Enron touted ties to Tories
Emails support NDP suit over power contracts
Emails hinting at a cosy relationship between Alberta’s former Progressive Conservative government and disgraced power giant Enron will form a chunk of a billion-dollar lawsuit launched by the NDP.
The NDP government says Enron wanted to ensure it could pull out of its power contracts if the Alberta government made changes in law rendering power purchase arrangements “more unprofitable.”
It’s challenging the legality of the words “more unprofitable,” arguing they were inserted secretly at the behest of Enron.
In 2000, Enron’s then-director of government affairs, Robert Hemstock, told a colleague about the great relationship he had fostered with the PC government of the day.
Not wanting to “toot (his) own horn,” he boasted in an email that last-minute changes to the province’s power purchase arrangements (PPAs) were based “in large part” on that relationship and the trust he had established with thendirector of electricity at the province’s resources department, Larry Charach.
Hemstock wrote he was “quite proud of . . . identifying the regulatory risks and advocating for changes that would mitigate or eliminate many of the risks in the PPAs.”
The loophole has some companies now scuttling their agreements. Essentially, that leaves Albertans on the hook for up to $2 billion, potentially through power bill hikes.
The government is taking on a host of power companies in its suit, as well as the Alberta Utilities Commission.
In its statement of claim, the government argues the commission’s predecessor, the Alberta Energy and Utilities Board (AEUB), acted above its authority when it altered the terms of PPAs; the contracts had been publicly discussed for weeks, the government says, and already agreed upon by the Independent Assessment Team (IAT) six months prior.
PPA regulations were detailed to the board in an August 1999 report by IAT.
That report made no mention of “more unprofitable.” Instead, it said market risks — bottoming out energy prices, for example — would be best managed by the power companies buying into the market.
It also noted that allowing companies relief from any environmental taxes would be “contrary to the public good.”
If power contracts were allowed to be terminated in situations other than those specifically laid out in the report, the IAT wrote, the entire process would be undermined and the balancing pool — therefore, Alberta energy consumers — exposed to “risks which they were not intended to bear.”
The PPAs went through public consultations in October 1999, and were approved by the AEUB in May 2000. According to government documents, it wasn’t until July 27, 2000 — just days before the power contracts went to auction — that Enron piped up with concerns about profitability.
Hemstock emailed Charach in the government’s resources department, worried that if changes to the PPAs weren’t made correctly, courts might find the contracts unenforceable; that could affect how aggressively Enron would bid on a contract, Hemstock wrote, or whether it would bid at all.
These were not merely “typographical errors and minor clarifications,” Hemstock argued, but changes “in the order of hundreds of millions of dollars.”
Charach passed those concerns over to AEUB executive director Bob Heggie, adding that Hemstock was pretty sure Enron’s requested changes could be passed without a public hearing.
“I realize you believe otherwise,” Charach wrote, but urged Heggie to give the Enron executive a call to “close the gap.”
In an email less than 24 hours later, Hemstock told his colleague that concerns about PPAs had “been addressed to Enron’s satisfaction.”
An Aug. 1 letter from the AEUB to then resources development minister Mike Cardinal says changes attached to the letter — including the “more profitable” line — should be considered part of the power contracts.
The NDP argues the changes were never rolled into PPA contracts and the AEUB overstepped its authority to push through the changes, skipping the necessary step of public consultation.
Interim PC leader Ric McIver called the lawsuit a move to save the government’s “own political skin” and said no matter the result, taxpayers will be left on the hook.
“It doesn’t matter who had lunch with who 16 years ago,” he said.
While McIver wouldn’t comment on the fairness of downloading power contract losses onto consumers, he said “a deal is a deal” and the government should honour its contracts.
Deputy premier Sarah Hoffman said her government doesn’t believe those deals were legal or ethical in the first place.
“This all started in 2000, and we want to fix this,” she said.