Yukon Energy is proceeding with the multimillion-dollar extension to the electrical grid from Carmacks to Pelly Crossing, says the chair of the publicly-owned utility.

Willard Phelps said in an interview Tuesday it was decided Monday by Yukon Energy's board of directors to go ahead with the contract to prepare final design and engineering documents for a construction tender, with an aim of beginning construction this September or October.

The chair of the board declined to disclose what the estimated cost of the project is, in keeping with the previously stated position of Yukon Energy.

Yukon Energy recently told the Yukon Utilities Board at a public hearing that it would not be releasing the final cost estimate in order to protect the public bid process.

Phelps also declined to say whether the board had to consult with Archie Lang, the minister responsible for Yukon Energy, before making its decision to proceed.

The recent ruling by the utilities board recommended Yukon Energy consult with Lang if the estimated cost was above the preliminary, high-end estimate of $25.9 million.

Phelps noted the board can still kill the project if the construction bid comes in higher than expected.

Final design and engineering work is only one of several aspects that need to come together if Yukon Energy expects to deliver hydroelectric power to the new Minto mine by the end of September 2008, Phelps pointed out.

He said there are still all the regulatory approvals and permitting that need to be secured, as well as finalizing a development agreement with three Northern Tutchone first nations.

Along with the decision to proceed with final design is the board's approval to order equipment that will take months to deliver, Phelps explained. If the board decides to kill the project in the end, Yukon Energy would have to pay a penalty for ordering the equipment.

Yukoners will be paying $15 million of the final cost for the main, 98-kilometre transmission line to Pelly, with $10 million coming straight out of the bank.

Another $5 million is being routed through the publicly-owned Yukon Development Corp., Yukon Energy's parent company.

Sherwood Copper Corp., owner of the Minto mine, will contribute $7.2 million toward the main line, and will pay the entire cost of the lighter 27-kilometre spur line running off the Klondike Highway into the mine site, estimated at $4 million.

Anything above the $22.2 million, the amount being funded by taxpayers and Sherwood Copper, will be passed on to Yukoners who use electricity, Yukon Energy told the utilities board.

The utilities board approved the grid extension to Pelly Crossing as a general benefit to Yukoners, in that it would generate extra revenue from what is now surplus hydro power.

It would also take the Minto mine and Pelly Crossing off diesel generation, and provide the first of two phases to eventually tie the Whitehorse-Aishihik-Faro grid to the new Mayo-Dawson transmission line.

The mine is expected to save $3 million to $4 million a year in diesel fuel. Pelly Crossing currently burns about 600,000 litres a year to keep the lights on in the community of 300.

In its approval, however, the board recommended Yukon Energy confer with the energy minister if the final estimate was above $25.9 million. It also recommended the minister be kept informed of the negotiations with the Northern Tutchone first nations, as that agreement could also affect the final cost of the project.

Yukon Energy should also confer with Lang if schedule delays are expected to push the completion date beyond Dec. 31, 2008.

The board emphasized in the ruling that its approval was only for the phase-one extension to Pelly. Before Yukon Energy proceeds with the 75-kilometre second phase to Stewart Crossing, the publicly-owned corporation will have to go through another public review process, the utilities board said.

The cost of the final design contract was unavailable this morning.

Yukon Energy spokeswoman Janet Patterson said the price is still being negotiated with Wardrop Engineering of Mississauga, Ont.

Wardrop was awarded the contract last February to do the preliminary design work for both phases of the proposed grid extension, for a price of $454,349.

Patterson said there was a provision in the first contact to do the final design if Yukon Energy proceeded with the grid extension. Negotiations for a contract price for the final design should be complete by the end of next week, she said.

As part of the preliminary design contract, Wardrop was also required to put together its best estimate of what phase one of the grid extension would cost.

It was that estimate which the board of directors used Monday to arrive at its decision.

The utilities board was told during last month's hearing that everything was being done to ensure the final estimate was on the money, to avoid the huge cost overruns that were experienced with the Mayo-Dawson line.

Yukon Energy and Chant Construction, the company that built the Mayo-Dawson line, are still before the courts sorting out their differences.

Originally budgeted at $27.2 million, the final cost of the project came in at $36 million-plus, and there are millions more in outstanding claims.