Cancelled gas plant cost $275 million, Ontario auditor general says

Jim McCarter says the province will save $76 million by not buying the cancelled plant's electricity.

TORONTO – The decision by Ontario’s Liberal government to scrap a partially-built gas plant in Mississauga, just days before the 2011 election, will cost at least $275 million, $85 million more than estimated, according to Auditor General Jim McCarter.

McCarter’s special investigation found the costs of cancelling the 280-megawatt generating station and relocating it to the Sarnia area were about $351 million, but said the province will save about $76 million by not having to buy the cancelled plant’s electricity.

The auditor says the decision to cancel the plant in mid-construction hurt the province’s ability to negotiate a good deal with Eastern Power, the developer of the project, and pushed costs.

“The circumstances surrounding the cancellation decision weakened the Ontario Power Authority’s negotiation position,” said McCarter. “We found that the OPA was under significant pressure to get the construction of the plant stopped as quickly as possible, and this likely resulted in the final cancellation costs being higher than they would otherwise have been.”

In fact, construction continued for weeks after the Liberals announced the plant was being cancelled, and McCarter said every day crews kept working “put the government in a more untenable position.”

The Ontario Power Authority, negotiating on the province’s behalf, will allow Eastern Power to use about $100 million worth of equipment the agency purchased for Mississauga at the new plant in Lambton, but negotiated an electricity price reduction worth only about $20 million.

“On balance, the OPA believes that a commercially reasonable deal was negotiated,” the agency said in its response to the auditor.

Some of the cancellation costs included:

  • $149.6 million paid by the OPA to the lender that was financing construction of the plant, with $90 million of that related to fees and interest that resulted from the cancellation.
  • $72.4 million in compensation to Eastern Power, for costs mostly associated with the cancellation.
  • $64.6 million paid by the OPA to the builder’s suppliers.
  • an estimated $60 million in additional future costs to deliver electricity from the Sarnia area rather than from Mississauga.

The Progressive Conservatives and New Democrats called the decision to scrap the Mississauga gas plant “an expensive Liberal seat saver program,” although the government has said all three parties had agreed to relocate the project.

However, the NDP say they maintained all along they would not have ripped up contracts if it was going to cost taxpayers too much money.

The auditor general has also been asked to investigate the Liberals’ decision to cancel another gas plant in neighbouring Oakville in 2010, which the government says will cost taxpayers about $40 million.

The opposition parties estimate the actual cost will be in the hundreds of millions of dollars, but the auditor’s report on Oakville isn’t expected until the summer.

Premier Kathleen Wynne has already admitted it was a political decision to cancel the gas plants, but said she wasn’t in the room when the Mississauga project was halted.

Wynne has repeatedly offered to appear at the justice committee hearings into the cancelled gas plants and testify under oath, and said she’s doing her best to make sure the opposition parties get all the answers they’re looking for.

©The Canadian Press