Hydro One Inc. is determined to maintain its capital budget as the provincial government looks for ways to cut costs and lower customer rates, company executives said Thursday.
In a conference call with analysts, Hydro One’s acting chief executive, Paul Dobson, said he expects the board to work with a new CEO to review the company’s spending but added the current plan is “defensible.”
He also said Hydro One expects to close its US$5.4-billion acquisition of Spokane, Wash.-based Avista Corp. before the end of the year, although three states in the Pacific Northwest still have to conclude regulatory reviews.
The company – which is 47-per-cent owned by the Ontario government – saw its previous board and former CEO Mayo Schmidt resign in July under pressure from Premier Doug Ford.
During last spring’s election campaign, Mr. Ford was highly critical of executive pay at Hydro One, including Mr. Schmidt’s $6-million package.
The new board, which was appointed in August, is now conducting an executive search to replace Mr. Schmidt and is reviewing executive compensation.
Hydro One will file with the Ontario Energy Board a request for a one-year, inflation-based rate increase, and then submit plans for 2020-22 capital spending once the new CEO and board have signed off on it, Mr. Dobson said.
He acknowledged the company is under pressure from the provincial government to find cost savings as the Ford government looks to make good on a campaign promise to cut electricity rates by 12 per cent. Mr. Dobson said all the various players in the electricity system are going to have to find cost savings that can contribute to the government’s target.
The company has projected capital investments totalling $8-billion over the next four years but must get regulatory approval to recover that spending from ratepayers. “The amounts put forward are the right amounts to keep reliability and safety balanced with customer rates,” Mr. Dobson said.
Acting chief financial officer Chris Lopez said the main driver of the capital plan is the need to replace and upgrade aging infrastructure in both the transmission and local distribution sides of the business.
Asked about the CEO search that is under way, Mr. Dobson said the board has struck a committee and is making progress, but he gave no timeline for a decision.
With regard to pay, Hydro One’s vice-president for human resources, Judy McKellar, said the board is aware the company will have to offer “market-competitive compensation” to attract the right candidate for the top job.
Despite the political upheaval of the summer, Hydro One reported solid results for the third quarter. It reported revenues of $1.6-billion, up 5.5 per cent from the corresponding period of 2017. Net income attributable to shareholders was $194-million, which was down from $217-million recorded in the third quarter of 2017, although last year’s figure was boosted by some one-time items.