Balancing Pool to investigate impact of PPAs

Enmax, Trans Canada and ASTC dump coal-fired power contracts

An arm’s-length provincial government entity is probing the termination of several coal-fired power contracts to determine the impact of the moves and the fate of the contracts.

The Balancing Pool, formed in 1999 to manage power contracts that were not sold at auction when Alberta deregulated the electricity market, will take over responsibility for the Power Purchase Arrangements (called PPAs) dumped by Enmax, TransCanada Energy and ASTC Power Partnership.

“The Balancing Pool will conduct an investigation and assess and analyze the potential impacts,” Balancing Pool president Bruce Roberts said in a statement.

He said if the Balancing Pool takes over the arrangements, it will be responsible for offering that power to market and making payments to the generators under the contracts.

The Balancing Pool has three options, he noted. It can continue to hold the PPAs, resell the PPAs, or terminate them by paying the power plant owner a termination payment equal to its book value, he said.

“The Balancing Pool will review its options and provide a decision upon completion of its review,” Roberts said.

Money collected by the Balanc- ing Pool is refunded monthly to electricity consumers, but losses will be tacked onto their power bills.

Enmax said its decision was triggered by the increased costs that will be imposed on its Battle River coal-fired plant as a result of recent changes to the Specified Gas Emit- ters Regulation that increased the carbon levy and the costs of the power coming from the facility.

Premier Rachel Notley said last week the government is reviewing the Enmax decision to see if it met the criteria to activate a clause in the agreement that allows the PPA holder to walk away from the deal if a change in law makes it more unprofitable.

Enmax has said it is confident its decision to terminate the deal will be upheld.

Economic Development Minister Deron Bilous confirmed this week the NDP government is reviewing the structure of the PPAs to ensure it is doing “everything in its power to protect consumers and taxpayers.”

Bilous said the PPAs that were drafted under the former PC government “were not in the best interest of Albertans.”

“There were loopholes in those agreements which allow companies to reap the benefits when electricity prices are high and hand all the risk back to taxpayers when the market is low,” he said. “Some are doing it now and claiming it is because of our Climate Leadership Plan. The reality is that coal is not very profitable right now.”

Former Balancing Pool president Gary Reynolds said Friday if electricity prices remain at current levels, the Balancing Pool could lose more than $470 million managing the PPAs by next year — and keep losing money every year until prices climb.

“In that scenario, (the Balancing Pool) will be motivated to terminate the PPAs,” he said in an email.

Reynolds estimated the cost of terminating the PPAs at $1.35 billion in 2016.

The Balancing Pool will review its options and provide a decision upon completion of its review.

BRUCE ROBERTS