ENMAX Corp.,the city-owned electricity utility of Calgary, Alberta, said it will abandon a secondpower purchase agreement, or PPA, with the provincial government, raising its totalimpairment from dumping the contracts to C$195.4 million.
The company will return the agreement to purchase the outputof units at the TransAlta Corp.-ownedKeephills coal-firedpower plant and take a C$51 million charge representing the remaining book valueof the contract, according to a May 6 statement. The company took a C$144.5 millionwrite-down on its Battle River PPA late last year.
In both cases, the company cited a clause in the agreements thatallows them to be returned to the Balancing Pool, a provincial entity that administersPPAs, in the event that they become unprofitable due to changes in government policy.Alberta's year-old New Democratic Party last year boosted the so-called carbon taxit collects under the Specified Gas Emitters Regulation.
"This provision was approved by the Alberta Energy and UtilitiesBoard in advance of the PPA auction and has existed since the PPAs were establishedin 2000," ENMAX said in its statement. "With respect to the KeephillsPPA, the change in the costs under the Specified Gas Emitters Regulation made thisPPA 'more unprofitable' than it already was so the right to terminate was triggered.With this decision by ENMAX, the Balancing Pool will have dispatch control overall coal-fired PPA generation in the province."
Alberta Premier Rachel Notley has said the province will the return of PPAs to theBalancing Pool because her government merely raised the carbon tax and did not originateit. The contracts were sold more than 15 years ago as part of a provincial governmentscheme to deregulate its wholesale power generation sector. All of the PPAs wereattached to coal-fired generation units, which Notley's government plans to shutterby 2030. Former PJM Interconnection LLC head Terry Boston is negotiating with plantowners over compensation for the shutdowns.
ENMAX said it is supportive of the government's plan for theearly shuttering of the coal-fired plants. The company started production from the873-MW natural gas-fired ShepardEnergy Centre in Calgary with partner Capital Power Corp. in March 2015. It also owns three natural-gasfired generators in areas around the city and has plans to build a fourth.
Capital Power, TransCanadaCorp. and AltaGas Ltd.have all returned PPAs to the Balancing Pool since the changes to the tax regimewere announced.