Ontario Liberals Often Fail to Honour contracts

The Toronto Star ran an article recently indicating a political leader in Ontario would not honour contracts.   That leader was PC leader Tim Hudak, and since I’ve said in the past Ontario’s ratepayers would have saved billions by electing Hudak’s party when they had the change in fall 2011, I thought I’d take some time to show why that is, and how the current government has not honoured the contracts signed prior to that election.

The PC’s party “Changebook” 2011 campaign platform included;

We will end the feed-in tariff program that, in some cases, pays up to 15 times the usual cost of the hydro. Hardworking farmers and other Ontarians who signed contracts to host energy production on their property will have their contracts honoured. But there will be no more of these deals.
We will end the king of all secret, sweetheart deals – the $7 billion Samsung deal…

As Mr. Hudak’s stance of trying to end contracts is portrayed as being impractical, in the Toronto Star article and elsewhere, it’s important to note that in the two years following that election there has been little new contracting of supply.    Comparing the OPA’s 2013 Q3 – A Progress Report on Contracted Electricity Supply to the same report for the quarter prior to 2011’s election, only 33.6MW more “wind” shows as being contracted ( 5,755MW total), and 62.7MW more solar (of 2,050MW total).    The majority of renewable supply contracted since July 2011 is the conversion of Atikokan from coal to biomass (Hudak is currently being criticized for supporting another biomass project).

Despite the lack of new contracts, the contracts not “in service”, but “under development”, went down by less than 25% over the two years.

The earliest contracts under Ontario’s now mercifully defunct (for industrial wind) feed-in tariff program were offered almost 4 years ago, in April 2010.  Despite the contracts including, “The Supplier acknowledges that time is of the essence to the OPA with respect to attaining Commercial Operation of the Contract Facility by the Milestone Date for Commercial Operation…the date that is three years following the Contract Date,”  most of the projects initially contracted did not meet the timelines.  Many still aren’t in service, nor are any of the sites contracted in February 2011, although those sites were contracted after the first sites were given a option to extend the timelines.

The government continues to find reasons to offer extensions to projects.

Not long after I wrote Killing Time, in April 2013, the government did finally take one small step to rectify a too-generous, and not necessary, contract, and revised the agreement with the Korean Consortium – but instead of honouring the contract (by cancelling it after the dates were missed), the government newly guaranteed a minimum rate of $295/MWh for large solar in a revision; a competitive bid would currently come in far, far below this price, and the most recent, still too high, FIT price is already under the Korean Consortium’s foolishly guaranteed minimum.

More slow was the government to respond to another article I wrote in in 2012, Billions at Stake In Feed-In Tariff Contract Fine Print.   The article may have had some impact on Minister of Energy Bentley, as the rumoured gifting of payments for curtailed production from industrial wind turbines didn’t occur – but once Kathleen Wynne became Premier and installed Bob Chiarelli in the Energy ministry, the gift was given.  This too is a violation/alteration, of some original, pre-FIT, contracts.

Early indications are that policy changes to pay for curtailed supply will benefit a few large companies (see Big Thunder is a Big Mistake).

Successive Liberal governments have failed to honour the public’s side of contracts by attempting to enforce the original agreements.  The Niagara Tunnel contract was re-written (to enrich it for the contractor), and the Oakville Generating Station moved instead of letting the courts sort it out (Oakville may have prevented the project from moving forward without the still ratepayer penalty).

Tim Hudak is not the one who should be under examination for how his approach to managing contracts will cost Ontarians.

 

Note: spreadsheet comparison of OPA Q3 figures of contracted renewable supply, for 2013 and 2011, is here

Related: Wind Feed-in Tariffs in Ontario: An Info-Obit