Gas plants and unseemly haste

'Maybes will kill us" is not a good maxim to live by. The report on the cancellation costs for a proposed gas-fired electricity-generation plant in Oakville, Ont., by the provincial auditor-general, Bonnie Lysyk, makes it look as if Dalton McGuinty, the former premier of Ontario, and some of his colleagues, tried much too hard to get a difficulty behind them.

In the process, they needlessly damaged their reputations, partially obscuring their accomplishments.

The cancellations of the Oakville plant and another in the nearby city of Mississauga took place as an election approached, in which the governing Liberal Party was at risk of losing its majority. The government wanted to get out of its agreement with TransCanada Energy Ltd., the contractor for the Oakville project.

The general common-law principle is that if someone breaches a commercial contract, the injured party is to be compensated by being paid the amount of the profits that the company would have earned, if the transaction had been carried out.

But contracts can also fail because of events outside the control of either party, vividly expressed by the French phrase force majeure.

There were several obstacles in the path of the contractor, TCE, especially the opposition of the municipality. Once the province changed its plans, it could reasonably have argued that the whole contract had been frustrated – that TCE was owed nothing.

Instead, according to the meeting notes of Jamison Steeve, the premier's principal secretary, Mr. McGuinty "wanted some certainty ASAP" and believed that "maybes will kill us."

The consequence was a hasty payment to TCE, much more than was needed, according to Ms. Lysyk. And when the two cancellations are added up, the result was $1-billion.

The maybes were not the problem. Rather, the extravagance of the rushed settlement with TCE showed a grave, callous disrespect for the taxpayers' money.