Tories warned of possible lawsuits if energy retrofits cancelled

OTTAWA - The Harper government was warned by its own experts that it could face up to $4.5 million worth of lawsuits for cancelling a popular energy-efficiency retrofit incentive program for homes established by the previous Liberal government, CanWest News Service has learned.

The decision to end the EnerGuide for Houses program compromised 66 contracts worth nearly $19 million with contractors who performed inspections to help homeowners figure out what renovations would be necessary to improve a home's energy efficiency. But newly released documents reveal bureaucrats had raised alarm bells about the government's decision to scrap the old program and repackage it under its new name, the ecoEnergy Retrofit Program.

One of the documents, a memorandum dated Aug. 3, 2006 and prepared for Natural Resources Minister Gary Lunn, warned the government to set aside new money to cover the cost of potential claims.

"Contractors are eligible to seek recourse for costs incurred or revenues lost as a result of termination for convenience," said the memorandum, obtained following an Access to Information request by Ottawa researcher Ken Rubin. "An internal evaluation of revenues lost by all contracts estimates the total potential claim at $4.5M."

The program was among billions of dollars worth of climate change spending initiatives introduced by the previous Liberal government, but scrapped and then re-launched under different names after the Conservative government was elected. Although Lunn had argued that homeowners were only getting fifty per cent of the EnerGuide for Houses program budget, several federal studies and independent reports concluded that it was a popular and effective program.

Government officials also warned that the decision would spark a public backlash.

"Canadians expecting incentives for efficient (heating) systems will be disappointed," said another document that explained the cuts in the 2006 federal budget. "We anticipate a negative response from low-income householders who expected relief from rising energy prices as well as the opportunity to improve their buildings. Provincial, territorial and utility partners who have already announced - or launched - their own complementary programs based on the federal effort will also object."

A more recent briefing note for Lunn from Jan. 29, 2007, established the overall wind-down cost for the EnerGuide for Houses program at $650,000, including penalties for cancelled contracts and changes to promotional material and websites. It also estimated an additional $435,000 in costs to launch the new program.

But Lunn said the additional spending allowed the government to make changes that will encourage more people to do renovations with an average grant of about $1,100 per household. Under the original program, he said homeowners could get subsidies for a contractor to perform an evaluation without following through with renovations to improve their energy efficiency.

"Whether you make changes or shut it down, you're still going to assume costs," said Lunn in an interview. "But the costs are very minimal compared to what the program is doing ... Ninety per cent (of funding) is going directly to home retrofits which is having a direct co-relation on the amount of emissions going into the atmosphere."

He said the only major problem with the new program is in rural areas that are facing shortages of contractors who can perform audits. While he was working with his department to resolve this problem, he said he was never worried about the possibility of lawsuits from contractors because of the decision to cancel the original program.

"It's just about putting the facts out," he said. "People just want the facts and people expect our government to deliver, if they want to see results. we're hearing that loud and clear on the environment."

But a non-profit group that represents some of the contractors says the government's changes have done more harm than good.

"It's just been a nightmare," said Clifford Maynes, executive director of Green Communities Canada. "It's been an unnecessary inefficiency in a system that was working perfectly well. If they wanted to eliminate federal audit subsidies and continue with the system, they could have done that without much of a hiccup."

He added that the legal warnings suggest the government should be ready to pay out more in compensation for tearing up the old contracts.

"The fact is, it's a formal recognition that what they did was damaging to people with whom they had an agreement," Maynes said. "We should not be required to seek redress through the courts and go up against the federal government. They should do the right thing and pay out that compensation directly."

Liberal environment critic David McGuinty said it was another example of the government ignoring advice from its officials, as it had last year when it introduced a tax credit for bus passes which was deemed to be an inefficient measure for reducing greenhouse gases and air pollution.

"They just keep getting caught," he said.

"As one of my children just said to me, 'You know Dad, if you live by the lie, you can die by the lie,' and increasingly the government has been misleading Canadians, they are suppressing information, suppressing the analysis. This is yet another example of it coming to light, and there will be more."