If I made a decision to waste $230 million, I’d go to jail (especially if the actual cost of the decision ended up being somewhere between ½ and 3/4 a billion)!
In order to win an election, a decision was to move two gas fired electric generating plants designed to provide power to the west side of the Greater Toronto Area elsewhere. Only 10% of the GTA power comes from the GTA (compared to New York City where they are working toward generating 80% of their electrical power within their boundaries).
What is bothersome is why we only question when and who knew what about details? Shouldn’t the actual decision be questioned? Shouldn’t the deal reached with the building parties be questioned?
A Mississauga (Charles Sousa’s, Liberal, riding) gas fired plant is being moved to Sarnia (Robert Bailey’s, PC, riding). The Government’s mid 2012 estimate to cancel was $190 million (I couldn’t easily find an original guesstimate of the cost to make this change but there may have been some misinformation that hinted that the cost could be as low as $10 million – an initial payment to the developer/builder to stop).
The Auditor General’s April 2013 estimate of cost to cancel is $275 million (351 costs – 76 possible savings).
“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 of the plant;
$72.4 million in compensation to Eastern Power, the builder’s parent company, for costs mostly associated with the plant 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; and
$4.4 million in legal and other professional fees.
Offsetting total costs of $351 million are estimated savings of $76 million. The lion’s share of these savings relate to the province not having to pay for the cancelled plant’s electricity, which the OPA indicated won’t be needed for at least the next few years. As well, some savings resulted from the price for electricity from the Sarnia-area plant being slightly lower than the electricity price contracted for the Mississauga plant.”
From Canada Newswire summary of Auditor General’s report
An Oakville plant, (Kevin Daniel Flynn’s, Liberal, riding) is being relocated to the Lennox Generating site near Bath (Randy Hillier’s, PC, riding). The original (2011) estimate to cancel and relocate was $40 million. However, recent estimates of cost to cancel are much higher:
$260 million (provincial source – March 2012)
$700 million (Bruce Sharp – Toronto Star 10th October 2012)
From very limited information, an estimate for each generating plant is probably in the one billion dollar range. Using the Mississauga data:
• the financiers will be paid approximately 15% of the total cost to build just to stop.
• the builders will be paid 7.5% of the total cost for work done, and
• suppliers will be paid 6% of the total cost for supplies in the pipe line.
I believe that the amounts proposed for the builders and suppliers are probably reasonable. But for the bankers to receive more than the value of the work done material ordered surely is excessive.
If you negotiated such an agreement, would you still be working? Again, our representatives are questioning who knew what and when. As before, why is the original decision not under much more scrutiny. We’ll have spent at least half the value of another power plant just to save a couple of seats in a government that in any case ended up being a minority.
Also, why is the cost paid to the developers also not questioned. Paying the financiers more than the builders seems to be exorbitant. Somehow bankers have become worth more than builders and our political and bureaucratic leaders are supportive.
We, our government, those who question them are in need of a change of perspective. We’ve become a society of data and paper pushers. We now value those who negotiate, argue over and support more than those who do more than those who design and build.