The Energy Solutions Centre was created as a separate company unbeknownst to its parent corporation or the government.

The Auditor General of Canada released a report on Monday addressing concerns about the Energy Solutions Centre (ESC).

The centre was created in 2000 to do energy audits of homes and businesses and to 'promote, co-ordinate and facilitate energy programs with an overall goal to create energy cost savings and reduce greenhouse gas emissions,' according to the report.

'The company was not established by specific statute; rather it was created pursuant to the Business Corporations Act. It was set up by the Yukon Development Corporation (YDC) as a subsidiary.

'Although the corporation has the authority to establish a subsidiary, we would have expected the government of Yukon to be informed of the creation of the company. The corporation was not directed by the government of Yukon to set up this entity. Instead, the company was created without informing the minister why there was a need to have a separate subsidiary.'

The auditor general's report indicates it never fully established the reason for the separate entity.

'It is unclear why this company was originally set up. The funding agreement established between Yukon Development Corporation and Natural Resources Canada did not require the corporation to establish a separate company,' reads the report.

'It does not appear that the costs and benefits of setting up the company were carefully considered prior to its establishment. While the corporation's board of directors was informed that the Energy Solutions Centre Inc. would be co-located with the Yukon Development Corporation to share and reduce costs, the findings in this report would indicate the costs of operating the company were not insignificant.

'We note that the Corporate Governance Act, which came into effect after the creation of the company, requires that new government corporations can only be established either through legislation or with the consent of the (cabinet).'

During yesterday's hearing of the legislative assembly's public accounts committee, YDC's current president, David Morrison, spoke to the committee about the creation of the centre.

He pointed out that because the ESC was created as a separate corporation, it did not have to follow some of the basic guidelines of a government entity.

One of the major concerns raised by both the auditor general's report and by Morrison is the fact the two main people at the ESC, the managing director and the treasurer, were on contracts instead of hired as employees.

This enabled the managing director to pull in $168,000 in 2003, while the treasurer took home more than $104,000 from that position alone in 2003. Those salaries are more than what a deputy minister makes.

In his testimony yesterday, Morrison talked about the contracting concerns of the ESC and how those contracts were not subject to the scrutiny of a government contract.

'As a government agency, Yukon Development Corporation is required to submit a contracting report to the government's monthly contract registry,' said Morrison.

'Energy Solutions Centre, as a private corporation, had no requirement to follow any of these guidelines.'

Morrison doesn't think the ESC needed to be a separate company.

'I believe that all the work that was done by Energy Solutions Centre could have been carried out within either the Development Corp. or the Energy Corp.,' he said.

Morrison joined the fold at YDC in May 2003 as the board chair. He then became the chair of the ESC in August that year. He became the president of YDC last year.

Morrison has absolved himself of being involved in any the problems as he found them upon his arrival.

It was Morrison himself who asked the auditor general to do a review of both the solutions centre and the Mayo to Dawson City transmission

In his testimony, the YDC president questioned the necessity of having the ESC separate from the development corp.

'The murkiness of the past, and particularly back in 2003 and earlier, was that it seemed to me, at least that the Energy Solutions Centre mandate and the Yukon Development Corporation's mandate were one and the same, and you weren't sure which was carrying it out,' he said

Immediately after the auditor general released the report on Monday, Premier Dennis Fentie announced the government was moving the control of the Energy Solutions Centre from under the Yukon Development Corp. to the Department of Energy, Mines and Resources.

Morrison called the move 'a step in the governance process.'

Also appearing at the hearing is the current chair of the boards for YDC and the centre, as well as a former government leader, Willard Phelps.

Phelps, who has been on the job for just a few months, was concerned with what the ESC was doing.

'The Energy Solutions Centre, in effect, took on responsibility for looking at energy-related policies and, in effect, through its actions, developed energy policy in a de facto way,' said Phelps. 'My view is that that's really not desirable, either.'

He said the policies should be development by the government, specifically the Department of Energy, Mines and Resources, where the ESC now finds itself.