Wynne apologizes after AG reveals cost of cancelled Oakville gas plant
Sandie Benitah , CP24.com
Published Tuesday, October 8, 2013 5:13AM EDT
Last Updated Tuesday, October 8, 2013 6:45PM EDT
Ontario Premier Kathleen Wynne has apologized for the “unacceptably large” cost the Liberals incurred after hastily cancelling the construction of a power plant in Oakville ahead of the 2011 provincial election.
Her latest apology for the scandal comes on the heels of a report released Tuesday afternoon by Ontario’s auditor general which shows that the Liberals’ actions in Oakville back in 2010 will cost Ontarians $675 million.
That price tag could balloon by another $140 million once gas is delivered to its costly new site in Napanee. This figure takes into account a possible increase in delivery tolls.
Together with the $275 million cost of a similarly controversial decision to cancel a power plant in Mississauga in late September 2011 -- just days before the election -- the total loss to taxpayers exceeds $1 billion.
Ontario’s auditor general Bonnie Lysyk’s report was released Tuesday afternoon, confirming what was long speculated – the Liberal government’s initial estimate of the cancellation costs was significantly lower than what Ontarians would eventually have to pay.
The Liberals have said the cost of cancelling the Oakville plant to taxpayers would be about $40 million, but the government’s partner in the deal, the Ontario Power Authority, said it would likely be around $310 million.
“Estimates vary, including today's estimate from the auditor general, of what this will cost over the next 20 years, but all of them are unacceptably large,” Wynne said to a crowd of reporters. “Money is too tight for tax dollars to be spent in any way that is not productive. As a member of the cabinet under which this happened, I take full responsibility and offer a full apology.”
Opposition parties have long said the cancellation of the Oakville plant cost taxpayers at least $585 million and that the Liberal government knew about the price tag all along.
The report says that in fact, the total cost of cancelling the Oakville power plant could reach $1.112 billion. However, it is expected that there will be about $437 million in savings, bringing the net cost down to about $675 million over the next 20 years.
Taxpayers would be on the hook for $40 million of that cost while the rest - $635 million - would have to be paid by electricity ratepayers.
In her report, Lysyk said the government made some “questionable decisions.”
“This cost is significantly more than may have been necessary,” she said in a news release attached to the report. “A number of questionable decisions made along the way contributed to this situation.”
Among those decisions:
- The premier’s office, held by Dalton McGuinty at the time, assured private company TransCanada Energy Ltd. (TCE) that they would be compensated for the full financial value of the Oakville contract. That ignored the protections that existed in the contract that would have minimized some of the damages that needed to be paid to the builder.
- The province and the Ontario Power Authority agreed to arbitration terms that favoured TCE and waived the protections that were in place under the original contract with OPA.
- Ontario’s energy minister instructed the new plant be built in Napanee – a site that proved to be expensive. The report says the cost of transporting natural gas to that location costs significantly more as well as the cost of transmitting electricity back to southwest GTA (where Oakville is located) where there is a need for power.
Lysyk also noted in her report that the OPA told developers bidding to build the plant that municipal opposition to the project would not be a factor when making a decision of where to build.
The Liberal government has faced intense scrutiny for their decision to cancel the Oakville plant and a power plant in Mississauga leading up to the 2011 provincial election. Communities in both Oakville and Mississauga fervently opposed the plants’ construction. Critics say the Liberals canceled the construction in order to win seats in those ridings.
A report by the auditor general released in April 2013 found the cost of cancelling the plant in Mississauga was about $275 million --- about $85 million higher than what the Liberals said it cost.
“This report is going to be a lightning rod for the public,” PC Energy Critic Lisa McLeod said to reporters after Lysyk released her findings.
“I believe the Liberals have lost their credibility. I believe they’ve lost their legitimacy,” she said.
TCE profited from plant relocation
Speaking with reporters Tuesday afternoon, Lysyk said the deal to relocate the Oakville plant was a profitable one for TCE – more so than if the plant had stayed put.
“The profit TCE made by moving the plant to Napanee is greater than what they would have made in Oakville,” she said. “It’s a better deal than what they would have gotten in Oakville.”
Lysyc said she found no evidence to suggest anything untoward in the relationship between TCE and the OPA and said she could only guess why the government chose to settle a new deal with the company rather than fight to keep the protective terms of their contract.
“There was concern TCE would take legal action and that was a factor in their decision making,” she said.
However, Lysyk said the government could have simply waited to see if the contract would expire, seeing that TCE had problems getting the appropriate permits because of drawn out legal disputes with the community at the Ontario Municipal Board.
Under the TCE contract, if building on the plant hadn’t commenced within 24 months of the original service date, the contract would have been considered null and void.
The mayor of Oakville indicated at one point that he was ready to fight the plant’s construction all the way to the Supreme Court.
The Liberals said the legal advice they received was to settle with TCE rather than go to court.
“I believe staff in the former premier's office acted in good faith while the relocation of the Oakville plant was being negotiated,” she said. “But from this experience there are important lessons to be learned. We are acting on those lessons.”
Wynne said the Liberals will implement new changes that will force the government to take a sober second look at their decisions.
The government has committed to improving the siting for large energy infrastructure projects by implementing recommendations that have been made by the OPA and the Independent Electricity System Operator.
“Communities will have a say at the beginning,” she said.” We need to ensure that we get the siting decisions right the first time.”
As well, political staff will now be restricted in their dealings with commercial and third-party transactions.
“It never should have happened and it pains me that it did,” Wynne said at the news conference. “We need to do better and we will.”