The provincial government has reached a settlement with Enmax, ending a legal battle dating back almost two years after the city utility tried to return a money-losing electricity contract to the government.
The legal dispute stems from an announcement by the NDP government in June 2015, one month after it was elected, that it would hike Alberta’s carbon levy on large industrial greenhouse-gas emitters, including coal-fired power plants.
That move triggered an opt-out clause contained in a series of electricity deals known as power purchase arrangements (PPAs), which were established when Alberta’s electrical sector was deregulated nearly two decades ago.
The deals gave companies such as Enmax the ability to buy coal-fired electricity from power generating firms, in order to resell it to consumers on the open market.
But the opt-out clause allowed those purchasers to hand PPAs back to the Balancing Pool — a government-created agency that backstops the deals — if a change in legislation causes the agreements to become unprofitable “or more unprofitable.”
With these power agreements already suffering significant losses due to slumping electricity prices amid a recession, the rising carbon taxes prompted Enmax and three other companies to return their PPAs to the Balancing Pool.
The legal troubles for Enmax surround its attempt to return a PPA for the Keephills generating facility to the provincial agency in May 2016.
That summer, the provincial government filed a lawsuit against Enmax and the other companies to stop these moves. It alleged the opt-out clause was secretly inserted into the deals at the last minute at the behest of now-defunct Enron Corp. when the PPAs were created in 2000.
It later reached settlements with three buyers, but the Enmax suit remained outstanding until Friday, when an agreement was reached.
“We are glad to put this behind us as we continue to focus on creating value and serving our customers and communities,” said Enmax president and CEO Gianna Manes.
In the settlement, Enmax agreed to transfer 166,667 carbon offset credits to the Balancing Pool in exchange for a payment of equivalent value “for previously disputed and unpaid dispatch services and PPA transition matters.” The carbon offset credits would help the Balancing Pool meet its greenhouse gas emissions compliance obligations for its generation assets, the utility company said in a news release.
“This agreement ensures we can focus our efforts and energy on this important work,” Energy Minister Marg McCuaig-Boyd said in a statement. “The Government of Alberta took legal action to fight to protect Albertans, and many parties, including Enmax, were regrettably caught up in our action against the past government.”
A spokesperson for McCuaig-Boyd declined to comment further.
In November, a Court of Queen’s Bench Justice issued a ruling in favour of Enmax, requiring the Balancing Pool to conduct an assessment of Enmax’s decision to return its Keephills PPA after the city utility argued the government agency had dragged its heels for too long.
Former Balancing Pool president Gary Reynolds called Friday’s settlement “long overdue.” He said the entire situation had been “in complete shambles” since 2015 because of the NDP government’s approach.
“The Government of Alberta trying to put the blame on the past government is completely ridiculous, because it was specifically their action in increasing the carbon tax in 2015 that created this whole mess,” said Reynolds. “Something should’ve happened in terms of coming to some sort of agreement long before this. Their legal action has actually cost consumers hundreds of millions of dollars, because that legal action forestalled the Balancing Pool from terminating the PPAs much earlier than this.”
He estimated that the Balancing Pool has incurred losses of close to $70 million per month, or $840 million per year, by continuing to hold on to money-losing PPAs rather than terminating these deals, a process that the agency previously said has been stalled by ongoing legal action.
“Ultimately, those losses have to be covered by consumers,” Reynolds said. “And the Balancing Pool already has implemented a charge to consumers, which shows up on everyone’s energy bill to collect funds to cover the losses.”
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