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Ontario’s government-owned power utility has come under renewed fire for its generous compensation practices.Tim Fraser/The Globe and Mail

Ontario's government-owned power utility has come under renewed fire for its generous compensation practices, with the province's regulator slashing $500-million from the Crown corporation's budget for nuclear operations over the next five years.

Ontario Power Generation (OPG) says it is still considering the Ontario Energy Board (OEB) decision, which came Friday and was described as the largest rate application ever submitted to the board. The ruling can be appealed to the province's divisional court. "We are reviewing the decision in detail," OPG spokesman Neal Kelly said Tuesday.

OPG, which provides 40 per cent of the province's power, still managed to score some major victories with its application. The regulator agreed with its plan to begin charging consumers in 2020 for the $12.8-billion refurbishment of reactors at the Darlington Nuclear Generating Station and to spend $292-million between 2017 and 2020 on technical assessments of its proposal to rebuild reactors at the aging Pickering plant.

However, the OEB's three-person panel ordered OPG to cut $500-million from the $16.8-billion five-year budget it submitted to cover its nuclear operations. It disallowed some proposed costs for compensation and forced OPG to absorb a portion of cost escalations for some nuclear work.

OPG had estimated that its proposed revenue plan would add 65 cents a month to the average homeowner's electricity bill.

Soaring electricity costs have been a major political headache in Ontario, and Premier Kathleen Wynne tried to ease the pressure last year by ordering a 25-per-cent reduction in hydro bills for homeowners.

The OEB decision will allow the utility to "smooth" the cost recovery for its reactor projects, adding more than $1-billion to the burden on future ratepayers.

OPG has faced continuing criticism for its generous compensation, which was slammed in a provincial auditor-general's report four years ago. After it was released, two vice-presidents and the chief financial officer were fired. A subsequent report by former pension executive Jim Leech warned that pensions at OPG and other provincial power companies were overly generous and could require higher electricity prices to meet the liabilities.

The Crown corporation "had made some positive steps towards controlling its overall compensation costs," the regulatory panel concluded in its ruling . But it added that the compensation as proposed by OPG was still too high by as much as $50-million a year.

Both the Auditor-General and Mr. Leech recommended that OPG pay $1 in pension contributions for every $1 paid by its employees – as is the norm for other provincial employees. OPG said its contribution rate was 3 to 1 in 2015 and was expected to fall to 2 to 1 last year. However, some critics said the company had left some significant payments out of its calculations and that the real rate was more like 4 to 1.

"The pension issue has been part of every OPG hearing" since it came under OEB jurisdiction, said Brady Yauch, executive director of the Consumer Policy Institute, which intervened in the rate application. "It's been viewed as wildly generous."

Mr. Yauch noted OPG also fared poorly in assessments of its project management in a key division and that the OEB demanded the company conduct an independent audit to determine whether it is getting full value for its contracts.

Major industrial customers said the OEB decision is an indication of business as usual in the power sector, where sharply higher prices have put competitive pressures on big electricity users. The OEB decision appeared to lock in plans for refurbishments of OPG's nuclear reactor fleet. The company "pretty much got everything it wanted" on the financing plan for the major nuclear projects, said Colin Anderson, president of the Association of Major Power Consumers in Ontario.

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