Questions remain when Alberta NDP learned of Enron clause

Evidence suggests the NDP government may have known about the ‘Enron clause’ prior to Deputy Premier Sarah Hoffman’s claims that the government was unaware of the regulation until March 2016.

On Tuesday, Hoffman admitted the government wasn’t aware of the ‘Enron clause’ — which lets power companies offload money-losing contracts if government actions make them unprofitable — when increasing the carbon levy for emitters.

The clause has been on the Queen’s Printer since it was legislated by the former PC government in 2001.

Premier Rachel Notley referenced it in early March and, according to Wildrose electricity and renewables critic Don MacIntyre, a September briefing note indicates Balancing Pool officials must’ve known about the “Enron clause” when reviewing levy hikes on power purchasing agreements (PPAs).

“We have to take their word the minister didn’t know,” he said. “But of course department officials knew; they’ve been on these files since day one. I find it odd they didn’t tell the minister until March.”

The government couldn’t confirm or deny Energy Department officials knew about the clause prior to informing the government about them in March.

Hoffman suggested the NDP would’ve remained firm on the levy increases as the note said officials believe levy increases to PPAs wouldn’t cause them to terminate.

However, Enmax, TransCanada, AltaGas and Capital Power have announced they plan to terminate their PPAs largely over the government’s increase to the carbon levy.

And despite the Enron clause being on the Queen’s Printer for more than a decade, Hoffman said they were never fairly distributed to media or formally debated.

Notley’s competence questioned in “Enron clause” fiasco: political scientist

The fiasco over the ‘Enron clause,’ the centrepiece of a recently-launched NDP government lawsuit, is the first time Rachel Notley’s competence as a leader has been truly questioned, according a Mount Royal University (MRU) political scientist.

Premier Rachel Notley referred to the regulation as a “loophole the size of seven different large trucks,” recorded on the March 10, 2016 Hansard.

Lori Williams, a political scientist and professor at MRU, said the incident raises questions about co-ordination and competence.

“It’s going to be a tough one for her to overcome,” Williams said. “We’ve had a premier, for the most part, that’s seemed quite bright and entrepreneurial, but now we have someone who is showing that dissonance or contradiction.”

Official Opposition Wildrose also released a September briefing note that showed Balancing Pool officials knew the ramifications of increasing the carbon levy to power purchasing agreements.

“Either the Deputy Premier isn’t being told all the facts, or is willfully hiding the truth when it comes to the timeline of when the NDP government knew about the impact breaking PPAs would have,” said electricity and renewables critic Don MacIntyre. “Either way, these points do not justify legal action.”

But Hoffman defended the government’s claim that they were unaware, emphasizing the September briefing note made no mention of the ‘Enron clause’ specifically.

“I feel like the Wildrose keeps getting this wrong,” she said. “They want the government to let profitable electricity companies, which have made about $10-billion in profits, offload what could be $2 billion in losses to the public all because of a bad deal.”

But Mayor Naheed Nenshi again slammed the government for the lawsuit on Wednesday, saying the city-owned Enmax has abided by the law.

“It’s particularly weird because I happen to know that they were warned repeatedly that this may trigger the very thing that they’re suing themselves about right now, and in fact, had they done the climate change policy just slightly differently they would have been able to avoid this trigger,” Nenshi said.

“Enmax is owned by the rate payers, so if Enmax has to take a penalty, it’s the city of Calgary citizens that will end up having to pay for that. So even their logic doesn’t make any sense.”

The Evidence

• Balancing Pool briefing note

A September briefing note by the board of the Balancing Pool — a government agency that deals with PPA transfers — shows officials were reviewing agreements that were affected by the government’s carbon levy hike. Officials didn’t specifically note the ‘Enron clause,’ but were aware of termination ramifications for PPAs. The document did note officials believed no PPAs would terminate with the increase.

• Rachel Notley during a March sitting at the legislature

On March 10, Rachel Notley referred to the clause as a “loophole” that was “negotiated by the previous government,” after the Wildrose criticized the government for allegedly causing TransCanada to terminate its PPA. Despite the March reference, legal action wasn’t taken until July.

• The Canada Leaders Debate

During the Canada Leaders Debate in April 2015, former Premier Jim Prentice questioned Notley on how the government would pay billions of dollars in damages if the coal-fired power plants were closed early. In response, Notley said those damages would be owed, adding the phasing out of coal would give the government social license.

• The Queen’s Printer

The ‘Enron clause,’ also known as 4.3(j) in legislation, has been on the books since the former PC government overhauled the electricity industry in 2001. The government has called it “secret,” when in fact it’s been there since they took power.