A rural municipality west of Edmonton is crying foul after an Alberta statutory corporation recommended the termination of three of the province’s power purchase agreements (PPAs) from a TransAlta power plant in Wabamun, Alta.
“TransAlta has been identified to be compensated approximately $170 million for the termination of these agreements but no thought or consideration has been given to the potential $40 million loss to the municipality,” Parkland County CAO Mike Heck said in a statement Tuesday. “We cannot continue to have a crisis every week in the power generation markets. It is now significantly impacting communities and local governments.”
The Alberta government said the $170 million in compensation is linked to government coal policy that takes effect 13 years from now.
According to TransAlta, its Sundance plant is the largest coal-fired power plant in western Canada. Parkland County’s mayor says if the Sundance PPAs are terminated, as the Balancing Pool has recommended, it could lead to “TransAlta and other coal-fired power generators shutting down or mothballing power generating units earlier than planned” which he says has the potential to cause Parkland County to lose $2 million in tax revenues every year.
“It’s a grave situation we’re facing,” Parkland County Mayor Rod Shaigec said Wednesday. “With the potential loss of tax revenue from TransAlta, with the closure of the coal plants and the PPAs, we’d be looking at a tax increase of 14 to 15 per cent.”
“Any decision on when or if to terminate PPAs is up to the Balancing Pool, not the government,” Energy Minister Margaret McCuaig-Boyd said in a statement Wednesday.
The Balancing Pool is a public enterprise set up by the Alberta government to manage certain “assets, liabilities, revenues and expenses” when the province moved to deregulate the generation of electricity.
“The county is vehemently opposed to the cancellation of the PPAs at this time without a full cost and impact analysis that includes the impact to communities,” Shaigec said in a statement Tuesday. “These decisions cannot be made in isolation from the communities they affect.”
In a statement, Parkland County said they were made aware of the Balancing Pool’s proposal to terminate the Sundance A, B, and C PPAs on July 4. The county said it was initially given until July 20 to provide input on the terminations.
In a July 4 news release, the Balancing Pool said it “anticipates it will continue to experience considerable loses if it continues to hold these PPAs.
“The financial analysis suggests the Balancing Pool could significantly mitigate its PPA losses if it were to terminate the Sundance PPAs. The net benefit of terminating the Sundance PPAs is expected to be $475 to $518 million after making the required $171 in termination payments to the owner.”
Parkland County argues that because of Alberta’s carbon levy, in “late 2016 and early 2017, many PPA holders began returning PPAs for coal-fired electricity generation to the Balancing Pool” by using a provision allowing companies to cancel agreements “if any change in law makes the deals unprofitable or ‘more unprofitable.'”
“With respect to the county’s statement on Tuesday: buyers of PPAs made billions in profits from Albertans, then abandoned those contracts to the Balancing Pool, even though it was the market, not carbon levies, that made the PPAs unprofitable,” McCuaig-Boyd said. “The Balancing Pool still faces losing hundreds of millions of dollars from now till the end of 2020, unless it exercises the option in the PPAs it holds – to return the contract rights to power plant owner.”
Watch below: On July 25, 2016, Fletcher Kent filed this report about the Alberta government taking some of the province’s biggest power providers to court. The NDP alleged a series of backroom deals involving Enron and the former PC government could cost consumers $2 billion.
“Ensuring good-paying jobs for Alberta families is our priority,” McCuaig-Boyd said. “We’ll continue to work closely with Parkland County and others to diversify our economy and build long-term, sustainable growth throughout Alberta.”
In July 2016, Alberta’s NDP government said that provision was passed secretly by the Progressive Conservatives in 2000. At the time, the government announced it was going to court to challenge the regulation that it said would saddle consumers with billions of dollars in losses from coal-fired power agreements.