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The Hydro One Pleasant Transfer Stationis seen here in Brampton, Ontario Monday March 9, 2015.Tim Fraser/The Globe and Mail

Hydro One has reinstated full authority to its board of directors, following allegations that the Ontario government's move to strip the board of its power during the planned sale of the utility violated securities laws.

In a letter to the Ontario Securities Commission, Hydro One chairman David Denison told the stock market regulator the company's directors "will be subject to, and intend to fully comply with, their obligations" under the Securities Act as the province looks to sell shares of the company.

The fracas came after the Ontario government announced plans this spring to sell off 60 per cent of Hydro One in an initial public offering in the next four or five years.

In laying the groundwork for the deal, which could be worth $9-billion, the Ontario government removed "all rights, powers and duties" from the Hydro One board with respect to the privatization. Opponents said that left directors without any oversight over "whether, how, and when to proceed with the transaction" and "whether to take any steps in preparing the corporation for the transaction."

Lawyers for the Canadian Union of Public Employees (CUPE), which is against the privatization, said the deal would violate securities laws, since the board is required to sign off on key aspects of the share offering, including certifying the accuracy of the prospectus.

Joe Groia, whose firm represents the union, wrote to the OSC on July 15 calling the province's decision "abusive." He requested that the IPO not be allowed to proceed, saying the government was attempting to "improperly interfere" with the mandatory duties of the board.

In response, Mr. Denison told the OSC in a letter sent last week that the board's oversight had been reinstated through a July 22 declaration that returned authority to the directors. The move coincided with a new board being named on July 17, with Mr. Denison as chairman.

"To avoid any doubt on this point, the province has revoked entirely the prior shareholder declarations and resolutions restricting the powers of the board in connection with the initial public offering," Mr. Denison said in the letter, which was obtained by The Globe and Mail. "The board now has full power to make all decisions as it sees fit in connection with the transaction."

Opponents of the Hydro One privatization are trying to slow down the sale and have it subjected to more public scrutiny. The union believes the sale of Hydro One will bring a short-term windfall to the province but will hurt Ontario financially in the long run owing to lost revenue. CUPE argues that key stakeholders such as employees and consumers have not been given proper say in the decision.

Of the roughly $9-billion the privatization is expected to bring in, the Ontario government is looking to use $5-billion to pay down debt. The other $4-billion would be used to set up a fund for transportation infrastructure.

David Sischy, a securities lawyer at Groia & Co., told The Globe in mid-July that the request to reinstate the board's power was to prevent the province from tailoring the process to its liking without respect to the laws. "Really, it's to slow down the process and make sure it's done properly," Mr. Sischy said.

Mr. Denison, who previously served as chief executive officer of the Canada Pension Plan Investment Board, was picked to head Hydro One's board in April. He was renamed chairman on July 17 of a new 15-member board that is tasked with overseeing the company during the privatization process and after the transaction is complete.

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