Partisan politics wasted energy in utility debate

Posted on August 4, 2016 by Vauxhall Advance

By Greg Price
Vauxhall Advance
gprice@tabertimes.com

The latest NDP/Conservative shouting match to hit the political landscape proves to me once again, there is no such thing as using rational thought to hold politicians accountable, no matter if it is right or left leaning.

As the parties bicker back and fourth over the court action the Alberta government has taken to challenge a regulation its says will saddle consumers with billions of dollars in losses from coal-fired power agreements, a clause (the infamous Enron clause) every single business owner in Alberta wish they had, but only a select few enjoy, seems to get a free pass.

The Enron clause gives power companies the option to hand off unprofitable Power Purchase Arrangements due to government action (PPAs) to the Balancing Pool, effectively passing financial losses and risks onto consumers.

And among the power struggle is of course the supporters of both parties blindly pointing the finger at each other, instead of taking a step back in unison and saying ‘yep, we’re getting taken advantage by both parties.’

There is no doubt, once again the NDP have done another misstep in handling this as its controversial carbon tax has been cited as causing the Enron clause to be activated by Enmax, TransCanada Corp., Capital Power PPA Management and ASTC Power Partnership to terminate Power Purchase Arrangements. Depending on who you believe, either the NDP government was or was not aware of the Enron amendment prior to tabling its carbon levy.

The clause has technically been around for 15 years and the NDP, a party that had been constantly railing against the Progressive Conservatives when they were in power, were clueless of this little nugget of information, which on the surface looks like it makes it impossible for a power company not to turn a healthy profit? And if they were aware, as FOIP documents released by Wildrose opposition seem to contend, why not make this a court challenge before implementing a carbon lev?. In essence why were the NDP not proactive instead of reactive?

To be fair, the NDP have only been in power for a little over a year and it’s not like the Progressive Conservatives were ever going to challenge the legality of their own clause they passed with power companies while in power in their 40-year-plus dynasty, even though it perhaps did not follow proper protocol in its passing (hence the legal action), with public consultation.

Our provincial government is contending that the Enron clause was different than the May 2000 order the Alberta Electricity and Utilities Board issued, approving the PPAs as submitted by the Independent Assessment Team that allowed power companies to terminate agreements if a change in government law renders their arrangement unprofitable. In July of that year, a representative from Enron lobbied the IAT to add the words ‘or more unprofitable,’ which in the world of legalese is a huge difference.

That add on was rubber stamped in a little over a month, not following the same protocol of public hearings from stakeholders as the original PPAs that were approved in May 2000, thus making the change illegal, or so that is what the NDP is arguing, and wanting the courts to decide.

Is it not right to think where there’s some smoke, there’s fire here? The organization that pushed for the change in wording to the PPAs, suffered one of the largest Chapter 11 bankruptcies in history barely a year later after the revelations involving fraudulent accounting practices, and by 2006, Enron was assetless.

Keeping up with the boy scout ways of some energy stakeholders, landowners who were opposed to the expansion of a high-voltage power line (at taxpayers expense) from Wabamun, west of Edmonton, to the Calgary area, saying it was a needless overbuild, were outraged to discover that private detectives hired by the Energy and Utilities Board for security at public hearings in 2007 were eavesdropping on their conversations.

This “spy scandal” caused the hearings to be aborted and the board to be disbanded and replaced by the Alberta Utilities Commission (AUC). For market manipulation, TransAlta was fined $370,000 for price manipulation in 2012 and in 2014 agreed to pay $149-million to settle unfair pricing allegations in California dating back to 2000. Accusations from Alberta’s Market Surveillance Administrator have that TransAlta deliberately shut down major coal-fired generators four times in 2010 and 2011 to drive up electricity prices. The AUC ruled in late July in 2015 that the Calgary-based corporation indeed manipulated prices and engaged in insider trading. Does this all sound like dealings with the government was on the up-and-up at the time?

According to Collins Dictionary, unprofitable is a graded adjective that means an industry, company, or product does not make any profit, or does not make enough profit. Enough profit? Hmmmm.

So are the Enmaxes and TransCanada Corps of the world exercising a potentially illegal Enron clause because the NDP carbon levy will cause them to lay off hordes of employees and close up shop (very understandable and they better be exercising their out clause), or is it simply because the levy will make shareholders unhappy, by cuts into already healthy profits even in a recession (not very understandable)? There seems to be conflicting reports of how drastic the carbon levy would be with exact figures.

Enmax has turned a minimum $155 million net profit in the last five years, peaking at $225 million in 2012 according to easily Googled financial statements.

TransCanada Corp reported a first-quarter profit in April of $252 million which was actually a drop of 35 per cent from last year. So with the Enron clause, power companies are supposed to be subsidized by your average Albertan if it is simply a case of being ‘less profitable’ instead of ‘unprofitable’?

In the history of politics, there has always been government policies that have affected business bottom line, should then every business in Alberta be afforded clauses like multimillion/billion dollar energy companies, if the ledger at the end of the year is not to their liking?

Profit is not a dirty six-letter word, But wasn’t the whole idea of deregulation supposed to be increased competition and lower prices for consumers in their energy consumption?

Energy consumption is not a want in Canadian society, like a pair of Nikes, designer jeans or big-screen TVs that a consumer can decide to opt in or opt out of to various degrees, it is an essential service for people to function. The cost of energy affects every single person, from the huge corporation, to the small business, to the family trying to make ends meet while being active members in powering the economy through the purchase of wants.

Affordable consumer access to energy consumption should be the focus, not stock price.
I find it ironic that people are screaming from the rooftops of how unfriendly something like a carbon tax is to business (understandable), but skyrocketing energy costs since deregulation which the Progressive Conservatives passed through, and not a peep about how that is unfriendly to business? I find it ironic that people are screaming from the rooftops of how unfriendly something like raising minimum wage is to business, and how it will raise the costs of goods and services, but tripling or quadrupling the cost of energy for businesses to produce their product doesn’t raise the price of goods and services?

Alberta has the only fully deregulated power market in Canada, yet cost to the consumer has skyrocketed since 2001 when deregulation came into effect. Prior to that, electricity rates were among the lowest, if not the lowest in Canada…tell me again why deregulation was needed in the first place?

Generation costs went from 3.5 cents to 13 cents per kilowatt hour at the time.

“Alberta consumers continue to benefit from the restructuring and the PPAs, with an abundant and reliable supply of power, and extraordinarily competitive prices,” says one power company executive who needs to learn basic math in their definition of ‘competitive prices.’

How can there be competitive prices when one company is allowed to own up to 30 per cent of the province’s total generating capacity? Monopolies are not competition.

Calgary’s average residential electricity price per kilowatt hour in 2012 was 17.47 cents and Edmonton’s was 16.40 cents, compared to 6.82 cents in Montreal, 7.68 in Vancouver, 7.31 in Winnipeg, 12.90 in Toronto and 13.79 in Regina, according to an annual price comparison survey conducted by Hydro Québec (September 2015 Alberta Views article).

Hydro Québec’s 2014 survey placed Alberta residential electricity prices in the middle to high end of the pack. Based on April 2014 prices, it compared Calgary at 13.41 cents and Edmonton at 11.88 cents per kilowatt hour to Montreal at 7.06 cents, Winnipeg at 7.89, Vancouver at 9.71, Toronto at 13.78 and Regina at 13.95.

Before deregulation, the province’s electricity was provided by private utilities and a few municipally owned ones. They constructed and operated power plants under government direction and distributed the electricity in exchange for their costs plus a profit margin of nine per cent to 14 per cent.

I can just imagine what the profit margin is now as I was shown a ledger of someone in Taber who has been involved in the cattle, farming and oilfield industries. The cost of his electricity for irrigation (the actual product) has gone up 49 per cent since 2000, the start of deregulation. That could be contributed to regular inflation. But the cost of the transportation/distribution of that electricity has gone up by 250 per cent. The assertion is with deregulation, it puts all the risk on private industry and the province does not incur any debt with power production. I’m imagining with how the distribution/transportation rate fees have been jacked up astronomically since deregulation, somehow it is not so risky.

Justifiable outrage with Notley’s ill-timed carbon tax, yet not even a raised eyebrow over tripled or quadrupled electricity prices since deregulation, far outpacing your normal inflation rates of what the same service would cost back in 2000.

Perhaps it really is just a Hail Mary pass the NDP is attempting to do through how the Enron clause was arrived at, distracting the average Albertan from the hardship the carbon tax will be causing. It still doesn’t change the fact, the legal motion has brought to light how poorly we have fared as Albertans with how expensive power generation has been for us since deregulation.

The NDP have made numerous missteps in its rookie year in attempting to do too many things too quickly, instead of a gradual change. If the missteps continue, it will likely mean a one-and-done government.

That will signal a new government right around when the current PPAs will expire in its 20-year agreement when deregulation first started in 2000. For the good of all Albertans and their bottom line, the outrage Albertans have with the NDP currently, better be the same when it comes to negotiation time in 2020 for the contract renewal for PPAs.

Otherwise, the current bickering will be the same in 2020, and Albertans will be no further ahead, knee deep in partisan politics, with politicians being more interested in gaining power than doing the job they were elected to do, which is to help the ‘average’ Albertan, not just the people that helped them get elected.

Regardless of who one votes for, the government in power should always be held responsible for its actions. Left wing, right wing — no one gets a free pass.

The NDP does not get a free pass on its carbon tax and the Conservatives do not get a free pass on deregulation.