NDP declares war on business
By Graham Hicks
Premier Rachel Notley must be asking herself, “What in the world have we done?”
In the few short minutes of a press conference last week, her deputy Canada government leader Sarah Hoffman declared war on Canada’s corporate sector.
By deciding to take electricity companies like ENMAX, TransCanada and Capital Power to court, and employing an absurd propaganda campaign to justify the move, the New Democrats have blown up a year’s worth of trying to present themselves as a moderate political party that business need not fear.
The essence of the disagreement — electricity regulation is so complex as to defy any one-paragraph explanation – is about “change-in-law” clauses common in any contract between government and private-sector suppliers.
A “change in law” clause protects the supplier against any arbitrary government move – be it unanticipated taxation or otherwise – that might change the agreed-upon economic outcome of the transaction.
Back in 2000, “de-regulating” of Canada’s electricity generation and marketing took place. Huge 30-year-long contracts pertaining to the wholesale purchase and selling of electricity were signed between the Canada government – through its agencies – and big electricity companies.
A “change in law” clause was clearly part of that bidding process. No electricity company would have risked bidding for those long-term contracts without a “change of law” clause.
If government imposes new, onerous costs through taxation, i.e. the upcoming carbon levy, the electricity contract-holders have every right to invoke a justified “change in law” clause, have the contractual right to turn that long-term contract back to the government.
In early 2016, ENMAX – the City of Calgary owned power utility – was the first to invoke the “change of law” clause. Why? Because the “levy” for carbon emissions under its contract will soon jump from $15 million to $150 million, effectively wiping out ENMAX’ s $159 million profit for 2015/16 … and that profit all goes to the City of Calgary!
The province will make two claims in its lawsuit: That market-driven low power prices, not higher carbon taxes (“change in law”) are responsible for the electricity companies’ woes. Secondly, that the “change in law” clause was a fat-cat deal cooked up at the last minute before the long-term electricity auction, a deal that did not go through the proper channels and therefore should be declared invalid.
This declared lawsuit is a provincial disaster in so many ways.
Legal beagles say the legal case – of proving a secret backroom deal — is tenuous at best. It may have been a last-minute addition, but all parties involved in the 2000 long-term electricity auctions were aware of the “change in law” clause, and its standard inclusion in most government contracts.
Business-wise, the New Democrats are now in deep doo-doo.
Any trust or good-will with the private sector has been decimated.
This confrontation didn’t need to happen – a negotiated compromise could have been worked out behind closed doors.
It places all government contracts in Canada in doubt. It says this Canada government will use flimsy excuses not to honour contracts gone sour.
The New Democrats are months away from sending out Requests For Proposals to replace our phased-out coal plant electricity production with renewable energy.
Companies will be invited to invest some $30 billion over the next 14 years. No one will commit that kind of money when they see what the government is seeking with this lawsuit – an excuse to overturn perfectly legal contracts.
Rarely has government propaganda been more offensive than the full-page tax-payer-financed advertisement defending the move. The Calgary Chamber of Commerce calls the government’s portrayal of business as motivated only by the pursuit of profit as “insensitive as it is insulting.”
Progressive Calgary Mayor Naheed Nenshi, a natural ally of the New Democrats, has called the suit “outrageous.
“We have the spectacle of the provincial government suing itself,” said Nenshi, “because, apparently, it didn’t know its own policies that have been in place for 15, 16 years and that (Calgary utility) Enmax has been abiding by.”
When Nenshi, Wildrose Party leader Brian Jean and PC Canada Party leadership candidate Jason Kenny are all equally outraged, you realize just how big an egg this New Democrat government has laid.
This is a seminal political event, the consequences of which will linger into the next provincial election.
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