Since time immemorial Yukoners have dreamed of large-scale industry and inexpensive electric rates as the ticket to prosperity. In roughly 1946, their dream was taken to heart by the federal government because engineers also had a dream.

Hydrologists wanted to develop a colossal power project in the Yukon River basin--North America's fifth largest river and greatest untapped watershed.

A strong force behind the vision was Thayer Lindsley. One of his numerous companies was Falconbridge Nickel. It held controlling interests in Giant Yellowknife Gold and Keno Hill Mining.

Three of his other companies--Frobisher Exploration, Quebec Metallurgical Industries and Northwest Power Industries--worked on the power project in conjunction with Aluminium Company of America (Alcoa) and Reynolds Aluminium.

Seventeen hydro-generating sites were identified on the Yukon River and its tributaries to supposedly supply an annual 35 billion kilowatt-hours of power.

Part of the scheme included development of Aishihik by diverting water from the Alsek River basin over to the Takhini River, a tributary to the Yukon River.

Then the Yukon's major power system would be tied into British Columbia's and Alaska's transmission lines, thus resulting in inexpensive hydro power. By exporting power to outside markets for two cents a kilowatt-hour, a substantial return on the investment would be realized.

Those were the big plans back in 1946.

However, there was a hitch. Raising the water levels by 200 feet in the southern lakes for storage would drown Whitehorse and other small communities north to Carmacks.

Two years later, an Act of Parliament established a federal power commission, anyway. Its mandate was to construct and operate electric-power plants in Canada's North.

For the time being, the commission's main purpose was to encourage mining.

The 1948 act stipulated that the power commission, a non-profit venture, must pay its own way and never burden the Canadian taxpayers. Power sales would cover the expenses and provide the necessary cash so the commission could build other power plants, as required.

The commission's first assignment was a hydro plant, built in 1952, to sell power to Lindsley's Giant Yellowknife Gold Mine in the Northwest Territories.

Then the Northwest Territories Power Commission was renamed Northern Canada Power Commission, better known as NCPC.

By 1953, the power commission extended into the Yukon. A hydro project on the Mayo River sold power to Lindsley's Keno Hill silver mines.

NCPC's next task came in 1956 to construct a 15-megawatt Whitehorse Rapids hydro-generating plant on the Yukon River.

The Yukon's member of Parliament was enthusiastic. Aubrey Simmons echoed Thayer Lindsley's sentiments to the House of Commons.

"The North is on the threshold of the most beneficial and far-reaching development for Canada. Our great expansion will be economic hydro-electric power for industrial purposes."

Available power in great quantities will make mining, smelting, ore processing and manufacturing possible, Simmons continued.

The proponents of the power project visualized ore from the Yukon, northern British Columbia and from around the world being treated here.

If Friction Could Be Harnessed

Yukoners would have enjoyed a boundless supply of power at no cost. When the federal commission encroached on private-company turf in February, 1956, Yukon Electrical Company Ltd.'s secure future was threatened.

The home-grown power company had been struggling along on its own merits and ingenuity since 1901. In those days, electricity was still a novelty.

Regardless that rates were 40 cents per kilowatt-hour, business was brisk. By 1954, a 20-year franchise had been signed for the exclusive rights to supply Whitehorse's electricity.

As load expanded 25 percent a year, 1,600 customers soon were on line. Over the years, Yukon Electrical was able to reduce rates to 10 cents a kilowatt-hour.

Major financing had been arranged to develop a $2.5-million Primrose River hydro site, located about 45 miles southwest of Whitehorse. It would complement the two diesel-generator plants operating on McIntyre Creek and at Fish Lake.

But the federal authorities deemed diesel as the primary reason for steep rates. Therefore, the main thrust for NCPC's $7-million hydro project was to supply Whitehorse-based government facilities with wholesale hydro power.

Complete with two 7,500-horsepower generators, the 15-megawatt power plant was ready for action in late 1958.

Aubrey Simmons still agreed with the concept of abundant, inexpensive power. But the Yukon's member of Parliament asked his fellow Liberals to leave power distribution in the hands of private enterprise.

The same year the Whitehorse Rapids dam went into service, John Phelps and John Scott sold Yukon Electrical and Yukon Hydro to an Alberta-based company. Canadian Utilities immediately chopped the rates in half.

But, from here on, Yukon Electrical was not allowed to develop its own power sources but was forced to buy any of its extra power requirements from NCPC.

Big Mines Need Lots of Power

But big mines are big risks. And the Faro mine was the biggest.

To develop the 63-million-ton discovery into what was destined to be Canada's top lead producer, Dynasty Exploration joined forces with the Los Angeles-based Cyprus Mines. The two companies formed Anvil Mining Corporation in 1965.

Later, the head of Dynasty explained why there would never be another financial chance to carbon copy such a huge gamble. "Costs have increased," said Dr. Aaro Aho, a geological engineer.

"Risks and returns are restricted. You can only make a 15-percent profit. For some industries, there is no point. You may as well leave your money in the bank or a good investment groups. Making a mine out of a discovery is a tough thing to do."

Prospectors found the minerals; promoters raised the risk capital; developers proved the ore body; and the government provided the services.

The official production date was January, 1970. Of the more than $100 million of risk capital that went into the long-term venture, six million dollars was invested by NCPC in 1968 to increase the power capacity at the Whitehorse Rapids hydro-generating plant.

A third hydro unit was installed, supplemented with a standby diesel generator. And a 230-mile transmission line delivered 9.3 megawatts of power to the Faro mine-mill complex.

It wasn't enough.

A Stop-Gap Solution

was for NCPC to install another 10-megawatt diesel generator at the Whitehorse Rapids dam. In 1971, the total power output was up to 35 megawatts.

However, Anvil Mining's big electric shovel soon would be biting into higher-grade ore. A mill expansion was on the drawing board. By August, 1975, Anvil would need to buy a bigger block of power from NCPC.

In Whitehorse, Yukon Electrical also needed more power to fulfill customer demands in the growing community. But the government had denied permission for the Primrose hydro development. And the territorial water board had refused permission for Yukon Electrical to divert water from McIntyre Creek to build McIntyre No. 3 into a 750-kilowatt generating station.

Instead, NCPC's sleuths went out in great fanfare to search for a second hydro-electric generating site. They investigated Hoole Canyon on the Pelly River; Lapie River Canyon; Five Fingers Rapids on the Yukon River.

They hastily settled for Otter Falls on the Aishihik River, which wasn't even a contestant. From its headwaters of Canyon Lake, the 25-mile-long Aishihik River flows down over Otter Falls--the scene that once graced the back of the Canadian five-dollar bill. The water empties into the Dezadeash River, which feeds the southeasterly-flowing Alsek.

Unless NCPC incorporated the original 1946 plans to divert the Alsek River, an Aishihik hydro project might be deficient in one important ingredient.

Water.

NCPC went ahead, anyway, with the $15 million project and developed Aishihik Lake into a storage reservoir. But the estimators forgot another important factor.

Inflation.

Back in Whitehorse

the mayor, Paul Lucier, was insisting that the city could distribute power cheaper than Yukon Electrical. In July of 1974, the city refused to renew the franchise, which had expired after 20 years.

Whitehorse residents rallied to Yukon Electrical's defense. In a great public outcry, they debated the issue. The mayor wouldn't budge. Residents demanded a plebiscite. They voted down the mayor's opinion by nearly 85 percent.

Just as the mayor's position ended, Lucier, a former government fireman, was appointed to a cushy life-long senatorial seat by the Ottawa Liberal government in 1975. It was the first senator appointment for the Yukon.

Then Northern Canada Power Commission stepped in and took over power distribution--a decision that was not allowed to come to a public vote.

Since NCPC didn't pay corporate taxes, customers would take the brunt of this arrangement.

Yukon Electrical's income taxes were rebated so customers in outlying communities could enjoy similar power rates as customers who lived in the Yukon's capital of Whitehorse. With NCPC as power distributor, too, the equalization program would be lost.

Also, as a regulated company, Yukon Electrical had to justify profits and rate changes with the Yukon Public Utility Board.

NCPC, a non-profit federal corporation, was exempt from the procedure. Legislation dictated that consumers and taxpayers pick up the tab for any deficits and overruns. This lack of accountability encouraged reckless spending of public money.

With disregard for public opinion, NCPC simply took over power distribution by refusing to sell additional power needs to Yukon Electrical. At that point, Yukon Electrical was operating on borrowed time.

Then Yukon Electrical Went on the Auction Block

Ever since NCPC had been given authority to increase its presence in the North, Yukon Electrical had been forced to purchase the majority of its power requirements from NCPC. And those 16 years had been fraught with friction.

By then, the shortage of power-generating capacity in the Yukon was critical. But the federal authorities still balked at Yukon Electrical's requests to develop its own hydro-generating sites.

The message was clear: there were no future opportunities for investor-owned utilities in Canada's North. Canadian Utilities offered to sell Alberta Power's northern assets, which included Yukon Electrical and a sister company in Yellowknife.

As Yukon Electrical prepared to evaluate its properties, in readiness for sale, the public and political pressures were turned up to the boiling point. Yukon politicians demanded that negotiations cease; and Yellowknife residents joined the fray.

Over many months of uncertainty, the Yukon Electrical team travelled hundreds of miles taking inventory. They counted every pole and splinter, every piece of wire, every transformer and insulator, every street lamp and lightbulb, and every piece of equipment in the substations and power plants.

As the end grew near, the dedicated employees began to drag through their day-to-day duties in sadness.

While Yukon Electrical Counted Poles

and the Aishihik dam was under construction, a bill to amend the Northern Canada Power Commission Act came before the House of Commons.

The federal government was bent on controlling all power supply in Canada's North. Only NCPC would be allowed to install, operate and construct new generating facilities and transmission lines in the Yukon and Northwest Territories.

In early 1975 an angry group of Whitehorse politicians and businessmen descended on Ottawa. Yukon Electrical and Alberta Power were represented, too.

The delegation gave evidence before the Standing Committee on Indian Affairs and Northern Development about NCPC's poor management.

Private enterprises' pioneering spirits had been encouraged only in the small, rural settlements. But the federal government had rejected their proposals to supply electrical service to the new mines, opening in the Yukon and Northwest Territories (NWT).

The improprieties governing NCPC condoned irresponsible behaviour that was a detriment to the electrical customers, they emphasized. Any investor-owned or government-owned monopoly should be regulated to protect the public's interests. All other federal agencies--Canadian Broadcasting Corporation (CBC), Air Canada, Canadian National (CN)--were subject to control through the regulatory process. Why not NCPC?

In the North, where populations were small and vulnerable to high costs for service, each project had to be developed with care to assure minimal impact on electrical rates, they said.

NCPC Gave Assurances

that Aishihik would meet the maximum 32-megawatts of power on command.

The dam was designed with two turbines, supplemented in the underground power house with two diesel generators. Each back-up unit was rated for 14.4 megawatts and a continuous overload of about 10 percent.

An 80-mile transmission line was constructed to integrate Aishihik into a power-grid system, known as the WAF--an acronym for Whitehorse-Aishihik-Faro.

By the time Aishihik was completed, Anvil Mining Corporation had been reorganized into Cyprus Anvil Mining Corporation. The newly-formed company was ready to push 10,000 tons of ore a day through the ball and rod mills, flotation cells and fluff the concentrates powder-fine in the four huge dryers; only one was coal-fired.

Any interruption in production would reverberate around the world. Down time would result in tens of millions of dollars in losses. If the gigantic chemistry set ground to a halt, it would take weeks to return to full production.

Meantime, ore trucks would be idle; concentrates couldn't move by train to Skagway or be loaded into ships for foreign markets from the Alaskan deep-sea port. Contracts would be breached; overseas smelters and manufacturers would be waiting impatiently for concentrate shipments; and exchange would be lost in the international monetary markets, while banks continued to charge interest on loans.

A power outage would have extremely serious, wide-spread consequences.

To coordinate efforts with the round-the-clock mining operation, the Aishihik power project was scheduled to go into service in the summer of 1975.

When the Big Switch was flipped with great ceremony to connect Aishihik to the grid, it blew the whole Whitehorse system.

There were a lot of unhappy people.

The two hydro turbines could not churn out 32 megawatts of power.

As predicted, the Aishihik power plant experienced severe low-water problems. To meet the load demands, the diesel generators were put into constant service. To offset the high cost of burning diesel fuel, NCPC levied an offensive low-water charge.

In early 1976, Yukoners' anger was splashed across newspaper pages from British Columbia to Nova Scotia. They had launched a hot attack against NCPC, demanding an investigation into exorbitant power-rate increases; the takeover of Yukon Electrical; and the mismanagement of Aishihik.

The pricetag had more than doubled to a questionable completion figure of $44 million for a dam operating at half-capacity. A federal government load of $30 million at 11 percent interest had been amortized over 40 years. Within a year, wholesale power rates shot up 80 percent with another 160 percent hike on the horizon.

The marginally-profitable Whitehorse Copper Mine, located a convenient seven miles south of town, predicted that power rates would cause a premature closure, eliminating 200 jobs. The mine financially backed its United Steel Workers who spearheaded the movement for an NCPC investigation.

Cyprus Anvil, who bought the majority of power, had suffered numerous and expensive power outages since Aishihik went into operation. The zinc-lead producer threatened to generate its own power with coal.

A petition circulated the territory. Each of the 4,400 signatures was backed up with a personal letter to the Northern Affairs minister in Ottawa.

The federal government's promise that NCPC would prepare a report analyzing the reasons for high costs was rejected by the seven-member steering committee. It wanted a complete judicial inquiry with subpoena power into NCPC operations, and the findings tabled in the House of Commons.

Further, the committee wanted no more rate increases without approval from the Yukon Utility Board. NCPC was not subject to regulation but agreed to keep rates reasonable if it were granted an extra six feet of water fluctuation.

The Yukon Native Brotherhood protested that raising Aishihik water levels would cause more environmental damage. And the Archaeological Survey of Canada wanted to delay the raising of water levels until salvage work was completed at the Aishihik Indian village.

NCPC ran into another tempest when heavy runoff from the previous spring pushed water levels above allowable limits and caused erosion. The planners in NCPC's Edmonton office blamed the flooding on sparse information.

Since the Aishihik project was part of a major power development, NCPC had updated the study that would provide a deep-sea port for northern Canada. Federal politicians and industry people said inflation made it more economical to build now rather than later. And exporting hydro power to outside markets would result in billions of dollars in annual revenues.

The upshot was that Yukoners won the battle. NCPC did not buy Alberta Power's northern assets. And Yukon Electrical, with a freshly-signed franchise, went back to conducting business as usual.

Recognizing that hydro development was the cheapest source of energy and essential for the Yukon's future, Yukoners were resigned to pay for Aishihik--but only if they owned it.

In a flip flop of events, Yukon politicians began to investigate ways to take over NCPC and to form a Yukon power corporation.

Once Again, Big Mines Proved to be Big Risks

And before 1976 was over, the Yukon was back in the national news.

The 22,000 residents faced a winter of uncertainty imposed by a new federally-appointed commissioner, and the fear of another power-rate hike brought on by the crippled $228-million mining industry.

Labour disputes had closed three of the four operating mines, plus Cassiar Asbestos in northern British Columbia.

As winter approached, Whitehorse Copper and United Keno Hill miners reached a settlement and went back to work.

But there was no thaw in sight at Cyprus Anvil. When the Faro operation was immobilized, two-thirds of the territory was paralyzed. In one year, three major strikes had erupted at the Yukon's largest mine.

The 400 United Steelworkers insisted the strike was not against the company. They said the strike was a protest against the Anti-Inflation Board's roll back in their wage-and-benefit contract from 36 percent to 9 percent increase in the first year.

With the biggest power customer off line, NCPC reported a loss of $200,000 a month. Legislation prohibited the Crown corporation from operating in the red.

NCPC's chairman of the board, Jim Smith, a Whitehorse resident who had been serving in two federal-appointed roles simultaneously stepped aside after 10 years as Commissioner of the Yukon.

Dr. Art Pearson, the newly-appointed commissioner, served a short tenure due to an impeachment for wrong-doings in some business transactions brought on by ace investigative Whitehorse Star reporter, Robert Sibley, who advanced quickly to the Edmonton Journal before moving on to the Ottawa Citizen.

Pearson sat with the legislature during the fall session of 1976. Some of the 12 members were eager to legislate the unions back to work; other members wanted to talk about responsible government so the Yukon could run its own affairs and control its own destiny.

By the Late 1970s

Cyprus Anvil was still plagued by the same monotonous problems but continued to outline additional ore reserves. Finding repetitions to the magnificent Faro deposit was a reality that could extend the district's mining life countless years into the 21st Century.

Plans already had been made to mine the 10-million-ton Vangorda deposit; next, the 30-million-ton Grum deposit; later, the Dy deposit.

But mine expansions consume energy. And NCPC engineers were busy designing a fourth turbine for the Whitehorse Rapids power plant. Unit #4 would boost generating capacity to 45 megawatts.

Construction of a five-megawatt Faro substation and transmission line would be ready to deliver the extra power to the Vangorda Plateau by 1984. This upgrading would increase the whole WAF system to a maximum 80 megawatts of power.

Then plans went off-track. There were long faces in Cyprus Anvil's Vancouver board room when the majority of shares were bought by Hudson's Bay Oil and Gas Ltd.

Then, in 1981, control was taken over by a bankrupt Dome Petroleum. Some $6 billion in debt, Dome was more interested in negotiating a federal government bail-out rather than mining lead and zinc in the Yukon.

Once again, the Yukon was on its knees in mercy to mining.

Yukoners came to the stark reality they had no control over mines, unions, board rooms, stock markets, metal prices, world recessions, the economy, or Northern Canada Power Commission.

Capable Administrator Jim Smith Heads NCPC

Jim Smith's 10-year position as chairman of the NCPC board was no picnic but the job certainly was a relief after running the Yukon Territory as the Chief Executive Officer for the previous 10 years.

Smith had two problems at NCPC: he inherited a Crown corporation, poorly run from Ottawa with Basil Robinson at the helm; and he inherited the awfulest crop of ministers of the department of Indian Affairs and Northern Development (DIAND) that he ever had the misfortune to come across, he recalled in a 2000 interview.

During his time as Commissioner, Smith worked for three good Northern Affairs ministers, not to say that Arthur Laing (1966-68), Jean Chretien (1968-74) and Judd Buchanan (1974-76) made his job any easier. But they were astute political masters.

When taking up his role with NCPC, Warren Allmand (1976-77), Hugh Faulkner (1977-79), John Munro (1980-84) and David Crombie (1984-86)headed the list of awful ministers. Jake Epp (1979-80) and Doug Frith (1984) weren’t around long enough to do much damage.

These ministers served at the behest of prime ministers Pierre Elliott Trudeau, Joseph Clark, John Turner and Brian Mulroney.

The combination of Smith’s two problems made the job tough. After about five years, the occasions came closer together when he would gladly have resigned in two seconds.

There was one big blessing. When he left his commissionership and joined NCPC, he and his wife were able to return to a private and social life of their choosing--not one somebody else chose for them.

"Life is a great learning experience," he said. "Judd Buchanan came to me and said, 'Jimmy, it's of great concern to the prime minister (Pierre Trudeau) and myself that we are seen to be turning you loose. I said 'you're not turning me loose. I quit!’

"He said, 'I know that'. The prime minister was concerned about the public perception will be that you have been removed by cabinet.

"I said, 'You can tell the prime minister that he won't be accused of that by me. If anybody else wants to create that conception, that's up to them.

"Anyway, Judd came back after a while and said, 'Basil Robinson wants to be relieved of his duties as chairman of the Northern Canada Power Commission. Judd wondered if that might be an acceptable appointment as far as I was concerned. I had sat on the NCPC board at one time. I talked it over with my wife, Dorothy. We figured I could take it and see how it worked out. If I didn't like it I could always quit."

Although Robinson’s base had been Ottawa, Buchanan told Smith that he would remain in Whitehorse. He felt that part of the credibility of the Crown corporation was contingent on the senior people living in the North where the Northern Canada Power Commission provided power.

Smith would stay in the North and only commute to Edmonton, Alberta, the administrative center whenever necessary to hold meetings with the five-member politically-appointed executive who, at the relative time, included such high profile people like Hilda Watson of the Yukon and Don Stewart and Jim Robertson of the Northwest Territories.

Smith, as chairman of the board, would be visible. He would be under constant public attack and the one taking the flak on the front lines—even though most of his woes were minister-driven.

Smith announced to Buchanan that he would take the chairmanship of NCPC. “I was appointed chairman of NCPC while I was still Commissioner on the understanding that my replacement was only a matter of weeks away,” explained Smith.

Instead of getting out from under his Commissioner's job, as he so desperately wanted after 10 years, the two jobs ended up overlapping!

"I was appointed chairman of NCPC while I was still Commissioner on the understanding that my replacement was only a matter of weeks away," continued Smith.

The politicians' first choice for the new Yukon Commissioner's appointment was a good person and well-connected but he didn't pass political scrutiny in Ottawa. His family was very active in the Conservative Party in Ontario, so the Liberal administration didn't think that would look very good—even though the Conservative-leaning Smith had been appointed by and survived several Liberal administrations.

In 1976, the Ottawa Liberals eventually appointed Art Pearson, who was soon impeached.

"I could have enjoyed NCPC if I'd had a decent minister,” he said.

The first disaster was Warren Allman, a young member of Parliament elected to represent English-speaking Notre-Dame-de-Grace, Quebec. He was in over his head, obviously not having a good business head and knowing nothing about power generation and distribution.

Among his blemishes, he was a pill popper which exacerbated his inadequacies. “The guy was floating,” said Smith.

Allman carried a briefcase that he set on the floor beside his chair. Every 20 minutes during a meeting, he would pick up the briefcase, push back his chair, put the case on his lap and open it. Inside was a hospital-sized bottle of 222s. He’d flip one at least twice an hour.

It wasn’t long before Jim Smith received a phone call from Jean Chretien who was serving in the trade and commerce portfolio. Prime Minister Trudeau was sending Chretien on a mission to Whitehorse.

One person he wanted to meet with was Smith to discuss mixed signals bouncing back to Ottawa regarding the-then minister of DIAND (department of Indian Affairs and Northern Development).

Chretien’s duty was to investigate what was really going on with this character.

Smith thought the less said, the better. “I’ll just say I don’t think it’s in Canada’s best interest that Warren Allman remains as minister of Indian Affairs. It’s that simple.”

Within two weeks, Allmand was on the leaving list. There was a cabinet shuffle. He was replaced with Hugh Faulkner and Chretien moved into finance.

“Ministers couldn’t keep their cotton-pickin’ fingers off the place,” said Smith, recalling another example.

John Munro--the Mafia man from Hamilton, Ontario, who was eventually charged and tried for fraud and breach of public trust--would phone Smith with instructions that a mining company in financial trouble in the Northwest Territories needed a break in its power rates. Since the company was a substantial northern private-sector employer, Munro ordered Smith to fix the rate problem without delay.

Political favors didn't make economic sense. No problem. Munro wanted Smith to get power into a village north of Yellowknife. The powerline was only 20 miles away. "Make it happen," demanded Munro.

Smith put his researchers to work. "Sure," he later informed Munro, "power can be put in there for an unbelievable cost of $20 million. The transmission line has to go over a mountain."

Munro had made a political promise; therefore, money was no object.

The last straw, said an exasperated Smith, was the harangue about the reopening of the Anvil Mine at Faro. David Crombie sent one of his minions to tell Smith how NCPC would be part of this financial package to get the mine open.

"We were to buy a gas-turbine generator that had been put in by the mine on its own against our wishes as emergency power. The mining company claimed it was worth $18 million," related Smith.

"My people said it was worth $5,000 on the scrap market. It was nothing but garbage. I told Crombie it was stupid idea. He said, 'Stupid or not, it's got to happen.'”

Smith said he would take the matter up with the board of directors whose decision was that the minister would have to send a signed letter instructing Smith to carry forth on the stupid idea. Crombie refused to take responsibility in writing.

Smith warned Crombie not to get himself in any more trouble with the NCPC board than he already was. Some of the five members were powerful people.

"In due time, I received a nasty letter from one of his subordinates telling me they appreciated by assistance up to that point; but my assistance was proving to be of no use because in net effect what I wanted to do was not going to get the mine open," Smith explained.

"Therefore, I was instructed by the minister to do certain things. No minister's signature. I simply went back to the ADM (assistant deputy minister) and said the minister's signature is required.

"The minister was going to be in Edmonton, the corporation's administrative headquarters. We were having a board meeting. Crombie wanted to meet with the board. He did.

Hilda Watson, a high-profile political and public figure from Haines Junction, Yukon, was a board member. "She tore Crombie apart in little pieces," remembered Smith. "Crombie wished he had never come near the place. But we got the letter. This also is the kind of crap we put up with. You can't run a business this way," stressed Smith.

“This is the kind of garbage that ruins Crown corporations,” he said. “Crown corporations should be eliminated as quickly as possible on the general premise that they are not allowed to run really as businesses. They are simply instruments of government policy.

“I learned. It was a learning experience. I won’t say I have any regrets about it. But, in hindsight, I think I could have done something for the last 10 years of my working life that I would have had a lot more enjoyment out of than I did out of NCPC.

“But I guess I had to pay some kind of a price to be relieved of the pressures from the Commissioner’s job. NCPC was the price I paid,” he said.

Then the Whole Yukon Ground to a Halt

In 1982, while four years remained in Smith’s mandate, all the operating mines closed: Whitehorse Copper, United Keno Hill, Cantung (NWT), Cassiar (B.C.) and Cyprus Anvil. The White Pass & Yukon Route narrow-gauge railroad, operating since 1900, had been hauling most of the ore to Skagway, Alaska. Without industrial customers, the railway became extinct.

The Yukon's population declined by 2,000 residents; school enrollment was down; the Yukon government cut back to a four-day work week; businesses folded; and 'For Sale' signs were tacked to 450 Riverdale houses and more in the subdivision of Porter Creek.

With the Faro mine down, NCPC sighed with relief. Unlike 1976 when NCPC had suffered a $200,000-a-month shortfall with Cyprus Anvil off the grid, this time NCPC was saving money.

Even though Cyprus Anvil's $5.5 million power payment was lost, the bulk of the mine's electricity was supplied by diesel generators. A dramatic reduction in fuel consumption saved NCPC $7.3 million in operating costs.

With Excess Power on the Grid

there was no logical reason to develop more power. Yet NCPC decided to proceed with the $52-million, 10-megawatt fourth wheel to displace dependency on diesel fuel.

The rationale was that inflation made it wiser to build sooner rather than later. Interest rates had risen to 17.5 percent in comparison to 11 percent interest for the Aishihik project.

Also, the Faro closure was viewed as temporary. With multi-millions of tons of proven, probable and possible ore reserves, the mine was expected to re-open when metal prices improved. Then extra power would be needed again.

But Yukoners did not want to be saddled with any hefty power bills. Since Aishihik's completion, the power rates had jumped quickly. And the federal government came to the realization it could not justify any more increases. So, when Unit #4 came into service in 1984, Yukoners' power bills became heavily subsidized.

The $9.1-million interest on the loan, initially rolled into NCPC's assets for customers to pay, was written off during the fiscal year 1984/85.

Unit #4 had been deemed unnecessary. The whole Whitehorse Rapids system was under-used. The interest was written off. And NCPC was not charging high enough rates to cover costs.

As NCPC slipped into debt, the infrastructure was no longer maintained or upgraded. Equipment fell into disrepair and wore out. Power quality was poor; and outages frequent. The system had no back up for emergencies.

In 1985, the National Energy Board declared NCPC insolvent.

Meanwhile, Yukoners demanded the government re-open the Faro mine, although it was not profitable.

Concentrates glutted the world smelters; manufacturers weren't buying lead-zinc; and metal prices remained flat. When minerals can not be mined at a profit, there is no mine.

The healthy mining companies were not interested. Yet the politicians were willing to inject public money to produce an artificial economy that brainwashes people into believing it is real. But, without Faro, the Yukon was withering on the vine.

Before Erik Nielsen retired in 1987, the Yukon's Progressive Conservative member of Parliament set the wheels in motion. The feds beat the bushes, looking for an opportunist to generate optimism for the Yukon, which was on the verge of psychological and economical collapse.

By December of 1985, Curragh Resources Corporation had acquired a portion of the Faro assets. And the government offered numerous concessions and subsidies to keep the mine in motion for seven years.

Curragh was given Cyprus Anvil's power contract. Upon expiry on March 31, 1993, Curragh would be required to enter into an agreement to pay full cost of electrical service.

By the time the feds finalized the loan agreement, the territory had elected an New Democrat Party (NDP) government in 1985. The new government leader, Tony Penikett, handed the $30-million cheque to Clifford Frame, Curragh's chairman and principal owner.

After a four-year closure, the Faro mine re-opened in 1986. By June 7, over 300 employees were on the job. The town grew to 1,500 people.

The event achieved its goal. For a while, Yukoners wore smiles and walked on spring-loaded boots. They thought Curragh was Cyprus Anvil.

Devolution Was in the Works

But the public never uttered a peep when saddled with a less-than-favorable transfer agreement for NCPC's assets.

The Yukon's NDP government may not have had much say over what was in the package. Otherwise, the negotiating team surely would have driven a harder bargain.

A review of NCPC's financial and maintenance records would have revealed how much the assets were worth; how much value had been depreciated or remained undepreciated; if used equipment was useable; or had the life cycle expired, rendering equipment as high-priced junk.

But the NCPC records were not in order--a fact later confirmed by a utility board chair, who referred to them as "frankly, deplorable".

At time of transfer, NCPC's debt was about $126.3 million. The federal government wrote off 25 percent, or about $31.6 million. That left $94.7 million worth of alleged used and useful assets.

The federal government gave the territory a $19.5 million grant in the form of another debt write-off. It was matched by the Yukon government's $19.5 million shareholder investment. Ownership and control were transferred to the Yukon Development Corporation.

After all the figures were juggled, the Yukon government ended up owing the feds $56 million. Yukon politicians had hoped for a larger debt write-down because, over the first three years that Unit #4 was in service--from 1984 to 1987--NCPC's losses and write-offs had amounted to $25.3 million.

But Yukoners were salivating for the assets, and NCPC wanted to unload the Whitehorse Rapids and Aishihik hydro plants; Faro substation; the transmission system; plus two independent diesel plants at Mayo and Dawson. So politicians were basically happy with the end results.

Jim McLachlan, Faro's Liberal member of the Legislative Assembly, told the Yukon Legislature in February, 1987: "There is no doubt...that the $95 million paid for the assets of the power commission is, indeed, a good deal, especially when one considers that the fourth wheel cost (around) $56 million to build. I am sure that will be realized again when the cost estimates to rebuild the dam at Mayo and Dawson City finally do come in.

"Whether the commission can be run in a manner that reflects the $95 million pricetag remains to be seen. I realize that the kingpin in the whole deal is based upon the ability of the mining operation in my riding to continue a successful operation."

Yukoners accepted complete ownership on March 31, 1987. And the title-holder was now responsible for all the maintenance, repairs, upgrading and installations so the power system wouldn't rot with result and ruin.

At first, Yukoners were delighted to accept the risks associated with ownership. They finally had control over their own affairs. And, for a while, the release from the federal government's apron strings instilled a euphoric sense of freedom.

Another Euphoric Bell Rang

The Yukon's NDP government froze power rates for two years.

In the same breath, the government insisted that the newly-formed Yukon
Power Corporation would be a viable, self-financing operation. It was structured to earn a commercial rate of return on investment, like a private-sector utility.

Then a five-year contract was tendered for a professional energy manager to oversee Yukon Energy Corporation's daily operations, but would be devoid of any association with the shareholder.

The investor-owned Canadian Utilities competed against the government-owned Manitoba Hydro and Ontario Hydro, who were always in financial trouble.

The Alberta-based Canadian Utilities was solvent, and had an excellent 30-year track record in the territory since buying Yukon Electrical in 1958. The utility company had expanded into more than 15 communities, where employees were stationed to cover the wide expanse from Watson Lake near the British Columbia border to Old Crow above the Arctic Circle.

With a leading edge, Yukon Electrical was awarded the Yukon government's $700,000 contract. Besides annexing NCPC's former employees to Yukon Electrical's payroll, a host of new duties were added to the roster: delivering product to the customers, planning, engineering, billing, preparing financial statements and public communications.

As a power producer and distributor in its own rights, Yukon Electrical continued to buy electricity from the Whitehorse Rapids dam on a metered basis for distribution to Whitehorse customers.

However, the need for a city franchise had been dissolved by devolution. The franchise agreement was replaced by the territorial government's Public Utilities Act and a set of Electric-Service Regulations.

Yukon Electrical was used to living in a fish bowl--observed closely by shareholders and regulated by a utility board. Since Yukon Energy was earning a rate of return on investment, it too was subject to regulation. After experimentation, Yukon Energy and Yukon Electrical began to file joint applications to cut down on costs and paper flow.

For government-owned and investor-owned utilities to be working together to achieve the same goal was a unique arrangement to the whole of Canada. Yukon Electrical was focusing on delivering the product and service to the customers, while Yukon Energy concentrated on policy direction and development.

Despite the fact that the Yukon Energy and Yukon Development ended up with eight, cost-shared employees on the payroll, Yukon Energy was making money. It was collecting payments on a much higher rate base than the discounted version transferred from NCPC.

Also, the Faro mine was buying the excess power from the grid, and power payments were coming in from Dawson and Mayo. And power rates had stabilized during the late 1980s. For a while, everything looked rosy.

Yukon Electrical was transferring the power payments to Yukon Energy, who paid the shareholder. As Yukon Development amassed money, the NDP government took notice.

Prior to the 1989 territorial election, the utility board was instructed to decrease power rates by 20 percent. This action brought rates down to a level paid about 10 years previously, when the assets were 10 years younger and ratepayers' salaries were 60 percent lower.

Similar tactics had started NCPC's downhill spiral back in 1984/85. And the infrastructure had been allowed to fall into disrepair. Now the responsibility of upgrading the system to proper standards lay with the new owners. Yukon Energy was spending lots of money on capital improvements.

The political interference to give a big power-rate discount was a marvelous idea and a short-term vote-grabber; the NDP government was reinstated for a second, four-year term. But, over the long haul, the decrease was going to be the ratepayers' nightmare.

From the outset, re-opening the Faro mine artificially had been an iffy proposition. Curragh, Inc. represented 40 percent of the grid's power and 28 percent of Yukon Energy's total revenues.

If the mine shut down after its seven-year tenure was completed, Yukon ratepayers were going to be left holding an empty bag. They would have to re-pay the 20-percent rate decrease, plus pay the tab for the $25 million improvements.

Yukoners no longer had a federal subsidy cushion to fall back on to soften the blow. The only money available was from Yukon Development. That fund supposedly was earmarked to cover any energy-related emergency, which was destined to rear its ugly head soon.

The Public Was Weary

of dependence on one company that continually needed cash injections to provide an industrial-based economy.

Tired of prolonging the agony and leery about government involvement in business, Yukoners were more responsive to paying power-rate increases than offering a $29 million loan guarantee.

When 1992 newspaper headlines warned that a 30 percent power-rate increase hinged on the Faro mine, Yukoners didn't flinch.

If Curragh went off the grid, diesel consumption would be reduced significantly. But the loss of 40-percent power sales would not waive the $40 million "flexible" bond, held by the Bank of Canada.

The bond was based on power sales. Since other sources purchased 60 percent of the available power, the principal and interest still had to be paid; as well as the $16 million hard bond. However, the $56 million debt had been reduced to about $47 million.

Curragh was up and down like a yo-yo, and started downsizing to demonstrate its intentions to carry out the threat of leaving the Yukon--unless the loan guarantee was forthcoming, and the government paid the company's power bills.

Back in 1985, Yukon politicians had agreed that re-opening Faro would be a boon to the Yukon's economy, unless Curragh started to view the government as a "well that never runs dry".

One day, the government got a wake-up call. it became apparent that Curragh never had been capable of generating enough money to justify its existence. The little Cat-and-mouse game went on until, in early 1993, the recent-elect Yukon Party government contracted economists to review Curragh's financial status.

The only reason the mine re-opened in 1986 was based on a series of government subsidies, they said. And it stayed open for seven years because the federal and territorial governments had acted as subsidy machines.

The federal government had issued a $30 million start-up loan, which supposedly was repaid; the Yukon government awarded a $3 million mineral-recovery grant; a $15 million loan guarantee; and an unpaid $5 million loan, secured by concentrates, which crossed the ocean long ago.

Economists advised the government not to over-ride the mining people's judgements by squandering more taxpayers' dollars in an artificial situation. If the private-sector investors were not willing to invest risk capital, there was no rationale for misusing public funds on a losing proposition.

By mid-1993, the Yukon was on hold, awaiting a verdict. The utility board granted an interim 6.7-percent power-rate increase while the Yukon government and Curragh continued to examine further prospects.

The upshot was that the government backed off; private investors backed off; Curragh ran out of options. And, in late 1993, Curragh went into receivership, leaving local creditors holding $15 million worth of outstanding debts.

A $500,000-a-month minimum charge for power bills had been incurred, even with the big switch flipped off. And Yukon taxpayers were stuck with the $2.4 million bill, which the government paid direct to Yukon Energy.

Yukon taxpayers also lost the $5 million loan; and ratepayers' power bills would be increasing to cover capital infrastructure improvements for the purpose of supplying power to the mine.

With events no longer speculative, the utility board allowed the next power-rate increase to be implemented in November, 1993. The "rainy day", expected when Curragh's seven-year tenure expired, was moderated with $3.5 million from Yukon Development Corporation.

At this point, the Yukon government plugged the holes to stop money from flowing out the corporation's backdoor on non-energy ventures, such as sawmills, hotels and convention complexes.

The energy minister issued a directive that future profits would be devoted entirely to reducing energy rates, developing energy infrastructure, and promoting energy conservation.

But, until the policy is engraved in legislative stone, the money on reserve is still open to political whim. And it is Yukoners' responsibility to ensure that politicians never play politics with ownership of their power assets.

Politicians must never again spend the corporation's money frivolously, nor interfere again with the public-review process by having power rates set arbitrarily.

Even if Curragh had stayed on line, the power rates had to go up, anyway. Yukon Energy was bumping into minimum-capacity draw-down at Aishihik and would have been forced to burn more diesel.

With Curragh gone, Yukon Energy saved $3 million in the cost of providing diesel fuel for electrical-energy generators. But the savings did not offset the $8.3 million revenue loss.

This is a reversal of NCPC's earlier predicament. When Cyprus Anvil Mines went down in 1982, NCPC's operating expenses exceeded the power sales.

Then, there is no more federal subsidy for ratepayers. And Yukon Energy still has to pay off loans for the fixed costs of transformers, new diesels and upgrading the hydro-transmission line to service the mine.

At the relevant time, the utilities were struggling along under severe budgetary restrictions. And Yukoners were feeling the pinch from the removal of federal subsidies.

Yet, during the difficult times, it is paramount that Yukon Energy's and Yukon Electrical's health be preserved. Yukoners do not want their utilities to step back into history, falling into the trap of running into debt and disrepair, as did NCPC. That scenario is as disastrous as governments engaging in deficit-financing. The taxpayers suffer in the long run.

To Conclude on a Brighter Note

Yukon Energy's debt interest was renegotiated. That meant long-term debt payments would be lower and the decrease passed on to power customers.

In the long-term, Yukoners will benefit a thousandfold because they are the owners making the decisions, rather than having the decisions made for them in faraway Ottawa.

Yukoners are the shareholders and now have the say over building more infrastructure to supply power to mines; or, after the Curragh experience, should mining companies post bonds to cover new infrastructure costs.

When moving toward the 21st Century, Yukoners had the say as to how they want to meet future energy requirements--with large or small hydro, diesel, coal, wind or another source of alternate-energy.

In other words, Yukoners now have complete responsibility for ownership and for decision-making, which gives control over their own destinies.

And that is what they had always wanted.

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Copyright 2006 diArmani.com