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Could Ontario Premier Dalton McGuinty’s green-energy contracts be reversed?

Lawrence Solomon — Financial Post — December 2010

Obligations that are odious should not be honoured. So says the Doctrine of Odious Debts, a theory first postulated by Russian legal scholar Alexander Sack in 1927 that is now increasingly accepted by international bodies such as the United Nations and the International Monetary Fund, as well as by today’s legal scholars.

That doctrine, to date, has been applied chiefly in undemocratic settings, where tyrants callously rack up debts that a hostage citizenry is then expected to repay. It may soon be applied more broadly in democratic states where elected leaders fail in their fiduciary duties, wrongly saddling current taxpayers as well as their children with dubious obligations that do not benefit them, and that they didn’t request.

In the United States, governments at the state, county and municipal levels are beginning to roll back pension obligations that previous governments had negotiated with civil service unions, arguing that the pensions are unreasonably rich and unaffordable. These odious-debt-type cases between unions and successor governments are expected to ultimately be settled by the U.S. Supreme Court.

For Canada, let me offer as a test case my province of Ontario, where the government of Premier Dalton McGuinty has embarked on a spending spree in the name of creating green energy jobs. Under McGuinty’s plan, the province will replace its fleet of coal plants — among the cleanest, most reliable and most economical in the continent — with renewable power contracted from developers at windfall rates — as much as 20 times the cost of power from coal plants. Some of the contracts are flipped after signing — the contracts are so ridiculously generous that the same one can generate quick profits for multiple players.

None of the contracted-for power is needed, except to fuel the aspirations of McGuinty and his government — they boast often that Ontario will be the only jurisdiction in North America to entirely phase out coal plants. The green jobs that the government uses as its rationale are also ephemeral — studies elsewhere show that green energy developments not only fail to add to employment, they typically lead to the loss of more jobs than are created. More evidence of misguided policies: Rather than leading to modest electricity rate hikes, as the McGuinty government initially promised to wide skepticism, his green agenda is now fuelling double-digit annual rate hikes.

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