Wynne to rein in Ontario Power after auditor’s tough report on spending

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The Ontario government is moving to arm itself with the power to directly set compensation at the province's electricity-generation utility, even as it comes under fire for intervening in the corporation's affairs.

In response to an order from Energy Minister Bob Chiarelli, the board of Ontario Power Generation fired the chief financial officer and two vice-presidents just hours after the provincial auditor released a report on Tuesday, revealing that the Crown corporation had hired more executives and paid them fat bonuses when it was supposed to be downsizing.

Now, Ms. Wynne says she is "deeply concerned about what seems to be the culture in that organization," and has pledged to table legislation early next year to give the government direct control over salaries, benefits and other perks at OPG.

Executives in the energy sector questioned why the three executives took the fall over compensation practices that are the responsibility of the government-appointed board of directors at OPG.

"It's very unusual for a shareholder to dip in and fire people two levels down from the chief executive," said Jan Carr, a former head of the Ontario Power Authority, the government's electricity-planning arm. If the government isn't happy with OPG, Dr. Carr said, "it should fire the board, not the executives."

Another energy executive who asked not to be named said he does not understand why the executives were shown the door. "The chief financial officer would not be a major player in determining pay raises," he said.

Mr. Chiarelli said he is satisfied that OPG's long-serving chairman, Jake Epp, and the rest of the board have taken strong action in response to the auditor's findings.

"I asked the board chair to bring a message back that we wanted the strongest possible response," Mr. Chiarelli told reporters on Wednesday. "The response was strong."

The response of Premier Kathleen Wynne's government to the problems at OPG is in sharp contrast to how her predecessor handled controversies at major Crown corporations. A decade ago, Dalton McGuinty's government went much further when it ousted the chairman and two top executives at OPG after massive cost overruns in the rebuilding of a nuclear power station. The entire board and the CEO of the Ontario Lottery and Gaming Corp. met a similar fate in 2009 amid a scandal over expenses.

Mr. Epp, chairman of OPG since 2004 and a former federal cabinet minister in the Mulroney government, did not respond to requests for an interview on Wednesday.

According to OPG's statement on executive compensation for 2012 filed with securities regulators, a four-member committee of the board is responsible for approving compensation and ensuring that there is a "strong link between pay and performance."

Two of the terminated individuals were among the five highest-paid executives at OPG, according to the filing. Donn Hanbidge, the former CFO, is entitled to severance of $1.46-million, equal to two years' pay, if he is terminated without cause, the filing says. John Murphy, former executive vice-president, strategic initiatives, did not have a termination clause in his employment contract.

Dwight Duncan, who cleaned house at both OPG and the OLG as a minister in the McGuinty government, said it is virtually impossible for the government to exercise proper oversight over these large entities. They should be operated by the private sector, he said, but remain publicly owned.

"Do you layer on another Band-Aid on a fundamentally broken model?" he said.

The Progressive Conservatives say the government is not going far enough, and must fire Mr. Epp, OPG chief executive officer Tom Mitchell and the Energy Minister.

In British Columbia, the government also demanded that B.C. Hydro rein in spending after it floated rate hikes of 26 per cent over two years.

With a report from Justine Hunter in Victoria