The Ontario power plant scandal (also called the gas plants scandal) relates to the decisions by the Liberal government to cancel the construction of two natural gas power plants: one in Mississauga and another in Oakville. Members of the Progressive Conservative Party of Ontario (PC) as well as the Ontario New Democratic Party (NDP) also voted to cancel the power plant. The Mississauga cancellation was made as a late campaign promise in the 2011 general election. From immediately following the election until March 18, 2013, the Liberal government stated that the cost of the cancellations was $230 million — $190 million for the Mississauga plant and $40 million for the Oakville plant. A final report by the Auditor General of Ontario that was released on October 8, 2013, found the total cost of the cancellations was $950 million ($275 million for the Mississauga plant and $675 million for the Oakville plant). This cost included estimates of future costs to the ratepayers.
The scandal contributed to the resignation of Premier Dalton McGuinty and Energy Minister Chris Bentley.
Tendering and bidders In April 2005, the McGuinty Government closed the coal-fired Lakeview Generating Station in the Greater Toronto Area (GTA). This closure created a need to establish new power plants to support the electricity needs of the GTA.
In 2007, the Ontario Power Authority's (OPA) Integrated Power System Plan report recommended new natural gas-fired electric power generation plants (gas plants) be constructed. In August 2008, the Minister of Energy and Infrastructure directed the OPA to competitively procure a combined-cycle gas generation facility in the southwest Greater Toronto Areas with a capacity of up to 850 megawatts (MWs). These plants were to be in operation no later than December 31, 2013. Under this procurement, the contractors would continue to own and operate the asset, not just build it as had been typical in the past.
In the May 2009 information to bidders, the OPA stated that the constructors' proposals would need to consider municipal requirements for their proposed sites that were in effect on January 16, 2009. The constructors were responsible for obtaining local permits, not the government. In September 2009, the OPA announced it had accepted a bid by TransCanada Energy (TCE) to build a 900-megawatt natural gas-fired power generation facility in southeast Oakville.
Local opposition On December 11, 2009, the fast-growing Citizens for Clean Air coalition in Oakville stepped up opposition to the project with the campaign slogan: 'It just doesn't make sense.' By June 2010, TCE had missed the contract's milestone dates for obtaining pre-construction approvals and permits from the Town of Oakville.
On October 1, 2010, local opponents rallied at the Ontario legislature and brought in American environmentalist Erin Brockovich to help generate publicity for their fight with the government. Liberal MPP for Oakville Kevin Flynn battled his own government's plan for the gas plant. On October 7, 2010, Liberal energy minister Brad Duguid announced the cancellation of the Oakville gas plant. Ceding to increasing opposition, Duguid proposed to feed the GTA's power demand by improving transmission lines.
In the 2011 Provincial election, the Mississauga candidates of all three parties openly expressed opposition to the Mississauga power plant in pre-election debates. NDP candidate Anju Sikka wrote in an open letter to Dalton McGuinty "An NDP government would never allow construction to begin before a thorough and independent Environmental Assessment has been completed", and PC candidate Geoff Janoscik stated in a press release "A Tim Hudak Government will cancel this plant".
Oakville cancellation On October 9, 2009, the OPA and TCE signed a contract for the Oakville plant. Amid local protest and opposition from the Town of Oakville, in June 2010 TCE missed the milestone date under the contract for obtaining all pre-construction approvals and permits for the Oakville plant from the Town of Oakville.
On October 7, 2010, the Government announced the cancellation of the Oakville plant. The Ministry communique stated that TCE was entitled to reasonable damages and the anticipated financial value of the original contract. On the same day the Minister sent a letter to the OPA advising them of his directive. This commitment to make TCE "whole" became central to the massive cost escalation of the project. Minister Kathleen Wynne, later Premier, signed the Cabinet directive.
Mississauga cancellation On September 28, 2011, a week prior to a general election, the Ontario Liberal Party's campaign announced that if elected, the government would cancel the Mississauga gas plant. Editorials questioned the role politics should play in controlling electricity policy.
The election On October 6, 2011, the Liberals won the most seats in the new legislature but not a majority. The lack of a majority would allow opposition parties to use legislative committees to probe the gas plants scandal. On October 7, 2011, the Minister of Energy announced the Mississauga project had been canceled by the Cabinet.
Oakville negotiation The OPA directed to negotiate a settlement with TCE. However, the Premier's direction to guarantee the full financial value of the contract would greatly increase the cost of cancellation. The contract's force majeure clause allowed for the cancellation of the contract without costs if the project lagged by more than 24 months due to a failure to obtain municipal permits. TCE had already missed key dates and the Town of Oakville was threatening to fight the project to the Supreme Court of Canada if necessary. These delays might have allowed the government to exit the contract without penalty. Alternatively, another contract clause limited the government's liability to costs paid in the event that the government unilaterally terminated the contract. However, enforcement of the contract was not pursued.
Negotiations took place on the Premier's Office's terms—a commitment to make TCE "whole." An initial proposal was developed by TCE to build a replacement power plant in the Kitchener-Waterloo or Cambridge area. A memorandum of understanding on the project was signed. However, the MOU expired in June 2011 with no plan adopted.
On August 5, 2011, TCE and the government met to arbitrate the settlement. According to the Auditor-General's report "as with the Premier’s Office’s commitment to TCE the year before, the [arbitration] framework waived the clause in the Oakville plant contract that gave the OPA a defensible claim of not owing TCE lost profits (that is, the clause stating that only if the Government took discriminatory action through legislation or similar means would the OPA be liable for damages such as loss of profits, with the OPA’s cancellation of the plant not meeting the definition of discriminatory). In March 2012 OPA offered a $462 million settlement to TCE, which was rejected. In April 2012, under Cabinet direction, the OPA offered a settlement of $712 million, which was also rejected. Energy Minister Chris Bentley announced an agreement was reached on August 24, 2012, but still maintained the cost of the cancellation would be $40 million. On Oct 15, 2012, Premier Dalton McGuinty announced he would resign after the selection of a new leader by the Liberal Party. On the same day, he prorogued the legislature, shutting down the investigative committees.
Later in October 2012, Premier McGuinty rejected a media report citing research by energy consultant Tom Adams estimating the cancellation costs of the Mississauga and Oakville plants at $1.3 billion. Premier McGuinty continued to claim the cost of canceling the Oakville plant would be $40 million and the Mississauga plant cancellation would cost $190 million -- for a total of $230 million.
The Ontario Liberal party elected MPP Kathleen Wynne as its leader on January 26, 2013. On February 7, 2013, Premier McGuinty requested the Auditor-General review of the costs associated with the cancellation of the Oakville gas plant. Wynne became Premier on Feb 11, 2013.
On March 18, 2013, the Minister of Energy for the first time stated that the $40 million estimate of the cost of canceling the Oakville plant "could be wrong."
Final accounting of costs On October 8, 2013, the Auditor-General Bonnie Lysyk reported the cost to cancel the Oakville plant at $675 million. The Auditor-General noted that had the premier's office not become involved, the OPA may have been in a position to simply wait and then exercise an option to break the contract without penalty: "We believe that the settlement with TCE will not only keep TCE whole but may make it better than whole," Lysyk said. The report estimated the Premier's Office directive to make TCE "whole" increased the payout to TCE by $225 million over what was due under the terms of the contract.
A substantial portion of the net $675 million cost of canceling the Oakville plant and replacing it with the Napanee plant relates to the decision to locate the replacement plant farther from the location of power consumption in the GTA and farther from natural gas supplies. The Auditor General calculated increased gas supply costs and additional line transmission losses totaling of $609 million (included in the $675 million total), which are wholly or partially off-set by a savings of $275 million through a lower negotiated price for the Napanee plant.
Opposition contempt charge As the questions arose concerning the accuracy of the Liberals' claim that the two gas plant cancellations only cost $230 million, opposition members of the Legislative committee asked new Energy minister Chris Bentley to hand over all documents related to the gas plant cancellations.
On May 16, 2012, the Estimates Committee of the Ontario Legislature adopted a motion directing the former Minister of Energy, the Ministry of Energy, and the OPA to produce "all correspondence, in any form, electronic or otherwise, that occurred between September 1, 2010, and December 31, 2011, related to the cancellation of the Oakville power plant as well all correspondence, in any form, electronic or otherwise, that occurred between August 1, 2011, and December 31, 2011, related to the cancellation of the Mississauga power plant."
On May 30, 2012, the former Minister of Energy declined to disclose the records requested by the Estimates Committee, citing “the confidential, privileged and highly commercially sensitive nature of the issues.”
On July 13, 2012, 500 pages of emails, letters, and PowerPoint presentations were released to the Estimates Committee. Members of the opposition were not satisfied with the 500 pages of documents that were produced
On August 27, 2012, a member of the Estimates Committee sought a ruling from the Speaker on whether privilege had been breached by the failure of the former Minister to provide the documents ordered.
On September 12, 2012, Energy Minister Chris Bentley stated he would comply with the Speaker's order to provide gas plants documents but asked for six weeks more time so as to not jeopardize negotiations with TCE. However, an agreement had been made with TCE on August 24, 2012.
On September 13, 2012, the Speaker found in favor of members of the opposition that there was a prima facie case for contempt by the former Minister and, through the issuance of a Speaker's ruling, ordered the former Minister to comply with the Estimates Committee motion.
On September 21, 2012, Don Guy, the Manager of the Liberals' 2011 campaign, emailed the Premier's Office staffer Laura Miller and the brother of the Premier saying the Speaker needs to "change his mind" on his ruling. Miller emailed back to Guy stating Premier's Office staffer Dave Gene "is putting the member from Brant [ie: Levac] on notice we need better here."