Are Yukoners Subsidizing Mines? | Thursday, January 6, 2011

One of the most often asked questions we've received lately revolves around the suggestion that Yukoners are subsidizing the territory's two operating mines. A recent newspaper story said that the newest mine to begin operation, the Bellekeno Mine, is pushing up Yukon Energy's costs and forcing residential customers to foot the bill.

While it is understandable why some people might think this, it is in fact an incorrect assumption. Only 10 percent of the power we provide to the mine is produced using diesel…the other 90 percent comes from hydro. Combined, it is costing Yukon Energy approximately 4 cents a kilowatt hour to provide power to the mine. The mine is paying about 10.5 cents per kilowatt hour. That means there is approximately 6.5 cents a kilowatt hour available to put towards costs associated with running our facilities…costs that otherwise our other customers (residential, small business and government) would have to pay. So the Bellekeno mine is not costing other customers any more and is in fact saving them money. Other customers are not subsidizing Bellekeno; if anything Bellekeno is subsidizing our other customers.

So the next logical question would be: if that’s the case, why aren’t rates going down for other customers now that the Bellekeno mine is in production? In other circumstances, rates might well go down. But our costs are rising and we have chosen not to ask for a rate increase. Instead, we are using the money from the Bellekeno mine to help cover our overall expenses, keeping other customers' bills lower than they might otherwise be.

We recently received this follow-up question from a ratepayer: Can you explain how you concluded that only about 10 percent of the power sold to the mine is generated by diesel?

Answer: Yukon Energy's 2011 business plan forecast for diesel generation on the Mayo-Dawson transmission grid is about one gigawatt hour for the entire year (2011). The forecast energy sales to Alexco mine is 11.8 gigawatt hours for the year. Even if all of the forecasted diesel was required to meet the mine load, it would still supply less than 10 percent of the mine's 11.8 gigawatt hours per year load, with the balance of the electricity coming from hydro.