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

[email protected]

26 Jul 2016

Lethbridge Herald

John Cotter

THE CANADIAN PRESS — EDMONTON

Lethbridge Herald

The NDP says last-minute changes to a regulation passed secretly by the Progressive Conservatives in 2000 allows power companies to hand back agreements to buy electricity from coal-fired plants if actions by the government make them more unprofitable.

Deputy premier Sarah Hoffman said the government estimates these power purchasing arrangements could end up costing consumers up to $2 billion by 2020.

“Today our government is taking legal action to protect everyday Albertans from having to pay for the business losses of Alberta’s biggest and most profitable power companies,” Hoffman said Monday.

“We think this is not only unfair to Albertans, it is also unlawful.”

Hoffman said U.S.-based Enron lobbied the Alberta Tories for the change as part of the government’s plan to deregulate the province’s electricity market. Enron declared bankruptcy in 2001 following an accounting fraud scandal.

READ MORE: Alberta electricity rates to rise sharply because of climate plan, says study

Hoffman said the Tory government at the time told Albertans that the risks of a deregulated electricity system would be shared by power companies.

She said the “Enron clause” did the opposite – it set up a system where consumers bear all the risk.

“Our government believes that regular Albertans should not be on the hook for secret backroom deals between companies and the previous PC government.”

Hoffman said the clause was not included in more than a year of public hearings and the government took steps to hide the clause by exempting it from standard public disclosure.

Enmax Corporation has used the regulation to terminate its power purchasing arrangement. Earlier this year Enmax said the government’s decision to charge companies a higher tax on carbon dioxide emissions this year and in 2017 made the agreement unprofitable.

The government contends the Tories had no legal right to create such a legal loophole and is seeking a court order declaring the regulation to be void.

The NDP also wants a judge to quash a decision by a government agency called the Balancing Pool to accept Enmax’s decision to hand back its agreement.

Other companies that have served notice they intend to terminate such arrangements include TransCanada Corp. (TSX:TRP), Capital Power PPA Management (TSX:CPX) and the ASTC Power Partnership.

On Monday, Enmax issued a news release saying they have concerns with the accuracy of information in the filing.

“These legal agreements with the government have been in place and relied upon for 16 years, and were intended to be respected for a 20-year period by an industry that has invested billions of dollars in Alberta during this time,” said the release.

“We are very disappointed that the government is retroactively challenging fundamental aspects that have been in place in these agreements since their inception.”

READ MORE: Alberta NDP’s plan to phase out coal could triple power bills, says Coal Association

Capital Power Corp. also issued a statement Monday.

“We will exercise every legal avenue at our disposal to ensure that the Government of Alberta honours the terms of the PPAs,” said Capital Power president and CEO Brian Vaasjo.

“We believe the legal claim is without merit, and we will look to the courts to ensure that the Government of Alberta cannot retroactively amend an arrangement for which Albertan companies paid and upon which they have been relying in good faith for 16 years.”

Capital Power also called into question some of the government’s assertions.

“Today’s announcement by the Government of Alberta claims that the PPA terminations will result in consumers bearing up to $2 billion in costs between now and 2020. This claim is misleading because it is incomplete. Based on available public information, the Balancing Pool can reduce its liability to an estimated $950-million by terminating the PPAs that were recently turned back to them, or to an estimated $635-million by terminating some PPAs, and retaining and managing others.”

Spokesman Mark Cooper said TransCanada has always operated in a fully open and transparent manner and will defend its right to terminate the arrangements.

“We properly exercised our termination rights under provisions in the Power Purchase Arrangements that were clear 16 years ago and that remain clear today,” he said in a statement.

“The Government of Alberta through its regulator the AUB clarified the intent of these provisions for all parties during a fully public process back in 2000. We relied on the termination provisions in the PPAs as fundamental to the commercial decision to participate in the PPA auction and would not have participated without them.”

READ MORE: Electricity analyst says Alberta has reasonable deadline to get off coal 

In March, TransCanada and Capital Power both cited the increasing costs of CO2 emissions when serving notice of their intention to terminate their agreements.

Nigel Bankes, chairman of Natural Resources Law at the University of Calgary, said he is surprised by how the amendment was developed and handled by the then Tory government and regulators.

He wondered how officials at the time decided it was in the public interest.

“This amendment is not the sort of clause you would expect to see in any ordinary commercial arrangement because it really did provide an open-ended opportunity for companies to walk away from unprofitable arrangements having taking advantage for many years of very profitable arrangements,” he said.

“The transfer of risk that was going on here was just remarkable and it was just done with a sleight of hand.”

The Progressive Conservatives issued a statement Monday afternoon suggesting the NDP was trying to dodge accountability for its policy decisions.

“This government has a habit of blaming others for the consequences of its own policy decisions – decisions that are costing Alberta taxpayers billions,” interim PC party leader Ric McIver said in a release. “The regulation in question has been a matter of public record and available via the Queen’s Printer for the past 15 years. The government failed to read the contract before triggering this clause with its poor policy decisions.”

Calgary Mayor Naheed Nenshi also criticized the NDP government’s decision to take legal action Monday.

“This suit is outrageous,” Nenshi told reporters Monday evening.  “We have this spectacle of the provincial government suing itself because apparently it didn’t know its own policies that have been in place for 15 or 16 years, and that Enmax has been abiding by.”

Watch below: Mayor Naheed Nenshi blasted Alberta’s NDP government on Monday over its decision to take power providers to court over a controversial coal power buying rule. Nenshi suggested the government was “suing itself” because it didn’t know its own policy.

The Wildrose Opposition called the government’s court action “heavy-handed.”

“Today’s announcement to take private companies to court over agreements signed at the turn of the century is extremely short-sighted and will keep billions of dollars of necessary investment away from our province,” Wildrose critic Don MacIntyre said in a news release.

Hoffman said lower electricity prices are why power companies are losing money.

The court action is to be heard in November.

-With files from Global News.

© 2016 The Canadian Press