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Ontario Power Generation’s Toronto office. Nearly one in three managers at Ontario’s Crown-owned electrical power generating utility received pay hikes in 2012, despite a legislated wage freeze for the public sector.

FRED LUM/THE GLOBE AND MAIL

Nearly one in three managers at Ontario's Crown-owned electrical power generating utility received pay hikes in 2012, despite a legislated wage freeze for the public sector.

Ontario Power Generation exploited a loophole in the legislation to award increases to 220 supervisors, ensuring that their salaries were 3 per cent above their highest-paid unionized subordinates.

The legislation was aimed at addressing the province's deep fiscal challenges. The former McGuinty government announced in the 2012 budget that it was extending a two-year pay freeze unveiled in 2010 for all public-sector workers who do not bargain collectively.

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The government closed one loophole with the new legislation, known as Bill 55, by freezing both salaries and bonuses – many public-sector employers had flouted the spirit of the initial law by paying bonuses.

But Bill 55 opened new ones. The fine print exempts many employees – the two-year freeze on salaries and incentive pay applies only to those at the vice-president level and above.

OPG was not alone in using the exemptions. Hydro One paid salary increases to 49 managers in 2012, or 8 per cent of the Crown-owned electricity transmission utility's 600 managers, said spokesman Daffyd Roderick. At the Independent Electricity System Operator, 12 of 50 supervisors received increases averaging 1.7 per cent, said spokeswoman Alexandra Campbell.

But provincial Auditor-General Bonnie Lysyk singled out OPG for its culture of entitlement in her annual report last week, which led to the firing of the chief financial officer and two vice-presidents. Ms. Lysyk said OPG used exemptions to hand out lavish increases to many of its 729 management employees. Bonuses for the top 50 earners, for example, boosted their overall compensation by an average of 11 per cent in 2011. Many others were promoted to executive and senior management jobs in 2012. And the 220 supervisors received increases of 3 per cent to elevate their pay above the 680 unionized employees who earned more than their bosses.

Efforts to curb wages at the province's hydro utilities, hospitals, universities and other public-sector entities sparked a standoff between former premier Dalton McGuinty's government and public-sector workers.

"The government's firm expectation was that its partners in the broader public sector and those at the head of organizations would lead by example and that all organizations would be fiscally responsible," Jenna Mannone, a spokeswoman for Government Services Minister John Milloy said in an e-mail response to The Globe and Mail.

Kathleen Wynne, Mr. McGuinty's successor, has pledged to table legislation next year to give the government direct control over salaries and other benefits at OPG.

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The utility's government-appointed board of directors is responsible for approving compensation. Peggy Mulligan, head of the board's four-member compensation and human resources committee, said she was "phenomenally grateful" that the supervisors were exempt from Bill 55.

The vast majority of OPG's 11,100 employees belong to a union. The 3,400 engineers, scientists and other white-collar workers who are members of the Society of Energy Professionals are in line for wage increases averaging 1.43 per cent a year over three years.

Ms. Mulligan said OPG, which produces 60 per cent of the province's electricity, was having difficulty persuading Society members to move into management and take on more responsibility for less pay.

"It was our judgment that the 3 per cent was imperative to ensure that we had people willing to step into that front-line role," she said in an interview. "We needed to ensure that we could keep the management ranks populated."

However, Ms. Mulligan said, the supervisors did not receive pay increases for this year. She also acknowledged that directors were concerned about the optics of pay increases.

"We had a very robust discussion around the matter," she said, "and we did determine that as directors our duty is to the corporation and ensuring that we have great people running our facilities."

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