Oilweek Magazine
December 11, 2006

Ontario’s hydro companies will be kept on a tighter leash now that the province is on the hook for $3 million in severance for the chief executive of transmission giant Hydro One, Premier Dalton McGuinty said Monday.

The province will be keeping a close eye on the Hydro One board to ensure executive salaries and expenses are kept under control in the wake of a scathing report by Ontario’s auditor general, McGuinty said.

Former chief executive Tom Parkinson resigned last week after the auditor exposed $127 million in Hydro One corporate card charges that were approved without proper documentation, including $45,000 Parkinson charged to his secretary’s credit card.

"We will work more closely with the board to ensure that Mr. Parkinson’s successor sets the appropriate tone of accountability for Hydro One," McGuinty said, adding the utility must use taxpayer dollars carefully.

The governing Liberals will also be keeping close watch to ensure the next CEO’s salary is reasonable, McGuinty said.

"These are highly sophisticated organizations," McGuinty said of Hydro One and Ontario Power Generation. "They require exceptionally talented people to provide leadership. But at the same time, they are public organizations and we’ve got to be accountable ultimately to taxpayers."

Parkinson earned a $780,000 salary in 2005, plus $702,000 in bonus incentives and $130,000 in other compensation, including a $40,000 "executive allowance." Part of the mortgage on his home in Oakville, Ont., west of Toronto – $125,000 – was also paid by the company.

While Parkinson’s $3-million severance has been met with anger and outrage, McGuinty said it was the cheapest way to get rid of Parkinson.

Former CEO Eleanor Clitheroe filed a $30-million wrongful dismissal lawsuit after she was fired in 2002 amid a public outcry over lavish spending and her $2.2-million salary. The case is still before the courts.

"It is explosive and it’s touched a nerve with Ontarians," Energy Minister Dwight Duncan said of the auditor’s findings. "We want to make sure that, whatever we do, we get it right."

But he said the utilities are taking steps to address the problems.

At Ontario Power Generation – employees there charged $6.5 million to corporate credit cards without receipts and spent $8,000 on leather jackets for long-serving employees, the auditor found – the system of tracking expenses has been upgraded and expensive gifts have been banned.

Critics say the government isn’t doing nearly enough to change the culture at Ontario’s utilities. Conservative Leader John Tory said few people get severance when they quit a job, let alone when they leave under "a cloud."

Vowing to keep a closer eye on Hydro One’s board is nothing but a "deathbed repentance," Tory said.

"This man presided over a company where there is a litany of abuse of ratepayer and taxpayer money and some question about his own expenses," he said." He then quit under a cloud – I’m wondering why he got paid anything."

NDP Leader Howard Hampton said the government hasn’t done anything to solve the underlying problems at Hydro One. The board – which approved Parkinson’s expenses and accepted his resignation with "deep regret" –is still there, he said.

The government should have a public inquiry into Hydro One to examine how disproportionate executive salaries and perks are, Hampton said.

"They’re not going to do that," Hampton said. "I don’t think you’re going to see much change."

Still, some say more government interference will only hurt the province’s utilities. Tom Adams, executive director of Energy Probe, said Parkinson was getting paid appropriately and was only fired because of the political firestorm created by the auditor’s report.

With Hydro One under a political microscope, Adams said the company will end up with a CEO who is more interested in pleasing the "political whims of the day" than running a profitable utility.

"We’ve seen a lot of this in the past of political supervision by people who don’t know the business at all," he said. "It never works out well."