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Local residents in Oakville, Ont., voiced opposition to the gas-fired power plant that TransCanada Corp. was planning to build there until 2010, when the McGuinty government pulled the plug on the project.PETER POWER/The Globe and Mail

Ontario's provincial auditor questions why electricity consumers are on the hook for the government's decision to scrap a power-plant project west of Toronto and says the final price tag is well above previous estimates, according to sources.

Bonnie Lysyk, Ontario's newly appointed Auditor-General, plans to reveal the tab for cancelling the project in a report on Tuesday. Ms. Lysyk says former Ontario premier Dalton McGuinty's government could have walked away from the project without paying anything in compensation, say sources familiar with the auditor's draft report.

TransCanada Corp., the Calgary energy giant that had the contract to build the province's third-largest gas-fired power plant in Oakville, faced significant impediments. Local residents of the affluent enclave west of Toronto complained the plant would be too close to neighbouring homes and schools. The Town of Oakville passed a bylaw blocking construction of the 900-megawatt plant and the mayor vowed to fight the project all the way to the Supreme Court of Canada.

"I did have some concerns as to whether this project would ever be able to get a shovel in the ground, given the challenges," former energy minister Brad Duguid told a legislative committee in April probing the cancellation of two gas-fired power plants.

If the Oakville contract had run its course, according to government e-mail records released to the committee, it eventually would have been terminated due to events beyond TransCanada's control. The company would not have paid a penalty or been entitled to damages under such a scenario. But that would have taken several years to unfold.

With a provincial election looming, however, the government "wanted some certainty ASAP," according to meeting notes between Jamison Steeve, Mr. McGuinty's former principal secretary, and lawyers in the Attorney-General's Office.

In the summer of 2010, Mr. McGuinty's mantra was, "maybes will kill us," Mr. Steeve said, according to the notes. "He said let's get answers to the issues that are killing us."

The high cost to taxpayers of scrapping two gas-fired power plants – $585-million at last count – is at the heart of opposition accusations that the government abandoned plans to build the electricity plants in Oakville and Mississauga to save Liberal seats during the 2011 provincial election.

The costs associated with pulling the plug on Oakville have been a moving target. Officials in the McGuinty government initially pegged the tally at just $40-million – a figure that was greeted with much skepticism. The price tag ballooned last April, when Colin Andersen, the president of the Ontario Power Authority, told the legislative committee it would cost $310-million to relocate the plant to eastern Ontario.

His estimate included $40-million in so-called sunk costs, plus $210-million for turbines TransCanada bought for Oakville. The big-ticket item was the government's agreement to reimburse TransCanada for gas-delivery costs to operate the new plant.

There is a lot of debate surrounding the calculation of gas-management costs over the 20-year life of a contract. The auditor, said one of the sources, has come up with a more conservative estimate for the gas-delivery costs, putting the overall tab for relocating the plant north of $400-million.

In the OPA's estimate, the costs were offset by savings from lower contract payments to TransCanada for the electricity and the fact that the plant would start operating later than it would have in Oakville.

The government announced in October, 2010, that the power plant would not be built anywhere in the Greater Toronto Area. It agreed to compensate TransCanada for lost profits, even though it had no legal obligation to do so, the documents show. Senior staff in Mr. McGuinty's office pledged that TransCanada would be "made whole" as to damages, according to the e-mail documents.

"The Liberals' primary interest was in making this thing disappear," Peter Tabuns, the New Democrats' energy critic, said in an interview. "They wanted it out of the headlines."