Skip to main content

Surface mining of low sulphur thermal coal to fuel the Sheerness Generating Station, at Sheerness, Alta.

LARRY MACDOUGAL/The Canadian Press

TransCanada Corp. plans to end its agreements to buy power from three coal-fired plants in Alberta, saying the contracts are continuing to hurt their bottom line.

The Calgary-based company said on Monday costs associated with carbon-dioxide emissions from the plants have risen and are forecast to increase further over the remaining term of the agreements. The power-purchase contracts can be terminated under a provision where a change in provincial law makes them unprofitable, TransCanada said.

The decision affects 913 megawatts of generating capacity at TransAlta's Sundance A and B plants west of Edmonton, and 756 MW at the Sheerness power plant near Hanna, Alta., owned by Atco Power and TransAlta.

Story continues below advertisement

The purchasing agreements now go back to the provincial regulator, which can continue to buy and distribute the power itself, resell the capacity to another distributor or end the agreement entirely by paying the owner the net book value of the contract.

TransCanada said it expects to write down the remaining value of the power-purchase agreements for a total non-cash charge of $235-million before taxes and $175-million after taxes, representing the remaining book value of the company's investment.

Bill Taylor, president of TransCanada's energy business, said the company continues to see investment opportunities in the Alberta energy market, citing new wind projects and the need for gas-fired power capacity. "The company does not view this action on the [power-purchase agreements] as a full retreat from the Alberta power market," he said in a statement.

The NDP government of Rachel Notley announced in November that it planned to impose a carbon tax and phase out coal-fired power plants to reduce carbon dioxide emissions, a contributor to global warming.

The next month, utility company Enmax ended its power-purchase agreement to buy up to 663 MW from Atco Power's 689-MW coal-fired power plant.

AltaGas president David Harris said on a Feb. 25 conference call with investors that the company was evaluating the impact of the new climate regulations and considering terminating its power-purchase agreement with the Sundance B plant.

But while companies are looking at the impact of new climate regulations, Ben Thibault, electricity program director at the Pembina Institute, says current electricity prices that are close to half the five-year average are having a much bigger effect on profitability. "That difference is much larger than any impact of the actual carbon price," he said.

Story continues below advertisement

David Grey, an electricity market analyst, said the relatively low cost of buying natural gas and the increasing efficiency of gas-fired power plants have helped erode the profitability of coal contracts.

"The power-purchase agreements for those coal plants have gone, I think to everyone's surprise, out of the money," Mr. Grey said.

Mr. Grey said Enmax's decision to cancel its power-purchase agreement marked the first time a company had done so.

He said the move means consumers could be on the hook if power plants continue to lose money.

"They're putting the risk back on to the general consumer," Mr. Grey said.

Editor's note: An earlier version of this story incorrectly stated that TransCanada owned three Alberta power plants. This version has been corrected.

Story continues below advertisement

Report an error
Tickers mentioned in this story
Unchecking box will stop auto data updates
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

Cannabis pro newsletter
To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies