David Denison is chairman of the board of Hydro One Limited.
Hydro One owns and manages virtually all of the electricity-transmission facilities within the province of Ontario. It is also the largest provider of local electricity distribution in the province; our more than 1.3 million customers are families, businesses, schools, hospitals and other entities across the province. The management and board of directors of Hydro One understand the significant responsibility entrusted to us to deliver a critical service to the people of Ontario.
We are reminded of the importance of that responsibility by events such as last week’s wind and ice storm that temporarily left 500,000 of our customers without power. In those challenging circumstances, the management and employees of Hydro One quickly mobilized resources and rapidly restored service to our customers.
One of the top priorities of Hydro One’s board since it was formed over two years ago has been to recruit an experienced and talented management team who are capable of fulfilling these critical and complex responsibilities. In chief executive Mayo Schmidt and his senior colleagues, we have an eminently qualified team in place that has the full confidence of the board. In their relatively short tenure, this team has made significant tangible improvements to the operations of Hydro One, which include:
- Achieving over $114-million in cost savings which flow back to our customers;
- Fixing billing issues that had long plagued Hydro One and its customers by achieving a record 99.3-per-cent accuracy level;
- Becoming the first electricity provider in Ontario to not only suspend customer disconnections in winter months but to voluntarily reconnect customers so that no one would be without power during that period;
- Bringing our 400 call-centre employees in-house, in two locations across Ontario, and opening our phone lines to serve customers on Saturdays;
- And achieving the highest customer satisfaction levels in four years.
The board is responsible for setting compensation for our CEO and senior-management team. In doing so, we work with external compensation experts and compare practices of similar organizations. The board believes the compensation paid to Mr. Schmidt and other senior executives is appropriate for their roles in overseeing an enterprise with $25-billion of assets, annual revenues of almost $6-billion, and a strategy to expand our capabilities both within Ontario and outside this province, as evidenced by our pending acquisition of Avista Corporation in the United States. In 2017, more than 99.7 per cent of shareholders who voted registered support for Hydro One’s approach to executive compensation.
Like virtually every publicly traded company, the board of Hydro One has incorporated what is commonly known as a “change in control” provision that applies to management only within its compensation structure. The framework of our provision is similar to those of many other companies. However, over the course of several months in 2017, we revised our provision to incorporate the circumstances that would constitute a change to the ownership structure and governance arrangements that are specific to Hydro One. This provision would only be activated for management if there is a material change in the governance of Hydro One that is also accompanied by a change in direction or existing policies of the company that would effectively preclude management from achieving the strategic objectives that motivated them to join Hydro One. This change of control provision is clearly described in Hydro One’s 2018 Management Information Circular which is readily available to all interested parties.
Hydro One had previously capped the amount of executive compensation that is funded by our customers through the rate they pay at an amount equivalent to the level of compensation prior to our initial public offering of shares. Consequently, any additional compensation paid to Hydro One executives after it ceased to be a Crown corporation, including increases granted to Mr. Schmidt or other executives in 2017, have absolutely no impact on the rates our customers are charged. Likewise, should circumstances arise where change of control payments are triggered, those payments would also have absolutely no impact on customer bills.
Hydro One’s board and management have no intention of engaging further in the political fray of the current election cycle. We did, however, feel compelled to provide this commentary given various statements that have been made and published in the press. What we will do is continue to devote our energies and attention toward providing a reliable supply of power and ongoing improvements to Hydro One’s operations that benefit our customers and other stakeholders.