Electricity consumers in Ontario will assume much of the risk on a $1.4-billion power plant project, under a controversial deal that leaves them footing the bill for construction costs.
TransCanada Corp., the Alberta energy giant that has the contract to build the 900-megawatt, gas-fired power plant in Eastern Ontario, will receive $210-million up front from the province, primarily to cover the cost of gas turbines. The money will come from electricity consumers, who will in effect pay for power from the plant well before it is up and running in 2017.
The McGuinty government disclosed reams of documents on Monday, revealing the costs associated with its decision two years ago to pull the plug on building the plant in the affluent enclave of Oakville, west of Toronto. The government inked a deal early Monday morning with TransCanada to relocate the plant in Lennox and Addington County, about 140 kilometres from Ottawa, on the same site where Crown-owned Ontario Power Generation operates an oil- and gas-fuelled generating station.
TransCanada will receive $40-million to cover costs for goods and services that cannot be transferred to the new site.
Energy consultant Tom Adams said the deal is too generous and leaves consumers, rather than TransCanada, bearing too much of the risk associated with such a large project. “A quarter of a billion dollars is a pretty rich Band-Aid on wounds that might have been suffered there,” Mr. Adams said in an interview.
TransCanada will also receive a guaranteed revenue stream over the 20-year life of the contract. Once the plant begins generating electricity, the company will receive 15.2 cents a kilowatt hour for the power. This is less than the 17.28 cents the company would have received for Oakville.
Energy Minister Chris Bentley said the lower amount reflects in part the fact that TransCanada is receiving money for the turbines. “We pay up front but we get it back over the life of the contract,” Mr. Bentley said, describing it as a good deal for electricity consumers.
TransCanada will receive well above the going rate for most electricity produced in the province. Ontario Power Generation, which generates about 60 per cent of the province’s electricity, receives five cents a kilowatt hour on average. Private-sector companies are paid an average of nine cents a kilowatt hour.
The government released 36,000 pages of documents in response to the Speaker’s ruling that there is evidence Mr. Bentley breached his privileges by refusing to hand over information to a legislative committee. The documents reveal the tense, behind-the-scenes negotiations over two years that led up to the latest agreement. It shows that the decision to scrap plans to build the plant in Oakville was made in Premier Dalton McGuinty’s office without any input – or even knowledge – from Mr. Bentley’s predecessor as energy minister.
Officials at the government agency that manages electricity contracts with the private sector expressed frustration in e-mails that they were responsible for negotiating a settlement with TransCanada while the government was “making deals around us” and had “backed us into a corner.” One internal OPA e-mail dated Nov. 17, 2010, a month after the Oakville plant was cancelled, complained that no one seems to know what the government meant with its promise to make TransCanada whole. “This is really a mess. Far too many people involved and no one accountable for making decisions. We are going to get into trouble,” the e-mail says.
TransCanada’s lawyers described the settlement negotiations as an “unmitigated disaster,” according to an e-mail from a lawyer in the Attorney General’s Office dated May 25, 2011, to a Ministry of Energy official.