‘Out’ clauses are standard: Girling

• “Out clauses” such as the one the Alberta government claims was illegally added to its power contracts 16 years ago and is now challenging in court are standard in arrangements with governments, says TransCanada Corp. president and CEO Russ Girling.

The Alberta government launched a lawsuit this week against a handful of energy companies — i ncluding TransCanada — that backed out of power contracts made less profitable by higher carbon costs.

Tr a nsCanada took a $235-million charge in March over the termination of those contracts, called Power Purchase Arrangements ( PPA), after triggering the out clause and returning the contract to a provincial agency, the Balancing Pool, after the government boosted carbon costs as part of its aggressive climate change policy.

“Any time we have arrangements with governments it’s key that there is regulatory predictability and regulatory stability, and we depend upon those, and during the cases you are investing a lot of money, you look to ensure that changes can’t be made in those structures in the future,” Girling said in an interview Thursday after TransCanada released results for the second quarter.

The NDP government claims its own regulatory agency, the Alberta Utilities Commission, wasn’t authorized 16 years ago to allow a clause “lobbied for by Enron — a discredited and now bankrupt U. S. electricity operator at the centre of numerous other controversies and questionable business practices” and secretly accepted by the previous Conservative government so the private sector could “earn greater profit.”

The clause made it possible for energy companies to back out “if a change in law renders the PPA unprofitable, or more unprofitable.”

The province said in its lawsuit, filed at Court of Queen’s Bench of Alberta in Edmonton, that power consumers could be stuck with $ 2 billion in losses if that clause stands.

Girling said TransCanada’s bid at the time was made based on existing regulations and contract terms.