Lawrence Solomon: If voters want to rip up Ontario’s outrageous renewable energy contracts, the courts won’t stop them

(October 6, 2016) The implication that cancelling odious solar and wind contracts would scare off investors defies history and lacks credibility.

A TransCanada solar array reflects some fall colour at a solar farm on the outskirts of Brockville, Ontario, Oct. 4, 2016. Darcy Cheek/Postmedia Network.

A TransCanada solar array reflects some fall colour at a solar farm on the outskirts of Brockville, Ontario, Oct. 4, 2016. Darcy Cheek/Postmedia Network.

This article, by Lawrence Solomon, first appeared in the National Post

Those who don’t know history are doomed to repeat it. Those who misunderstand the law are doomed to make ill-informed investments. Two prestigious law firms — misunderstanding history and the law — could benefit from a lesson in both.

“Once a contract has been entered into in a country where the rule of law is respected, it’s expensive to break it,” wrote Ron Clark, an energy lawyer at Aird & Berlis, on this page yesterday. He was disputing my recent column — one of several I’ve written in the last few years — arguing that the Ontario government should rip up the outrageous agreements it entered into with firms in the renewable energy industry. If Ontario did rip up these contracts, Clark suggested, it risked being shunned by investors, just as investors shun the likes of Russia, China and Venezuela. The previous day, Osler, Hoskin & Harcourt’s Jacob Sadikman asserted in a letter to FP Comment that “developers’ rights when participating in government procurement programs are often limited until the contract is executed, at which point their rights are enshrined in the contract.”

What Sadikman didn’t write was that this is true as long as the government doesn’t decide to rip up the contract to appease an angry electorate and save its own skin. Had he added that, he would have been less likely to inadvertently mislead the lay reader. Sadikman and Clark, both lawyers at major firms, surely are aware that the Supreme Court of Canada has stated that “the legislature may have the extraordinary power of passing a law to specifically deny compensation to an aggrieved individual with whom it has broken an agreement.” As Patrick J. Monahan, author of Constitutional Law and former Dean of Osgoode Hall Law School wrote after the federal government ripped up the scandalous Pearson Airport contract in 1994,“no legal commentators have ever expressed any doubts about Parliament’s unlimited authority to deny compensation for breaches of contract.” (Monahan, now Ontario’s deputy attorney general, did go on to become his own exception, as he did eventually express personal doubts.)

The law does not support Sadikman’s bald assertion that rights enshrined in contracts are unlimited. Neither does history. Especially in Ontario. Especially in the power sector, which has for more than a century been highly politicized. The great developers who built power plants, transmission lines and public transit systems at the turn of the last century on the basis of what they thought were iron-clad contracts learned this only when the government nullified those contracts.

The developers had more than contracts as assurance; they even had legislation specifically designed to enforce their contractual rights. That legislation proved as worthless as the contracts did, when a new government amended the legislation in response to public outrage over monopoly pricing. The privately owned Electrical Development Company — a massive enterprise created to bring power from Niagara Falls to Toronto — was soon eviscerated. The related Toronto Power Company would also be eviscerated, without even having its day in court; to cut off any argument it might want to make, the province passed a law denying it legal redress. “If the Legislature says, it is your duty not to try such and such an action, it is my duty not to try it,” Justice W. R. Riddell explained at the time. “I am here to carry out the laws.”

The Ontario government nullified its agreements over the objections of the developers’ foreign financiers, who warned that the government’s “confiscation” of their rights would make a shambles of the province’s credit rating. Ontario’s credit rating, in the end, was unaffected. The government argued, persuasively, that it had not acted arbitrarily; it was only effecting the will of the people, as unambiguously shown by election results. The foreign financiers accepted this explanation — it was, after all, accurate — and continued their lending, helping to make Ontario an economic powerhouse. In the 1930s, another provincial power scandal involving other cancelled contracts also led to a lenders’ revolt, but it too was fleeting.

The implication that cancelling power contracts would lead investors to view Ontario as another Venezuela defies history and lacks credibility. Ontario would be acting within its moral as well as legal authority in cancelling clearly odious contracts between naïve politicians (there is no other charitable way to describe the actions of recent Ontario premiers) and opportunistic developers selling power at several times the market price. Moreover, the cancellation would be protecting the many scrupulous investors in other sectors of the provincial economy who strengthen, not weaken, Ontario industry. The only future investors who would and should view their capital as at risk would be those embarking on equally odious development schemes. The notion that investors would single out Ontario for punishment is all the more far-fetched given that power contracts are being ripped up throughout Europe as the public there, too, awakens to the harm done by their own naïve politicians.

In a democracy, the people are sovereign. Contracts are inviolate only when the public, through the legislature, agrees. This applies also to the United States, which unlike Canada has enshrined property rights in its constitution. “Unless you can so conduct your business as to get the good will of the community in which you are working, you might as well shut up shop and move away,” explained Samuel Insull, the great Chicago industrialist who pioneered America’s power industry. This is advice all developers must weigh before investing in odious projects. This is the ultimate rule of law.

Lawrence Solomon is executive director of Energy Probe. Email: LawrenceSolomon@nextcity.com.

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8 Responses to Lawrence Solomon: If voters want to rip up Ontario’s outrageous renewable energy contracts, the courts won’t stop them

  1. Cheryl Gallant says:

    By Cheryl Gallant, MP October 2016

    Energy Poverty Means Pre-Paying

    This should be no surprise to who are familiar with the close political party relationship between Ottawa and Toronto.

    Federal Agency Measurement Canada is preparing to finalize approval for “pre-pay” hydro meters. This was only a matter of time since the province installed so-called “smart meters” in people’s homes.

    The announcement by the Federal Government that the designation of “provisional” specification to a “full” specification follows a public mandate letter recently sent by the Toronto Liberal leader to her Minister of Finance bragging about the Ontario Electricity Support Program (OESP) being part of the federal budget.

    What I predicted before the last election is now happening. I predicted that all Canadian taxpayers would end up with part of the bill for Ontario Liberals’ policy disasters. It was predictable because the same policy advisers in Queen’s Park, who wrote the “Greed” Energy Act and fled Toronto, are now hiding in Ottawa as the most senior advisers of the federal Liberal Party. The cozy relationship between the Prime Minister and the Ontario premier is bad for all taxpayers, just as I warned Canadians before the last election.

    Implied Consent

    Pre-payment meters were given provisional approval before the liberal “Greed” Energy and Employment Act had raised electricity prices. Hydro One had not been sold, nor had the “smart meter” electricity scandal cost electricity consumers over a billion dollars. On the basis of no comments or requests from the public or industry back then, the federal government has assumed “implied consent,” which in their way of thinking gives approval to move full speed ahead.

    To picture a pre-payment electricity meter, just think of a parking meter that you load with money in order to park a vehicle. These are popular in third-world countries, particularly where poor people have no access to credit. They enable the power utilities to deny access to a basic necessity without actually having to pull the plug if customers have trouble with bills. It forces the poor household to self-disconnect.

    Energy poverty, defined as households that spend more than 10 percent of their income on home energy, affects about one million households in Canada. In Ontario, the lowest income group spends on average 12 or more percent of their income on utilities, while the average Ontarian spends only 4 per cent.

    Energy poverty is prevalent among certain types of households, including those with single residents, seniors, children or young adults, renters, and those with a female primary bill-payer. Low-income families and individuals are being forced to choose between heating their homes, buying groceries or paying the rent as the result of increasing utility prices. For many, it is literally a choice between eating and heating.

    The vast majority of Canada’s seniors (as well as low-income families) live in older houses, with inadequate insulation in attics, walls and basements. For young families just starting out, while these houses may offer cheaper than-average rent or require lower down payments than more efficient homes, their upkeep is costlier, particularly when forced to use electric heat in Ontario.

    Climate change policies raise energy costs. As a rule of thumb, the more the increase in fuel poverty, the greater the rhetoric about “climate change”. Canada had been following a smart policy to lower emissions. With the change in Ottawa and no one to moderate the extremists in Toronto, energy poverty is the new norm.

    Canadians still have an opportunity to withhold their “implied consent” to poverty meters. While the federal government has set a January 1st 2017 implementation date for its new policy, you are invited to provide me your thoughts on pre-payment electricity meters. Remember, ‘no comment’ is considered by this government to be a “yes.” The federal government deadline for submissions is October 30, 2016.

    • Stu Blakeney says:

      Cheryl, Good work on this but much more neefs to be done to get this into the public realm. I think I am well tuned in but this is the first I have heard of perpaid metering. This is a serious, dangerous and potentially deadly plan! Are you & others talking/working w/ the media on this? The time is ripe to get media involved. There’s a growing media swell. Pls take steps with fellow MPs & Ontario PC MPP’s to get word out to the media… pretty sure CFRA’s Bill Carroll & Rob Snow would be interested… similarly CTV’s Evan Solomon & Rebel’s Brian Lily… lots of others beyond those too.

      I for one do not grant my consent to this plan, implied, or otherwise.

    • Wow, that’s the first I’ve heard of this as well. This info needs to go viral! Most people don’t have a clue this is going on, how do we stop it? I give a big fat NO!

  2. Pingback: YFile » Cleveland Indians: Indigenous mascots are nothing to cheer about

  3. Andrew Roman says:

    There is no valid reason to pay for any essential service prior to consuming it. The only people who would do this are ones given no other choice. The utilities giving them no other choice should be prohibited from doing this, because they continue to earn a generous rate of return for their shareholders, which, in Ontario, are mostly municipalities.

  4. Brenda says:

    37 Billion dollars we were ripped off for. Those so called smart meters were not suppose to cost us a damn cent. But we got the bill for that too. Now you want us to pre pay for a service that is NEEDED by people. GFY. Take it off the 37 Billion dollars you owe us. We want the interest paid to us on that 37 billion dollars. Your money problems are not our problem. Your broken services and worn out equipment is not our problem. You could have use the 50 million dollars that you wasted in the Hamilton area (for hydro lines that went NO WHERE) a 50 million dollar useless project and it costs us 50 million just for the interest payment on it. You must be a bunch of BOZO’s. I actually think BOZO the clown had more brains. Who just finished paying of “YOUR DEBT RETIREMENT CHARGES” WE DID! IT WASN’T OUR DEBT IT WAS YOUR DEBT. I FOR ONE AM TIRED OF BAILING OUT A COMPANY THAT NOT ONLY SCREWS THEIR CUSTOMERS, BUT HAS NO CLUE HOW TO MANAGE THEIR MONEY. MAYBE YOU SHOULD GET RID OF SOME OF THOSE WHO SIT AROUND IN THEIR PIGGY SUITS DOING NOTHING BUT SENDING ONTARIANS INTO POVERTY BECAUSE THEY EACH WANT HUNDREDS OF THOUSANDS OF DOLLARS FOR PAY AND SOME INTO THE MILLIONS. MAYBE YOU SHOULD START FUNDRAISING FOR THE THINGS YOU NEED. IT IS TIME TO SINK OR LEARN HOW TO SWIM. I WILL NOT BE APART OF YOUR PREPAYMENT PLAN.

  5. Brenda says:

    p.s. if you want me to prepay I will take 10% interest per day on the money that I have prepaid. AND NOTHING LESS. I ALSO WANT RENTAL FEES FOR HAVING YOUR METER ON THE SIDE OF MY HOUSE. IT IS AN AREA OF THE HOUSE I AM NOT ABLE TO USE. IF YOU COME ON MY PROPERTY WITHOUT 24 HOURS WRITTEN NOTICE I WILL HAVE YOU CHARGED WITH TRESSPASSING. OH AND THOSE TREES IN FRONT OF MY HOUSE THEY ARE NOT ON MY PROPERTY. THEY ARE AT LEAST OVER 60′ HIGH SO I HOPE WITH THE BAD WINTER COMING THEY WON’T LAND ON MY HOUSE. I WOULD HAVE TO SUE YOU FOR DAMAGES.

  6. Lets hope there is a refund for all……

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