Canadian Manufacturing

Former Ontario cabinet secretary: ‘sunk costs’ part of gas plants tab

by The Canadian Press   

Canadian Manufacturing
Operations Energy Oil & Gas cancelled gas plants Mississauga Oakville sunk costs

Including $210 million for turbines for the Oakville facility

TORONTO—The former secretary of the Ontario cabinet says the Liberal government knew so-called “sunk costs” were just one area that would add to the bills for cancelled gas plants in Oakville and Mississauga.

An auditor general’s report released Monday on the cancelled gas plant in Mississauga shows the Liberals low-balled the $275 million cost of scrapping that project by $85 million.

Shelly Jamieson, once the head of the public service, testified today that “there were buckets of costs” for cancelling gas plants, and that sunk costs—costs already incurred that cannot be recovered—was just one category.

Jamieson said everyone knew trying to reach deals with the developers of the two cancelled projects had the potential to cost a lot of money.


The Liberals have always maintained it cost $40 million to cancel the planned gas plant in Oakville in 2010, but admitted the province also paid $210 million for turbines for the plant.

Ontario will also need to spend another $200 million on transmission lines, but the Liberals say they would have been needed anyway.

On Tuesday the opposition parties demanded Ontario Premier Kathleen Wynne needs to stop hiding the truth and tell people how much it will cost for the Liberal government’s decision to scrap a planned power plant in Oakville.

“The auditor told us that he will be using the same criteria in telling us how much your Oakville cancellation really costs,” Progressive Conservative energy critic Vic Fedeli said during question period.

“You’re sticking to $40 million, but the OPA (Ontario Power Authority) shows that those same extra costs the auditor will look at using, will bring this to $991 million.”

The New Democrats said the Liberals should never have turned to the private sector to build electricity projects in the first place, and called on the government to update the $40 million figure for the cancelled Oakville gas plant.

“This government signed private power deals, defended those deals and insisted that they were absolutely necessary, (but) when it looked like it would cost them political power, they cancelled the deals,” said NDP Leader Andrea Horwath.

“And not only did they stick the public with the bills, they’ve gone out of their way to hide the details and the real costs.”

Premier Kathleen Wynne and Energy Minister Bob Chiarelli refused repeated opposition demands to apologize for the soaring costs of cancelling the Mississauga gas plant, and also declined to update the $40 million figure for the Oakville project.

“It was a political decision that in the implementation had business costs associated with it,” Wynne told the legislature.

“The reality is every member in this house, all parties, agreed that these gas plants should be relocated, and there was a cost associated with those relocations.”

Outside the legislature, Chiarelli admitted the deal with the developer of the Oakville power plant also includes items that will add hundreds of millions of dollars to the total bill. However, the minister said he wasn’t prepared to offer any new figures until the auditor releases a separate report on that project, expected in August.

“The memorandum of agreement specified $40 million, (but) it also specified items such as price for power and the cost of the turbines,” said Chiarelli.

“That is the information that we have, and we will let the auditor general do his work as he did on the other facility and wait for his report.”

The opposition parties called the decisions to cancel the gas plants “an expensive Liberal seat saver program,” and even though the Liberals were re-elected in 2011, they were reduced to a minority government.

Copyright © The Canadian Press


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