Yukon Energy's boss is backing away from assurances the new $142-million Mayo B hydro expansion and Pelly-to-Stewart Crossing grid hookup will not increase electricity prices in the territory.

"The way we're proceeding with this project is to ensure that there's no exposure to the ratepayer, and that's why this level of investment by the federal government is so critical," Premier Dennis Fentie said at Friday morning's announcement that Ottawa will cover half the project's cost.

This morning, Yukon Energy Corp. (YEC) CEO David Morrison said there are no such guarantees.

"I don't know what will go on in the next couple of years, I don't have a crystal ball," said Morrison, who called the federal investment "a good deal for ratepayers."

"(Yukoners) just got $71 million from the federal government, something they didn't have to pay for ... that asset can be used to generate power and they didn't have to pay for it."

The balance would be covered by the territorial government and potential first nation investors, said Morrison.

Despite Ottawa's contribution and promises from the Yukon government and electric company that other financing is available, NDP Leader Todd Hardy believes the consumer will be on the hook in the end.

"The territorial government has only got a limited amount of money and the feds keep throwing money into the territory. At some point, they're going to be maxed-out," he said.

"The Conservative government's run up debts, they're not fiscally responsible, they've shown it time and time again and the public is going to be the one paying these bills."

While the premier pledged consumers would not subsidize the expansion and YEC has to crunch the numbers before it can agree, it appears the winners at this stage are the environment and upward of 300 people to be employed by the project.

According to the YEC, if the current hydro facility at Mayo is not expanded by 2012, the energy provider will require $20 million a year in diesel fuel to meet consumer demands.

"If we used (this) diesel, power rates would go up for sure," said Morrison.

With the grid connection and Mayo expansion, current annual levels of green house gas emissions would be cut by half as well, according to the YEC.

In 2008, the energy provider spent $428,000 on diesel, and with three more active mines anticipated by 2012, that explains a significant portion of the 40-fold projected diesel needs, according to Janet Patterson, the energy corporation's spokeswoman.

On Friday, Morrison said a deal with Alexco (owner of a planned Keno City-area mine) is "three-quarters" complete and that the YEC is in negotiations with Western Copper for power purchase agreements that would help pay for the project.

Work is expected to begin this month on the north-south grid connection between Pelly Crossing and Stewart Crossing while surveying work is ongoing at the Mayo dam.

Morrison expects the Yukon Environment and Socio-economic Assessment Board's (YESAB) review of the Mayo power plant - located three km downstream from the existing dam - to be finished within the year.

The entire project is to be completed by the end of 2011.