AG Turns Lights on OPG’s Compensation

(An improved version of this review of the AG’s report on OPG is posted on the TVO The Agenda blog site here. The original posting is left here in case anyone has linked to it.)

Yesterday, the provincial Auditor General issued her annual report, including a chapter on OPG‘s wild no-limits compensation party. If Ontario is to restore a competitive cost of living and cost of doing business, we must redirect the power system generally to behave more responsibly.

The press release issued by the AG understates many of the substantive findings in the report itself. For example, the press release states, “Earnings and benefits were significantly more generous at OPG than for comparable positions in the Ontario Public Service.” In Figure 8 of the report, average compensation for particular positions at OPG are compared with the top compensation paid in the Ontario Public Service for equivalent positions. In the case of director level accounting positions, the top pay in the OPS is about $130k while at OPG the average pay in the equivalent position is about $230k.

The AG’s findings on OPG should lead to an investigation of the compensation arrangements at other Ontario Hydro successor agencies, including the OPA.

There is an eternal character to today’s AG story. The Ontario Energy Board expressed concern about excessive compensation at Ontario Hydro in the 1980s. In 2007, the Ontario government commissioned the “Agency Review Panel” to provide high level advice to the government on how to manage the sector. That panel found that “total operating, maintenance and administration (OM&A) expenses for the provincial agencies in the electricity sector increased by 4.3 per cent a year on average between 1998 and 2006.”

On CBC’s Here and Now last night, I attempted to make the point that the irresponsible compensation practices are endemic to Ontario’s electricity sector. The sector has cultivated an image that they are a special priesthood deserving of very special privileges. The average compensation for the five top municipal water utility executives in Ontario — very highly qualified people (no phoney CVs, like Toronto Hydro’s CEO) with extremely demanding positions providing an essential service — earn average annual compensation of about $189k with the highest paid person at about $229k.

One Comment

  1. I tweeted yesterday that this all made me recall my Hydro days, terms like “Double Bubble” (double time for OT) and hearing of nuclear operators playing “Hide and Seek for a Thousand a Week”. Of course, that’s now Two Thousand or more.

    I was hired by Ontario Hydro in 1987 straight out of engineering school. At the time, my understanding was that the origins of their professional (engineering, etc.), non-union pay scales were a desire to have salaries in the top quartile. My starting wage was a lot lower — about at the industry average of what I understand my classmates were getting. After two years I hit the minimum end of my first “MP” (management professional) pay scale. Including cost of living increases, my salary rose over 80% in two years. Thereafter it slowed but it still tended to rise faster than inflation due to moving up the pay scale.

    The MPs were organized into a quasi-union but not as strong as the actual union and so Hydro was able to keep MP pay scale increases slightly below the union increases. Still, there’s likely a strong residue from that upper quartile mindset, along with continuous increases, waste and other issues such as ridiculously-funded pensions.

    With total annual compensation at $ 1.7 billion and consider the above factors, it’s easy to envision potential savings of 15 % – 30 %, i.e. $ 255 – $ 510 million. If the total savings went directly to ratepayers, residential consumers would receive roughly 34%, resulting in a per-household annual bill savings of $ 22 – $ 44.

    Next consider Hydro One and its Ontario Hydro origins and it’s a virtual certainty that similar things are going on.

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