25 Aug 2016

Lethbridge Herald

THE CANADIAN PRESS — CALGARY

25 Aug 2016

Lethbridge Herald

THE CANADIAN PRESS — EDMONTON

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Don Braid, Calgary Herald

Published on: August 9, 2016 | Last Updated: August 10, 2016 11:02 AM MDT
City-owned Enmax has hunkered down in public silence since the legal assault from the provincial government began.

But with the latest twist — the revelation that a current Enmax executive once negotiated the “Enron clause” for his then-employer — the gloves are off.

“We have done nothing wrong,” communications vice-president Tamera Van Brunt said in an interview Monday.

“Sixteen years ago we bid on a power purchase agreement (PPA) in good faith. So did other buyers in the process. All the bidders knew what they were walking into.”

This contradicts the NDP’s claim that the Enron clause was negotiated illicitly and in secret, outside the knowledge of other companies.

The chief negotiator for Enron was Calgary lawyer Robert Hemstock, who in 2000 was senior director, government and regulatory affairs, for Enron Canada Corporation.
Emails from Hemstock, supplied by the government and published in the Herald, showed him jubilant after advocating successfully “for changes that would mitigate or eliminate many of the risks in the PPAs.”

Hemstock was sent a celebratory email from Enron’s chief lobbyist in the U.S., saying “your work on the Alberta PPA has not gone unnoticed.”

The next year, parent company Enron Corp. was embroiled in a huge U.S. scandal over billions in hidden debt, power price manipulation in California, and accounting practices that masked criminal fraud.

Current Enmax executive Robert Hemstock, shown here as vice-president, regulatory affairs, Direct Energy, in 2004, once negotiated the “Enron clause” for his then-employer with the Alberta government over power purchase arrangements. Leah Hennel / Postmedia

Nobody is saying Hemstock was aware of any of this. People who know him say there’s no chance he was. In 2000, Enron’s interest in the Alberta electricity market was actually considered a prestige thing by the PC government.
Enron Canada later collapsed under the weight of the U.S. uproar. Afterward, Hemstock worked at UBS Warburg Canada and then as vice-president of government and regulatory affairs at Direct Energy.

In 2006, Enmax hired him as executive vice-president of regulatory and legal services. He was in that job until quite recently, when he became special legal counsel to CEO Gianna Manes, a post where he’s still listed as part of the executive team.

Van Brunt says the move has nothing to do with the NDP lawsuit or his background with Enron. He’s working on important legal files, she says, including the government’s lawsuit.

Hemstock won’t speak publicly, she added, also because of the lawsuit.

“Robert Hemstock is an experienced regulatory lawyer, ” she says. “He was doing his part at that time (2000) to ensure that in any agreement the bidders were going into, there was an understanding of what was going to be outlined.”

“It was a clause that all the bidders were aware of. He did his part to put that in place. That affected how we were going to invest . . .”

That suddenly-famous clause, of course, says buyers of PPAs may terminate them if a change in government policy makes them not simply “unprofitable,” but “more unprofitable.”

The latter part triggered the termination by a half dozen companies of agreements to buy coal power, at a potential public cost of $2 billion, according to the NDP.

Van Brunt says Enmax is entirely justified in dumping its PPAs because the financial burden of NDP policy changes was going to be enormous — a $600 million hit over five years.

That would virtually wipe out Enmax profits, which run about $150 million annually, and last year provided a $56 million dividend to the city treasury.

If Enmax is stuck with this liability, it will land on city taxpayers when Enmax inevitably comes to council for more capital.

Enmax puts the blame for its termination of the PPAs squarely on the looming carbon tax, and increases in the levy on heavy emitters.

The annual cost of the original emitters levy was about $15 million a year for Enmax, Van Brunt says. The new policies will raise that to $160 million.

“What’s important to understand is that these carbon levies are not a tweak, these changes in law are a major, major change in law, a tenfold change (for Enmax),” she adds.

The crazy irony is that Enmax is Alberta’s greenest utility, the one you’d think would be an NDP favourite rather than a demon.

Enmax no longer puts a single coal-fired electron into the provincial grid. Eighty-six per cent of generation is fired by natural gas, mostly from the new Shepard generator. The remaining 14 per cent is from renewable sources, including solar and wind.

How the province’s lawsuit helps foster goals like that is beyond understanding. So far, the dispute doesn’t seem to benefit anyone but corporate lawyers.

“Everybody’s lawyering up,” says one, who doesn’t want to be named, for reasons that will be clear from the rest of this quote.

“It’s awesome. Bring it on, Premier Notley. Too many lawyers are sitting around twiddling their thumbs right now.”

Don Braid’s column appears regularly in the Herald

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