August 4, 2016 – “Albertans should not be on the hook for these backroom deals,” said Sarah Hoffman, Alberta’s deputy premier, as the province took legal action to “protect Albertans from an attempt to offload business losses in the electricity market onto the public”.
“The previous government sold deregulated electricity as a way to transfer financial risk to the private sector in return for giving them the chance to earn greater profit. In secret, they did the opposite, setting up a system where consumers bear all the risk,” added Hoffman.
The province contends this attempted offload is being implemented through a regulatory clause that was “lobbied for by Enron” and “unlawfully enacted” when the province’s electricity system was deregulated.
The so-called Enron clause purports to give power companies the option to hand off unprofitable Power Purchase Arrangements (PPAs) to the Balancing Pool, effectively passing their financial losses and risks on to consumers, argues the province.
The court action began July 25, 2016, with an originating application for judicial review and declaratory relief. The application seeks an order declaring the Enron clause void in law and an order quashing a recent decision by the Balancing Pool to accept the return of ENMAX’s Battle River 5 PPA.
For its part, ENMAX says it looks forward “to responding with facts during the judicial review process” but, given the government’s change in law to carbon costs, its actions on PPAs “were completely foreseeable, legal and reasonable in carrying out its fiduciary duty to its shareholder, the City of Calgary”.
“The Government of Alberta should have known about the implications of its actions related to the PPA issue,” said ENMAX, adding it is “very disappointed that the government is retroactively challenging fundamental aspects that have been in place in these agreements since their inception.”
“We believe there are cooperative solutions that can meet the government’s climate change goals, manage the costs to consumers and respect the investments industry has made,” ENMAX concluded, warning of the signal the government is sending “for future investment in Alberta”.