchising of electrical rates, what does he think is going to happen in rural Yukon? The base is so small. If you don't have rate equalization, then everybody in rural Yukon is going to pay a lot more for their power.
So that is why the Yukon Party didn't agree with municipal franchising in four years in government, and it was a good decision. The only way municipal franchising can work is if you find an acceptable solution and, in 10 years of consultation, not one government, NDP or Yukon Party, found one.
So, Mr. Speaker, what we have now is a situation where it's common knowledge that almost 90 percent of the distribution, if not more, in the Yukon is owned by YECL. And yes, it is a growing asset base, but distribution grows steadily. It's poles and wires. When you have generation and transmission assets, they grow in leaps and bounds because generation and transmission are usually bigger projects - more capital intensive and change the asset base equation more substantially.
So, Mr. Speaker, the members opposite are comparing apples and watermelons. They're not even in the ballpark. They don't know what they're talking about. That's why they couldn't get a deal. That's why all they could do was get to "no" in negotiations. I mean, the pattern is clear. The former government was extremely stubborn. They didn't recognize a win-win deal at all. They couldn't come up with a deal. We had no land claims signed off in four years. None. We're still trying to put together the claims that were attempted to be finalized. We had, in devolution, the Whitehorse airport devolved. All they talked about was devolution, devolution, devolution. What do we get? Whitehorse airport.
Mr. Speaker, devolution wasn't even a priority for the NDP government and we still managed to devolve more in seven years than the Yukon Party could even dream about and we still managed to move land claims along. Now we have a partnership for the first time in devolution and what happens in the Yukon Party? They said, "Oh, you sold the farm." They said we sold the farm. First you said we sold the farm and then they say, "You should resign."
Mr. Speaker, if performance was the criteria for resignation, there wouldn't have been a Yukon Party Cabinet minister on this side of the bench after three months in office. The member opposite says it's pretty confrontational. Well, I'm responding in kind.
The former Minister of Tourism talks about first class. The former Minister of Tourism is the one who spent $39,000 of taxpayers' money going around Europe and apparently, Mr. Speaker, he felt that that was okay for him, but when someone else pays for it on their own ticket, that's wrong.
So, Mr. Speaker, just when you think the Yukon Party will stoop low, they go even lower.
Some Hon. Member: (Inaudible)
Hon. Mr. Harding: Yes.
Speaker: Order please.
Hon. Mr. Harding: Actually, the Yukon Party takes it one step further. They say that they knew that they travelled first class, but they want to hide it from the Yukon public. They say that you can't fly-
Speaker: Order please. I'd ask the minister to speak to the motion.
Hon. Mr. Harding: Okay, I will, but I was heckled very aggressively by the Member for Riverdale North, who spent $39,000 -
Speaker: Order please.
Hon. Mr. Harding: Mr. Speaker, I want to talk about the level of assets that we're talking about here, and I want to talk also about the issue of the phase 2 transfer. Phase 2 of the rationalization only happens -
If there is an arrangement to proceed with the McIntyre Creek microhydro, in a joint venture, then there will be some experiment with trying to reach a conclusion about the back-up generators in Dawson City, and I think that the deal with regard to joint projects on microhydro on McIntyre Creek, where YECL also has some assets right now, is one that's worth exploring. It's certainly not one that's carved in stone, as is nothing in the agreement in principle, because it's not fully finalized yet, but it's something that presents a microhydro option and provides some opportunity for the Yukon to expand its generating base.
Obviously the members opposite are opposed to expanding the generating base with microhydro. They didn't do any of it for the last four years. Unfortunately, Mr. Speaker, I think that there is some merit in pursuing this option, and that would occur as a second part of the rationalization in action.
Mr. Speaker, I want to talk a little bit about the YDC. The members opposite have been saying there's $10 million in YDC. The information that I have is that the reserves of Yukon Development Corporation - and it's not always a target that's settled down - are between $8 million and $9 million - $9 million being on the high side. There has not been $10 million.
Now the members opposite say, "Well, what's $1 or $2 million?" Well, I think $1 or $2 million is a pretty substantial amount when you're talking about the reserves of the corporation, and I think it is important, when they're promoting $30-million projects, such as the grid extension to Mayo and Carmacks on the WAF grid, from Carmacks, they
have to know how many millions of dollars they have. Clearly, they're not aware of what the picture is, and that's why I brought the Yukon Energy Corporation president - I've asked him to come to explain it to them tonight. He can give them the numbers and he can explain the technical information to them, and they can then get a picture of what the situation is, as requested by the Member for Riverside the other day.
It's obvious that the situation with losing $6 million for the major customer, the situation with not having a major customer pay $4 million in arrears, is serious and I think it's one that demands a lot of attention and it has received a lot of attention.
Mr. Speaker, as we speak, I think it is-
Some Hon. Member: (Inaudible)
Hon. Mr. Harding: The situation, as I understand it, is that this afternoon there's a discussion underway with the stakeholders of the Energy Corporation, or the intervenors - people who normally intervene on rate applications. They are discussing options. Hopefully, they'll be putting forward some suggestions to the Energy Corporation to try and mitigate the impact of the proposed rate increase as a result of losing Anvil Range, and I'm very anxious to see and to hear what, if anything, comes out of those discussions.
And, Mr. Speaker, if the Energy Corporation proceeds with their interim application, then they'll have to take that action and we will have to wait for what the Utilities Board, who is the regulator, decides. It will be interesting to see, as the intervenor will obviously get a chance at that point as well, to make some application to them as to options that might want be presented and that they could consider.
So, at that point, Mr. Speaker, it can be looked at by the government, but the members of the Opposition have presented none to us. They are not as existent as they would have the public believe. They say, "Don't raise rates," but then they say, "Don't use rate relief". They say, "Don't use YDC money, but don't raise rates". They say, "Don't use taxpayers' money, but don't raise rates and don't raise YDC money". You're caught in this infernal web of don't do this, don't do that, but nothing coming from them in terms of options.
They have said, "Drain down Aishihik Lake", I'll give them that. The problem with that is, though, that Anvil Range, a major customer, is no longer on the grid and they would not produce the savings anywhere near the vicinity of what has been proposed for the rate increase. The members can ask the Energy Corporation that tonight, if they wish. I have already asked them. Plus, they would not be able to, when it comes to Aishihik Lake, keep their promises to do something about that lake. That is the second issue and probably the most important. They said they were going to do something in 1992. They did nothing for four years.
Mr. Speaker -
Speaker: Order please. Let the member continue.
Hon. Mr. Harding: Thank you, Mr. Speaker. I think that, as I said before, my colleague will be tabling some of the information that he has, just for the record, on the fact that the option of rationalization was being considered by the Yukon Party. The only thing that they said they were opposed to was full privatization. That was only after they were beat up for a couple of years in the Legislature and backed off of it.
I also have some discussion notes from a facilitator. The facilitator during those discussions says, and I will read the quote, "At the outset of the consultation process, the Government Leader made it clear that the government will retain control of the Yukon Energy Corporation and will not consider full privatization of the utility as an option." - would not consider full privatization.
Mr. Speaker, that is the same member that stood up last week and said he's always resisted the sale of any assets. Why did he say that? Why did he say "full privatization"? Well, I'll tell you why. First of all, we backed them off full privatization, which is what they wanted to do, so they were looking for a way to merge with YECL/Alberta Power. That's why, when we came into government, the first question was, "Will you still consider that merger option?" We said, "No". So, they pulled it off the table, because it was a merger only on our terms.
Mr. Speaker, the Official Opposition is not being clear with the Yukon public about their official position, and they have not been clear with the Yukon public about how it is actually we who have been protecting the public interest and protecting the public corporation and not the Yukon Party, which was interested in full privatization.
I want to go through some of the aspects of the arrangement, and I'll go through in some detail. Now, this is absolutely and completely not inconsistent with our policy as a government. We have never supported wholesale privatization of the Yukon Energy Corporation, and we oppose the Yukon Party plan to do this. We support the investment of energy infrastructure that will provide long-term rate stability, provide electrical services to communities and foster sustainable regional economic development.
The $4.4 million received from the sale of distribution assets will support the strategic investment objectives and maintain our asset base at the same level.
Now, Mr. Speaker, the Yukon Party has put forth this cockamamie argument that somehow this $2 million in savings that we have put forward in reduction of fees from $800,000 - which the previous government rolled over on - to $375,000, is not going to save any money for ratepayers. That's preposterous. They're saying because YEC has lost assets they're going to lose that rate of return. What they're ignoring is that there is no transfer of assets until January of next year, so right now the board of the Energy Corporation are looking at ways of investing it. They've ignored that if there is any lag time, it can be put in an interest-bearing vehicle to offset any rate of return loss, if there was any. They're ignoring the 60/40 debt equity ratio - but I wouldn't expect them to know anything that complicated - which shows that only 40 percent of the assets are eligible for the rate of return. And their number, saying it's going to cost $2.5 million, assumes that the assets would not be invested, and that they all were eligible for the full rate of return, for five years, the whole year of the deal.
So, on five counts they are completely wrong and completely out to lunch.
So, Mr. Speaker, we are going to support the Energy Corporation as long as the deal that they receive respects the government policy, a commitment to long-term public ownership, and a commitment to public control. We support the Energy Corporation that focuses on generation and transmission. We want a government that has an ability to use energy as a tool for economic development, and we want an Energy Corporation that's not contingent on having a responsibility for retail sales to residential and commercial consumers.
Mr. Speaker, the Yukon Energy Corporation remains responsible for the vast majority, as much as 95 percent, of electrical energy and essentially all transmission. We remain fully responsible for serving major industrial customers throughout the territory. We believe that the key to economic development rests with developing affordable energy, distribution of energy through key transportation and regional corridors to communities and areas, sustainable and environmentally sensitive energy sources and facilities, providing other parties, including Yukon First Nations, with the opportunity to develop their potential energy resources and market them to Yukon consumers through an electrical grid.
The retail sale of energy is a small part of that equation. Yukon Electrical has already invested in retail distribution and is providing these services in most Yukon communities already.
Now I want to say also that the deal that's proposed by the board of directors appointed by the Yukon Party includes a buy-back provision for those assets. The Opposition has been making predictions. Of course, they talk to the board members they appointed, and the board members tell them how they voted and tell them what happened. Anyway, they've been making these grand predictions- sort of Babe Ruth-called shots, or something - that this deal, for example, is a bad one.
Well, I make a prediction that if this deal goes through and the Yukon Party was fortunate enough - God help us - to get re-elected in four years, they would not buy back those assets. I make that prediction right here and now on the floor of this Legislature, and we'll see what happens - w
ell, we probably won't see what happens.
The operating agreement between the Energy Corporation and the Yukon Electrical Company will not lead to increased use of diesel generation or prevent action to reduce the high cost of energy to Yukon consumers. It'll provide $2 million in savings for ratepayers over the five-year life. It has nothing to do with the use of diesel generation as opposed to other alternatives.
What did the Yukon Party do in four years to develop energy alternatives? Nothing. Our goals for energy include a safe, reliable, reasonably priced and affordable electrical supply at the lowest possible cost for consumers.
We extended the bill relief program. We've been looking at options. We've formulated an Energy Commission to develop some long-term policy. We're facing two rate riders that were beyond our control. We're facing a mine that has shut down, unannounced to the financial community or the people of the Yukon, and we're dealing with a major revenue shortfall. Mr. Speaker, we are going to have to deal with those things, and that's all there is to it, but I want to say that it has not been a very easy task in the first five or six months of the government. It does not make for the eased rate stabilization, to say the least.
The equality of rates for the communities throughout the territory is also something that's very important. We don't want to see Whitehorse with lower rates than all the rural communities. We want to see some rate equalization. If it's a goal of the Yukon Party or the Liberals to have municipal franchising and see rate equalization set back, then that's something we just cannot share.
Mr. Speaker, we want to see resource development that's both economically sustainable and environmentally sensitive. We want to reduce energy consumption through the promotion of sensible conservation practices.
In our recent bill relief program, we built in conservation measures for the ratepayers. We don't want to see them rely on the fact that there's rate relief to have people out in the public not think about energy conservation.
Mr. Speaker, we want to look at development of appropriate diversified technologies to reduce dependence on non-renewable fossil fuels for power generation. We've talked about microhydro, we've talked about wind and we've talked about wood chip. I dare say, the members opposite are quite hilarious when you mention coal in this Legislature. They giggle and chuckle. They're quite beside themselves; they've lost all touch with reality when it comes to some of these issues. They're so bitter about the election. What they forget is that they haven't been able to read one quote where the Member for Faro ever said, "I'm against coal." They have not produced one quote. They can't produce one quote because it doesn't exist.
I'll tell you why, Mr. Speaker, because the position on coal was consistently that we would only support coal if it was economically and environmentally feasible. The problem was the Yukon Party could never prove that to us. They were so bent on coal. They spent hundreds of thousands of dollars on coal. They were putting the cart before the horse in entirety and they had nothing, no information to back it up whatsoever.
The Government Leader at the time, the best he could say was that he visited this coal plant. He's from Alberta and Alberta thinks coal is great. He visited this coal plant and there were mountain sheep running around the coal plant. It actually enhanced their habitat. So therefore he saw that with his own eyes and thought that we should have coal.
Well, you have to do better than that. You have to do better than that. You have to tell Yukoners and you have to show them how it's environmentally feasible. They're saying you can't solve one environmental problem with another, referring to the decision not to draw down Aishihik and increased diesel use. So, Mr. Speaker, their solution to that is to draw down Aishihik and pump coal smoke emissions into the air. That's their solution: pump out coal smoke. But you can't solve one environmental problem with another.
Some Hon. Member: (Inaudible)
Hon. Mr. Harding: They're pumping more smoke than coal smoke too.
Mr. Speaker, you know, one of the things we were loathe to do was to promote high-risk, high-debt projects, and I agree with the Liberal policy - I read it the other day - in the election campaign. The Liberals had a big press conference. One thing they did talk about was protecting Aishihik Lake and the Liberal Leader was out there at Aishihik Lake. There was a picture of him in the Whitehorse Star, walking across the mud flats saying how it should be restored to its natural levels and how awful it was - he used to go hunting and fishing there. Of course, they were trying to show the public that they had a green side. It was pre-election run up and they wanted to talk about how they cared about Aishihik Lake, but the problem with the consistency in the position is that there is none from the Liberals.
I know that the Liberal Leader has a distinct difference of opinion with the Liberal Leader in the Legislature. The two should come together on how they should handle the Aishihik Lake issue because really it's very difficult for the government to get a clear idea. We're interested in this Legislature in working with the Opposition, but in order to do that we need a clear position from the Liberal Party. What we used to hear was, "Save the lake." Now we hear, "Drain the lake." So, I would ask the Liberal Party to be more clear about how they respond to the Aishihik Lake situation.
Mr. Speaker, I think that the arrangement that we have negotiated - or excuse me, Mr. Speaker, that has been negotiated by the board of directors; I misspoke myself - that has been negotiated by the board of directors of the Energy Corporation - excuse me, Mr. Speaker; I made a drastic error there and misspoke myself - the board of directors of the Energy Corporation, who negotiated the arrangement, I think have a pretty reasonable deal before them.
They have looked at a deal that is going to save - if it goes ahead, if the t's are properly crossed and the i's are properly dotted - then I think the arrangement will be good for Yukoners in the long term. You're looking at a $2 million savings for Yukoners. You're looking at management fees being reduced from $800,000 to $375,000 a year. You're looking at a situation where a lot of those support services will be verified as to their cost effectiveness by the Yukon Utilities Board. You're looking at an arrangement for rationalization that allows us, with a buy-back clause, to invest in new asset infrastructure.
We are authorized within this arrangement to take more control of the Energy Corporation, to be involved in more of the capital planning, to be involved in more of the water licensing, and thus take more control over the Energy Corporation.
I think that with regard to the aspects of a rationalization, although they have been controversial, I think there is some sense. I believe it will lead not only to good asset investment, it will lead to the Energy Corporation being able to look very, very seriously and not having economies of scale that reduce the ability of the Energy Corporation to go to direct management in the future.
Mr. Speaker, I think that it is important in that sense. On the issue of franchising, the Yukon Electrical Company, in so many communities, has the vast majority of the distribution business. They also have some small diesel generating capacity, but mostly their business is distribution. We believe that the franchising agreement cannot - as it's negotiated - impede YEC from conducting economic development initiatives, and we believe that - as it's proposed by the board of directors of the Energy Corporation - it does not impede the ability of YEC to undertake economic development initiatives. It does present, and it can present, some difficulties for municipal franchising, but it is not an impossible situation. What it does present is, in the policy of the government to the municipalities, that we want to see continued rate equalization. That problem has not been solved and never has been solved by the Yukon Party or the previous New Democratic Party government.
The government has been taking a lot of action when it comes to developing energy policy. The commission read out today a statement on a workplan and initiatives that have been undertaken. I think that we got into rate relief very quickly upon assuming office. We made good on our election commitment to help to mitigate the environmental impact on Aishihik. There's more to be done. We've supported the Energy Corporation Board of Directors as they reach this new agreement in principle. We look at it as a good cost savings. We look at it as freeing up some money for the Energy Corporation to allow us to invest in new initiatives.
And we believe focusing on generation and transmission will allow us to develop that infrastructure for the Yukon, for our future, that will hold us in good stead for the long term.
Mr. Speaker, we believe that long-term rate stabilization has to be pursued, and we're not ready to take the Yukon Party's advice that you've got to kill rate relief to do that. Now, this year, what we're doing is we're looking at the entire rate relief program in an overall sense. We're trying to establish some options for rate relief to ensure that it's targeted and it's doing what it should be doing in the community, and we think that's a responsible course of action.
There were some initiatives put forward that also, I would admit - from the Liberal member - deserve some consideration. They've talked about a rate stabilization fund to deal with the situation when we lose our major customer. That's a laudable goal. Where the money's going to come from is the big question, but certainly it's something that can be looked at.
One of the things that we are interested in doing is very much pursuing the option. Minto Exploration is a mining company in the vicinity of the Selkirk First Nation, in their traditional territory, and they're looking at a project - they're going for their water licence, I believe on May 14th - of opening a mine, and they're interested in grid power.
So, Mr. Speaker, there is the potential to add another customer to the grid and provide an alternative customer to Anvil Range. Of course, there then become capacity changes but, nonetheless, that is one way to avoid huge, wild, rate swings, by broadening the customer base and adding more industrial consumers.
If you could go on to Pelly Crossing with the grid, then I agree, if you've got a big, industrial customer there, it makes a lot of economic sense to go there, and also to allow Pelly Crossing, if possible, to get off diesel and get on the main grid.
So, there's some things are being investigated there Mr. Speaker, but those things take time, and they take money, and they take well thought-out policy. You don't just do it in the election campaign, at the ninth hour - or at the twelvth hour, it was - say that they were going to spend $30 million hooking-up the WAF grid. I think that what you have to do, in that respect, is build a public consensus around that. Explain what the risk is, explain what the possible benefits are and then allow the Yukon public to make a more informed decision about an expenditure of some $30 million.
Mr. Speaker, I think when it comes to environmentally friendly electrical energy, the record of the NDP when we were in government very much pursued conservation measures. The Power Smart program was very successful. That was killed by the Yukon Party, and I think the Energy Commission is anxious to look at energy conservation initiatives too.
We have to get Yukoners thinking about energy conservation and that we all have a stake in this, and that when we deal with problems of enhanced capacity, when we deal with problems of rate swings and rate stabilization, it's all related to how we, as Yukoners, feel about our utility. You know, which comes first, the chicken or the egg? Yukoners are sometimes of mixed minds.
They say you got to have power-generating capacity ready, and build-them-and-they-will-come mentality when it comes to mines and industrial capacity. You put up the dams, like in Mayo, where you have a dam, you have a good road, you have a school, you have all the infrastructure in place, but you don't have mines.
Or, Mr. Speaker, do you wait until you get an agreed-upon industrial customer and then build the infrastructure to suit that industrial customer? How do you lock in the industrial customer to ensure that you don't build all that infrastructure and then have the industrial customer decide that they won't be there for you and have the ratepayers paying months and years later for increases due to the fact that you've lost that major customer?
That is partly the situation with the Anvil Range mine now. I know that's a big debate in a lot of coffee shops in the Yukon and debate in schools as people talk about energy issues. It is incredibly complicated, Mr. Speaker.
We believe that we have some answers. We do not have all the answers. We have implemented a number of initiatives since we came into office on energy that we believe are consistent with the policy goals that we put forward to the Yukon public.
Admittedly, without a doubt, having to deal with the Faro situation and the two rate riders that were decided before we ever came into government have made it difficult to stabilize rates, but, Mr. Speaker, we are taking all appropriate action and all action we can to try and deal with the situation. I don't think it was a bad thing to ask.
I want to make a distinction. We asked the Energy Corporation to review the situation with intervenors prior to their application going before the Utilities Board, because we didn't want to - dare I use the word - shock people seeing the application for the first time. We thought that a business operating in a private sector in a non-monopolistic and non-utility regulated field would definitely go out to their customers and explain - one on one or in groups - why they were doing what they were doing. I don't think that the Energy Corporation has operated in that kind of environment, because they have always had a guaranteed-rate-of-return environment. We would like to see them become more customer friendly, if you will - more willing to exchange information and show them the equation.
You know, Mr. Speaker, it has been so long since the Energy Corporation had a meeting with Champagne-Aishihik, or so long since they went over their financial situation with any of the stakeholders. I have said to the Energy Corporation, "Please, you have got to be more consumer friendly. You have got to get out there an explain the equations to them. You can't just report to your citizen-appointed board of directors. You've got to go out and reach people."
That has not been a directive from me.
The former Government Leader said that I should be briefed every day by the Energy Corporation. He speaks out of both sides of his mouth. On the one hand, he says it should be arm's length. On the other hand, I know he was heavily involved in the agreement in principle negotiations for the operating contract that led to the one-year extension. I know that Creighton Twa had discussions about it. If he is calling what I am doing political interference by supporting the board, I don't know what he was doing then when he was discussing these issues with Creighton Twa.
Mr. Speaker, I don't know what he was doing when he was making the decision to extend the contract for another year. I think that it is appropriate, when I am being briefed by the Energy Corporation, that I at least let the board know what our government policies are and what we would like to see the Energy Corporation do in terms of reaching out to their customers.
Now, I know the Yukon Party is opposed to reaching out to the energy customers and today was advocating that we just allow the rates to increase, but I think that there is a role for government. We committed to a role for government and the Energy Commission is reviewing the whole relationship, and there are many.
Today, Mr. Speaker, there was an interesting proposal put forward by the Yukon Party, where he said that the whole regulatory process should be scrapped, that the Cabinet should essentially, through government action, direct the Energy Corporation and run it, and that rate increases and rate hikes should be debated on the floor of the Legislature. That is an interesting point of view from the Yukon Party Leader and one that I will keep near and dear to me as we enter on to the debates in the future, and I expect there are going to be lots of them.
The best solution for rate stabilization in the short term is a restart of the Faro mine. Mr. Speaker, it is sincerely my hope that they do that. It is sincerely my hope that they do agree to pay their power bill. They are incredibly sensitive about the power issue. They do not believe they are being charged a fair price for their power. The fact remains though, the Utilities Board did give them a ruling and we have to deal with that. We can deal with those arrears. We also have to look to the future, and the future is one that includes, I hope, a restart of their operations and an increase in the revenues that we need so that we can put the kind of emphasis we want to on rate stabilization and looking at energy options.
So, Mr. Speaker, when I look at the motion from the Yukon Party, I say, number one, the AIP reached by the Yukon Energy Corporation Board of Directors is totally consistent with the positions of the Yukon New Democratic Party. We have always opposed full privatization and the efforts of the Yukon Party to wholesale sell off the Yukon Energy Corporation and merge with Alberta Power.
We did not propose that. We are not proposing that. We did not agree to that, and we put that off the table very early on.
Secondly, Mr. Speaker, this deal will save Yukon ratepayers money in the long term. It will allow us to invest in targeted asset infrastructure. It has absolutely nothing to do with the increased use of diesel. It has zero to do with that, and I am amazed that that was put in a motion because the two things are quite separate. Actually, if anything, it will help us to take pressure off the use of diesel in the system and we believe that this will be a good decision for Yukoners so that we can maintain control of assets, we can keep that control, we can stop the Yukon Party direction, which was to sell off the utility to a southern interest, wholesale, and we can ensure that Yukon ratepayers and the Yukon public have a say in energy issues for the near future and for the long-term future.
And, Mr. Speaker, we will be supporting the board of directors in their AIP and we urge them to negotiate very strongly with the Energy Corporation as they cross the t's and dot the i's over the next couple of months as they look at the two oncoming hurdles with the setting of rules of the operating agreement and also getting on with finishing the franchising arrangement.
So, thank you very much, Mr. Speaker, and I thank the members opposite for allowing me a chance to educate them a little bit more on the issues.
Mr. Cable: I was really quite happy to see, Mr. Speaker, that the energy minister is now doing the public relations for the Energy Corporation. I was thinking to myself, just who is this masked man anyway? He's doing rate relief and rate applications, and now he's doing public relations.
I was also asking myself just what this government has done in the last six months. The first shot, of course, was the Energy Commission, and my initial reaction to that was: finally we have something to coordinate energy policy development and energy strategy.
Now the sole product to date, after six months, is this commissioner's statement given today, which really is a smokescreen for a lack of action. There's no real time line in the statement that was given, and I have a sneaking feeling that the intention is to go on to the next election, hoping for some continuing exposure.
Let me make this suggestion to the energy commissioner: if he's hoping for continuing exposure, he's going to get it, but it may not be the type that he's expecting.
I also would make this suggestion to him: get up early in the morning, 6:00 a.m., and go to bed late, at 11:00 p.m., and get this energy policy finished. The Yukon needs it. We can't go through some bureaucratic exercise that's going to go on ad infinitum into the future. We need something more than a wishy-washy ministerial statement after six months.
Some Hon. Member: (Inaudible)
Mr. Cable: Good, glad to hear it.
Now the agreement in principle on rationalization - and we'll get into this tonight. I'm not going to waste a lot of time bantering back and forth here. We'll get some real facts tonight, hopefully. We have this franchise arrangement, which we're told is no threat to us. There's 20 years. Now as I read it, the 20 years applies to the whole of the Yukon, so there'll be some explanations on that. It's not just the franchise arrangement for the purchased areas.
We have the $4 million that the minister is talking about spending. You know, we're going to dig holes and fill them back up again to maintain the rate base, while the corporation is crying for cash.
Then we have the rate shock and the financial position of the Yukon Energy Corporation. Last week the minister said I was an alarmist and then he was on a couple days later on the radio, saying there was shortfall of $6 million. I think we're now talking about $10 million. I don't want him to be an alarmist, but I want him to show some flicker of concern. Tonight we'll get the real numbers and we'll find out just what the worst case is that could confront us, and perhaps the best case. We'll get some real facts.
Now, I have to say to the energy commissioner and the energy minister that there was a very extensive energy policy exercise carried out about five years ago, and it resulted in these booklets, Mr. Speaker. The policy on many of the issues that the commissioner will be confronting were dealt with in depth. It sounds to me like he's going to be reinventing the wheel. Let me encourage him to go through the book in detail and get moving. Let me encourage the minister not to mistake talk for action. We need action in this area. We need the Energy Corporation stabilized. We need some solution to the financial gyrations that go on in the energy picture here.
The Yukon energy strategy, the framework booklet, is fairly interesting. It covers virtually all the issues that we'll have to deal with. It talks about energy security, energy goals and energy pricing. It talks about the financial risk and energy economy. There are booklets on renewable energy, energy efficiency or conservation. There are booklets on space heating. There are booklets on fossil fuels. There is a booklet on practically everything. We don't need to make this a three-year exercise.
Now, as I said, I don't intend to spend a lot of time on this. I hope this issue comes to a vote this afternoon. We're going to vote in favour of the motion because we want to indicate to this government that we're not satisfied with its handling of the energy issue. It's one of the most important economic development issues that this territory has to deal with and all we've witnessed on this side is a bunch of gyration in the last couple of weeks. It doesn't raise our confidence level.
Thank you, Mr. Speaker.
Mr. McRobb: Thank you, Mr. Speaker. I know that I only have 20 minutes, and I'll be using this time wisely and carefully to record some information for the public that they may find useful.
It's impossible to respond to all the allegations raised by members of the Official Opposition, but I can assure the Member for Riverside that the commission, in developing the comprehensive energy policy, will be reviewing all previous policy drafts, which is what he was holding up, Mr. Speaker; it was merely a policy draft, four and one-half years ago, that was developed and ignored by the previous government.
We are not reinventing the wheel. We are taking the spokes that we found in the closet and we'll be putting a wheel together to get us moving down the road of developing a sound energy policy for the territory. I'm sure when the final product is in, they'll all be hopping on board that vehicle, because it will be running smoothly.
I want to review a few areas; firstly, some of the benefits from this agreement in principle for a new operating agreement with the Yukon Electrical Company Ltd. to manage the assets of the publicly owned Yukon Energy Corporation.
There's $2 million saved over the life of this agreement for the benefit of Yukon ratepayers. Mr. Speaker, that is a significant amount. In addition to that saving, we have greater Yukon control of our energy assets and greater ability to plan in the future how to develop the Yukon's energy potential.
The agreement also places certain cost factors before the Yukon Utilities Board, allowing greater scrutiny of those costs. Those costs must be justified and open to scrutiny before the Yukon Utilities Board and subject to accountability.
The new agreement also allows greater O&M efficiency by reducing costs in some areas of the Yukon that were very expensive for the publicly owned utility to maintain. It is precisely, Mr. Speaker, the alleviation of those high-cost assets that has caused the Opposition parties to heavily criticize this agreement.
I want to elaborate a bit on that point, because those cost efficiencies are exactly what led to the sale of the three percent of the assets of the publicly owned utility. Those assets - $4 million worth of assets - if this deal was agreed to, that money is in trust and will be invested in Yukon infrastructure along with other money, Mr. Speaker. The asset base of the publicly owned corporation will be increasing dramatically.
Now, the Leader of the Official Opposition was elaborating how, in previous years, the rate of the investor-owned utility was outpacing that of the publicly owned utility. Indeed, the NDP, when in Opposition, brought that point to this Legislature, and it's true. However, there's one reason to explain why that has been the case, and that is the lack of investment in generation infrastructure. The recent Yukon governments have not approved the building of new generation infrastructure, but that's a problem our government will be addressing, and we can look forward to new generation in the future to alleviate some of the pressure on our existing facilities, which include the diesel generators. Once that happens, Mr. Speaker, Yukon Energy Corporation's asset base will increase from about $120 million that it is now upwards - perhaps $150 million or more - while Yukon Electrical's asset base will remain in approximately the same ballpark it is in - around $35 million.
So, there's nothing to fear, Mr. Speaker. This was merely a point that was raised by the Opposition and, through some fear-mongering and some sensationalism, it was blown out of proportion. This is merely a blip on the roadmap to creating a strong, publicly owned utility, and that's exactly what this government will do over the course of the next four years.
The sale of that small amount of assets is not privatization, as referred to by the Opposition parties; it is rationalization, and I'll be tabling a document here shortly, Mr. Speaker. This was the discussion paper released publicly by the Yukon Party. It's dated July/August 1996 - the very month they called the election - and it talks about rationalization. Let me find a reference or two and I'll read it into the record. Here's one: "Rationalization of assets and role clarification between YEC and YECL have not occurred since 1987 despite various discussions during this period."
Now, they presented four options in this document. The first two dealt with various management scenarios. The third one, seen as a compromise, dealt with establishing one Yukon power utility. This was the merger option, Mr. Speaker, and let's make no mistake: this merger option really meant the wholesale sellout of about half a billion dollars of Yukon energy assets to Alberta. Those energy assets have a book value of only about $100 million. Their real value is upwards of half a billion dollars. The government received submissions to that effect but ignored them. They pursued the merger option.
"Rationalization of asset ownership might help to clarify the public mandate and role of each utility," this discussion paper says. That's one of the reasons we did it, Mr. Speaker - to clarify the roles of the utilities.
It was a tough decision. The former government realized they required political courage to do this. Well, Mr. Speaker, it was just another one of those would-be plans that was left on the table when we took office, and we showed we had courage to do what we thought was right, whether it would take some political heat or not.
I can reassure Yukoners and ratepayers we are taking a long-term and responsible approach to energy issues. The Cabinet Commission on Energy will be looking at a rate policy, new supply and conservation policies, et cetera. The Yukon Energy Corporation will soon be poised to reinvest the $4 million and more into new infrastructure.
I also want to talk a bit about some of the comments made by the Opposition, which seems to thrive on sensationalism for headlines in the media at the expense of the truth, Mr. Speaker. It's obvious the Yukon Party Opposition got a leaked copy of the agreement in principle. That's not a problem. We can live with that. We won't call in the RCMP to conduct an investigation. We won't call in Ed Henderson to tap anybody's phone. We can live with it because that's fair game. It was they who appointed members of the board. We can live with that.
When they did get the copy, they pored over it for days, trying to determine the best political angle they could put on the agreement, this very good agreement. It must have been very disappointing for the members opposite reading about all the good things for ratepayers that were included in this agreement. What they did was find something they didn't have the courage to do: the rationalization. Their spin doctors put a bad spin on a good agreement. Unfortunately, the media covered this sensational angle spun by the spin doctors, and the cartoonists seemed to like it, too, Mr. Speaker. That's all right. That's fair game. We can sleep comfortably at night knowing that we're doing what's right.
Point of order
Mr. Jenkins: What I hear is the member opposite accusing this party of having stolen a document, and that's totally out of the realm of reality - number one. And, it is not language that should be used in this House, an accusation of that nature.
Mr. McRobb: On the point of order, Mr. Speaker, I clearly did not accuse the members opposite of stealing anything. I merely said that we would not call in the RCMP if they were in possession of something.
It was the Yukon Party who called in the RCMP and accused the Utilities Consumers Group of stealing a document.
Speaker's ruling
Speaker: Order. On the point of order. I did not hear the word "steal" used by the member. In fact, the comment was that the members were in possession of it, without a reference to how, in fact, possession may have been gained.
Mr. McRobb: Furthermore, the Opposition confused the public by combining the agreement with other energy issues not related to the agreement in principle.
Issues such as the appeal rider - they were responsible for the appeal rider, which was decided by the Court of the Yukon - I believe it was last April.
Let me ask him myself, Mr. Speaker, why it wasn't until after the election, some five months later, that the Utilities Board didn't review that decision and impose a rate rider?
Maybe that information will come out in time, Mr. Speaker.
There is a fuel rider. The proposed interim refundable rate application is being reviewed today, scrutinized by the intervenors. This is the first time intervenors have been asked to come in and scrutinize an application before it's submitted to the Yukon Utilities Board, when they have a realistic opportunity to influence the figures in that application. That's something our government is proud of: open the doors and have a more inclusive process.
The Yukon Party couldn't make these tough decisions, Mr. Speaker. They only could delay. They didn't have the courage to do what's right, whether it's the management agreement, the appeal rider, Aishihik Lake decision or whatever. When it comes to energy, the record over the past four years is pretty skimpy.
I want to talk now about the scary scenario, Mr. Speaker, if Yukoners had re-elected the Yukon Party last September. This document I referred to, and I will table it now. This discussion paper, "The Next Step in Merging Yukon's Power System", was accompanied by a householder that went out to every household in the Yukon, surveying them for their input on what should happen to the future of the Yukon energy system.
What this was, in effect, Mr. Speaker, was a mandate for the Yukon Party to allow the wholesale sellout of Yukon assets to Alberta. They'll deny that now, but we know it was the truth. We heard the Leader of the Official Opposition today talk about Mr. Penikett. He accused him of not having a mandate. That's why this discussion paper was created - to give them the mandate for this merger. Absolutely. The merger of assets; sell out to Alberta.
I also, Mr. Speaker, want to introduce an amendment that I'll table here now. This amendment reads something to the effect that this agreement in principle should be supported and the Yukon Energy Corporation should be supported by this House to continue its hard bargaining position on behalf of Yukon ratepayers as they negotiate all outstanding aspects of the agreement.
Speaker: Order. Would the Member for Kluane please read the amendment as it's written.
Amendment proposed
Mr. McRobb: THAT Motion No. 54 be amended by deleting paragraphs (1), (2) and (3) and substituting for them the following: "that the Yukon government should support the agreement in principle reached between the Yukon Energy Corporation and Alberta Power Ltd. that was approved by the Yukon Energy Corporation Board of Directors; and
THAT this House urges the Yukon Energy Corporation to continue its hard bargaining position on behalf of Yukon ratepayers as they negotiate all outstanding aspects of the agreement."
Speaker: It has been moved by the Member for Kluane
THAT Motion No. 54 be amended by deleting paragraphs (1), (2) and (3) and substituting for them the following: "that the Yukon government should support the agreement in principle reached between the Yukon Energy Corporation and Alberta Power Ltd. that was approved by the Yukon Energy Corporation Board of Directors; and
THAT this House urges the Yukon Energy Corporation to continue its hard bargaining position on behalf of Yukon ratepayers as they negotiate all outstanding aspects of the agreement."
Point of order
Speaker: The Member for Riverdale North, on a point of order.
Mr. Phillips: Mr. Speaker, on a point of order, this amendment should not be allowed. In other words, it changes the whole intent and reverses the intent of the initial motion. If the member speaking disagrees with the motion, then he has the alternative to just vote against the motion rather than to turn the motion around to say exactly the opposite of what it says. It changes the intent and by our rules we're not allowed to change the intent of the motion.
Speaker: The Minister responsible for the Yukon Energy Corporation, on the point of order.
Hon. Mr. Harding: Thank you, Mr. Speaker. I would argue that this amendment is perfectly consistent with amendments that have been the previous practice of this Legislative Assembly. It speaks to the issue that was identified in the initial motion. It speaks to aspects of that issue. It deals clearly with the major issue that we've identified is at stake here, which is the agreement in principle. I do not believe it changes the intent. The intent is to raise the profile of the issue of the agreement in principle. There may be a disagreement about the particular issue and the merits of the particular issue, but the intent of raising the agreement in principle as the issue is certainly identified in the amendment and I would argue that it is entirely consistent with many of the motions that have been debated on Opposition Wednesdays and Private Members' Wednesdays over the course of the five years that I've been in this Legislature.
And I for one strongly believe that the amendment as proposed is perfectly consistent with what we have identified in the parameters of the debate today. It's a debate about the agreement in principle. The intent is to highlight the agreement in principle aspects of it, and the members talked about seriously reconsidering. They were not taking hard positions in the motion, and therefore the intent of the motion, which was to highlight the agreement in principle, has not been violated, and that is absolutely and completely consistent with past practice in this Legislature, and I would submit to the Speaker that should he review what has been the norm for this Legislature for Opposition Wednesdays for amendments that have been put forward on Government Private Members' Wednesday, that again the Speaker would see that they are perfectly consistent, are appropriate, and speak to the issue as it's outlined in the motion that was put forward by the Leader of the Official Opposition.
Some Hon. Member: (Inaudible)
Hon. Mr. Harding: Well, Mr. Speaker, I'm trying to argue a point of order. The member has raised a procedural point, and I'm simply trying to respond to that procedural point. I'm not trying to prolong the debate. I'm simply trying to respond, and as the member continues to heckle -
Speaker: On the point of order, please.
Hon. Mr. Harding: Thank you, Mr. Speaker.
So, again, I would submit that it's perfectly consistent with the practice of the Legislature in terms of amendments to motions. I would argue that it's perfectly consistent. The intent of the motion, which is to raise the issue of the agreement in principle and aspects of it, has certainly not been violated. It's entirely consistent with the debate about the agreement in principle. The amendment, as proposed, deals with aspects of the agreement in principle, so, therefore, I would submit that it is fully in order - respectfully, Mr. Speaker.
Mr. Ostashek: Mr. Speaker, on the point of order, I do not believe the amendment should be allowed because it's against the rules of this Legislature as it changes the intent of the motion. If we look at the motion that was proposed by the Official Opposition, the Government of the Yukon should reconsider the agreement in principle. The amendment that's been put forth by the Member for Kluane is that Motion No. 54 be amended by deleting basically the entire motion, clauses 1, 2 and 3, and substituting the following: that
the Yukon government should support the agreement in principle.
That is changing the intent of the motion, and I urge you to take that into consideration in your deliberations.
Mr. Cable: As Mr. Speaker will recollect from last week, there was an interesting definition of what went into changing the intent of a motion, and I think what is proposed today is very, very similar. I would very respectfully suggest to you, Mr. Speaker, that this will help us delineate what is acceptable and what is not. In my view, this is very similar to last week's amendment that was ruled out of order.
Speaker's ruling
Speaker: On the point of order, as the Member for Riverside properly notes, there was a ruling, of course, last week on a matter that certainly bears some similarities. Without making excuses for a new Speaker, certainly one of the things that I have not had an opportunity to do, I think, is adequately review the precedents. What I would like to do at this point is to defer a decision until the House sits tomorrow. I see that we're close to the end of the day. I would look for some guidance, I guess, from the House Leaders in terms of how you'd like to proceed at this point.
Amendment taken under advisement
Speaker: The Member for Kluane has three and one-half minutes remaining in his time. I would ask him to speak to the main motion.
Mr. McRobb: Thank you, Mr. Speaker. I'll use the remaining few minutes to elaborate a bit more on the benefits of this proposed agreement.
The $2 million saved over the life of this five-year agreement for ratepayers will help reduce rates in the future. As we all know, in the past, the management contract with Yukon Electrical was in the neighbourhood of $800,000 a year. This particular year, I understand that amount would have been closer to $840,000 a year. This agreement reduces that to less than half, considerably less than half, Mr. Speaker. That is a big saving for Yukoners.
The greater control of our assets and planning - Mr. Speaker, this is Yukon taking control, taking charge of its own energy future, not Alberta policy. The greater scrutiny through the Yukon Utilities Board of the management costs could further lower the amount paid to Yukon Electrical. The greater O&M efficiency and reduced costs related to the sale of those assets will also decrease the pressure on rates.
I also want to point out that the total ... On the matter of rate setting, there seems to be a lot of confusion. The other day we heard that the loss of profit would negate any benefit from this $2 million saving. That is not true, Mr. Speaker. This $2 million saving will accrue to ratepayers.
The member opposite - I believe it was the Member for Klondike - raised the allegation. Obviously, there's a need for education regarding the 60/40 debt/equity ratio. With the figure he used, the first thing he would have to do is multiply it by 40 percent, and that was what he was dealing with.
But that was over the life of the agreement - five years. He presumed that money would not be reinvested. However, that sale's not scheduled to transact before the end of this year. Certainly, thereafter, we anticipate opportunities to reinvest, and we will be living up to our campaign platform document. In any new investment in infrastructure, we will be offering investment opportunities for municipalities and First Nations and other Yukoners. So, any allegations contrary to that effect are simply not true.
Speaker: Order. I would note that the member has 30 seconds remaining.
Mr. McRobb: Thank you, Mr. Speaker. Obviously I'm not in support of the motion presented by the Official Opposition, and believe that there's been a lot of political grandstanding by them on this issue and misinterpretation by the media and misinformation presented to the public. I invite those interested in learning more facts to review the record of Hansard and the points made by my colleague, the Member for Faro - the minister responsible for the Yukon Energy Corporation - on this issue. Thank you.
Hon. Mr. Sloan: It seems like all of our energy has been taxed at this point.
We appear to have some confusion - I know it was a bad pun. We don't raise taxes. Thank you. Thank you for that reminder. We appear to have some confusion as to who's speaking at this point, but since I'm on my feet, I guess I may as well go.
My heavens, I have quite a bit of time.
I would just like to speak to this motion and why I'm not in favour of it, just basically because I think the actions of the board, in this case, in bringing about this arrangement, I think, were necessary. I think it was necessary because, with regards to this contract, it essentially brings about some action, because the previous government had put off making some fairly tough decisions on energy management.
With regards to the issue of selling off assets, we had fought to prevent the Yukon Party from giving away the store previously, and as I go through this, I take a look at this, I see all kinds of interesting things in here. The idea of rationalization - this is a little gem that comes out, "Where do we want to go?" Well, it looks like we want to go in merging YEC and YECL. Yes, and what do you think? Well, talk about a leading question: "Do you believe that the government-owned Yukon Energy Corporation, the privately owned Yukon Energy Company Ltd., should be merged into one?" This is the Yukon Party.
And I think the actions that are being undertaken are, to be quite blunt, extremely modest when I take a look at this kind of rather frightening proposal.
We see this new arrangement as being responsible and far-sighted. It gives YEC and the government more leverage to deal with energy issues - energy issues which have not been dealt with in a long time.
It allows for clarification of operational functions. It gives YEC more control.
Speaker: Order please. The time being 5:30 p.m., the Speaker will now leave the Chair until 7:30 p.m. tonight.
Debate on Motion No. 54 accordingly adjourned
Recess
Hon. Mr. Harding: I move that the Speaker do now leave the Chair and that the House resolve into Committee of the Whole.
Speaker: It has been moved by the Government House Leader that the Speaker do now leave the Chair and the House resolve into Committee of the Whole.
Motion agreed to
Speaker leaves the Chair
COMMITTEE OF THE WHOLE
Chair: I will now call Committee of the Whole to order.
As members are aware, the House passed a motion yesterday, April 8, 1997, which stated that at 7:30 p.m., on Wednesday, April 9, 1997, Rob McWilliam, president of the Yukon Energy Corporation, and Cam Osler of Intergroup Consultants, a company on contract with the Yukon Energy Corporation, appear as witnesses before Committee of the Whole to discuss the financial status of the corporation.
Witnesses introduced
Chair: I would like to welcome Mr. McWilliam and Mr. Osler. I would also like to remind both members and the witnesses to address their remarks through the Chair.
Hon. Mr. Harding: I would like to welcome tonight Mr. McWilliam, president of the Yukon Energy Corporation, as well as Mr. Cam Osler, who works with the Energy Corporation and has for a considerable number of years as a consultant. He has been involved, I think, from the NCPC transfer and, perhaps even before that, had worked with the Yukon Energy Corporation.
We have asked the Yukon Energy Corporation to come before the Legislature to respond to some of the more technical questions, to respond to some of the issues that have been raised surrounding the recently announced proposed rate increase that they intend to be pursuing before the Yukon Utilities Board as a result of losing their major customer, the Anvil Range mine.
It is my understanding that the president has some opening remarks that he would like to relay to members. I also have a couple of questions him. Then I assume we will open up the floor for questions. I think that, in the interest of expediency, I will allow Mr. McWilliam to begin his remarks.
I hope that, by way of opening up the discussion and asking the first question, in his remarks he can perhaps clear up a question - or if not clear it up, at least explain the rationale for one of the issues that is often identified in the public's mind in the Yukon. As a result of rate increases from 1993 and the subsequent Yukon Utilities Board hearings in 1995, there is a perception in the public that when the Faro mine goes down, rates go up; when the Faro mine goes up, rates go up, and on and on it goes.
Mr. Chair, the members opposite are saying it's not a perception. That is why the member is here, to hear it. Certainly, that is an issue on the minds of many Yukoners. With that, I would ask Mr. McWilliam to begin and open up the floor.
Mr. McWilliam: Thank you, Mr. Chair. To speak first to Mr. Harding's, I guess, question, it's certainly something which we're hearing on the streets, we see in the media, et cetera. It's a very interesting factoid. A mine goes down; prices go up. A mine comes up; prices go up. It has a certain ring to it that sort of captures the public imagination. Unfortunately, it doesn't happen to be true.
I think people have to bear in mind what happened in 1995, when the GRA for 1996-97 was being addressed. The mine was back and there were indeed savings, but the savings were directed to certain classes of customers rather than spread generally across. If you were to average it out, I believe the average was an eight percent saving, but residential customers, those who are particularly watching their bills, wouldn't have seen any saving. Their rates stayed roughly the same. The people that saved substantially were commercial customers and municipal governments, where there were large savings in the 1996-97 GRA.
So, there was an effort by the Utilities Board to try and rebalance the rates to come closer to having all categories of customers paying full cost of service, and that meant that some of the categories of customers who were paying far in excess of 100 percent had their rates moved down, while the residential customers who were paying approximately 80 percent of the cost of service really didn't see an impact on their rates.
So, to try and deal with Mr. Harding's comment, I think our position is the rates very definitely went down when the mine was reopened, despite how attractive the factoid might sound.
One of the other things which I think is on the street now and which I've certainly heard with some concern is the comment about the impact of mining on the rates, the questions that are being raised about the benefits of mining to the territory when you have these type of impacts occurring on electrical rates as a result of the mine closure. I think what we need to appreciate is that there are both costs and benefits to mining, and that relates to energy rates as well as other aspects of the economy.
The point that I think needs to be stressed is that of the electrical infrastructure that we have in the territory, all of the hydro facilities are basically here as a result of various mining activities.
We are the beneficiaries of mining through the expansion of our electrical infrastructure. If we were trying to provide the same service to just the average residential and commercial customer, our base wouldn't be large enough to justify the investment that we have in hydro capacity. So, we have been beneficiaries. At this particular point in time, we're faced with some of the costs, but I think it's important that we recognize both sides of the equation.
The corporation is in a situation where we have to deal with some very fundamental challenges right now. We've lost our major customer. Over 40 percent of our revenues were tied to the mine in Faro. There is considerable uncertainty about the Faro mine's future, and it's likely to be several months before we're able to resolve issues around when the mine will come back and under what circumstances. And thirdly, we were looking at the situation where we were going to have to go to a general rate application in the fall for 1998-99. Putting all three of these factors together, and looking at the emergency situation that we were dealing with in terms of our revenue shortfalls, we felt the most appropriate way to address it would be to go for an interim, refundable rate rider. And that's essentially what we will be going forward to the Yukon Utilities Board for.
Just to review the basis for our application, I think there are a couple of points that are important to emphasize in terms of the difference between the situation in '93 and the situation we're currently facing. One factor is that, in '93, Curragh basically stayed on the system as a customer. They weren't paying their bills, but they were still a customer. We were continuing to demand charges and, through the Yukon government entering into a memorandum of understanding with Curragh, we were eventually able to recover some of the lost revenue.
The situation with Anvil Range is very much different. They formally disconnected as a customer on April 1st and they've been able to operate using their own standby diesel, so we are no longer in a position where we are getting the demand charges, let alone selling any energy to the mine, and that has compounded our lost revenue situation.
What we're looking at for 1997 is the reduction in revenue that we're going to be experiencing between April 1st and December 31st. Strictly from Anvil Range, this is $11,614,000. Now, we are attempting to do what we can to offset our costs. Certainly there is over $4 million in diesel that we won't be expending. We're reducing our labour and materials as best we can, but doing it in sort of an orderly, phased-down manner so we can ensure that the equipment is properly mothballed before we leave it. So, there's about $400,000 in savings on labour and materials, and we have what's called the flexible term note with the federal government, which relates to the fourth wheel and the transmission line to the Faro mine, where we don't pay if there is insufficient demand from the mine. We'll save about $970,000 on that. That leaves us with a shortfall of $5,548,000 - sorry, I beg your pardon. That's the total of the reductions that we can make, and the net reduction in earnings that we're facing is slightly over $6 million, if we're being faced with that situation.
And that, I should emphasize, ignores the arrears that we currently have with Anvil Range and the fact that we recognize that there are going to be lost residential and commercial sales, particularly in the Faro area. But simply with looking at the Anvil Range situation, we're looking at a loss in revenues of $6 million.
Given that, we had to look at what our options were, and we looked at a number of scenarios. One would be to try and recover just our losses over the balance of 1997. Another option would be to look at recovering all of our potential losses, which would have included going after the arrears - declaring them bad debt - which we have not yet done, and factoring in the lost sales that we anticipate from the community of Faro. Or, a third option - and the one which we have attempted to put forward - is to look at spreading our recoveries over 20 months, as opposed to simply the balance of 1997, and that would result in our coming forward with an application for a 20-percent increase in rates effective May 1st.
What we are looking at is proposing to the Utilities Board that several actions be taken. As I mentioned, obviously one is to come in with an interim refundable rider, which would basically exist until such time as the mine came back on, if it comes back on earlier, or when the GRA is dealt with in the fall.
The second recommendation that we have for the Utilities Board would be that they deal with the general rate application for 1998-99, plus finalizing the rates for 1997 in
October of this year.
A third recommendation deals with something which is called rider G, which basically deals with the situation where, because of the timing on the previous GRA, there were overpayments from customers and we were remitting money to them as we were able to bring it in from Anvil Range.
Currently, rider G deals with only the territorial and federal government. All other customers have had their accounts brought into balance again, but if we suspended rider G, we would be suspending payments in the order of $400,000 to territorial and federal government departments.
And, finally, we're asking the board to clarify our understanding of what the situation is with the mine at Faro as it relates to what is called schedule 39, the industrial rate schedule which deals with the demand charge, how long a company has to be down before they can go on site maintenance rate and how long they have to anticipate they would be down. The other schedule, site maintenance rate, is schedule 40, and we're also seeking some clarification of that, just to ensure that our understanding of those two particular rate schedules is consistent with what the board's understanding was.
That's basically what we are proposing to go to the Yukon Utilities Board with.
I would turn it back to you, Mr. Chair.
Chair: Thank you, Mr. McWilliam.
Hon. Mr. Harding: Often in the House, there can be strong words used. I am not so sure that it's always something members mean to do.
Mr. Chair, I would like to ask the president of the corporation about concerns that have been bandied around about the solvency of the corporation. Could you speak in general terms about your views of the solvency of the Energy Corporation as it stands now?
Mr. McWilliam: As I am sure all members are aware, we are under instruction through order-in-council to maintain a 60/40 debt/equity ratio. We are complying with that. Our concern is dealing with the fact that we aren't going to be making any dividend for this year, which would reduce our ability to deal with situations such as providing money for rate relief or future infrastructure development, et cetera. But, we are a long way from being insolvent.
Hon. Mr. Harding: I will just ask one more question and then turn it over to the Opposition.
I wrote a letter making a request of the chair of the board that, prior to making an application for rates, the corporation have some discussions with stakeholders or interveners - people who traditionally intervene before the Utilities Board on issues pertaining to energy and energy rates. Could you explain to the House if any of those discussions have taken place and what some of the general concerns and general impressions you got were?
Mr. McWilliam: Thank you, Mr. Chair. We did contact all of the parties who were registered as interveners in the previous GRA. We also looked through a list that the Energy Commission has developed - what they call stakeholders - to ensure whether there were groups that were broader than that list of interveners at the last GRA. We then sort of compiled the list, which we contacted late last week. We offered all those groups an opportunity to participate in a meeting with us, where we would go through our situation, speak to the application we were putting before the board to, essentially, see if they had any further suggestions for areas that we should pursue that we simply hadn't identified yet.
As I say, we contacted all the groups that had previously intervened. The offer that we made to all those groups was that we would encourage them to come to the briefing session, which we did today, or alternatively, that we were prepared to sit down with them individually if that was more convenient and appropriate in their case.
We had approximately 50 percent of the interveners from the previous GRA at the meeting that we held today and it was a very useful discussion. They suggested a number of items that we will pursue. Most of them tend to be more long term. I think there's a clear recognition of the emergency nature of what we're dealing with now and the steps that we're taking to address it, but there were a number of suggestions that dealt with a more long-term response and particularly things that we should consider including in the next GRA.
We are currently reviewing the application we're putting forward to the Utilities Board to ensure that we factored in any of the comments that we received from those intervener groups.
Mr. Ostashek: Thank you, Mr. Chair. I want to thank Mr. McWilliam and Mr. Osler for appearing tonight. I don't think there's anybody in this room, or in the Yukon, who doesn't think that we're in a very serious situation in the Yukon when it comes to power.
I want to explore with you this evening what the true financial position of the corporation is, how we got there and some of the options for getting out.
We did have a briefing from you, Mr. McWilliam, about a week ago, and got some of the numbers, and I just want to go back into them. While you have said here tonight that the corporation is not insolvent, I do believe that you would agree that we are faced with a very serious cashflow problem in the short term. And how we get out of that without impacting on how we're going to deliver power to Yukoners at a reasonable rate over the long term is the challenge that's facing us today. And so, we'd like to get a better understanding of the actual commitments that the Energy Corporation is going to have to deal with over the next 12 months - what's going to have to be paid out. You've touched on some of them. There's going to be a $4 million savings in diesel; there are going to be some staff reductions and purchasing - that'll save another $400,000 and $970,000 saving on the flex note. And as you relayed to the Legislature, that's going to leave you with a $6 million shortfall on that side alone.
There are some other things that we explored with you at the briefing we had a week ago that I would like to touch on now and get clarification on. And I know that will change now that the Faro mine is not on the grid, but the decision not to draw down Aishihik Lake I believe has put substantial pressure on the cashflow of the corporation. I believe the figure that was given to us was $4.7 million - the cost that was spent on diesel - not to draw down Aishihik Lake.
I'll let you answer now. I don't want to go on forever. I think I'd sooner do this on a Q&A, rather than go on forever and then ask you to go on forever to answer it.
Mr. McWilliam: Thank you, Mr. Chair. I certainly appreciate the consideration. I'm not inclined to go on for ever.
I think that Mr. Ostashek has really put his finger on the problem. What we're dealing with here is a cashflow issue as opposed to insolvency. We do have a serious cashflow problem that we're dealing with. The Development Corporation, as members are aware, is the recipient of dividends, which come in from the profits of the Energy Corporation. The owner of the corporation, the Yukon government, has, from time to time, instructed us to use that money in various ways - for rate relief or economic development investments in the past or, more recently, to hold so that we had sufficient funds for infrastructure development so we could proceed with some of the bigger-ticket items by having some no-cost capital available, which would certainly sort of improve the economic calculations when you go to look at things like major transmission lines.
The decision that the government made in December - and I won't go into the background to that decision; that was a policy decision - the instruction to the corporation, was to ensure that we protected the bottom two feet of water in Aishihik Lake and, essentially, to hold the ratepayers harmless from that, which would mean that that would become the first draw on our earnings.
And, when we get into a situation, as we are obviously in, where it either exceeds our earnings or, as the problem that has been compounded with Anvil Range, we don't have any earnings, we have to fall back on the reserves that we have in YDC. At the time that the decision was made in December, the best calculation that we could do was that the impact of the decision would be approximately $3.7 million.
What's happened since that time, or it actually had started around that same time, is we experienced a 30-percent increase in the cost of diesel over the last six months. So that has certainly compounded the problem.
Other than that, we're looking at a situation where, you know, we were running YECL diesels in the communities. We had Anvil Range running their diesel for us. All the bills aren't in yet. All we can really say at this point is that the cost of the Aishihik decision to the Development Corporation is going to be between $4 million and $5 million.
Mr. Ostashek: Well, I thank the president for that.
So, I just want to clarify it for the record. The decision not to draw down Aishihik Lake within the allowable licence was a policy decision that was made by government and relayed to the Energy Corporation, and the decision was then approved by the board after the fact. Am I correct on that?
Mr. McWilliam: You have to bear with me in terms of the sequence here, but my recollection of the situation was that we received an order-in-council from the Yukon government, as our owner, instructing us on how to deal with the two feet of water. To effect that order, we then had to pass a board resolution, which the board proceeded to do.
Mr. Ostashek: Okay, I thank you for that.
Now, this $4 million to $5 million as a cost of that decision has impacted on the cashflow of the corporation quite substantially.
I guess before we go further, I'd like to know if you can relay to this House: are we going to be spending any money on diesel fuel on the grid, now that the Anvil Range mine is down, or will we be able to carry it all on the hydro?
Mr. McWilliam: Mr. Chair, we're dealing with a situation where we are experiencing very low water flows. That's not only the situation with Aishihik. That's also the situation with Whitehorse. We're operating considerably under capacity with Whitehorse hydro as well. With the Aishihik situation, we're sort of within a week to two weeks of the usual turnaround, which would mean that there would be some water there, but normally we rely on the Whitehorse hydro for our summer generation. Water levels are low. I certainly would not say that we can rely exclusively on hydro, even with the mine down, because of the water situation.
Mr. Ostashek: I guess my next question then is this: I understand that water levels are low, but if the corporation had not been instructed to not utilize the last two feet of the licence at Aishihik, would we have been able to carry the demand on the grid without using diesel?
Mr. McWilliam: I'm not an engineer, and I hesitate to tread into some of these areas, but my understanding is no, we would have had to use some diesel.
If we had average flows, it would have been a different situation. We have sub-average flows, and we were in a situation where there was the potential to use water out of Aishihik during the first three months, that we didn't, but we would have still had some diesel requirements.
Mr. Ostashek: Thank you. I'm trying to get my head wrapped around this, because we've had low-water flows for several years now. This is not the first year. I think we're into the third or fourth year of the drought cycle in the Yukon.
I could be wrong on this, and I don't want to get into a debate with the president on it, but I believe we were handling the demand on the grid with hydro, prior to Anvil Range coming back on stream. Am I correct in that?
Mr. McWilliam:
I think, with a couple caveats, I would say yes. One of the things was we had a fairly full reservoir before the mine came back on. What we've been doing, while the mine has been operating, is drawing down that reservoir.
Mr. Ostashek: Okay, I thank the witness for that. I'll ask a couple more questions and then I'll let some of my colleagues in here. There are a couple more points that I would like to make while I'm on this.
This morning we heard the minister on the radio saying that the shortfall could be as much as $10 million. Could the president inform this House - it is probably not fair to ask the president, but I expect the minister got the information from the president that there could be a $10 million shortfall -
how that calculation was arrived at?
Mr. McWilliam: I'm sorry, Mr. Chair, I'm not sure that I know exactly what shortfall the minister was referring to. We have a situation where, as I said, we've got a net reduction in earnings of $6,066,000. We also, if you factor in GST, have about $4,100,000 in arrears with Anvil Range. I'm putting words in the minister's mouth by trying to figure out which shortfall he was referring to, but I assume that he's looking at the two aspects. What we are proposing to do with the interim refundable application that we're going forward to the board with is to say let's set aside the arrears. We still have hopes, based on some discussions with Anvil Range, that we will be able to collect that money, including the interest on those arrears. So we're not determining that as bad debt at this point. We're essentially setting that aside in our calculations for the interim application.
Mr. Ostashek: Thank you. I just have about two more questions and I'll let somebody else go.
Mr. McWilliam, when you were giving your opening comments, you stated that residential consumers were paying less than 80 percent of the cost of service. Am I not correct that with rate relief they are paying far less than 80 percent? It's somewhere in the neighbourhood of 65 percent of the cost of service. Am I not right in that?
Mr. McWilliam: That's correct. Rate relief does compound the problem. We have a situation where residential consumers are paying the lowest part of the cost of service and there's rate relief on top of it. Yes, it compounds it.
Mr. Ostashek: Thank you. I guess the next question I have for you is about the Anvil Range bill. How long has it been in arrears? How long has it been since they've paid their monthly bill in full? Could you just relate to the House as to how far this goes back?
Mr. McWilliam: Mr. Chair, in January we received payment of the December bill. In February, when we were trying to seek payment of the January bill, we weren't successful. So, basically the arrears are from January on.
Mr. Ostashek: Is it standard practice for the corporation to allow customers to get this far in arrears before any action is taken?
Mr. McWilliam: Certainly it is not standard practice. We did take action. We have filed a miners lien in early March on the arrears at that point and we've updated the lien since then.
Mr. Ostashek: Was the minister made aware that Anvil Range was in arrears, and when was he made aware?
Mr. McWilliam: Thank you, Mr. Chair. I don't think we have made any secret of the fact that there have been arrears. We've been prepared to provide that information to the media, to anybody who has inquired.
The minister was certainly advised, along with other parties, that there were arrears. We are participating with a number of government departments in a group which is dealing with the Anvil Range situation. The information is being communicated through there, as well.
In terms of when the minister was made aware of it, I can't give you a firm date on it.
Mr. Ostashek: Thank you. I have one more question. When the minister was made aware, were there any instructions given from the minister or from Cabinet as to how to deal with it?
Mr. McWilliam: No. It was basically being provided to the minister as an information item - you know, this was something that the corporation was dealing with. As I recall, we indicated the measures that we proposed to take in terms of filing a miners lien. We followed the first miners lien on the property. There have been subsequent ones since, but there was no instruction; it was simply information.
Mr. Cable: Let me just briefly go over the variables that you're dealing with right now. You have the Anvil Range Corporation, which is presenting problems on two fronts: there is a recovery of this fairly large receivable, and there is the Anvil Range loss of sales, which I think you mentioned netted out to $6 million after you credited some of the savings. There is the extra diesel expense, which is the diesel price increase and the diesel volume increase, because of the Aishihik decision. There is the court case for the recovery of the money granted through the Court of Appeal and back to the Public Utilities Board, which presumably won't bear on your cashflow, but will affect rates.
You have indicated that the rate relief was funded, but I think, from what you've said, there aren't any dividends to fund rate relief any more. You have indicated, as I think most people are aware, that precipitation is down in the two water basins that feed the two sets of dams.
Do you do a best case/worst case scenario, or are you just picking one single number that you're working on?
Mr. McWilliam: Thank you, Mr. Chair. Frequently, I wonder who wants this job next, but, as long as I have it, we look at a number of scenarios. We look at best case/worst case. We've tended to be conservative with the numbers that we have and use worst case numbers. In our scenarios we've sort of assumed that Anvil Range was going to go off and there would be no demand-charge money coming in. So, the fact that they did, we had sort of factored that in.
So, yes, we are very definitely looking at scenarios.
One point that you made about funds for rate relief - one of the things that we identified as an obligation of the corporation was the current rate relief program for residential ratepayers, and I would assume that, if we go forward with and are successful in getting the board to grant the interim application that we're filing, that would be one of the things the government would deal with in terms of how they want to address the issue of impact on ratepayers. That would be a government issue.
Mr. Cable: Is the rate application that's going forward prepared with a view that there will be profit generated so that there will be rate relief money to distribute around? I know it will go in one pocket and out the other, but is that your intention?
Mr. McWilliam: Thank you, Mr. Chair. Yes, essentially what we're trying to do is protect our earnings to try and ensure that we comply with the order-in-council directive, that we maintain a proper debt/equity ratio. And, as you say, the earnings may very well go in one pocket and out the other, but that would be a decision for our owner, the Yukon government, to make in terms of how they want to deal with the earnings.
Mr. Cable: Now, on your financial position, I'm not going to call you "insolvent" because I know that you don't like that and the minister doesn't like that, but are you now meeting your bills? Are you paying your bills as they come due with the cash that's coming in?
Mr. McWilliam: Thank you, Mr. Chair. Categorically, I can reply, "Yes".
Mr. Cable: I think the president, Mr. Chair, was on the radio the other day, if I heard him correctly, saying they were in the red. If you don't get this rate increase - I mean, you are in one of these corporations where, of course, I suppose technically you can never go insolvent because the ratepayers are there to grab onto - but if you don't get this rate increase, when are you going to go into the red and be unable to meet your bills as they come due?
Mr. McWilliam: Thank you, Mr. Chair. The member is asking me to cross a whole bunch of bridges I don't think we've even approached yet. I think that we have some scenarios that we would look at, depending on what level of rate increase the board felt was appropriate. I mentioned before that one of the things we are trying to do right now, is an orderly shutdown, which means that we're mothballing equipment, ensuring that it's ready to come back on when the situation turns around.
There is another scenario if our revenues, sort of, remain down, and that's slash and burn. And that would become essentially where we'd have to go. There are a number of deeper cuts we'd have to make that would have an impact on the ability of the corporation to, sort of, move forward with some of the things that are priorities, but the reality would be, simply, we wouldn't have the money for them. We propose to address that when we get to that point.
Mr. Cable: What is the monthly cash shortage right at the moment? Can you give us a ballpark figure, just so we know how serious this problem is?
Mr. McWilliam: Mr. Chair, I'm sorry. We're sort of groping for numbers right now. I don't have the numbers available to answer the member immediately. We can provide that information.
Mr. Cable: Yes, I would appreciate it if you would.
Now, I think one of the options that you were talking about, when you were talking about the recovery of the losses, was the spreading of the losses together with the bad debt receivable over 20 months. Now, that wouldn't mesh with the period of the loss, would it? The $6 million loss, I think, accrues to the end of December. What's the rationale for having these out of sync?
Mr. McWilliam: I think probably the way to deal with that is to first go in a bit more to the situation with 1998. In our calculations and what we're going to forward to the Utilities Board with, we have assumed that Anvil will stay down for 1998, for, sort of, calculation purposes. That would mean then that we would have the full impact - like a year's impact - of the shutdown, but we would have gone through the more extreme transition blip that, you know, has been experienced twice before when this mine has shut down. The first year, there's always a lot of transitional costs that have to work their way out before we get back to more of a stable state.
What we're projecting in our application to the board is that if the mine stays down for 1998, there would be a net reduction in earnings of approximately $5 million for 1998, as well. And what we've tried to do is spread the recovery over that 20-month period for the projected losses of the 20 months.
So, we will underachieve our earnings for 1997. We would be slightly over our normal earnings for 1998 as we re-balance the situation, bearing in mind that we've done these calculations with the understanding that we would be going into a general rate application in October 1997, and there would be a final re-balancing of the 1997 numbers as well as looking at what rates they would approve for 1998-99.
Mr. Cable: I have questions in some other areas, and I'll just finish off here and turn the floor back again.
This 20-percent rate increase, is that based on our worst case scenario and the recovery of the loss over the 20-month period?
Mr. McWilliam: Thank you, Mr. Chair.
It's worst case in terms of we're assuming that the mine stays down for that period, and I think I have to emphasize that, because what we're looking at here is an interim application. If the mine comes back up, then the situation reverses.
In the GRA application this fall, we will have to deal with the issue of bad debt if we have not been successful in collecting the arrears from Anvil Range. We'll also have to deal with the retail sales losses that we anticipate for Faro, particularly, but commercial customers more generally. And the 20 percent really leaves the corporation, you know, less than completely whole, but we thought it was an appropriate amount to share with ratepayers. Essentially what we would recover, given 20 percent in 1997, is $4.6 million. As I said, our net losses are over $6 million, so we're still going to experience a shortfall there, but it's a manageable shortfall.
Mr. Cable: I have a couple of questions that arise from that. I need some clarification. The 20-percent rate increase does or does not include the Anvil bad debt?
Mr. McWilliam: It does not. It does not include either the arrears - you know, I'm using the word "arrears" very advisedly, because we're still not considering that bad debt. We have had discussions with the company about recovering that money and, you know, we're prepared to take other measures beyond what we have already to do so. So, we have not yet declared that as bad debt.
The other thing that it does not include is the retail sales losses for Faro, particularly, both the residential and commercial out there, besides the mine.
Mr. Cable: If you do not get this rate increase, what is the projected annual loss for the period ending December 31, 1997?
Mr. McWilliam: The total? Okay. First of all, our projected loss would be the $6,066,000, but if we were unable to realize any of the payments on the Anvil Range arrears, that would be about - and, we factor in the lost retail sales, and bearing in mind that bad debt is amortized over five years in rates, we would be looking at an additional $1.3 million for 1997. So, you can add that $1.3 to the $6 million, and $1.9 million in 1998.
Hon. Mr. Harding: On redirect, Mr. McWilliam. I have a couple of questions on some of the issues that were identified in some of the debate that has gone on so far, with some of the Q&A.
I'd like to ask Mr. McWilliam if, when the Faro mine returned to full operations and decisions were made to reduce some classifications of rates - commercial being one - and to set up reserve funds, was there any direction or encouragement given the YEC by government to reduce the rates to residential consumers at that time?
Mr. McWilliam: Thank you, Mr. Chair. I don't believe I can answer that question. I wasn't in the corporation at the time, and it would be strictly hearsay.
Hon. Mr. Harding: Perhaps Mr. McWilliam could let me know the answer to that at some future point.
With regard to the issue of the Aishihik Lake decision, it was funded by reserves of the Energy Corporation through YDC as opposed to the cashflow. Is that not correct?
Mr. McWilliam: That's correct. That was the direction in the order-in-council, Mr. Chair.
Hon. Mr. Harding: Did the decision to not draw down the bottom two feet contribute to the interim rate application that is proposed to go before the Yukon Utilities Board in the near future?
Mr. McWilliam: Thank you, Mr. Chair. No, we're dealing with, in the interim application that we will be filing, simply the loss of Anvil Range as a customer. It's a one-issue application that we're submitting and that's one of the reasons we hope that the Utilities Board is going to be able to address it promptly.
Hon. Mr. Harding: On the issue of Aishihik Lake and its hydro generating capacity, one of the issues that is of concern is the seasonality of the use of the lake, its impact on the hydro generating capacity, whether the Anvil Range mine is operating in the summer months or whether it's operating in the winter. Could the president perhaps explain the impact on costs as it relates to Aishihik Lake and the impact on the draw down in the summer versus the winter when the mine is operating?
Mr. McWilliam: Thank you, Mr. Chair. It's a very broad question that's being addressed to us. By way of answering it, I think to provide a bit of background on how we operate the Whitehorse-Aishihik-Faro system is important. We use Aishihik primarily during the winter because that's where we have storage capacity. We primarily try to use Whitehorse hydro during the summer because that's run of river system; we don't have storage capacity there. So, the minister is bang on in terms of talking about the timing for the mine going down being very unfortunate.
Unfortunately, they did the same thing in 1993. They seem to pick the most awkward time for the mine to go down, just after we've gone through the four months of highest energy use and at a point where some of our other supplies are starting to come on line. So, we certainly would have appreciated better timing on their part. But I'm not sure if I'm answering the minister's question. Essentially, during the summer out first objective is to use the Whitehorse hydro; during the winter when that's a lower source, then we rely on Aishihik.
Chair: Is it the members' wish to take a short recess at this time?
Some Hon. Member: Agreed.
Chair: We will take five minutes.
Recess
Chair: I will now call Committee of the Whole to order.
We will continue with questioning.
Mr. Jenkins: Thank you very much, Mr. Chairman. If I could just explore with the president the 1995 statements of the Yukon Energy Corporation, they show retained earnings as $36 million, and in the same statement it shows the corporation will be borrowing $12 million to pay a note to Canada in 1997. This would indicate to me that, before you take into consideration all of the factors - the Anvil Range shutdown, the drawdown of all of your cashflow for purchasing diesel to augment not drawing down Aishihik Lake and the diesel depletion fund - there is a cashflow problem within the corporation. Is that not so?
Mr. McWilliam: No, I don't think I could agree with the member that there was a problem before all of these situations. The borrowing that the member is referring to was done to pay down a loan that we had with Canada at a fairly high rate of interest. We were essentially able to negotiate a much better rate of interest with a commercial bank, and so it was sort of prudent to get out of that one.
It has also been pointed out to me that that particular note came due on March 31st, 1997, so it was just sort of regular business.
Mr. Jenkins: Now, let's explore the debt that has been incurred by Anvil Range. A debt of this magnitude - is a decision to allow that to be incurred decided at your level, Mr. President, or is that a board-level decision, or does that require the ministerial approval?
Mr. McWilliam: Thank you, Mr. Chair. It's something I've raised with the board in terms of how we were going to deal with it. I think one of the things that's important to bear in mind is that while I sort of highlighted some differences between the situation we have now and the situation that the government and the corporation were experiencing in 1993, one of the things we do have is the legal history of how we were able to recover our money for Curragh's bad debt, and we were basically proceeding along those lines with the filing of the miners liens, and we're now looking at taking, sort of, additional action against Anvil Range to expedite their payment. But it was something that was discussed with the board, and they provided me with direction to ensure that we did file the liens and took what steps we could.
Mr. Jenkins: Thank you, Mr. Chairman, but Mr. McWilliam, what we have not received is an answer to the level - is it a presidential decision, a board decision, or a ministerial decision? To incur a debt obligation or an accounts receivable of that magnitude, at what level is the requirement for that authority vested in?
Mr. McWilliam: It's a complex issue and one that perhaps my sort of lack of experience in the corporation leads me to be able to give you a less-than-satisfactory answer. But my understanding is that these are the types of situations that I would take to the board, which we've done on a sort of monthly basis, and we would deal with it within the corporation.
The minister is provided information, in terms of what the situation is, but we've certainly never sought direction from him in terms of how we dealt with the arrears.
One of the things that I think that's important to bear in mind with the situation we have in terms of the Anvil Range arrears is, first of all, every customers is entitled to 30 days in arrears before we would take any action. And, we're dealing with a customer whose bills are in the millions of dollars a month. So, it doesn't take very many months before the situation escalates rapidly. It was that situation that led from the first failure to pay in February - when they were given the January bill - to the situation, where, at the end of March, we were facing $4 million in arrears on the March bill.
Mr. Jenkins: Let's cut to the chase. Who actually made the decision to allow this order of debt to be incurred by Anvil Range? Who in the corporation allowed it to occur? The outcome of this kind of accounts receivable could have an impact on all the ratepayers in the Yukon. So, who made this decision?
Mr. McWilliam: Thank you, Mr. Chair. I would have to say, as president and chief executive officer of the corporation, I'm responsible for the day-to-day operations of the corporation, so I would take responsibility for that.
Mr. Jenkins: Thank you, Mr. Chairman. So, the decision was made by yourself and then subsequently ratified by the board.
Mr. McWilliam: That's correct.
Mr. Jenkins: Thank you very much.
Let's go back a while. If we look at the Whitehorse residential rates in 1986, we were at seven cents a kilowatt hour, and if you look at it in 1996, we're at 11 cents a kilowatt hour. This is stripped of all of the rate relief and rate riders that are in place, or have been in place, and subsequently removed. Over that past 10 years, there has been a 57 percent increase in electrical rates to the residential consumers here in Whitehorse. Now, what I hear advocated over the past little while, is probably as much as another 55 to 60 percent increase, compounded. Is that not the case?
Mr. McWilliam: Thank you, Mr. Chair. Perhaps the member could sort of bear with me and provide a bit more explanation of where he's getting his figures from. I don't understand where he's looking at the 50 percent compounded increase - if he could walk me through that a little slower.
Mr. Jenkins: Well, if you look at the two rate increases that have just been incurred, they compound to just over 11 percent. Now, you compound that again with another proposed - or what you're suggesting for Anvil Range shutting down - 20 percent. Then if you look at what will happen - you just indicated to the House that the 20-percent increase applies solely to Anvil Range shutting down. Now, if we don't recover the indebtedness that Anvil Range has incurred, there's going to be another subsequent increase to recover that rate. Then we have to build up our reserves, Mr. President. That compounds out, according to the numbers I've put together, at between 50 and 60 percent.
Mr. McWilliam: I think the member has raised a couple of points that help me to understand his calculations. I am not sure that I would agree that we want to take something like building up the reserves and automatically assume that that's going to result in a rate increase. That's an issue that the corporation is going to have to deal with on an ongoing basis. Certainly, given what's happened with rates, I think there would be some reluctance to build up those reserves, as you put it.
The reference was to 11 percent. I think we have to bear in mind that what we are dealing with is a 5.5-percent rate rider that was put on to deal with the results of the appeal decision. We have a three-percent rider, which is on there for diesel, which will be partly mitigated by the situation with Anvil Range. We are now looking at an additional 20 percent. If the worst case scenario was that we were unable to recover any of the arrears from Anvil Range, which, I would suggest, is extreme, then, yes, we do have some additional losses, which I identified. But, I don't see how that works up to 50 percent.
Mr. Jenkins: Let's explore this agreement in principle that we have with the Alberta Power people. The management side, we are told, would be a $200,000 saving. Let's not even deal with that issue. Let's look at the transfer of assets. I think they are poles and wires, $4 million. The resulting loss and return on investment on that $4 million will be, in one year, how much, Mr. McWilliam?
Chair's ruling
Chair: While we are waiting for the answer, I would like to remind members to address their questions through the Chair. Thank you.
Mr. McWilliam: Thank you very much, Mr. Chair. I guess I'm caught a bit off guard, because I had understood that we were here to deal with the financial status of the corporation. I didn't bring materials dealing with the agreement.
As I understand it, what the member is dealing with is the differential in rate of return, which is a number that we had provided previously. I don't recall it off the top of my head, but by order of magnitude it was about $20,000. The argument has become a policy one in terms of whether the corporation is going to be able to invest the money that it is getting from the sale of those poles and wires into other infrastructure, which is the intention, and how quickly it can do it, and therefore what the gap is in terms of the timing. I suspect that that is sort of leading me into the realm of policy issues.
Mr. Ostashek: Thank you, Mr. Chair. I guess there has been a misunderstanding. We thought we were going to be able to question the witnesses on the new management agreement as well, but if we can't I would ask the minister if he would make a commitment now that he will provide the president, and possibly Mr. Osler, to give us a private briefing in the next week or so some time on the management agreement.
Hon. Mr. Harding: If the motion was for the financial status, to discuss that, but if there's some general questions this evening that are not too detailed, they obviously can speak to some of them off the top of their head, but if there is some more detail, I'd be more than pleased to have Mr. McWilliam provide a more detailed briefing again for the member.
Mr. Ostashek: Thank you. Well, I have a few more questions on the financial status of the corporation and I just want to get some clarification from our briefing the other day.
Now, I guess the figure we got the other day was $4.7 million in extra diesel fuel by not drawing down Aishihik Lake. Am I correct in that figure?
Mr. McWilliam: Maybe that was one of the discussions that were going on at the time. As best I can recall, what I had said was the initial estimate was that it was $3.7 million and that we had experienced increases in diesel costs of approximately 30 percent. We were now looking at a situation where the Aishihik decision would cost between $4 million and $5 million.
Mr. Ostashek: Thank you, Mr. Chair. I'd like to ask the president, then: where did that money come from?
Mr. McWilliam: Mr. Chair, in the event that we have no profits, that money will have to come out of the YDC reserves.
Mr. Ostashek: Thank you. Then am I correct to say - while I agree with the president that the interim application is to deal with the Anvil Range shutdown - that had we not cut into our cashflow as deeply as we did because of the decision not to draw down Aishihik Lake, we may not have had to apply for a 20-percent interim increase because of the Anvil Range shutdown?
Mr. McWilliam: Thank you, Mr. Chair. Again, my unfamiliarity with some of the background in this may be a bit of a handicap but that would not be my understanding. The situation in 1993 was that we went forward with an application that would have seen us, sort of, protect our return on investment, and that sets aside what the owner has done with the dividends. So, I guess I'm not sure that the board would have made the choice to draw down the reserves of the corporation to basically extend out the inevitability of going back to the ratepayers. That would have been something the board would have had to address.
Mr. Ostashek: Thank you. I understand that but, at the same time, I also understand that the board doesn't have the ability to make that decision now because we don't have the reserves in the Energy Corporation. Am I not right?
Mr. McWilliam: Thank you, Mr. Chair. Our options are certainly somewhat constrained. I'll leave it at that.
Mr. Ostashek: Thank you, Mr. Chair. If I could ask the president: how much is in the YDC pool of money that was being set aside for further infrastructure development? Does the president have that figure with him this evening?
Mr. McWilliam: Thank you, Mr. Chair. Just off the top of my head, I believe we had approximately $8 million in there at the end of 1996 and we put another $2 million in at the end of 1996, so there would have been $10 million in reserves.
Mr. Ostashek: Thank you, Mr. Chair. Could the president tell me how much was the rate stabilization fund and how much is left in it today?
Mr. McWilliam: Mr. Chair, just for clarification, I believe the question relates to the diesel contingency fund? The diesel contingency fund, when it was set up through the previous GRA, using money that came in from the Curragh bad debt, which we recovered, and other things, there was approximately $4 million in there. The way that fund is handled, it can go plus or minus $4 million, and we draw down at the end of each year, sort of, an annual accounting. At the end of 1996, based on drawdowns from 1995 and 1996, there was approximately $2.8 million left in the diesel contingency fund.
Mr. Phillips: Thank you, Mr. Chair.
I want to go on to another matter that the witness talked briefly about earlier, and that is the Yukon River/Marsh Lake system and the fact that we draw it down and use it primarily in the summer months, I understand. What I'd like to ask the witness, Mr. Chair, is: because of the announcements at Faro this winter, have we been utilizing that system more than we normally do? Have we drawn it down any more than we would in a normal winter? Because some residents in the area have indicated to me that they feel that the water levels in the Marsh Lake system have been low primarily in the last few years because of the snowfall and the lack of rain, but also this spring it seems that the water levels lower than usual, and I just wonder if we've increased our usage from that system to try and offset some of the incurred costs with Anvil going down in the last few months.
Mr. McWilliam: Thank you, Mr. Chair.
No, we haven't increased the usage on that system. In fact, on an average basis, we're getting far less energy out of the Whitehorse hydro than would have been normal. I think what residents are seeing is the same thing that we're experiencing. It's the continued drought situation. As the member may be aware, we applied for an emergency amendment to our Whitehorse water application last year, which was granted. We are looking at having that extended for this year, because we are anticipating that the situation is going to continue to be critical in terms of water.
Mr. Phillips: Thank you, Mr. Chair.
So what the witness is saying is that they are going to be applying for the same kind of emergency application this year to close the gates earlier in the year and conserve more water than they have in the past. Is that what he is saying, and have they selected some dates on which they plan on closing the gates? I know last year, I think, they were about a week earlier or 10 days earlier than normal What's the plan for this year?
Mr. McWilliam: Thank you, Mr. Chair.
Last year, it was done as an emergency issue because of the low water situation and the fact that there had been no opportunity to sort of go through the normal process. We were advised by the officials with water resources in DIAND that it wouldn't be appropriate to continue to deal with this as an emergency-type situation. What we are applying for is an amendment to our licence that will allow us to deal with these situations as they occur, and what we are proposing is to basically track the same type of timing we had last year in terms of the same dates for closure.
I should add that we're just in the process of consulting with all of the affected communities and organizations on that licence amendment.
Mr. Cable: I've got some questions, Mr. Chair, about this franchise arrangement that's in the agreement in principle, but before getting there, I just want to clarify some of the numbers.
The worst case scenario that was calculated, showing the corporation about to show a $10 million loss, approximately, up to December 31st, does that include the likelihood that the precipitation conditions are going to be unfavourable, or are you waiting to see how that's going to play out?
Mr. McWilliam: The calculations that we have done did not factor in the assumption that it was going to be another drought year, partly because of the time when we get the information on snowpack readings. We know from anecdotal information that it's low again this year. But, the other problem with us, in terms of calculating how much water we're going to have coming into the system - a lot of our system intake comes in the form of rain during the summer. So, we couldn't factor that in at the time that we were looking at our various scenarios.
Mr. Cable: The snowpack forecast, or the water supply forecast, doesn't look too good. If the snowpack is below, or well below normal in eastern and central Yukon - if that comes true, and if we have a cool summer and the glacier melt is down, are we looking at significant increases in this figure of $10 million that you gave us?
Mr. McWilliam: First of all, I think I should clarify something. The member was raising the $10 million figure in reference to some discussion that the minister had had, and I was trying to explain where I thought that figure might have come from. That wasn't a figure that the Energy Corporation had developed.
If we are faced with continued low-water levels, the other important factor is what happens with the mine. If the mine stays down for an extended period of time, and there's an opportunity for the reservoir to recover, albeit much more slowly, that's one situation.
If the mine is coming back on, then we're definitely in a situation where we are burning more diesel.
Mr. Cable: Mr. Chair, the president indicated, though, that the precipitation and moisture problems, if we have any, are not yet factored into the equation. He also mentioned that the loss of sales due to the Anvil shutdown between April 1st and December 31st were something like $11 million - if I heard him correctly. For that period, what are the total sales projected for the corporation?
Mr. McWilliam: Unfortunately, we've got so many documents here, we would have to do some digging. What I can undertake is to get back to the member with the total sales figure. The sales to Anvil Range from April 1 to December 31 were $11,614,000. That's the loss in revenue.
Mr. Cable: If we could get the total sales for that period, then we could compare and see how significant it is.
I'd like to ask a few questions about the franchise arrangement that the corporation has worked up with the Yukon Electrical Company Limited. Now, it appears that Yukon Electrical Company Limited is going to get a 20-year franchise on all their distribution systems - the ones that they're going to take over and the ones that they presently own. Am I reading the handouts correctly?
Mr. McWilliam: Thank you, Mr. Chair. We have not yet entered into a franchise agreement with Alberta Power and YECL. Essentially, we have agreed to negotiate a franchise agreement with them, and the basic parameter is that they would have a 20-year franchise for distribution.
Mr. Cable: Well, that appears to very significantly enlarge their present rights, because it's my understanding they don't have long-term franchise agreements on their present distribution systems. Am I correct?
Mr. McWilliam: I'm sorry, Mr. Chair, I was being talked at from a whole bunch of different directions. I am not sure that I got the complete gist of the member's comments. But, if I understood the point, let me venture to respond. If I missed it, you can correct me.
First of all, it has been pointed out to me that I misspoke when I said "we"; it is basically the Yukon government that is going to have to enter into a franchise agreement and do the negotiating.
We have a situation now where there is an order-in-council which is quite vague in terms of what the franchise arrangements are. It says that Yukon Electrical has the rights to those areas which they currently serviced at the time of the transfer of the NCPC and YEC has everything else. In effect, they were currently servicing all except Mayo, Dawson and Faro.
There is no formal franchise agreement in place now. There hasn't been since, I believe it was, the mid-1970s. There has been a series of efforts to try and negotiate a franchise agreement that, for one reason or another, haven't been resolved. But, I think one point that certainly our lawyers are very aware of is that Yukon Electrical, by being there in the communities - by distributing the power - have, in effect, the deemed franchise, which gives them some legal clout if we were to try to move in and do something else.
Mr. Cable: I think it is fair to say, though, that formalizing the arrangement with a 20-year franchise very substantially increases the value of the distribution system and the amount that would have to be paid if they were ever purchased or expropriated. Is that not correct?
Mr. McWilliam: Thank you, Mr. Chair. I think for those assets which we are proposing to sell them, we would have the buy-back right, so that would not be influenced. If what you're talking about is the expropriation of the rest of the distribution within the territory, I would think it would have an impact on the value.
The point that I think is important to keep in mind is that this deal which we're entering into is a package deal. We have got what we consider to be some significant improvements in terms of the operating agreement and some real cost savings in terms of the cost of the agreement, and part of the value for YECL is that they would get the franchises.
Mr. Cable: Yukon Electrical then told the Energy Corporation and the government that, "You give us a 20-year franchise or no deal." Is that what they said?
Mr. McWilliam: Thank you, Mr. Chair. I don't think I would put it quite in those terms. It was made very clear that it was a package deal. We had things we wanted in the package, too.
Mr. Ostashek: Thank you, Mr. Chair. I'll just have a few questions of a general nature on the franchise agreement. I don't want to get into detail. There is a lot more information that I would like to get, but the minister has offered to make you available for a briefing so I appreciate that and hopefully we can have a good discussion on the ins and outs of the agreement. When we talk, I believe, as the president explained to us the other day, that the issue of this was that if there was no franchise agreement negotiated by the end of June, either party could withdraw from the management agreement. Am I correct in that?
Mr. McWilliam: Yes, you're correct in that. The arrangement we have now is a series of steps. The first step was the agreement in principle. The second step is finalizing the actual detailed terms of the operating agreement, which has to be approved by the boards of both parties. And then we would have to have a franchise agreement finalized by the end of June or, as the member says, either party would have the right to basically cancel the deal.
Mr. Ostashek: Thank you, Mr. Chair. Well, the question is - and it may be somewhat hypothetical because we haven't got to the end of June yet, but having been involved in previous negotiations with Alberta Power and knowing how they come at you - would the president care to speculate on how serious Alberta Power is about walking away from the management agreement if they do not get the 20-year franchise? Suppose they were to get the assets that they want for the three communities that they don't have now - Dawson, Mayo and Faro - and as the minister put it, "Poles and wire", but we also know that there are diesel generation plants that are going to be negotiated further along with that. My question is simply this: how serious does the president feel, in negotiations with Alberta Power, they are about walking away from that arrangement if they don't get the 20-year franchise?
Mr. McWilliam: Thank you, Mr. Chair. For a moment there I hoped the minister was going to have to answer that question. I think the member certainly has a considerable amount of experience dealing with Alberta Power and I would think that your opinion of that is equally valid to mine.
My sense is that we are a long way from done on this deal. There are a lot of details that still have to be sorted out and we have to ensure that both parties are satisfied with the arrangements.
Mr. Ostashek: I just have one more question regarding management now, and then we'll get back to finances.
Does the president feel that, if we are unable to reach an agreement with Alberta Power, or even if we are able, we can hire the expertise to run the corporation ourselves if this were to fall through?
Mr. McWilliam: Thank you, Mr. Chair. One of the things we did in terms of preparing for the negotiations was to take a very serious look at what we call direct management, where the YEC would operate the assets themselves. We made it very clear to Alberta Power, during the negotiations, that we thought that was a viable option. There would obviously be some fairly significant transitional problems, and doing it at the same time as we are dealing with Anvil Range going down, having to re-licence all of our hydro facilities within the next four years and dealing with other issues like where do we get future generation capacity, there's a lot of stuff that would be on our plates that would compound the transition problem. But we made it very clear to Alberta Power that we were prepared to go to direct management if we didn't have a deal that our board of directors would accept.
Mr. Ostashek: Thank you, I'll save any further questions I have on the management agreement, or the possible management agreement, for another time and another meeting.
I want to get back to the finances of the corporation, and I want to just go back over some of the things that the president has said, one being that it was the intention of the utility to go to the Yukon Utilities Board this fall for a GRA - that's aside from the interim application that they're going for now.
Could the president share with us, if, in fact, that application that they were anticipating this fall was, in fact, for another rate increase?
Mr. McWilliam: I guess you'd have to say at one point in time before the announcement of Anvil Range going down we were cheerfully contemplating the fact that we might be able to do this as a paper hearing, and simply extend the 1996-97 rate schedule. Things have changed an awful lot in a few months.
I think what we anticipate is that by October, when we would be filing for the next regular GRA, the situation with Anvil Range, if not resolved, will certainly have more certainty to it, and we would then be in a position to determine whether we needed to look at further rate increases or whether there was, in fact, going to be an operating mine there.
Mr. Ostashek: I thank the president for that, Mr. Chair.
My next question is again with regard to Anvil Range, being our major customer, and the comments made by the president that the situation this time is much different from 1993 because, I believe as he said, Anvil Range has ceased being a customer as of March 31st. So, even though Curragh didn't have the money to pay the bill, the demand charges were building month after month after month, and we eventually got them from the receiver. And we don't have that. And I believe that impact is going to be substantial on the corporation - somewhere in the neighbourhood of $500,000 a month, I believe the demand charge is. Have those been factored into the interim application that the corporation intends to make to the Utilities Board?
Mr. McWilliam: Thank you, Mr. Chair. Yes, the loss in revenues includes the loss in demand charges. The demand charges amount to about $440,000 a month that we were getting, based on the six-month peak in energy demand from the corporation. The situation in 1993 was that Curragh stayed on as a customer until May, and then we were filing in June, and there was the arrangement that was worked out between the Yukon government and Curragh in June for a memorandum of understanding.
Mr. Ostashek: Thank you, Mr. Chair.
The situation with Anvil - and I should know this, but I don't, so I'm going to ask the president - is it standard procedure for a customer the size of Anvil Range to be able to come along on such short notice and say, "We're not taking any more power from the corporation," without any penalty?
Mr. McWilliam: I think one of the things that we all recognize is standard procedure and the Faro mine is that they are rather inconsistent terms.
In terms of the arrangements we have with the mine and have had historically with the other operators of that mine, we have been providing power to them under a rate schedule. There is no written contract between YEC and the mine. We comply with the schedule that is approved by the YUB as regulator.
It would be standard procedure for any of our customers to be able to advise us in advance, which Anvil Range did, that they were going to disconnect as of the end of a month. What would not be standard, and which is one of the points which we are seeking clarification from the Utilies Board on, is our concern that Anvil Range might feel that they can go off as a customer and then reconnect at some later date and have had those demand charges fall away, because they are now a new customer. That's not our reading of what the rate schedule provides for, and we want the Utilies Board to verify our understanding.
Mr. Ostashek: So, if I follow what the president is telling me, even though Anvil Range has disconnected as of the end of March, if they were to come back to the corporation say, on August 1 and ask for a reconnect, then the corporation is seeking a ruling as to whether demand charges would apply to April, May, June and July? Is that what the president is telling me?
Mr. McWilliam: Thank you, Mr. Chair. I guess the short answer is yes. The rate schedule now requires that a company pay the demand charge for six months before they can go to site maintenance rate where they would have the lower cost. At that point, they also have to be able to satisfy the regulator that they will be off for an additional six months. So, our concern is that if the company goes down for a month, two months, three months and then comes back up, our reading of the rate schedule is that demand charges should still apply.
Mr. Ostashek: I will just ask a question or two and then I will let somebody else get into the debate.
Can the president tell me - because I understand that Anvil Range is prepared to pay a certain amount of their bill, but there's a certain portion of their bill that they're disputing - if he is aware of that and can he relate to this House what that figure is?
Mr. McWilliam: Thank you, Mr. Chair. There was a bit of a dispute when the bill was read at the end of December. Because of the holiday period, YECL went out and read the bill before Christmas, which would have had some impact. When you tacked another five days onto the January bill, they were being dinged for some additional demand charges, which were inappropriate. They brought that to our attention. We agreed with them. My understanding was that that point was resolved with the accountants that were involved and is no longer an issue.
I understand from other discussions with Anvil Range that they continue to take exception to the rate they are being charged for their power. They feel that some of the items that the Utilities Board included in the calculation were inappropriate. The operators of that property have fought that battle on at least two previous occasions and, if Anvil Range believe they have an issue, they can take it to the Utilities Board again as a cost-of-service issue.
Ms. Duncan: Thank you, Mr. Chair. I have a few simple, straightforward questions, and I hope you won't be asked to restate the obvious.
In 1993, when there was an application before the Utilities Board, it was a bit of a convoluted application process because Curragh was on and then they were off. Ultimately, the application was for a 60-percent increase when Curragh went down. With Anvil Range down, you're looking at an application for a 20-percent increase. Is there a significant, obvious difference between the 1993 application and this application that I'm not seeing, other than the 40 percent?
Mr. McWilliam: Thank you, Mr. Chair. I got my hopes up when the member said, "Easy question." It's a complex issue and I'm not sure that I'm going to be able to do it full justice.
I think one issue was timing. We're attempting to deal with this now, as soon as the problem had arisen with the company going off-line.
One of the issues that we are very much concerned about is that the longer we delay the application, the greater the percentage has to be. For example, if this application that we are proceeding on now, for 20 percent, is delayed until June in terms of a decision by the board, well, that automatically increases it by at least a percentage point. If you go beyond that, then you're getting into the very low months, in terms of energy consumption. And, to recover the revenue, you have to have a higher percentage. I'm not addressing all of the issues, because it was quite a complex issue.
Ms. Duncan: At that time, the court allowed 30 percent, or roughly half of the increase. Now, I realize that it's difficult to speculate on what the Utilities Board might do, but have you any sense, because of the differences in applications, that you might get the full 20 percent, or if you might again get half?
Mr. McWilliam: Thank you, Mr. Chair. I think it's important to recognize that between the time of the initial application and the revised application, the Yukon government took certain actions. For one, there was the memorandum of understanding that was entered into for approximately a $3 million loan, which brought Curragh back on to pay the demand charges. That had a significant impact.
The other thing that was done was that there was something called the low-water fund at that time and a large amount of money was taken out of the low-water reserve to help offset the cost; I believe $1.8 million was taken out of that. So, I guess that's a long way of saying that the government may be able to address some of these issues as they relate to what the impact will be on ratepayers, as it relates to something like the diesel contingency fund or rate relief or other things which are at government's disposal as opposed to the Energy Corporation's.
Ms. Duncan: I'm not sure I got an answer to my question, but I'd like to wander for a moment, if I may. You mentioned the OIC, an order-in-council, and a 60/40 debt-to-equity ratio and you mentioned this several times as a guiding principle for the financial structure and financial guidelines. Have you or has anyone prepared any scenarios with that debt-to-equity ratio changed?
Mr. McWilliam: It has certainly been looked at a number of times, and it has been an issue that has been discussed at previous GRAs. That debt-to-equity ratio was established consistent with the principle that government wanted Yukon Energy to be able to stand alone. With that debt-to-equity ratio, we can go out, and we can borrow on our own. If we have less than 40 percent equity, we are not going to be able to go to the money market and borrow by ourselves. They would be seeking, you know, sort of, support from government. Basically, it would make us part of a deficit-type situation that the government would encounter if we got into that. So, 60/40 is an important principle, if you want to maintain the corporation as viable on its own.
Ms. Duncan: Just one more question, if I might. You mentioned deeper cuts in a worst case scenario, and I was looking at the 1993 decision of the Utilities Board. And, of course, there were some, I guess you could say, fairly deep cuts at that point in time. Have you prepared any sort of a scenario of these deeper cuts - of what specific positions could result in cost savings? Has there been any work done on that?
Mr. McWilliam: Thank you, Mr. Chair. Yes, we've looked at that with our manager, Yukon Electrical. We are identifying some of the areas that we could cut further, both in capital and operations and maintenance - you know, if that's required. One of the things that we were hearing from our manager as a concern - and this came largely from employees who were on the system in the 1992 situation - was we were very much in a slash-and-burn approach back in 1992 and, you know, equipment was effectively simply turned off. The problem with that was that when you went back in to reactivate it, there was a lot more maintenance involved in order to bring it back on line.
What we're attempting to do this time is - I refer to it as an orderly shutdown. We want to do the maintenance first, but if we were in a situation where we were told by the board we weren't going to get the 20 percent, we would basically have to accelerate some of those cuts and not do that sort of preventive maintenance.
Hon. Mr. Sloan: Thank you, Mr. Chair. Just one question. I am not an electrical sleuth like some of my friends are or others across the floor, but I would just like to ask: in terms of the interim refundable rate rider, under what circumstances does that become refundable, and to whom?
Mr. McWilliam: Thank you, Mr. Chair. The trigger is if Anvil Range comes back or if that mine comes back during the period, at that point, we would no longer require it.
Hon. Mr. Sloan: So, at that point the rider would be discontinued and the previous rates would revert?
Mr. McWilliam: Thank you, Mr. Chair. Once we had recovered the losses that we had incurred to that point, yes. We would have to deal with the total losses, and then we would be back in the situation of the rates that were approved under the current GRA.
Hon. Mr. Harding: Seeing the time, I think it would be appropriate to wrap things up. I would like to extend... If there are more detailed questions, I would be happy to arrange briefings with the Opposition. The president and the board are obviously very busy, but I will try and make them available as quickly as possible. They are engaged in a number of things.
I would like to thank the members and thank both Mr. Osler and Mr. McWilliam for coming forward tonight and for answering the questions very openly. I would like to, once again, thank all members.
Chair: I would also like to thank the witnesses and now excuse them from Committee of the Whole.
Witnesses excused
Hon. Mr. Harding: I move that the Speaker do now resume the Chair.
Motion agreed to
Speaker resumes the Chair
Speaker: I will now call the House to order.
May the House have a report from the Chair of Committee of the Whole?
Mr. McRobb: Mr. Speaker, pursuant to Motion No. 55, which was passed by the House on April 8, 1997, Rob McWilliam, president of the Yukon Energy Corporation, and Cam Osler, of Intergroup Consultants, appeared before the committee to discuss the financial status of the Yukon Energy Corporation.
Speaker: You have heard the report from the Chair of Committee of the Whole. Are you agreed?
Some Hon. Members: Agreed.
Speaker: I declare the report carried.
Hon. Mr. Harding: I move that the House do now adjourn.
Speaker: It has been moved by the Hon. House Leader that the House do now adjourn.
Motion agreed to
Speaker: This House stands adjourned until 1:30 p.m. tomorrow.
The House adjourned at 9:29 p.m.
The following documents were filed April 9, 1997:
97-1-6
Government should act to protect Taylor House (letter and news release from Piers McDonald, (then) Leader of the Official Opposition, both dated July 30, 1996) (Phillips)
97-1-7
The Next Step in Managing Yukon's Power System (discussion paper prepared by the Department of Economic Development, July/August 1996) (McRobb)
91-1-8
Help Determine Yukon's Energy Future (questionnaire prepared by the Department of Economic Development) (McRobb)