Yukon Energy and Sherwood Copper Corp. have finalized a proposed agreement worth tens of millions of dollars to supply the Minto mine with hydroelectric power.

The proposal is expected to save the copper-gold mine vast amounts of operational costs while benefitting Yukoners by selling surplus energy on the Whitehorse-Aishihik-Faro grid.

The schedule requires final approval by the Yukon Utilities Board by the end of April, with delivery of power to the mine site in late 2008.

The project is set out in two phases. Phase one will involve the extension of the main grid from Carmacks to Pelly Crossing at a estimated cost of $17 million to $23 million, along with the installation of a 27-kilometre spur line into the mine site at a cost of $3.8 million.

Phase two is scheduled to follow immediately after completion of the extension to Pelly. It will bring the transmission line from Pelly to Stewart Crossing, where it will tie into the new Mayo-Dawson grid, at an estimated cost of $12 million to $15 million.

'If all the stars line up, and we get all of the approvals and permits, and everything falls into place, we could be into construction this fall,' Yukon Energy president David Morrison said last Friday.

Morrison said the power purchase agreement was signed off last Thursday evening, and was immediately forwarded to the Yukon Utilities Board for review and approval.

As part of the agreement, Sherwood Copper is obligated to purchase at least $24 million in hydroelectric energy over the eight-year period after it's hooked up.

While Morrison maintains his hearty support for the project, more caution is being exercised by the Yukon Electrical Company Ltd. and the Yukon's utility watchdog, the Utilities Consumers' Group.

'One of the things we have concerns with right off the get-go is how they are determining the industrial rate,' Roger Rondeau, president of the utilities group, said Tuesday.

Rondeau pointed out that Yukon Energy is seeking a general rate application for the entire territory this October, which includes a review of how much it costs to service each ratepayer. A cost-of-service review, he said, has not been done for years, and is essential in arriving at what utilities should be allowed to charge customers.

Rondeau said without such a review, he's not sure how Yukon Energy arrived at its new industrial rate of 10 cents per kilowatt hour for the Minto mine and any other industrial customers who come on line.

At this point, he said, he's not suggesting the new industrial rate is inappropriate, but rather that more time was needed by himself and the utility lawyer the utilities group has retained to flush out the power purchase agreement .

Doug Tenney, general manager of Yukon Electrical, said Monday the private utility is also just now going through the finalized purchase agreement, and will be participating fully in its review before the utility board.

As he mentioned in late December when the first draft of the agreement was released, Yukon Electrical wants to ensure ratepayers are not negatively affected by the deal or exposed to any financial risk, Tenney said.

'I can tell you we intend to participate in the regulatory proceedings,' he said.

The private company declined to participate in the November hearings into Yukon Energy's 20-year plan which included the Carmacks-Stewart extension. In its decision not to participate, Yukon Electrical noted the territorial cabinet promised to call for project-specific hearings into any of the major projects outlined in the 20-year-plan, such as the line extension.

Yukon Electrical indicated it would have been a waste of time and money to go through the November hearings, and then repeat the exercise for each individual project like the Carmacks-Stewart Crossing connection.

Energy, Mines and Resources Minister Archie Lang said Monday the government remains committed to full review of the proposal by the board.

The Yukon, Lang reiterated, does not want to repeat financial misgivings of the Mayo-Dawson transmission line, which did not receive any public scrutiny under the former Liberal government. At last count, the project came in 30 per cent or $10 million over budget and is still before the courts with suits and counter suits.

The minister said he has not heard from Justice Minister Marion Horne regarding when she expects to order the utilities board to conduct the project-specific hearing.

But he suggested it will be soon, as the territorial cabinet is sensitive to the tight schedule being proposed.

As part of the utilities board approval of Yukon Energy's 20-year plan, the board stipulated it wanted to review the finalized power purchase agreement before the Crown corporation proceeded with the line extension.

Lang said he's been told it is possible to have the board complete its own review of the agreement, and conduct a cabinet-ordered review of the overall project, at the same time.

Whether the board will call for a full public hearing as part of its review of the overall project, or simply conduct a paper exercise, will be for the utilities board to determine, said the energy minister.

Liberal Leader Arthur Mitchell expressed concern Tuesday about the finer points of the proposal, but not the concept itself.

On the surface, connecting to the two hydroelectric grids, selling surplus power and displacing more diesel generation appears to be an overall benefit, Mitchell said.

He does, however, question specific provisions of the purchase agreement. The deal, for instance, required Yukon Energy to buy the four mobile diesel generators the Minto mine will be using to supply its power needs until it's hooked up, for a cost of $2.24 million.

'Extending the grid to other communities is positive, and extending the grid to the mine is positive, but we are just uncertain about other aspects of this deal,' Mitchell said.

Under the agreement, Sherwood Copper and its wholly owned subsidiary, Minto Explorations, will contribute $7.2 million to the cost of extending the main line, and will pay the entire $3.8 million for the spur line.

Yukon Energy will provide the upfront financing, and the Minto mine will repay the amount over several years.

Both Yukon Electrical and the utilities group previously expressed concerns about Yukoners providing the upfront financing, should something negative happen to the mining project.

The Australian bank providing the lion's share of financing for the project is first in line for the assets should problems develop, it's been pointed out.

The corporation's president, however, said Friday Yukoners should take comfort in a recent deal Sherwood has made with the Bank of Montreal for additional financing.

The Canadian bank has provided $40 million more in financing, and while the Australian bank remains first in line for assets if anything should go awry, Yukon Energy is second in line, ahead of the Bank of Montreal and its investment.

In addition, Morrison noted, Sherwood Copper is putting $850,000 upfront as the cost of removing the spur line at the end of the mine life, which right now is estimated at just over seven years.

Additionally, Yukon Energy is undertaking its own full review of the Minto mine proposal to verify its validity, Morrison pointed out Friday. He also noted that actual construction of the grid extension will not begin until the mine is in production, which is expected this spring.

Meanwhile, the Western Copper Corp. is advancing its Carmacks project through the environmental screening process. The Yukon Environmental and Socio-economic Assessment Board is preparing to call for public comment on the proposal.

Yukon Energy has pointed out in the past that if Western Copper chooses to hook into the grid, and it's expected it will if the project goes forward, it will be required to contribute $8 million toward the project to extend the main grid.

With $8 million from Western Copper for the grid extension, $7.2 million from Minto Explorations, and $5 million expected from the publicly-owned Yukon Development Corp., there could be little or no capital costs for ratepayers, Morrison has pointed out.