Gas, New Projects

Decision to relocate Canadian natural gas-fired power plant will cost taxpayers $275mn

A decision to stop construction on a natural gas-fired plant in Mississauga, Ontario and relocate it to the Sarnia area will likely cost taxpayers in the province around $275 million, according to a report from Ontario Auditor General Jim McCarter.

The government had contracted with Greenfield South Power Corp. for the 280 MW power plant in 2005, although various delays resulted in construction beginning in June 2011. Shortly after the Oct. 6, 2011 general election, the Liberal Party announced it was canceling the construction of the plant, according to a release from McCarter’s office.

At the time, the party said the costs would be around $190 million once the cost of a litigation settlement was included, according to CBC Toronto.

The special report released Monday, however, said the total costs of the decision are about $351 million, but that cost is offset by an estimated savings of about $76 million, most of which is a result of the province not having to pay for the cancelled plant’s electricity. Additional savings resulted from the price for electricity from the Sarnia-area plant being slightly lower than the electricity price contracted for the Mississauga plant.

McCarter stated in a release the circumstances of the cancellation decision weakened the Ontario Power Authority’s negotiating position, and the pressure to get the construction of the plant stopped as quickly as possible likely resulted in cancellation costs being higher than they would have been otherwise.

Costs for canceling construction and relocating the plant included: $149.6 million paid by the OPA to the lender financing construction of the project, with $90 million of that related to fees and interests resulting from the cancelation of the plant; $72.4 million in compensation to Eastern Power, the builder’s parent company, for costs mostly associated with the plant cancelation; $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; and $4.4 million in legal and other professional fees.

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