The NDP government’s challenge of Enmax’s decision to dump its unprofitable coal-fired power contract into the lap of consumers has little chance of success, says a University of Calgary law professor.
Enmax terminated its power purchase arrangement (PPA) for the Battle River coal-fired power plant in January on the basis that it was no longer profitable as a result of low power prices and changes in law to hike the carbon levy on heavy carbon emitters.
Since then, TransCanada, with partner AltaGas Pipelines, and Capital Power have also terminated their PPAs for electricity from coal-fired power plants — all relying on a clause in the arrangements that enables them to get out of them if the government makes a change in law to render them “more unprofitable.”
Bankes said he assumes the government was aware of the clause when it made its decision to hike the carbon levy last June.
“People who had been working on this file over the decades would know that and one would assume that they brought it to the attention of their political masters,” he said.
I like how a short-sighted clause granted to privatized industry that handicaps advances in technology and clean energy is spun as the fault of the current government.
I like how a short-sighted clause granted to privatized industry that handicaps advances in technology and clean energy is spun as the fault of the current government.
The clause might not be the fault of the current government, but knowing about the clause and knowing about the effects of their actions on industry and consumers is their fault.
If the current government hadn't brought in a carbon tax (their thinly veiled general tax), then the consumer wouldn't be facing the costs associated with these contract cancellations.
The Following 2 Users Say Thank You to llwhiteoutll For This Useful Post:
I like how a short-sighted clause granted to privatized industry that handicaps advances in technology and clean energy is spun as the fault of the current government.
How was it short-sighted? Would you invest billions in a coal plant if you thought it could be unprofitable? That's what happens when you open the market to private interests but still regulate it with a quasi-governmental agency.
The thing is that we have too many threads encompassing too many subjects that get circuitous and then the thread gets cut in half so original arguments are lost.
I mean, if I have to get into the minimum wage debate again I might kill myself. I think I've explained my position on it a dozen times.
__________________ The Beatings Shall Continue Until Morale Improves!
This Post Has Been Distilled for the Eradication of Seemingly Incurable Sadness.
The World Ends when you're dead. Until then, you've got more punishment in store. - Flames Fans
If you thought this season would have a happy ending, you haven't been paying attention.
The thing is that we have too many threads encompassing too many subjects that get circuitous and then the thread gets cut in half so original arguments are lost.
I mean, if I have to get into the minimum wage debate again I might kill myself. I think I've explained my position on it a dozen times.
I like how a short-sighted clause granted to privatized industry that handicaps advances in technology and clean energy is spun as the fault of the current government.
How would you word a clause like that?
The premise is that when you entered into that contract with the government, the government cannot re-negotiate the terms without allowing the contract purchaser to leave. Basically it allows the purchaser to leave without penalty if the government changes the law on them.
I think it's quite reasonable as a premise in that neither party in a contract should be allowed to unilaterally change the terms of the deal.
Basically for the government to make the changes that they've made, they have, in essence, bought out the contracts that were bound to the previous laws. Now they can enter into new contracts with the new rules in place. Seems quite reasonable to me.
The other thing they could've done is grandfather all of the old contracts. But they chose not to do that either.
The Following 2 Users Say Thank You to Regorium For This Useful Post:
There is a clause in your cell phone contract where you can cancel if the company makes signifigant changes to their policies. Similar here except with power contracts.
Yeah, I find it funny that people are butthurt over a clause basically saying:
"One party cant change the rules however they want and expect the contract to remain binding and the other party totally knows all about this clause but chose to change the rules anyways and is now sad."
I think one of these clauses is pretty much boilerplate on all Government related contracts. Because the Government likes to change the rules. They're like Darth Vader at Cloud City.
__________________ The Beatings Shall Continue Until Morale Improves!
This Post Has Been Distilled for the Eradication of Seemingly Incurable Sadness.
The World Ends when you're dead. Until then, you've got more punishment in store. - Flames Fans
If you thought this season would have a happy ending, you haven't been paying attention.
Edit: That came off kind of rude. Feel free to steer the conversation in a different direction.
To be clear my post wasn't meant to call out both sides. It just feels like there's a bunch of posters trying to discuss the issues surrounding our ndp government while five or six posters circle around throwing in
"the stupid redneck Albertans don't understand that the goverment didn't create the energy crisis, the hicks are the stupid and don't know anything" when clearly no one is saying what they think everyone is saying. It dooms every alberta political thread and it's so frustrating.
The thing is that we have too many threads encompassing too many subjects that get circuitous and then the thread gets cut in half so original arguments are lost.
I mean, if I have to get into the minimum wage debate again I might kill myself. I think I've explained my position on it a dozen times.
The premise is that when you entered into that contract with the government, the government cannot re-negotiate the terms without allowing the contract purchaser to leave. Basically it allows the purchaser to leave without penalty if the government changes the law on them.
I think it's quite reasonable as a premise in that neither party in a contract should be allowed to unilaterally change the terms of the deal.
Basically for the government to make the changes that they've made, they have, in essence, bought out the contracts that were bound to the previous laws. Now they can enter into new contracts with the new rules in place. Seems quite reasonable to me.
The other thing they could've done is grandfather all of the old contracts. But they chose not to do that either.
This is nice in theory but not reality. If you really believe the above, why should any provincial government ever be allowed to unilaterally change royalties that apply to oil and gas leases (contracts)? Royalties are borne by their respective leases.
Don't forget, the PC's under Stelmach did the same thing (change royalties), but yeah I agree. It is kind of bull#### because companies purchase / lease land with a bonus payment for rights under terms and conditions that may unilaterally get changed in the future rendering said rights uneconomic (ie. Changing the rules after the money is paid on bonus).
Regardless I bet you won't get many Albertans agreeing that the government should never change royalties, so, your argument is kind of moot. Fact is, governments just do what they want, and businesses will always have to just deal with it. Also that's sort of how it works around the world too.
This is nice in theory but not reality. If you really believe the above, why should any provincial government ever be allowed to unilaterally change royalties that apply to oil and gas leases (contracts)? Royalties are borne by their respective leases.
Don't forget, the PC's under Stelmach did the same thing (change royalties), but yeah I agree. It is kind of bull#### because companies purchase / lease land with a bonus payment for rights under terms and conditions that may unilaterally get changed in the future rendering said rights uneconomic (ie. Changing the rules after the money is paid on bonus).
Regardless I bet you won't get many Albertans agreeing that the government should never change royalties, so, your argument is kind of moot. Fact is, governments just do what they want, and businesses will always have to just deal with it. Also that's sort of how it works around the world too.
Except no it's not.
Royalties are an ongoing tax, not a contract. Taxes get changed.
Contracts are specific, and just like as has been explained, when one side can unilaterally change the rules (i.e. do exactly what contracts are designed to avoid), it is not only reasonable, but common to add a clause like the one in question.
No, royalties are based on a contract. Lessor royalties, or Crown Sliding Scale royalties like in Alberta, are derived from leases purchased at landsales. They are not a tax.
For example, an oil company can make a profit (such as receiving a royalty from a separate 3rd party contract), and not have to pay the Crown a royalty based on that income. Royalties are based on production, the right to produce which can't be granted without mineral rights, which can't be granted without a lease (which is an assumed contractual relationship).
Therefore if the government changes royalties, they're unilaterally changing what's in a contract (leasing arrangement). Think of it like you lease a truck from the dealer, and in your lease you agree to pay a small royalty if you profit off the use of the truck. Then arbitrarily the dealership changes the royalty rate on you, and says pay us more.
Also yes, it is common in the world for governments to arbitrarily make decisions on contracts. Look at any country nationalizing an industry, for example.
No, royalties are based on a contract. Lessor royalties, or Crown Sliding Scale royalties like in Alberta, are derived from leases purchased at landsales. They are not a tax.
For example, an oil company can make a profit (such as receiving a royalty from a separate 3rd party contract), and not have to pay the Crown a royalty based on that income. Royalties are based on production, the right to produce which can't be granted without mineral rights, which can't be granted without a lease (which is an assumed contractual relationship).
Therefore if the government changes royalties, they're unilaterally changing what's in a contract (leasing arrangement). Think of it like you lease a truck from the dealer, and in your lease you agree to pay a small royalty if you profit off the use of the truck. Then arbitrarily the dealership changes the royalty rate on you, and says pay us more.
regardless, they don't negate the fact that clauses like that being discussed exist and make sense
regardless, they don't negate the fact that clauses like that being discussed exist and make sense
Yes I agree with you, I was just trying to point out that governments unilaterally make decisions that impact current agreements every now and then. If the impacts are consequential for them, they should consider those steps prior to legislating but they still need to do what they think is best for the future of the society they govern and as Regorum says, new contracts can be negotiated now.
I was just using oil and gas as an example where governments make unilateral decisions, sorry, sort of off topic.
