Alberta Politics Thread

[Regorium]

Originally Posted by Makarov

I hear what are you saying but I still think that is the sort of policy decision that can be punished at the polls if it is regarded as a bad one (indeed, its safe to say from reading this thread that the NDP haven't earned themselves any new votes as a result of this decision so far.)

I think its unfavourable because it doesn't share the risk very evenly among the stakeholders. There are a great many unknowns in the world. Circumstances change (for example, climate change worsening). Governments need to react to those changing circumstances. That's a risk for everyone when they enter into commercial agreements (whether it is a family taking out a mortgage [faced with the prospect of a Bank of Canada interest rate change] or a huge elecricity generation company buying a PPA). Its reasonable to expect that in most commercial agreements, these risks are shared to some extent amongst the parties (although I suppose the parties are always free to distribute these risks as they see fit). In this case, it seems like the people of Alberta assumed all of the risk, that's all. (Sorry, long, rambling response).

I think I agree with most of your point. However, I don't think the electricity market is as one sided as you present.

The businesses assumed some billion dollars of risk to pay to have that clause - even so, it has been stated that the selling price of the PPA's were below what the government was expecting.

Businesses then invested further, which provided this glut of energy generation which has caused our power prices to be 1.8c/kwh, compared to ~20c/kwh in peak hours over in Ontario.

So, even though the companies themselves won big (10B+ of profits according to the NDP), Albertans also won big by having much lower power prices than other places in Canada. The government does assume a huge amount of risk - the entire point of the Balancing Pool is to assume risk but that is to provide this win-win environment for both for businesses and Albertans.

[Weitz]

Makarov, you act like there is no benefit to the government in these contracts.

These clauses ensured higher prices. As Capital Power said today the prices paid would be significantly less without these clauses.

Which, in my opinion, would open more lawsuits if the NDP win this lawsuit.

Also stating you think these clauses are "uncommon" from what you have seen makes me curious, because from my experience these clauses are quite common.

[Makarov]

Originally Posted by Regorium

I think I agree with most of your point. However, I don't think the electricity market is as one sided as you present.

The businesses assumed some billion dollars of risk to pay to have that clause - even so, it has been stated that the selling price of the PPA's were below what the government was expecting.

Businesses then invested further, which provided this glut of energy generation which has caused our power prices to be 1.8c/kwh, compared to ~20c/kwh in peak hours over in Ontario.

So, even though the companies themselves won big (10B+ of profits according to the NDP), Albertans also won big by having much lower power prices than other places in Canada. The government does assume a huge amount of risk - the entire point of the Balancing Pool is to assume risk but that is to provide this win-win environment for both for businesses and Albertans.

Makes sense. As I understand it, the goal of the PPA framework was to foster competition (and presumably lower prices). As I said, don't hold myself out as an electricity market expert by any means.

[Makarov]

Originally Posted by Weitz

Makarov, you act like there is no benefit to the government in these contracts.

These clauses ensured higher prices. As Capital Power said today the prices paid would be significantly less without these clauses.

Which, in my opinion, would open more lawsuits if the NDP win this lawsuit.

Oh, I totally agree. If (and it seems a large if at this point) the province's claim succeeded, any award of damages would have to consider (ie be reduced by) the amount that the "change of law" provision increased the PPA purchase prices by. Courts are no strangers to these types of set-off.

[Makarov]

Just one more thought regarding the argument that Alberta's rather litigious approach here will discourage investment in the province in the future. Its a fair point. However, I would note that, as anyone who has spent any time in the office of a large national law firm can attest, commercial litigation between large corporations (the same ones who seem to be getting a lot of sympathy in this thread) trying to escape or enforce or interpret the consequences of their commercial agreements is the bread and butter of superior court litigation in this country. Most of those corporations continue to do business with each other after the litigation dust has settled (indeed, often continue to do business together even while litigation is ongoing). To some extent, its just part of doing business.

[corporatejay]

Makarov, this isn't the same thing at all. This is Chavez level stuff and it's frightening.

[GGG]

This clause is very similar to the TPP clause where foreign entities will be able to sue for regulatory changes that hurt their business.

[Flash Walken]

Originally Posted by corporatejay

Makarov, this isn't the same thing at all. This is Chavez level stuff and it's frightening.

oh. come. on.

[CorsiHockeyLeague]

Chavez comment aside, he's right that there's no analogy. Market competitors are different from government actors, and a lawsuit is a risk / reward proposition. When a Government acts in a way that suggests it won't fullfil its bargains with those doing business in its jurisdiction it sends a message to others who might have wanted to do business there that they should take into account the potential for this happening to them. Or, hell, those that are already there, who may simply be more conservative in their dealings in-province, which isn't good for Albertans either.

[corporatejay]

Originally Posted by CorsiHockeyLeague

Chavez comment aside, he's right that there's no analogy. Market competitors are different from government actors, and a lawsuit is a risk / reward proposition. When a Government acts in a way that suggests it won't fullfil its bargains with those doing business in its jurisdiction it sends a message to others who might have wanted to do business there that they should take into account the potential for this happening to them. Or, hell, those that are already there, who may simply be more conservative in their dealings in-province, which isn't good for Albertans either.

I don't think the Chavez comments is out of line. I'm not suggesting it's nationalization or socialization. I'm saying when you have a government who won't stand behind its own agreements and sues market players when they simply abide by the rules you set forth you are basically venezuela, making the rules up as you go.

Foreign investors are already skiddish about the Alberta market, this makes it so much worse....that's why it's frightening.

[Mr.Coffee]

Originally Posted by corporatejay

I don't think the Chavez comments is out of line. I'm not suggesting it's nationalization or socialization. I'm saying when you have a government who won't stand behind its own agreements and sues market players when they simply abide by the rules you set forth you are basically venezuela, making the rules up as you go.

Foreign investors are already skiddish about the Alberta market, this makes it so much worse....that's why it's frightening.

Again I don't see it different than a change to the royalty regime, but people seemed to be ok with that.

[OMG!WTF!]

Originally Posted by Mr.Coffee

Again I don't see it different than a change to the royalty regime, but people seemed to be ok with that.

Royalties really are a totally different thing all together. No one is forcing companies to produce oil here. A PPA is an agreement to purchase power on our behalf. It would be like hiring Shell to make oil and then telling them we are going to increase the tax they pay by a 1000%. But they still have to make our oil. As it is, companies that don't like our current royalty regime or that don't like any future changes are free to do business elsewhere. Not so with PPA's.

Because it is fundamentally different, royalties are basically negotiations. Producers can and will leave if the government makes it unprofitable. They also will leave and not come back if these sort of shenanigans were common.

[Mr.Coffee]

Originally Posted by OMG!WTF!

Royalties really are a totally different thing all together. No one is forcing companies to produce oil here. A PPA is an agreement to purchase power on our behalf. It would be like hiring Shell to make oil and then telling them we are going to increase the tax they pay by a 1000%. But they still have to make our oil. As it is, companies that don't like our current royalty regime or that don't like any future changes are free to do business elsewhere. Not so with PPA's.

Because it is fundamentally different, royalties are basically negotiations. Producers can and will leave if the government makes it unprofitable. They also will leave and not come back if these sort of shenanigans were common.

I'm not sure I follow why a utility company is forced to do business here? Because they sign a PPA? A PPA is simply the contract to govern the purchasing of the power, it's a contract just like a Crown Agreement granting the right to win take and remove resources.

Are you saying these utilities have no other options (go to other jurisdictions to do business?) because again, why can't they? There are other deregulated power markets. Sorry just not sure I understand what you're getting at.

[Resolute 14]

Originally Posted by Mr.Coffee

I'm not sure I follow why a utility company is forced to do business here? Because they sign a PPA? A PPA is simply the contract to govern the purchasing of the power, it's a contract just like a Crown Agreement granting the right to win take and remove resources.

Are you saying these utilities have no other options (go to other jurisdictions to do business?) because again, why can't they? There are other deregulated power markets. Sorry just not sure I understand what you're getting at.

Because the NDP is trying to block their ability to get out from under these contracts. Notley's entire goal with this lawsuit is to force the re-sellers like Enmax and Capital Power to eat the burden of selling electricity in a perpetually losing state - which they have exacerbated - rather than the balancing pool.

There is pretty much no question that, even if the NDP is successful, these companies aren't going to touch an NDP-controlled Alberta with a 100 foot pole once the PPAs do expire. Great to be an energy province under a government actively trying to hamstring existing energy investment and drive new investment away.

[Fuzz]

Welcome to the exciting world of CO2 taxes!

[OMG!WTF!]

Originally Posted by Mr.Coffee

I'm not sure I follow why a utility company is forced to do business here? Because they sign a PPA? A PPA is simply the contract to govern the purchasing of the power, it's a contract just like a Crown Agreement granting the right to win take and remove resources.

Are you saying these utilities have no other options (go to other jurisdictions to do business?) because again, why can't they? There are other deregulated power markets. Sorry just not sure I understand what you're getting at.

If royalties were like ppa's oil companies would be obliged to continue producing at a loss. And Notely would expect them to do so even after raising their carbon tax 1000%.

[Mr.Coffee]

Originally Posted by OMG!WTF!

If royalties were like ppa's oil companies would be obliged to continue producing at a loss. And Notely would expect them to do so even after raising their carbon tax 1000%.

Ah thank you that makes more sense. So to clarify the utility can't simply stop providing the power because it's losing money?

[Resolute 14]

Whoops... turns out Hoffman was lying through her teeth when she said the NDP weren't aware of the termination clauses.

http://www.metronews.ca/news/calgary...rbon-levy.html

Which leaves the most plausible explanation for why Notley and the NDP got themselves into this mess is that they simply didn't care who got screwed, so long as their ideological decisions happened.

[Wiggum_PI]

Found another good article if people have the time to read.

Alberta’s Electricity System: Carbon Policies and the Risk of Unintended Consequences

In addition, in an economy where revenue from energy exports has been slashed, Albertans are also asking government to ensure that to the extent possible they are protected from other rising costs. Some of the questions raised by the proposed climate change policy include: How do we continue to retain and attract new investors in generative electricity capacity, increasing supply and therefore presumably reducing costs? How do we ensure that transmission and distribution costs better match other economic indicators in Alberta? and How will consumers be affected when power wholesalers shed their Power Purchase Arrangements (PPAs) and return these obligations to the Balancing Pool?

http://www.energyregulationquarterly....Om1qMRwA.dpbs

[SeeGeeWhy]

Originally Posted by Makarov

Take it up with the Alberta Utilities Commission which expressly found that PPAs are not commercial contracts.

Care to elucidate?