A decision by the Yukon Utilities Board regarding the Watson Lake LNG proposal could have implications for Yukon Energy's $42-million proposal in Whitehorse, observers say.

Representatives of the Utilities Consumers' Group and the Yukon Conservation Society say it's clear to them the utilities board has rejected the proposed LNG project for Watson Lake by Yukon Electrical Co. Ltd.

Company spokeswoman Laura Carlson said this morning the private utility is still going through the decision, including its impact on the LNG proposal.

"It's open to interpretation,” she said. "And we will have our interpretation of what we read from the board in our compliance filing.”

Carlson did acknowledge the $3-million back-up generator for Carcross is off the table as result of the decision. So too is the $3.9 million proposal to switch customers in the Whitehorse area, Tagish,

Marsh Lake, Carcross and Teslin to automated meters, she said.

The three capital projects and others of lesser value were part of Yukon Electrical's application filed last year for an 11.7 per cent rate increase for 2013, 2014 and 2015.

The proposed back-up generator for Carcross and the automated meters were also rejected in Yukon Electrical's last rate application.

The board's 110-page decision was issued April 23. It directs Yukon Electrical to file a compliance report no later than May 23 detailing how the decision affects the rate increase requested in the application.

Carlson said the company is going through the decision to prepare its compliance filing.

The decision said the board would not allow the cost of the back-up generator to be passed on to the rate base. Nor would it allow the cost of automated meters, or the LNG project.

Yukon Electrical wants to switch Watson Lake's six diesel generators to hybrid engines burning both diesel and natural gas. The company maintains it would result in huge savings in the cost of fuel and

cleaner exhaust emissions.

The board, however, indicated there was no competitive bid process to construct and supply equipment to the Watson Lake LNG facility, and therefore it left the board questioning the cost.

In its application, the board indicated it was entering into a partnership with its parent company, the ATCO Group of Companies based in Alberta, because there were no other parties available to supply the equipment and expertise.

"Despite the Board having rejected YECL's proposed Watson Lake bi-fuel project in Section 10.8.2 of this decision, the Board finds that this project has potential to be viable in the future,” says the

decision.

"Accordingly, the Board directs that all Watson Lake bi-fuel project study costs to date be held in WIP (work in progress) until such time as the project may be completed. The Board further directs YECL to

reflect this finding in its compliance filing.”

Roger Rondeau of the Utilities Consumers' Group said this morning they'll have to wait for Yukon Electrical's compliance filing to figure out the overall impact the decision will on the requested rate

increase.

"It is going to go down some but certainly not as much as we had hoped,” he said.

Rondeau pointed out while the three major capital expenditures were rejected, the board did accept many of the lesser projects as well as Yukon Electrical's forecast costs for operation and maintenance

over the three years.

For instance, said Rondeau, the board accepted the company's request to pass on to Yukoners the cost of renovations to its offices at the corner of Elliott and Front streets.

The consumers' group argued Yukon Electrical's parent company, ATCO, should have paid for at least half of the renovations, he pointed out.

Rondeau said rejection of the Watson Lake proposal was based on economics, and he's hoping the board will take the same view of Yukon Energy's proposal for a new natural gas generating plant and

storage facility for LNG.

The consumers' group argued the publicly owned utility did not prove the business case for the $42-million project, he said.

"We are hoping the board is going to take the same type of direction as the one here and put it on hold until we absolutely need it,” he said.

Anne Middler of the Yukon Conservation Society said if the board has questions about the economics of the Watson Lake proposal, it must have questions about Yukon Energy's proposal.

The conservation society is hopeful this decision is a foreshadowing of what the board will rule on Yukon Energy's proposal, she said.

Middler also noted the society's other objections about the proposal, namely the issue of public safety when having an LNG facility so close to populated areas.

Yukon Energy maintains the new facility would result in huge savings in fuel costs, and cleaner exhaust emissions.

It was initially planning to begin construction this month, with an aim of having the plant operational late this year or early 2015.