The Alberta government’s clumsy attempt this week to protect consumers – i.e. increasingly hostile voters — from the consequences of its aggressive climate change policy is backfiring, with the NDP getting blowback the size of a Chinook for not knowing the terms of its own 16-year-old power contracts, then suing to dodge the costs.
The province’s attorney general filed a bizarre lawsuit Monday to stop power companies – including utilities owned or partially owned by Alberta’s two largest cities, Calgary and Edmonton – from backing out of power contracts made less profitable by Alberta’s increased carbon costs.
The lawsuit also strangely targets its own regulatory agency, the Alberta Utilities Commission, for “unlawfully” agreeing to terms in 2000 that allowed termination of so-called Power Purchase Arrangements “if a change in law renders the PPA unprofitable, or more unprofitable.”
Strangely, Rachel Notley’s NDP government claims it wasn’t aware of the out clause until recently.
The actual announcement of the lawsuit was even more bizarre. In it, the provincial government said the exit clause was “lobbied for by Enron – a discredited and now bankrupt U.S. electricity operator at the centre of numerous other controversies and questionable business practices” and secretly accepted by the previous (Tory) government so the private sector could “earn greater profit ” — as if pointing the finger at long-dead Enron, or the previous government, or profit-seeking companies, somehow bolsters its credibility.
Any NDP delusion that the fight will garner consumer support was quickly overrun by reaction that ranged from disbelief to ridicule.
In a statement Wednesday, the Calgary Chamber of Commerce said the lawsuit “sets a devastating precedent that will erode public trust in our regulatory agencies, call into question contracts that have been promulgated under existing regulations, and discourage inward investment to our province.”
“The Government’s incendiary portrayal of business as motivated only by the pursuit of profit at the expense of public welfare, at a time when business is struggling – and still contributing substantially to our collective prosperity – is as insensitive as it is insulting,” the chamber’s director for policy, Justin Smith, said in the statement.
Calgary Mayor Naheed Nenshi called the suit “outrageous.”
“We have the spectacle of the provincial government suing itself because, apparently, it didn’t know its own policies that have been in place for 15, 16 years and that (Calgary utility) Enmax has been abiding by.”
“I think Venezuela has moved north,” said an oil executive. “If the reality were not so stark it could be a Monty Python script.”
One business observer described it as a “p.r. stunt” whose real intent is to tie up the dispute in the courts until the next election, while yet another said it’s evidence the province didn’t think through the consequences of its carbon policy, then made up a “ludicrous claim” to blame someone else for the fallout.
I get why they are not keen on having to potentially pay this, but neither are Albertans.
“Overall, this creates yet more uncertainty in the Alberta power market,” RBC Dominion Securities analyst Robert Kwan said in a report to clients. “Further, we wonder if this is a sign that the government will look for ways to minimize the cost to rate payers and/or tax payers of any intended (or in this case, unintended) changes in carbon legislation and market design.”
Deputy premier Sarah Hoffman, who got stuck defending the fiasco, said the province is trying to protect Albertans. “I get why (those sued are) frustrated,” she said. “I get why they are not keen on having to potentially pay this, but neither are Albertans.”
With the NDP government increasing the carbon levy on large emitters, by way of the Specified Gas Emitters Regulation, effective Jan. 1, and power costs at rock bottom due to Alberta’s depressed economy, Enmax, Capital Power, Trans-Canada Corp., ATCO Ltd., and AltaGas Ltd. used the out clause to terminate all of their PPAs for coal-fired electricity. The out clause was negotiated to protect the utilities against rule changes for the duration of 20-year contracts that could change the economics of the agreements.
The province is asking the Court of Queen’s Bench to deem the backing-out clause invalid because the Alberta Utilities commission didn’t have the authority to allow it. The case is going to court in Edmonton in November.
“If all these buyers were permitted to abandon their obligations under the PPAs … the estimated impact on Alberta electrical ratepayers is in the order of $2 billion … the shortfall of which will have to be charged to consumers,” Alberta says in its statement of claim.
The reality is the government has been downplaying the downside of its climate change plan from the get-go, as if remaking Alberta’s oil and gas-based economy to fit its green dreams won’t have costly consequences.
The dispute over PPAs is just the tip of the iceberg. Next in line will be coal companies forced to retire their power plants early, and oil sands companies impacted by a cap on oil sands. Watch them line up for compensation if they end up with stranded assets, with consumers/taxpayers stuck with the bill. That’s on top of a $3-billion carbon tax on everything they will have to start paying next January.