who we are

Established in 1987, Yukon Energy is a publicly owned electrical utility that operates as a business, at arms-length from the Yukon government. We are the main generator and transmitter of electrical energy in Yukon. We work with our parent company, Yukon Development Corporation, to provide Yukoners with reliable, sustainable and cost-effective power.

There are over 21,000 electricity consumers in the territory. Yukon Energy directly serves over 2,200 of these customers, most of whom live in and around Dawson City, Mayo and Faro. Indirectly, we provide power to most other Yukon communities through ATCO Electric Yukon. ATCO buys wholesale power from us and sells it to retail customers in the territory.

Most of the electricity we produce is renewable, coming primarily from hydro resources generated at our Whitehorse, Aishihik and Mayo hydroelectric facilities. A small amount of LNG and diesel is also used to ensure reliable and cost-effective electricity is available when it’s needed at peak times, during emergencies and when renewable sources of electricity are not available.

Our headquarters are located near the Whitehorse Rapids hydro plant in Whitehorse, with community offices in Mayo and Dawson City.

mission

To enable Yukon's prosperity with sustainable, cost-effective and reliable electricity

vision

To establish a sustainable legacy for Yukon's future

values

Safety

Accountability

Continuous Improvement

Teamwork

Professionalism

Good Corporate Citizenship

message to yukoners

Yukon Energy is an industry leader in sustainable energy production in Canada with more than 90 per cent of our electricity being renewable.

We remain committed to increasing the amount of renewable electricity we generate, however at the same time, we are facing some unique challenges. The Yukon is growing and Yukon Energy is attracting more customers while our generating facilities and transmission infrastructure are aging. We must generate more energy and build more generation capacity if we are to meet future residential and industrial demand for electricity and continue to provide reliable and affordable power to Yukoners.

In 2018, much of our time and energy was devoted to working with industry partners, Yukon First Nations and all levels of government to increase the availability of renewable energy solutions, reduce reliance on non-renewable sources, lessen energy consumption in the Yukon, and strengthen the reliability of our isolated electricity grid.

Our accomplishments over the year included:

Developing a new Five-Year Strategic Plan for the Corporation;
Working with Yukon government and ATCO Electric Yukon to launch the Standing Offer Program of the government's Independent Power Production Policy;
Securing Federal funding for a pilot test of residential demand response technologies to shift peak electricity demand in customer homes;
Refurbishing our backbone 138 kV transmission lines between Aishihik, Whitehorse and Carmacks;
Installing a third LNG engine in Whitehorse to better equip us to meet peak demands for electricity;
Beginning work to increase the amount of electricity we’re able to generate out of our existing Whitehorse hydro facility; and
Kicking-off preliminary planning work on the development of new mid-scale hydro facilities.

As we look ahead to 2019, our focus remains on building and delivering projects that enable Yukon’s prosperity with renewable, cost-effective and reliable electricity.

This means addressing the capacity issue we face head-on by working on a portfolio of solutions including upgrades at our Whitehorse hydro facility; enhancements to our existing hydro storage capabilities; two proposed hydro developments; a gridscale battery; a new LNG, diesel or dual-fuel generation facility; and a suite of energy conservation programs. We will also be starting work to update our 2016 Resource Plan.

This is an exciting time for Yukon Energy and we look forward to reporting back to you on our continued progress in future reports.

Lesley Cabott
Chair, Yukon Energy Corporation
Board of Directors

Lesley Cabott, Chair

Clint McCuaig, Vice-Chair

Susan Craig

John Jensen

Gary Jones

Simon Lapointe

Gina Nagano

Mike Pemberton

Wendy Shanks

president's welcome

I am pleased to present the 2018 Yukon Energy Annual Report.

During our last public survey completed in 2016, Yukoners told us that when it comes to future energy projects, they care most about environmental protection, then cost, then reliability, and finally social responsibility. These values are important to us too and are now the pillars in which we measure all of our planning and operational activities.

I am proud to say that in 2018, our customers experienced fewer power outages than the year prior. One contributing factor of this was the lower number of controllable outages – outages caused by loss of generation, equipment failure or human error – we had in 2018 compared to 2017. I believe this is a true testament of our team’s commitment to operating and maintaining our electric system with the highest level of care and attention.

Electricity rates in Yukon remain the lowest across Canada's North. Although we submitted an application in 2017 to our regulator, the Yukon Utilities Board, for our first rate increase since 2013, the Board did not deliver a decision on that application this past year.

Rate applications are always rigorous. The process includes multiple stage gate reviews and opportunities for governments, industry experts and the public to review, analyze and ask questions of the utility’s proposal and to provide counter arguments. I hope this instills confidence in you that rate increases – when they do happen – have been carefully scrutinized by a number of different parties and found to be just and in the best interest of all customers.

This past year also had its fair share of challenges too, the largest being low water levels at our Mayo and Aishihik hydro facilities. Water levels at these facilities at different points in 2018 were the lowest they had been since the late 1990s. As a result, we ended up needing to use more liquefied natural gas (LNG) to generate electricity and meet customer demands for power.

Through it all, our team of professional and dedicated employees and Board of Directors continued to work extremely hard to advance the goals that we set out for ourselves and the company at the start of the year, and to give back to the communities and people we are privileged to serve.

Andrew Hall
President and CEO

Generating capacity

129
MEGAWATTS in the summer
116
MEGAWATTS in the winter^*

*caused by a lower supply of hydro resources during winter months

Electricity supplied

450
GIGAWATT HOURS

Peak demand

93
MEGAWATTS

(recorded on February 5, 2018)

Renewable generation

92
PER CENT

Reportable motor vehicle incidents

0

(with damages exceeding $5000 as defined by the Canadian Electricity Association)

Environmental spills

0

(as defined by Yukon Spills Regulations)

2018

Achieve an All Injury Frequency Rate of 1.0 or less

In 2018, we had an All Injury Frequency Rate of 2.5, compared to 5.1 in 2017. We are trending in the right direction, but there is still work to be done.

Achieve a Reportable Motor Vehicle Incident Rate of 0

Achieved.

Achieve 10 or less Controllable Outages

We had 12 controllable outages in 2018, compared to 16 in 2017.

Achieve a Return on Equity of 7.35%

The 2018 Return on Equity was 6.54%, down from 8.32% in 2017.

Complete installation of third LNG unit on time and on budget

Achieved. The third unit was installed on time and on budget.

Complete 2018 scope of the Transmission Refurbishment project on time and on budget

Achieved. 2018 work was completed on time and on budget.

Develop and implement a Generation Resource Management Process

Achieved. We implemented industry best practices to monitor and forecast inflows to our reservoirs which will help maximize generation of renewable electricity.

Complete key deliverables for the first year of our Asset Management Program

Achieved. In 2018, we made good progress in developing an asset management framework consistent with best practices. Work remains to expand and implement the framework over the next few years.

Confirm path forward for addressing long-term energy and capacity requirements

In 2018, we began planning for upgrades to increase the output of our Whitehorse hydro facility.

Develop expanded Demand Side Management Program

We completed scoping of future demand side management programs and entered into discussions with Energy Solutions Centre about working together to deliver the programs. We also secured federal funding for a pilot test of residential demand response technologies to shift peak electricity demand in customer homes.

Submit an Aishihik Relicensing Application to the Yukon Environmental and Socio-economic Assessment Board with support from the Champagne and Aishihik First Nations

There was a delay as we continue to work with the Champagne and Aishihik First Nations on this application. We submitted an application for a 3-year license renewal in early 2019.

The health and safety of our people and customers are part of every decision we make and every action we take.

Achieved an overall score of 95% on our 2018 COR Audit
Provided more than 28 safety orientations to staff and more than 379 individual orientations for contractors and consultants
90% of Yukon Energy employees attended at least one safety meeting a month
More than 50% of Yukon Energy staff chose to utilize the company’s wellness subsidy
Implemented initiatives to improve employee communication and enhance teamwork within and across departments

We are committed to limiting the impact of our operations on the environment and promoting biodiversity.

Zero reportable environmental spills in 2018
Raised and released about 150,000 Chinook Salmon from our Whitehorse Rapids Fish Hatchery
About 60,000 Rainbow Trout, 30,000 Arctic Char and 80,000 Kokanee Salmon were raised at the Whitehorse Rapids Fish Hatchery
Continued support of community stewardship initiatives such as the:
- Celebrations of Swan Festival
- Fox Creek Salmon Habitat Enhancement Program
- Salmon conservation programs and fry release at Wolf Creek and Mayo River
- Yukon River Salmon Migration Study in partnership with Canadian Wildlife Federation, Carleton University, Carcross/Tagish First Nation and Kwanlin Dun First Nation
Partnered with the National Institute of Scientific Research (INRS) and Yukon College to monitor and assess the longterm effects of climate change in our hydro reservoirs

We are committed to providing sustainable, reliable, affordable and safe electricity service to our customers.

OUTAGES

Total Number of System Outages in 2018: 34

Top Causes of System Outages in 2018:

Equipment malfunction
External interference (third-party contact and wildlife)
Adverse weather
Planned outages

CUSTOMER RATES

Electricity rates in Yukon remain the lowest of Canada's three territories.^*

^* Source: Northwest Territories Power Corporation General Rate Application, 2016/19; Qulliq Energy Corporation 2018/19 General Rate Application; Quebec Hydro.

CUSTOMER CONNECTIONS

Total Number of New Customer Connections in 2018: 50 (2% of 2017 customer base)

Total Number of New Micro-generation Customers Connected in 2018: 3

OTHER MILESTONES

Executed a Power Purchase Agreement with Victoria Gold and began planning for the system protection regime to incorporate the Eagle Gold Project onto the grid.

community

We believe in giving back and being active members in the communities we are privileged to serve.

Provided $85,000 to a variety of community groups across Yukon in the areas of:

Arts, Culture and Tourism
Sports & Recreation
Health, Social Services and Education
Sustainable Development

Awarded $12,000 in post-secondary education scholarships

We are committed to enriching and building partnerships with Yukon First Nations, industry partners and all levels of government.

Advanced our Progressive Aboriginal Relations (PAR) Committed designation by implementing a First Nation Procurement Policy and First Nation Recruitment Policy.

Co-hosted and organized the Canadian Electricity Association's (CEA) Partnering in Energy Development Symposium with ATCO Electric Yukon at the Carcross Learning Centre. The forum focused on partnership opportunities with First Nations and included presentations by the Federal Minister of Innovation, Science and Economic Development, Premiers of Yukon and N.W.T., the Council of Yukon First Nations Grand Chief, First Nation Chiefs and Development Corporation delegates, Independent Power Production proponents and utility leaders.

Collaborated with ATCO Electric Yukon and Yukon government on the Standing Offer Program of the government's Independent Power Production (IPP) Policy.

Our business is the generation and transmission of electrical energy to most of Yukon. We strive for energy production that is reliable, sustainable and cost-effective. Our primary source of power comes from our legacy hydro assets and our goal is to minimize the use of non-renewable sources due to higher variable cost and environmental impacts.

Core business and strategy

Yukon Energy’s strategy is based on the following key strategic pillars.

1. SUSTAINABILITY

Yukon Energy is committed to the principles of sustainability in all our business practices, with the objective of protecting and enhancing Yukon’s human and natural resources. Yukon Energy developed a Sustainability Policy in 2017, and was awarded the ‘Sustainable Electricity Company’ designation by the Canadian Electricity Association (CEA) in 2017. In terms of the development of new energy resources, Yukon Energy is committed to developing renewable resources while recognizing the limitations of certain forms of renewable generation in meeting the energy and capacity needs of Yukon’s isolated grid. Thermal generation will continue to play an important role in meeting peak electricity demand cost effectively, and providing insurance against contingent events such as drought and outages of key hydro facilities. Yukon Energy applies a social cost of carbon to the economics of future thermal generation resources, in order to level the playing field between renewable and fossil fuel options when planning new resource investments.

2. FIRST NATIONS RELATIONSHIPS

Yukon Energy is committed to active engagement with Yukon First Nations, striving to meet the spirit and intent of Land Claims obligations. We recognize First Nations as decision bodies and potential energy proponents, partners and investors. We seek to leverage Yukon Energy’s ongoing business operations and future project development work to create opportunities for economic, social and cultural development for Yukon First Nations. Key First Nations initiatives include project specific agreements, and Yukon Energy’s First Nations Employment and Procurement policies. Yukon Energy is pursuing certification under the Aboriginal Business Council’s Progressive Aboriginal Relations (PAR) program as a means to manage and benchmark its First Nations engagement program.

3. DISCIPLINED FINANCIAL MANAGEMENT

Given the rate pressures faced by Yukon Energy’s customers and the prospect for future rate increases driven by the Corporation’s capital investment needs, disciplined financial management of our operating and project-related business is essential. Yukon Energy is also committed to continuous improvement as a management philosophy to drive sustained improvements in our operational performance and efficiency.

4. RIGOROUS AND PROACTIVE PLANNING

Yukon Energy applies industry best practices and processes for the planning of future capital investments required to sustain the Corporation’s aging infrastructure and address growing demand for energy and capacity. Rigorous planning of future investments is required to optimize and prioritize capital expenditures, accounting for the financial constraints within which the Corporation operates. Key business processes that support these planning activities include Integrated Resource Planning and Asset Management. Yukon Energy has developed and periodically updates its 5 year capital plan, including investments required to sustain existing assets and meet future growth, as a key tool to document and communicate the Corporation’s longer term capital needs.

5. STAKEHOLDER AND EMPLOYEE ENGAGEMENT

As a public utility, Yukon Energy is committed to broadly consult with stakeholders during the planning of new projects and initiatives, and to incorporate to the extent possible, the preferences of stakeholders in those plans. This consultation is essential to securing social license for corporate initiatives, while also balancing the obligations of the Corporation to its shareholder and its primary regulators (the Yukon Utilities Board and the Yukon Water Board). In addition, the Corporation’s employees are critical to the company’s success. Maintaining a safe, strong and engaged workforce capable of executing Yukon Energy’s ambitious plans remains a key strategic priority.

Capability to deliver results

In order to deliver on our strategic goals and achieve planned results, Yukon Energy maximizes the use of available resources while considering risks and impacts to stakeholders. These resources include leadership, labour force, working capital, systems and processes, liquidity, and capital resources.

We continue to develop human resources policies to adapt to our seasoned workforce.

We monitor and forecast our cash and financial strength on an on-going basis, including current and future projections. We expect to require cash to finance our capital projects in 2019 and are in the process of securing these resources.

Through established policies and procedures Yukon Energy maintains a capital structure ratio of 60 per cent long term debt and 40 per cent equity.

We continually monitor and evaluate the condition of our assets, and allocate a material portion of our capital budget for maintenance of these assets, thereby ensuring reliability of service to our customers. As well, the Corporation has started a multi-year project to implement a formal asset management system to ensure optimization of maintenance and capital resourcing.

We make it a priority to maintain and improve our key relationships with Yukoners including the Yukon government, Yukon Development Corporation, local First Nations, stakeholders, and our primary banker, TD Bank.

Results

Net income for the 2018 fiscal year was $6.1 million, $4.4 million less than the previous year. The decrease in net income was primarily due to a broad increase in operations and maintenance expenditures.

Revenue from sale of power was $48.0 million; $3.0 million higher than the prior year due to an increase in all power sales categories resulting from increased rates and higher non-industrial consumption.

The regulated rate of return on equity for 2018 is 6.54 per cent, down from 8.32 per cent the prior year./p>

Outlook

Net income for 2019 is forecast to decrease by $0.5 million due to an increase in fuel and operations and maintenance costs. Projected revenue from power sales is forecast to increase by $2.4 million.

The forecast return for 2019 is 5.96 per cent 2.74 per cent less than the Return on Equity that we were approved in our 2017-2018 GRA of 8.70 per cent.

Yukon Energy is planning for a General Rate Application (GRA) for 2019-2020. The GRA will give us the opportunity to adjust rates to reflect the Corporation’s cost requirements and capital plans.

Risk management

Yukon Energy is exposed to numerous risks in providing service to our customers. Risk impacts include staff and public safety, financial, reputation, physical plant, stakeholder relationships, environment, and regulatory. These risks can range in scale from minor to catastrophic. Yukon Energy endeavors to manage all the risks we face on a cost effective basis, taking into account the potential reward to be gained in return for the acceptance of the risk. We have an enterprise risk management framework that provides the basis for consistently applying risk management practices.

Key Strategies by impact area:

The safety of our employees, contractors, and members of the public is managed through a well-developed health and safety program that meets or exceeds established standards for the industry.

Yukon Energy is exposed to reputational impacts from a number of risks including Key Asset Failure, First Nations Consent, Cyber Security, and Insufficient Installed Capacity. Mitigation strategies used to address these risks include adequate stakeholder engagement, development of an asset management plan, and long-term resource planning.
Risks that can potentially have a negative financial impact include Financing Risk, Government & Shareholder Relationship Risk, Project Costs and Timeline Overrun, Employee Recruitment & Retention, and Inadequate Energy Supply. These are managed through an extensive budgeting process, board oversight of major projects, and keeping the Yukon Utilities Board informed of company plans and activities through regulatory hearings.

Key performance drivers

There are several performance drivers and key performance indicators that are critical to the successful implementation of our strategy and achievement of our goals. Below is an outline of four of our most important performance drivers.

1. HEALTH AND SAFETY

Given the nature of our industry, the Corporation takes health and safety seriously. The two primary indicators for measuring success in this area are:

a. All Injury Frequency Rate, and

b. Reportable Motor Vehicle Incidents.

With respect to the former, the Corporation failed to meet its target of an All Injury Frequency Rate of 1.0 or lower, however, the 2018 rate of 2.5 is an improvement from 2017 and 2016.

In 2018 Yukon Energy had 0 Reportable Motor Vehicle Incidents – incidents defined by the Canadian Electricity Association as those with damages that exceed $5000. The company recognizes that we had 3 preventable vehicles incidents in 2018 (each with damages less than $5000) and that work remains to be done to lower these types of incidents.

2. RETURN ON EQUITY (ROE)

In the process of regulating and setting rates for Yukon Energy, the Yukon Utilities Board must ensure that the rates are sufficient to allow us to provide reliable electric service while maintaining the financial integrity of the utility, including a return on invested capital.

3. WORKFORCE

A stable workforce is crucial for delivering services required to achieve our business objectives. We regularly monitor our vacancy and turnover rate to ensure that our staffing is at appropriate levels. We set our human resources policies to recruit and retain a competent work force, provide opportunities for professional development and perform succession planning.

4. RELIABILITY OF SERVICE

Reliability of service is one of our most important objectives. Improving reliability requires a longterm investment strategy and commitment. Trends in recent performance measures are compared against past results. Senior management reviews performance indicators and takes action when actual performance deviates from forecast.