Gas plant cancellations cost $1.1 billion
It’s $1 billion-plus boondoggle.
Ontarians will pay as much as $812 million to cancel the Oakville gas plant, the lion’s share added to hydro bills over the next 20 years, auditor general Bonnie Lysyk concluded.
Lysyk’s report released Tuesday says the total bill for cancelling the plant could reach $1.1 billion, offset by future savings of $437 million, for a net cost to taxpayers and ratepayers of $675 million.
Auditors found that an additional $140 million could be blown on the extra cost of delivering gas to Napanee, where the Oakville plant was relocated.
The hefty price tag, on top of the $275 million lost through the relocation of the Mississauga gas plant, means Ontarians will spend an estimated $950 million to $1.1 billion to not build two electricity plants in the Greater Toronto Area.
“This is a lot of money,” Lysyk said simply.
And in a damning aside, the auditor noted that Ontarians didn’t have to pay this much for the provincial Liberal government’s decision.
“On cancelling the Oakville plant, the Premier’s Office assured TCE (TransCanada Energy) that it would be compensated for the full financial value of its contract for the Oakville plant instead of relying on (protections) in that contract that could have minimized the damages paid to the builder following cancellation,” the auditor’s report says.
Under the terms of the contract signed with TCE, opposition to the plant from local government may well have allowed the Ontario Power Authority (OPA) to escape the deal with “no penalty and no cost.”
And in another shocker, it turns out TCE may actually make money on the cancellation — netting $170 million.
“It should never have happened,” Premier Kathleen Wynne said following the report’s release. “It was a big mistake.”
Wynne apologized and said her government has learned from the errors it made in siting the plants in the first place.
In particular, political staff will no longer be allowed to get involved in third-party commercial negotiations.
As the report confirmed, senior employees in former premier Dalton McGuinty’s office insisted OPA make TransCanada Energy “whole.”
Progressive Conservative MPP Lisa MacLeod said the Ontario government pulled the plug on the unpopular plant in 2010 to protect Liberal MPP Kevin Flynn’s Oakville seat.
Since then, Wynne and the government have been misleading the public and the legislature that the cancellation costs for Oakville would range between $33 million and $40 million, MacLeod said.
“We know that that cost is now up to $1 billion to save a single Liberal seat in the last provincial election — that’s 25 times higher than Kathleen Wynne told us in the assembly,” she said.
NDP Leader Andrea Horwath said she’s outraged by the “political” decisions made by Liberals which wasted more than $1 billion of public funds.
“Political manoeuvring by the Liberals drove up these costs,” she said. “It is a disaster for the people who are stuck with the bills.”
The 24-page report probed the decision by the then McGuinty-led Liberal government to cancel the Oakville after the deal had been signed.
The auditor’s number crunchers revealed that OPA, and thus Ontario hydro ratepayers, took on the financial risk for delivering gas to the relocated plant in Napanee at an estimated expense of $577 million.
The province and OPA also agreed to reimburse TCE $40 million in sunk costs, that is money already spent planning the plant in Oakville.
OPA paid TCE $210 million to cover the cost of buying gas turbines, including $15 million in penalties charged by the manufacturer and $21 million in modifications.
The auditor added to the tally $3 million in legal and other professional fees incurred by the public sector in negotiating the Oakville contract.
Transmission upgrades required to send the Oakville community the power it needs adds another $81 million, and power loss along those longer lines means another $32 million on hydro bills.
The auditor’s report says that TCE was promised it would not take any financial hit — despite problems with its proposal — if it agreed to “lay low and not start litigation against the government.”
A TCE spokesman could not immediately be reached.
Gas turbines - $210 million
Sunk costs - $40 million
Legal and professional fees - $3 million
Gas delivery and management services - $577 million
Gas and hydro connections - $43 million
Added gas for less efficient turbines - $35 million
Transmission system upgrades - $81 million
Line losses - $32 million
Replacement power - $91 million
Lower price negotiated for power - $275 million (savings)
No payments to TCE until 2017 - $162 million
TOTAL: $675 million
PLUS: Possible additional gas tolls - $140 million
PLUS: Mississauga plant cancellation - $275 million
KINDLY REMIT: $1.09 billion
Did you expect the cost of the gas plant cancellations to be this high?
Yes. Nothing this government does surprises me.
No. It's ridiculous.