December 11, 2013 – Ontario Power Generation (OPG) says it has fired three senior executives after the province’s auditor general issued a damning report yesterday, slamming the government-owned company for its generous salaries and pensions.

In her 2013 annual report—based on a 10-year review of the company’s human resources policies—Bonnie Lysyk noted that 2/3s of OPG’s operating costs are related to human resources. “Not only has the size of its executive and senior management group grown disproportionately, but 67% of people in this group received high annual incentive awards in the period from 2010 to 2012”.

“While reducing its overall staff by 8.5%, OPG increased the size of its highly paid executive and senior management group by almost 60% since 2005, creating a top-heavy organization,” she continued. “Incentive awards for OPG’s non-unionized employees can be up to $1.3 million, depending on the employee’s performance score, job band and base salary.”

She concluded that OPG’s “generous compensation and benefits negatively impact electricity costs”.

“On behalf of my fellow directors, I can tell you the board of OPG is troubled by the findings,” said Jake Epp, chair of the OPG board, adding that OPG accepts the findings and commits to doing better for Ontario residents. “I have directed management to address all of the report’s findings and I remain confident in the ability of our president and CEO, Tom Mitchell, to resolve these issues.”

“In 2010 OPG initiated a business transformation aimed at meeting the expectations of ratepayers by being a low-cost generator. In some cases the report highlights areas which OPG has already addressed, or is currently addressing. In other areas it provides insights into issues the company will act upon and will report back openly and quickly,” said OPG.

As a result of the report, the OPG board says it is taking a number of actions, which include imposing a minimum 10% across-the-board cut in performance pay, as well as:

• Continuing to decrease the number of senior positions and freezing the hiring of executive replacements. New senior executives will receive less pay than their predecessors as per the current practice. In the past year, the number of senior managers has gone down by 6% and since 2010, there’s been a 9% drop in total base salary costs for management;
• Saving an estimated $1 billion over six years (2011-2016) by reducing the overall headcount, from ongoing operations, by 2330 or 20% of 2011 levels. The departure of 1500 people since January 2011 has already saved $275 million;
• Reducing operating costs by implementing pension and benefit reforms for management employees;
• Ensuring fair, well documented hiring practices by centralizing hiring and putting in place clear expectations and controls;
• Adopting the Ontario Public Service relocation policy for all management;
Dec. 10, 2013
• Controlling overtime costs by improving monitoring and strengthening approvals; and
• Lowering compensation costs by continuing the government-imposed performance pay cap and implementing controls to ensure clear, well- documented rationale for performance pay.

Epp added, “Although we have made progress, I am disappointed our culture has not moved far enough. We strongly believe that the report will serve as a catalyst for further positive changes at OPG that will allow us to serve Ontarians better.”