Regulator orders Hydro One to cut its administrative budget

TORONTO — Ontario’s electricity customers shouldn’t foot the bill for “unreasonably high” compensation for Hydro One’s senior staff, the province’s energy regulator said as it ordered the company to cut its administrative budget by $30 million over two years.

In a recent ruling, the Ontario Energy Board rejected a Hydro One request to increase its administrative costs and spend more on capital projects.

The OEB decision comes as part of a review of a 2016 rate hike request from Hydro One which, if approved, would see rates jump by 0.5 per cent in 2017 and 4.8 per cent in 2018. The regulator will set the rates later this fall.

Hydro One said in a statement that it will review the OEB orders and “determine appropriate next steps.”

Natalie Poole-Moffatt, the company’s vice-president of corporate affairs, defended the utility’s management team.

“Hydro One recruited a leadership team with the necessary experience to deliver on the promises we made to our customers: improve customer service and increase productivity while maintaining reliability,” she said in a statement.

In 2015, the government announced it would sell 60 per cent of Hydro One to raise billions it would put toward infrastructure projects.

In the decision, the OEB said hydro customers gain little from the jump in executive salaries that were largely generated by the IPO.

The total corporate management costs for Hydro One in 2014 of about $5.5 million are set to increase to $22.1 million in 2018, the regulator said.

“The OEB shares the concerns of ... (those) who question whether Hydro One has adequately demonstrated that the significant increases in compensation costs associated with the parent company’s transformation will produce outcomes that utility customers value,” the OEB decision said.

It also expressed concern that Hydro One has stopped making progress toward bringing executive compensation levels down to the market median and those efforts have “now reversed.” The regulator also said the company’s total compensation amounts are likely understated because not all items of Hydro One compensation were included in its rate hike request.

“After considering all of the evidence related to the amounts for compensation that Hydro One seeks to recover from transmission services ratepayers, the OEB finds that compensation amounts in the total (administrative budget) for 2017 and 2018 of $412.7 million and $409.3 million are unreasonably high by an amount of approximately $15 million in each year,” the decision said.

The OEB also rejected a proposal to give all of the tax savings generated by the 2015 IPO of the partially privatized company to shareholders. The regulator instead mandated shareholders receive 71 per cent of the savings while ratepayers receive the remaining 29 per cent.