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Ontario Premier Kathleen Wynne looks over at Energy Minister Bob Chiarelli during a press conference in Toronto on Oct 8, 2013, after the release of a report by the provinces's auditor-general on the costs related to the cancellation of an Oakville power plant.MOE DOIRON/The Globe and Mail

Ontario's Liberal government will spend a billion dollars to cancel two gas-fired power plants, a sum that puts the scandal among the costliest in the province's history and threatens to damage the party months before an expected election.

What's more, Liberal intervention – including from staff in former premier Dalton McGuinty's office – drove that price tag far higher than it needed to be, Auditor-General Bonnie Lysyk said on Tuesday.

Her audit on one of the plants, in the Toronto suburb of Oakville, had Mr. McGuinty's successor struggling to contain the fallout. Once again apologizing to Ontarians, Premier Kathleen Wynne took the extraordinary step of vowing to ban political staff from interfering with commercial transactions.

"As a new Premier leading a new government, I pledge to you that this will not happen under my watch," Ms. Wynne told a Queen's Park news conference after the audit was released. "It never should have happened and it pains me that it did."

She also promised new rules to make sure residents are consulted before a power plant is built in their area.

The high cost of scrapping the two plants because of local objections is at the centre of opposition accusations that the government abandoned plans to build the gas-fired electricity projects in Oakville and Mississauga to save Liberal seats in the 2011 provincial election.

Up until last fall, the Liberals insisted the price of pulling the plug on the Oakville facility was $40-million. But Ms. Lysyk pegs it at $675-million, plus up to $140-million more depending on the cost of gas. Adding those figures to the previously revealed cost of cancelling the Mississauga plant puts the total for ending both projects between $950-million and $1.09-billion.

When Mr. McGuinty pulled the plug on the Oakville plant in the fall of 2010, Ms. Lysyk found, the Liberals did not take advantage of contract provisions that protected the province from having to compensate TransCanada Corp., the energy giant given the job of building it. Instead, Mr. McGuinty's aides assured TransCanada it would receive the entire value of the contract.

TransCanada was given a new deal to build a gas plant near Napanee in eastern Ontario. This drove up the province's costs further, as it is more expensive to ship gas to Napanee and transmit the power to the Toronto area. In fact, the contract was richer than the one TransCanada had for Oakville, Ms. Lysyk told reporters.

The auditor's findings jibe with internal government documents reviewed by The Globe and Mail, which suggest political staff repeatedly sidelined the Ontario Power Authority as it tried to reach a deal with TransCanada. In an email to a colleague in November, 2010, OPA executive Michael Killeavy wrote: "This is really a mess. We are going to get into trouble."

Under the contract, the government had no legal obligation to compensate TransCanada for lost profits in the event that the company could not complete the project. Strong opposition in Oakville made it unlikely the work could be done by target dates in the agreement. "It may well have been possible for the OPA to wait it out, with no penalty and at no cost," Ms. Lysyk says in her report.

Ms. Lysyk's Oakville tally is more than double the OPA's estimate of $310-million. The discrepancy arises from assumptions used to calculate future costs and savings over the 20-year life of the contract. A big-ticket item on the cost side, for instance, is the government's commitment to reimburse TransCanada for gas-delivery costs for the new plant. The OPA pegs these at $406-million. The auditor comes in at $577-million.

Offsetting the costs, the OPA estimates electricity consumers will save $539-million because the plant will begin operating later than the one in Oakville would have. The auditor's estimate is $162-million. The OPA said it stands by its estimates.

Officials at TransCanada declined to comment.

"The cancellation of the Oakville gas plant was a political calculation with no regard for taxpayers or ratepayers," Progressive Conservative Energy Critic Lisa MacLeod said.

"Political manoeuvring by the Liberals drove up these costs," NDP Leader Andrea Horwath added.

A legislative committee is still probing the matter and deciding whether to recommend a rare contempt of parliament charge against the government.

The cancellation of two gas power plants in Ontario will cost roughly $1-billion, according to Auditor-General Bonnie Lysyk — much higher than what was estimated over a year ago. This chart shows different estimations over time, dating back to July, 2012. Read the full story on the cancellations.

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