Market prices, not increase in carbon levy, caused PPAs to be “more unprofitable,” say experts
Government has 50-50 chance of winning legal battle, says University of Calgary professor
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Instead of increasing the carbon levy on emitters, market prices may be the actual trigger causing power companies to return their agreements to the Balancing Pool, according economic and legal experts.
On Monday, the NDP government launched a lawsuit over what it calls the “Enron clause,” which allows power companies to return their agreements if government action makes them unprofitable “or more unprofitable.”
Deputy Premier Sarah Hoffman said the government wasn’t aware of the clause until the energy minister was briefed in March 2016, seven months after the government increased the carbon levy on large emitters in June.
On Thursday, Nigel Bankes, chair of natural resources law at the University of Calgary, said it appears the energy companies are using the hike in the carbon levy in June as a trigger for lower profits today, even though a September briefing note suggested the PPAs would remain profitable in the future.
Trevor Tombe, an economist with the University of Calgary, suggested the value of PPAs has largely decreased because the price of electricity is at historic lows.
“Between then and now, the only thing that has changed is that the price has fallen,” Tombe said. “So in that sense, one might conclude the policy change at the time it was made didn’t constitute a trigger.”
Bankes concluded the government has a 50-50 shot at winning the court case, adding the government is out of a normal six-month timeframe to take action on certain clauses.