Spleens are being vented. Blood is being let. And for a few days, or weeks, or even months, Ontario Power Generation will continue to be battered for the dumbfounding business practices chronicled by the province’s Auditor-General.
If there is a sense of déja vu, it is not just because of some other recent controversy over how Ontario spends money to generate power. It is also because the cultural problems at the province’s largest hydro utility go back decades, to its time as the biggest chunk of the old Ontario Hydro – and somehow, for all the fleeting efforts to tackle them, they keep rearing their ugly heads.
This time, though, something really has to change, beyond a few executives getting turfed and some symbolic efforts being made to rein in costs. Because if it does not, OPG runs the risk of going beyond an embarrassment to its political masters and becoming a ticking time bomb.
Even as it is pilloried for everything from an absurdly employee-friendly pension plan to exceedingly generous performance bonuses to a recent swelling of its executive ranks, OPG is before the price-regulating Ontario Energy Board seeking a 30 per cent increase in rates for the nuclear power it generates. In light of Tuesday’s revelations, many within the energy sector are speculating that it will get slapped down – if not quite as spectacularly as the last time it asked for an increase, when the OEB actually reduced its rates, then with a much lower boost than it wants.
That decision would no doubt be welcomed by ratepayers, who already feel overburdened, and would probably be justified based on how OPG responded to the previous ruling, less than three years ago. It defies explanation that since then, while it belatedly began to shrink its unionized work force in response to lower demand for its energy, the utility significantly grew its number of executives and senior managers. Equally confounding is that it apparently continued to hand out large performance bonuses to the majority of its executive and managerial class.
To assume that bad news for OPG in its rate bid would be wholly good news for everyone else, though, requires some faith that it is capable of making major structural reforms that would allow it to make do with less. And even with a recognition that it needs to happen, it will not be easy.
It is one thing to recognize that a pension scheme in which the employer-employee contribution ratio is as high as 5:1 is indefensible; it is another to promptly undo an arrangement that dates back to those Ontario Hydro days. And while OPG managed to reduce its total number of employees to 11,100 in 2012 from about 12,800 in 2008, mostly through attrition, it can move only so quickly on that front without racking up huge severance costs – not to mention a lot of union anger toward a government that may not want it.
If it does not move aggressively on those and other fronts, the $367-million in profit that OPG generated last year – remaining a modest revenue source for the deficit-plagued province – could start to look like the good old days. A public company with a bigger work force than it needs for the amount of power it produces, compensation out of whack with the rest of the broader public service, and what is reported to be one of the biggest pension-fund deficits in the country could ultimately become a significant liability.
With that in mind, the privatization option tentatively favoured by the opposition Progressive Conservatives may quickly begin to gain some traction, even if a botched effort along those lines when they were last in power demonstrated that the option comes with its own risks.
Premier Kathleen Wynne is enormously unlikely to go that route, even if her government’s lack of oversight – and that of the asleep-at-the-switch board of directors it appointed – has helped make the case. So she is left to promise and to hope that this time will be different, if it is not too late already.