Killing green contracts: Samsung deal should go

Here from former CEO of the Ontario Power Authority Jan Carr, is an opinion on cancelling contracts for renewable power generation. Reprinted from The Financial Post.

Killing green contracts

FP Letters, May 23, 2014

Bruce Pardy (May 15) explains how Ontario election campaign promises to tear up high-priced renewable energy contracts would be legal if backed up by legislation.

The downside is of course that retrospective laws like this drive general costs up because they undermine investor confidence. Given the thousands of renewable energy contracts involved, it is not hard to imagine that if the economic consequences of such a break of faith would dwarf the $1.1 billion cost of Oakville and Mississauga gas plant cancellations.

“The massive 25-year Samsung contract was awarded without competition and to a company with no demonstrated expertise in either wind or solar generation.”

But if the cancellation legislation applied only to the the Samsung renewable energy contract awarded in 2010 it might actually increase business confidence. The power industry was aghast when this massive 25-year contract was awarded without competition and to a company with no demonstrated expertise in either wind or solar generation. In addition to the above-market energy prices available to all renewable energy generators, the contract provided an additional subsidy of $110 million and rights to 500 megawatts of scarce space on the provincial transmission system. Literally “priceless” because rights to transmission access are not for sale to anybody else in Ontario.

On a per capita basis, the $18.6 billion Samsung renewable energy contract committed each Ontarian to $1,400 over its life. In contrast the $25 billion F-35 fighter jet contract, which dominated public debate about government sole source contracting at the time, works out to $725 for each Canadian.

“The Samsung contract remains a monument to the worst excesses of government procurement.”

The Samsung contract has already been scaled back through negotiation but it still remains a monument to the worst excesses of government procurement. many would see legislated cancellation of the Samsung renewable energy contract as righting a significant wrong rather than the beginning of a slippery slope towards government-backed contracts not being worth the paper they are written on.

Jan Carr, former chief executive, Ontario Power Authority

 

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