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Hudak could repeat McGuinty’s mistakes in cancelling contracts

Ontario PC Leader Tim Hudak greets employees at Ranfar Steel Ltd. while campaigning in Courtice, Ont. on Saturday, May 10, 2014.

Darren Calabrese/THE CANADIAN PRESS

Political parties seeking advantage in election campaigns have little sense of irony.

And so, Ontario Progressive Conservative Leader Tim Hudak stole a play from former Liberal premier Dalton McGuinty by promising to tear up contracts in the province's troubled electricity sector in order to reverse a politically contentious decision.

The Tories believe Mr. McGuinty's successor, Kathleen Wynne, has a major problem with the Green Energy Act, which essentially subsidizes contracts for wind and solar installations to make Ontario a leading jurisdiction for renewable energy. While a number of factors are driving up electricity prices, the so-called Feed-in-Tariff for renewable power has certainly contributed to the increase, and to the forecast of a 42-per-cent price hike over the next five years.

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And so in a campaign stop on Monday, Mr. Hudak took dead aim at the much-criticized Green Energy Act as he promised to tame electricity prices. The Tory leader promises to terminate contracts that the Ontario Power Authority has entered into with private companies to provide 8,240 megawatts of wind and solar energy.

The previous Liberal government created massive problems when it cancelled two gas plants in the run-up to the last provincial election. That decision cost the people of Ontario upwards of $1.1-billion, and has haunted the Liberals ever since with allegations of cover-up and destroyed e-mails.

Now, the Progressive Conservatives say they will end contracts worth some $20-billion over 20 years as they disentangle Ontario from the Liberal embrace of renewable power.

PC energy critic Lisa McLeod said hydro prices have emerged as the number one issue as she stumps the province for her party's candidates.

"People are finding it very difficult to make those payments and try to keep up with other increases," Ms. McLeod said in an interview Monday. "It's on the top of everyone's mind."

While much of the wind and solar capacity still needs to be built, virtually all of it is contracted for by the province's Ontario Power Authority. Faced with supply glut, the Liberal government is no longer entering into renewable-power contracts, with the exception of small-scale projects.

Ms. McLeod said a Progressive Conservative government could declare "force majeure" to terminate contracts if necessary. There used to be an exit clause for many of the FiT contracts that had not yet been executed, but OPA waived that right in 2011. Now, the vast majority of the contracts are iron-clad.

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Queen's University environmental lawyer Bruce Pardy said the Tories could "probably" terminate the other contracts without incurring the kind of penalty paid by the Liberals in the gas plant fiasco, but that it would be messy.

"The legislature probably can [cancel contracts] because provisions in the contracts are irrelevant if legislation declares them to be null and void, its provisions to be of no force or effect, and the province to be free from liability," Mr. Pardy said.

"However, it is politically and economically risky to do so. It threatens the willingness of private parties to enter into future contracts with government and could detrimentally affect economic confidence."

And power providers from the United States – Florida Power and Light is a major player here – could have recourse to compensation under the North American Free Trade Agreement.

The PCs are also promising to reduce the power sector bureaucracy that exists in the province, including disbanding the Ontario Power Authority, which does planning and contracting on behalf of the provincial government. But the savings aren't huge. The OPA has an annual budget of $55-million in 2012, and earned $16-million in profit for the province.

Ms. McLeod said a Progressive Conservative government would look to a mix of nuclear, natural gas and hydro to power the province, and would consider the purchasing of cheaper hydro power from Quebec and Manitoba.

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The Liberals defend the renewable strategy as forward-looking – weaning the province off coal and avoiding the need for new nuclear plants while keeping greenhouse-gas emissions in check. In a speech in Ottawa last month, Energy Minister Bob Chiarelli said the previous Progressive Conservative government left a broken electricity system a decade ago. "It was always clear that necessary investments to rebuild our system, to get us back to surplus [power] and to create a cleaner system would push prices up," he conceded.

The Canadian Electricity Association has warned that consumers will face rising prices right across Canada as utilities and transmission companies need to invest in an aging system. While messy cancellation of planned renewable capacity may shave off some costs, there are no easy fixes for a province that is not blessed with an abundance of hydroelectric power or natural gas.

Shawn McCarthy reports on energy from Ottawa.

Editor's note: an earlier version of this story incorrectly said there were certain kinds of exit clauses in the Feed-in-Tariff program that an Ontario Progressive Conservative government says it could make use of. In fact, the right to use those exit clauses was waived in 2011. This story has been updated to reflect that change.

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About the Author
Global Energy Reporter

Shawn McCarthy is an Ottawa-based, national business correspondent for The Globe and Mail, covering a global energy beat. He writes on various aspects of the international energy industry, from oil and gas production and refining, to the development of new technologies, to the business implications of climate-change regulations. More

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