(Slightly updated 8-Sep, 2025)
Unauthorized and illegal activities? What? It turns out that Yukon Energy has been charging customers for diesel capacity that it has no authority to operate. This is fact. Customers have been charged for capacity that has not been assessed as required by YESAA and has not been permitted by the Department of Environment as required by the Environment Act. Can a company charge customers for things that the company is not authorized or allowed to do? Is it legal to charge for a service that you can’t legally provide? Can YEC do that? It seemed worth going to court to ask.
An appeal has been brought against Yukon Energy Corporation (YEC) and the Yukon Utilities Board (YUB), concerning the Board’s decision to allow YEC to charge customers for unpermitted and unlawful capacity.
Of course there are no cases in Canadian law that allow a company to charge for unlawful activities. This makes sense to me, as making it legal to charge for illegal things would make a bit of a mess. And yet, Yukon Energy seems to be arguing that it should be lawful to charge for unlawful operations.
The hearing for Leave to Appeal was on January 28, 2025, and Leave to Appeal was granted on February 6. The hearing of the appeal will be in November 2025. The Leave to Appeal decision is available here.
Back to the question: Can a company charge for illegal activity? Can YEC charge customers for capacity that it is not legally authorized to operate? YEC has charged customers millions for something it is not authorized to do. The goal of this appeal is to get those millions back!
There are lawyers from Yukon Energy and the Yukon Utilities Board arguing that customers can be charged for unauthorized or illegal capacity, and one non-lawyer arguing that customers cannot be charged for unauthorized or illegal activities.
Capacity limits are determined and permitted by Department of Environment in accordance with the Environment Act, YESAA and YESAB. The Yukon Utilities Board, in setting rates, has ignored these limits and allowed YEC to charge customers based on limits that exceed those determined by the Department of Environment. Customers are being charged for capacity that has not been assessed as required by YESAA or permitted as required by the Environment Act.
If a company is not authorized to do something, can the company still charge customers for it? If capacity limits are determined by the Department of Environment, can the Yukon Utilities Board ignore these limits and use a higher limit in determining rates for customers? And why has YEC not bothered with permits?
Here are the basics:
• As of the date of filing, 61% of Yukon Energy’s rental diesel capacity for 2024-25 had not been properly assessed or permitted. In 2023-24, 46% of rental capacity was unpermitted.
• In the proceedings of YEC’s 2023-24 General Rate Application, YEC confirmed that it did include unpermitted and unauthorized capacity in revenue requirements.
• Charges to customers for YEC’s unauthorized capacity accounted for approximately $2.3 million in 2023-24, and up to $4.1 million for 2024-25.
• Leave to Appeal was granted on February 6, 2025. The goal is getting this $6.4 million returned to electricity customers in Yukon.
• Should the YUB require customers to pay for capacity that YEC is not permitted to operate?
• If the Utilities Board allows YEC to ignore permitted limits when charging customers, are other companies also free to ignore permitted limits and charge for things they are not permitted to do?
• Is ignoring environmental and socio-economic assessment requirements and ignoring permit limits a prudent approach to providing safe and reliable power?
• The Yukon Utilities Board (YUB) has erred in law and exceeded it’s jurisdiction by permitting YEC to claim and receive payments from customers based on diesel generation capacity limits that exceed the limits permitted by the Yukon Department of Environment.
• The Board’s determination of rates based on excessive and unlawful capacity limits is patently unreasonable.
• Backup diesel is needed, but this does not exempt YEC from regulation.Document links and more:
The core of the argument for Leave to Appeal can be downloaded here – the Memorandum of Argument from the Motion Book that was filed in the Leave to Appeal. The Notice of Application for Leave to Appeal contains the grounds of appeal, and asks that costs associated with capacity in excess of what has been permitted be refunded to customers. Parts of Evidence to be referred to in Argument from the Motion Book are available here.
Below is some background on how/when/where Yukon Energy did not (and does not) have permits for rental diesel.
It was interesting to me to see how YEC handles permitting. For the Mayo rentals, YEC assured the First Nation of Na-Cho Nyäk Dun that the permit would be for 4.9 MW – and three days later submitted the General Rate Application (GRA) where YEC insisted it was a 7.2 MW project. Should YEC really be telling the First Nation that it is a 4.9 MW project while telling the Utilities Board it is a 7.2 MW project? Assessment levels change at 5 MW, so this is significant.
In Faro, in the GRA, YEC claimed to the YUB that no YESAB assessment was needed to expand capacity by 5.1 MW – which was simply not true. At the same time, YEC was telling Environment that capacity was not being expanded in Faro – so no assessment was needed. Once this contradiction came out in Yukon News, YEC first claimed that the generators might not be installed in Faro, but eventually initiated the required YESAB assessment for expanded capacity in Faro.
In Whitehorse, the “temporary” authorization for the rentals expired in March of 2022, and YEC did not initiate the renewal process until May of 2024.
When the “temporary” authorization for Whitehorse rental diesel began in 2017, it was done without YESAB assessment, using a now rescinded clause of YESAA that Larry Bagnell said was “illegally put into law” because it violated the Yukon First Nations Umbrella Final Agreement. The amended permit was issued the day after the clause that allowed it to happen was rescinded.