Advertisement

'They didn't do their homework': McIver blasts NDP power lawsuit

'They didn't do their homework': McIver blasts NDP power lawsuit

Interim PC leader Ric McIver lashed out Tuesday at the NDP government's decision to go to court in hopes of overturning a clause in contracts with Alberta's biggest power companies that were signed by the PC government sixteen years ago.

The NDP is seeking a court order declaring the clause — which it has characterized as secret and illegal — void in law. It would prevent power companies from using clauses in their contracts that allow them to abandon purchase agreements from coal-fired power plants.

"They made policy changes that triggered this thing," McIver told Edmonton AM Tuesday. "They figure out it will cost Alberta taxpayers $2 billion and now they're looking to cover their own trail, because they realized how bad they messed up.

"They're not doing it to protect Albertans. They're doing it to protect their own political skin."

Deputy premier Sarah Hoffman said Monday the decisions of several power companies to end their contracts could cost consumers $2 billion.

This spring, Enmax quietly ended its power purchase agreement to buy power from Atco Power's coal-fired power plant in December, becoming what is believed to be the first company to use the clause. TransCanada, Edmonton-based Capital Power Corp. and AltaGas soon followed suit.

The companies said they terminated their PPAs for electricity from coal-fired power plants after the NDP increased the carbon levy on large emitters on Jan. 1.

Clause inserted at 'last possible moment'

The clause in question permits power buyers to terminate agreements without liability if any change in the law makes them "more unprofitable." Hoffman said the clause was added at the last minute, without public hearings or notice to consumers or their representatives.

The clause was lobbied for by Enron, a U.S. electricity company that went bankrupt in 2001 and became emblematic of corporate corruption and fraud.

"At the last possible moment, the day before the PPA auction commenced, they inserted the Enron clause into the PPA contract language," Hoffman said.

"The government and board took steps to hide what they had done from the public."

But McIver said the clause has been "available to all Albertans from the Queen's Printer for 15 years now. There's nothing secret about it."

"The government didn't do their homework. They triggered a $2-billion loss for Albertans and now they're looking for someone to pin it on."

McIver could not recall if there were public consultations on the clause but insisted the information has always been public.

Profits of $10 billion since 2001

The PPAs were created in 2000 as part of a plan to move Alberta's electricity system from a regulated to a competitive deregulated market.

The theory was that PPA buyers would bear the risk of buying and selling electricity in Alberta in return for the opportunity to collect greater profits, Hoffman said.

Buyers have done very well by the process, making a collective profit of $10 billion since 2001, Hoffman said, and should now be prepared to face market downturns.

But one power company involved said the government should have realized the implications of the carbon levy on the PPAs.

"Given the government's change in law to carbon costs, Enmax's actions on its PPAs were completely foreseeable, legal and reasonable in carrying out its fiduciary duty to its shareholder – the City of Calgary and its 1.2 million citizens," Enmax said in statement Monday.

Capital Power said when it purchased the PPAs at auction in 2000 its bid was based on the terms, which included the-change-in-law protection.

"Collectively, we and other buyers paid $3 billion for the PPAs — money that was returned to Albertans by the government through the Balancing Pool," said senior vice-president Kate Chisholm. "Buyers would have paid substantially less to purchase any PPA that was missing a change in law clause."

'This all surprises me'

Electricity consultant David Gray called the court action interesting.

"I've been at this for 27 years and this is the first thing like this I've ever seen," said Gray, former executive director of the Utilities Consumer Advocate. "Essentially a government is suing its predecessor for malfeasance."

"I'm rarely surprised but this all surprises me."

The Wildrose Opposition called the NDP government's actions "heavy handed" and warned the lawsuit will scare away investment and drive up power prices.

"What we saw today was shocking — the NDP is asking the courts to turn back time," Wildrose MLA Don MacIntyre on Monday.

"Today's announcement to take private companies to court over agreements signed at the turn of the century is extremely short-sighted, and will keep billions of dollars of necessary investment away from our province."

Read the court application here