Incurring vehement objections from several parts of the industry, the government of Alberta has initiated a court challenge to see whether a clause inserted into Alberta power purchase agreements in 2000 is still enforceable. Seeking to prevent the early termination of several power production contracts, Deputy premier Sarah Hoffman said on July 25, “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.”
Officials from Alberta’s NDP government say the previous government hid the arrangement from a public review, and exempted it from standard public disclosure.
The issue in particular is a set of contracts to purchase power from coal-fired power plants that the producers say have become unprofitable. At least four companies with PPAs have served notice of cancellation: The companies include Enmax, TransCanada Corp. (TSX:TRP), Capital Power PPA Management (TSX:CPX) and the ASTC Power Partnership.
Enmax issued a statement saying, “We are very disappointed that the government is retroactively challenging fundamental aspects that have been in place in these agreements since their inception.” Calgary Mayor Naheed Nenshi said, “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.”
A significant difficulty for the case is that two different factors have eroded the profitability of the contracts: Lower average electricity prices, and increasing costs for environmental compliance caused by provincial policy changes to limit CO2 emissions. Apparently the case for cancelling the contracts is much stronger if the unprofitability of the contracts can be shown to be a result of unilateral changes to government policy.
Prof. Nigel Bankes, Chair of Natural Resources Law at the University of Calgary, writes that, “This will no doubt be one of the more complex and high profile judicial review proceedings ever heard in the province – and the stakes are high. The province has selected Joe Arvay from Vancouver\Victoria as its lead lawyer for its application, one of the best constitutional and administrative lawyers in the country.”