Alberta Politics Thread

[OMG!WTF!]

Originally Posted by Makarov

I take your point but, in any commercial relationship, there is always a risk that the regulatory or operating environment might suddenly change. Usually, that is part of the risk tolerance required to enter into an otherwise profitable agreement (which, for fifteen years, it appears these agreements were.) A right of unilateral repudiation, without penalty, at the first sign of troublesome change seems like a remarkably favourable provision for the energy companies involved.

The constant risk of a regulatory environment changing is one thing. But it's a whole other thing when the party responsible for changing the regulatory environment is the party you've entered into the agreement with.

[puckedoff]

Originally Posted by Makarov

I take your point but, in any commercial relationship, there is always a risk that the regulatory or operating environment might suddenly change. Usually, that is part of the risk tolerance required to enter into an otherwise profitable agreement (which, for fifteen years, it appears these agreements were.) A right of unilateral repudiation, without penalty, at the first sign of troublesome change seems like a remarkably favourable provision for the energy companies involved.

The difference being that in a normal commercial relationship, the risk is that an unrelated 3rd party (ie the government) will be changing the regulatory/operating environment.

With these contracts, the government is both the counterparty AND the one in charge of the regulatory environment.

[Resolute 14]

Originally Posted by Regorium

I don't think the government has a leg to stand on, but I think the clause itself is incredibly stupid. When times were good, the Buyers did not cancel PPA's for changes in law (SGER in 2007 for example), but now that times are bad, they are invoking the clause. I think that it should have to be shown that the Owner's increase in cost due to the change in law somehow cannot be feasibly passed to the consumer before the Buyer can terminate the contract without penalty.

It's not just that times are bad, but that the NDP are ensuring times will never get better at any point in the future. That, rather obviously, is why the companies are dumping these contracts back onto the balancing pool now. The NDP are playing a two-faced argument where they say taxpayers shouldn't foot the bill for their error, but they expect the companies to pay for their error.

[IliketoPuck]

Originally Posted by Resolute 14

It's not just that times are bad, but that the NDP are ensuring times will never get better at any point in the future. That, rather obviously, is why the companies are dumping these contracts back onto the balancing pool now. The NDP are playing a two-faced argument where they say taxpayers shouldn't foot the bill for their error, but they expect the companies to pay for their error.

While not admitting that they made the error in the first place that caused the companies to utilize a long agreed to clause.

[Locke]

Originally Posted by corporatejay

If the government is right, why would anyone ever sign a contract with the crown in this province? When they don't like the terms, they'll just bail out of the agreement. The consequences are serious.

[Bring_Back_Shantz]

Originally Posted by Regorium

The government's argument is that the carbon tax did not make the PPA's unprofitable, they were already unprofitable due to the awful spot pricing for electricity. However, a Query in 2000 clarified that the clause is not just talking about unprofitable, but includes "more unprofitable" in the definition. This torpedoes the government's case.

I don't think the government has a leg to stand on, but I think the clause itself is incredibly stupid. When times were good, the Buyers did not cancel PPA's for changes in law (SGER in 2007 for example), but now that times are bad, they are invoking the clause. I think that it should have to be shown that the Owner's increase in cost due to the change in law somehow cannot be feasibly passed to the consumer before the Buyer can terminate the contract without penalty.

Why/do you actually think that?
It's one thing to say the clause should have been written that way, it's another entirely to say "I know how the clause was written, but it's dumb and shouldn't apply".

If you're saying the former, that's a stance I can understand, if it's the latter, that's a pretty unreasonable stance.

The fact of the matter is the government should have know companies cancelling their PPAs was a possibility/likelihood due to the carbon tax.
So they either didn't know these clauses existed, didn't understand them, or didn't have a plan in place to deal with the fallout.

That being said, most of the actually day to day work is being done by bureaucrats who do understand these things, so I have a hard time believing that they wouldn't bring this up, which means they either weren't consulted, or were ignored.

That's a whole lot of "eithers", but none of them paint a picture of a qualified/reasonable government.

The fact that they are now suing these companies and using language like "Secret clause" and "Enron clause", is an ugly attempt to blame their failure on companies that have to this point acted in good faith.

[Locke]

Originally Posted by Bring_Back_Shantz

Why/do you actually think that?
It's one thing to say the clause should have been written that way, it's another entirely to say "I know how the clause was written, but it's dumb and shouldn't apply".

If you're saying the former, that's a stance I can understand, if it's the latter, that's a pretty unreasonable stance.

The fact of the matter is the government should have know companies cancelling their PPAs was a possibility/likelihood due to the carbon tax.
So they either didn't know these clauses existed, didn't understand them, or didn't have a plan in place to deal with the fallout.

That being said, most of the actually day to day work is being done by bureaucrats who do understand these things, so I have a hard time that they wouldn't bring this up which means they either weren't consulted, or were ignored.

That's a whole lot of "eithers", but none of them paint a picture of a qualified/reasonable government.

The fact that they are now suing these companies and using language like "Secret clause" and "Enron clause", is an ugly attempt to blame their failure on companies that have to this point acted in good faith.

And further, they keep bringing up the fact that companies made $10B over the last 15 years but now all of a sudden the heartless bastards are being little crybabies because they dont want to swallow $2B in losses.



Do these people understand anything about businesses or basic economics?

Its just astounding to me trying to understand how the NDP think.

"You werent complaining when you were generating steady revenues for the past decade and a half but oh no! Now that we've come in and unilaterally changed the rules and you're looking at losses for the forseeable future all of sudden you're complaining."



Just...actually mind boggling.

[Regorium]

Originally Posted by Bring_Back_Shantz

Why/do you actually think that?
It's one thing to say the clause should have been written that way, it's another entirely to say "I know how the clause was written, but it's dumb and shouldn't apply".

If you're saying the former, that's a stance I can understand, if it's the latter, that's a pretty unreasonable stance.

100% the former. I think the clause was poorly written as is.

However, I'm just commenting on intent, and what I feel is the "spirit" of the law. Just discussion that doesn't have anything to do with the actual legality of what is currently occurring.

Basically, I think that because the Buyer controls the price of the product, the profitability of the contract doesn't change with a carbon tax. The Owner raises his price by X amount because of carbon tax, the Buyer raises his price by X amount, the consumer pays X more. No profitability is affected if this is the case.

If the government, as an example, caps the price that the Buyer can sell electricity at, THAT would be a change in law that would drastically affect profitability. This is a case where I think it would be a legitimate use of the "change in law" clause.

Again, just to re-emphasize, the NDP government has no case, and they should have expected this based on the agreement that was signed. I'm just saying it's a loophole more than a feature.

[mrkajz44]

Maybe I am grossly oversimplifying this but...

If the clause is in the contracts then there is nothing the gov't can do from a legal standpoint, no? Would the courts not just read the contract and say "too bad"?

EDIT: I guess they could ask for rectification, but I don't think that would apply here.

[CaptainCrunch]

Originally Posted by Locke

Yeah, she's the furthest thing from Darth Vader.

She does make changes and it seems without thought, and she's been pretty destructive to investment in this province.

In fact here's the last outdoor meeting of the NDP party

[Bring_Back_Shantz]

Originally Posted by Regorium

100% the former. I think the clause was poorly written as is.

I would tend to disagree, but at least it's a reasonable position to have.

The reason I disagree is that if these companies have been taking it on the chin because these agreements are unprofitable due to the current price environment, I'd say it's unreasonable to to expect them to put up with more losses due to a change in regulations.

If the PPAs were marginally profitable or break even at this point would people be complaining that they shouldn't be allowed to invoke this clause?

Really what the clause should have said was that they can bail on the PPAs if new regulations had a material impact on their costs (with some definition of "material). This loosens that up a bit, but I think you'd have a hard time arguing that even if the contracts were written that way that this wouldn't constitute a material change.

[Regorium]

Originally Posted by Bring_Back_Shantz

I would tend to disagree, but at least it's a reasonable position to have.

The reason I disagree is that if these companies have been taking it on the chin because these agreements are unprofitable due to the current price environment, I'd say it's unreasonable to to expect them to put up with more losses due to a change in regulations.

Sorry I edited my post above, but my argument is that they don't actually take additional losses from the carbon tax.

Owner pays X more in carbon tax. Buyer pays X more to buy the electricity. Consumer pays X more to use electricity. Profitability of the Buyer is unaffected (in this super simplified scenario with no tax implications).

The carbon tax is supposed to flow through to consumers at every location (gasoline, electricity, heating etc.). By not flowing the costs through, and saying it affects your profitability isn't the intent of the change in law clause (imo of course).

[Bring_Back_Shantz]

Originally Posted by Regorium

100% the former. I think the clause was poorly written as is.

However, I'm just commenting on intent, and what I feel is the "spirit" of the law. Just discussion that doesn't have anything to do with the actual legality of what is currently occurring.

Basically, I think that because the Buyer controls the price of the product, the profitability of the contract doesn't change with a carbon tax. The Owner raises his price by X amount because of carbon tax, the Buyer raises his price by X amount, the consumer pays X more. No profitability is affected if this is the case.

If the government, as an example, caps the price that the Buyer can sell electricity at, THAT would be a change in law that would drastically affect profitability. This is a case where I think it would be a legitimate use of the "change in law" clause.

Again, just to re-emphasize, the NDP government has no case, and they should have expected this based on the agreement that was signed. I'm just saying it's a loophole more than a feature.

That's all well in good if those companies could actually just raise their prices by X. In reality the selling of power is much more complicated than that.

With the cheapest in/first to sell model for selling power, and the nature of a coal plant as base supply (pretty much unable to shut them down), they've now added a cost that pretty much ensures these PPAs will be unprofitable for the foreseeable future.

A few people have commented on how the price will just get passed along to the consumer but that's not the case. The way the power market is right now, much of the carbon tax will go directly to the bottom lines of the companies that are selling the power, there simply isn't room for them to bid in that extra cost.

That's the issue here, that instead of companies taking the hit, the NDP has now given them an out to put that burden back into the balancing pool, and THAT will show up directly on our power bills, every cent of it. If there was no way out for these companies, they would be the ones taking the majority of the hit, not the consumers.

[The Yen Man]

I think a Jim Benning gif would quite accurately portray the NDP government's take on the issue. What a bunch of clowns.

[Bootsy]

http://calgaryherald.com/news/politi...-power-lawsuit

Nenshi not pleased with this at all, I haven't seen him tear into the NDP like this yet. I particularly like the BC lawyer crack at the end.

[automaton 3]

It is a bit sad that I'm not even surprised at this government's level of incompetence any longer.

[Locke]

Originally Posted by Bootsy

http://calgaryherald.com/news/politi...-power-lawsuit

Nenshi not pleased with this at all, I haven't seen him tear into the NDP like this yet. I particularly like the BC lawyer crack at the end.

That was pretty cold.

[Fuzz]

I always thought it was a bit hasty to make all this coal expensive so quickly. All they had to do was phase out the plants as they age out, and it would have had a minimal affect on global CO2. Instead we have a few near new plants that are going to be useless, and now, hey lawsuits!

[Locke]

Originally Posted by Fuzz

I always thought it was a bit hasty to make all this coal expensive so quickly. All they had to do was phase out the plants as they age out, and it would have had a minimal affect on global CO2. Instead we have a few near new plants that are going to be useless, and now, hey lawsuits!

Hey! Whoa now! Lets not be reasonable or anything, thats just not how these cats roll.

[The Yen Man]

So I apologize if I have this wrong, but shouldn't the NDP be happy that companies are backing out of coal powered contracts? After all, their whole thing was cutting carbon emissions. With companies now backing out, doesn't that lessen coal usage?