CALGARY C The Alberta government is gearing up for a fight using the province’s power industry simultaneously as it appointed a negotiator Wednesday to develop terms for any coal-fired power phase out.
Economic Development and Trade Minister Deron Bilous said at a press conference Wednesday that power companies in Alberta were exploiting “loopholes” within the power market. He explained the government is reviewing whether not firms that have handed their money-losing contracts to purchase coal-fired control of to the provincially owned Balancing Pool had a right to do so.
“During the tenure from the former government, they negotiated power purchase agreements that, to be honest, were not within the best interests of Albertans. There are loopholes in those agreements that allowed companies to reap the benefits when electricity costs are high and hand all the risk to taxpayers when the marketplace is low,” Bilous said.
“Some are doing that now and claiming it is because in our climate leadership plan. The reality is that coal isn’t very profitable right now.”
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On March 7, TransCanada Corp. and AltaGas Ltd. handed their contracts to buy coal-fired electricity over to a provincial agency called the Balancing Pool, citing a change in what the law states his or her legal reason for exiting the contracts.
“The rules are evident and were established back when these PPAs were first auctioned off and acquired by TransCanada, over a decade ago,” TransCanada spokesman Mark Cooper said in an email.
Electricity prices have fallen sharply in Alberta and gas prices have fallen to levels where analysts express it is now cheaper to generate electricity from gas, particularly when the federal government taxes carbon emissions.
Calgary’s city-owned utility company Enmax Corp. also handed its power purchase agreement (PPA) for coal power over towards the Balancing Pool in December. The Balancing Pool subsequently sent Enmax a letter confirming the transfer of the agreement.
“Our decision to terminate the Battle River Power Purchase Arrangement wasn’t taken lightly. It was based on a mixture of lower forward market prices and the June 2015 increases in the carbon emissions costs underneath the Specified Gas Emitters Regulation,” wrote Enmax spokeswoman Doris Kaufmann Woodcock in an email. “After undertaking overview of the problem, out of the box required by the Balancing Pool Regulation, the Balancing Pool confirmed to us at the end of January that we were eligible for terminate the Battle River Power Purchase Arrangement depending on the the PPA.”
Progressive Conservative energy critic Rick Fraser rejected Bilous’ assertion, saying, “These companies are available in good faith and built the large infrastructure projects it requires to provide power.” Fraser added that Albertans would see higher power bills as a result of the new global warming policies.
Despite low electricity prices in Alberta, many industry observers say the province’s global warming policies – such as the requirement that carbon emissions be taxed at $30 per tonne starting in 2017 – were interpreted as a change in law, giving power companies the legal capability to exit their contracts.
“That dealt the credit card to the PPA holders that they are now playing,” said Gary Reynolds, who was CEO from the Balancing Pool between 2003 and 2011.
“The people (who are) likely to be obtaining the losses on that are Albertans and not the PPA buyers,” Reynolds said. “The impact on consumers could be very significant.”
“We’re in the process of reviewing the dwelling quite closely to make sure that we’re doing all things in our capacity to protect consumers and taxpayers,” Bilous said.
Bilous also announced the federal government had picked Terry Boston, the previous president and CEO of Pennsylvania-based power giant PJM Interconnection, to barter a settlement with the likes of TransAlta Corp. and Capital Power Corp. for that government’s intend to phase out coal-fired power generation by 2030.
“Alberta comes with an chance to demonstrate its leadership and supply a good example with other jurisdictions as coal-fired electricity emissions are phased-out around The united states,” Boston said in a release.
“We anticipate working with Mr. Boston because he develops a coal phase-out plan that maintains grid reliability, delivers stable electricity prices and it is fair to affected companies, communities and workers,” Capital Power vice-president of external affairs Martin Kennedy said within an email.
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