Alberta NDP to challenge coal power buying rule known as ‘Enron clause’
The Alberta government is going to court to challenge a regulation it says will saddle consumers with billions of dollars in losses from coal-fired power agreements.
The NDP says last-minute changes to a regulation passed secretly by the Progressive Conservatives in 2000 allows power companies to hand back agreements to buy electricity from coal-fired plants if actions by the government make them more unprofitable.
Deputy premier Sarah Hoffman said the government estimates these power purchasing arrangements could end up costing consumers up to $2 billion by 2020.
“Today our government is taking legal action to protect everyday Albertans from having to pay for the business losses of Alberta’s biggest and most profitable power companies,” Hoffman said Monday.
“We think this is not only unfair to Albertans, it is also unlawful.”
Hoffman said U.S.-based Enron lobbied the Alberta Tories for the change as part of the government’s plan to deregulate the province’s electricity market. Enron declared bankruptcy in 2001 following an accounting fraud scandal.
Hoffman said the Tory government at the time told Albertans that the risks of a deregulated electricity system would be shared by power companies.
She said the “Enron clause” did the opposite – it set up a system where consumers bear all the risk.
“Our government believes that regular Albertans should not be on the hook for secret backroom deals between companies and the previous PC government.”
Hoffman said the clause was not included in more than a year of public hearings and the government took steps to hide the clause by exempting it from standard public disclosure.
Enmax Corporation has used the regulation to terminate its power purchasing arrangement. Earlier this year Enmax said the government’s decision to charge companies a higher tax on carbon dioxide emissions this year and in 2017 made the agreement unprofitable.
The government contends the Tories had no legal right to create such a legal loophole and is seeking a court order declaring the regulation to be void.
The NDP also wants a judge to quash a decision by a government agency called the Balancing Pool to accept Enmax’s decision to hand back its agreement.
Other companies that have served notice they intend to terminate such arrangements include TransCanada Corp. (TSX:TRP), Capital Power PPA Management (TSX:CPX) and the ASTC Power Partnership.
On Monday, Enmax issued a news release saying they have concerns with the accuracy of information in the filing.
“These legal agreements with the government have been in place and relied upon for 16 years, and were intended to be respected for a 20-year period by an industry that has invested billions of dollars in Alberta during this time,” said the release.
“We are very disappointed that the government is retroactively challenging fundamental aspects that have been in place in these agreements since their inception.”
Capital Power Corp. also issued a statement Monday.
“We will exercise every legal avenue at our disposal to ensure that the Government of Alberta honours the terms of the PPAs,” said Capital Power president and CEO Brian Vaasjo.
“We believe the legal claim is without merit, and we will look to the courts to ensure that the Government of Alberta cannot retroactively amend an arrangement for which Albertan companies paid and upon which they have been relying in good faith for 16 years.”
Capital Power also called into question some of the government’s assertions.
“Today’s announcement by the Government of Alberta claims that the PPA terminations will result in consumers bearing up to $2 billion in costs between now and 2020. This claim is misleading because it is incomplete. Based on available public information, the Balancing Pool can reduce its liability to an estimated $950-million by terminating the PPAs that were recently turned back to them, or to an estimated $635-million by terminating some PPAs, and retaining and managing others.”
Spokesman Mark Cooper said TransCanada has always operated in a fully open and transparent manner and will defend its right to terminate the arrangements.
“We properly exercised our termination rights under provisions in the Power Purchase Arrangements that were clear 16 years ago and that remain clear today,” he said in a statement.
“The Government of Alberta through its regulator the AUB clarified the intent of these provisions for all parties during a fully public process back in 2000. We relied on the termination provisions in the PPAs as fundamental to the commercial decision to participate in the PPA auction and would not have participated without them.”
In March, TransCanada and Capital Power both cited the increasing costs of CO2 emissions when serving notice of their intention to terminate their agreements.
Nigel Bankes, chairman of Natural Resources Law at the University of Calgary, said he is surprised by how the amendment was developed and handled by the then Tory government and regulators.
He wondered how officials at the time decided it was in the public interest.
“This amendment is not the sort of clause you would expect to see in any ordinary commercial arrangement because it really did provide an open-ended opportunity for companies to walk away from unprofitable arrangements having taking advantage for many years of very profitable arrangements,” he said.
“The transfer of risk that was going on here was just remarkable and it was just done with a sleight of hand.”
The Progressive Conservatives issued a statement Monday afternoon suggesting the NDP was trying to dodge accountability for its policy decisions.
“This government has a habit of blaming others for the consequences of its own policy decisions – decisions that are costing Alberta taxpayers billions,” interim PC party leader Ric McIver said in a release. “The regulation in question has been a matter of public record and available via the Queen’s Printer for the past 15 years. The government failed to read the contract before triggering this clause with its poor policy decisions.”
Calgary Mayor Naheed Nenshi also criticized the NDP government’s decision to take legal action Monday.
“This suit is outrageous,” Nenshi told reporters Monday evening. “We have this spectacle of the provincial government suing itself because apparently it didn’t know its own policies that have been in place for 15 or 16 years, and that Enmax has been abiding by.”
Watch below: Mayor Naheed Nenshi blasted Alberta’s NDP government on Monday over its decision to take power providers to court over a controversial coal power buying rule. Nenshi suggested the government was “suing itself” because it didn’t know its own policy.
The Wildrose Opposition called the government’s court action “heavy-handed.”
“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,” Wildrose critic Don MacIntyre said in a news release.
Hoffman said lower electricity prices are why power companies are losing money.
The court action is to be heard in November.
-With files from Global News.
© 2016 The Canadian Press