Sunday, January 25th4.2°C

Report on bloated Ontario hydro pensions says taxpayers covering most costs

TORONTO - Ontario taxpayers are putting in almost $5 for every $1 employees are putting into unsustainable pension plans at Ontario's energy agencies, costs that pose a "significant risk" to electricity prices, according to a government-commissioned report released Friday.

Employees at the provincial transmission utility Hydro One provided a scant 12 per cent of contributions to their pension plan, compared to 81 per cent forked over by the Crown corporation, the report found.

Ontario Power Generation wasn't much better, with employees putting in just 24 per cent of the contributions compared to 76 per cent by the publicly owned utility.

Compared to other public-sector pension plans, those at Ontario's electricity agencies — including the Independent Electricity System Operator and Electrical Safety Authority — are "generous, expensive and inflexible," special advisor Jim Leech said in his report dated March 18.

Employers are responsible for a larger share of the pension contributions compared to other plans and bear all risks that can increase pension costs, which are ultimately borne by ratepayers, customers and shareholders, he said.

The report also warned that none of the four pension plans, which collectively have about 18,000 active members and 19,000 retired and deferred members, is stable.

"The plans are far from sustainable," Leech wrote. With employer contributions already high, none of the plans have the ability to absorb further market fluctuations, lower-than-estimated investment performance or costs associated with pensioners living longer.

"Should plans go further into deficit, the sponsors and, ultimately, ratepayers will be required to pay even larger contributions," the report said.

In 2012, total contributions from all sources of the four plans were approximately $585 million, with $106 million from employees. The employer contributed $480 million, comprising about $365 million in current pension expense payments and $115 million in special payments required under law for deficits.

The report noted that all elements of the pension plans, including benefit levels and employee contribution rates, were negotiated through collective bargaining. The generous provisions include unreduced early retirement, maximum survivor benefits permitted by law and a "rich" benefit formula which uses the employee's best three years plus bonuses in some cases, the report said.

Ancillary benefits account for a big chunk of the costs, it said, adding that the base pension represents less than 52 per cent of the total pension costs. And it's taking its toll on the balance sheets of the government-owned corporations.

ESA, which is responsible for electrical safety, including the licensing of contractors and electricians, has absorbed a 115 per cent increase in annual pension costs into its operating budget over the last three years, the report said. In the last fiscal year, it ate up about 10 per cent of the not-for-profit corporation's revenue.

The four energy companies also provide supplementary pension plans that provide additional benefits that are paid from the company's general revenues, which have a cumulative unfunded liability of about $490 million.

Leech, former CEO of the Ontario Teachers' Pension Plan, is recommending that the employer-employee contribution ratio for all four plans move to a target of 50/50 over the next five years.

The governing Liberals asked Leech to look into the energy sector pension plans following a damning report in December from the province's auditor general.

Bonnie Lysyk found OPG contributed "disproportionately more" to its pension plan that its employees, with a funding ratio of 4:1 or 5:1, significantly higher than the 1:1 ratio in the public service. OPG is also solely responsible for financing its pension deficit, which stood at about $555 million.

The report was quietly posted on the Ministry of Finance's website on Friday, a move the Progressive Conservatives called suspicious.

"They continue in the legislature to talk about being open and transparent, but when something like this comes along, it's so blatantly obvious that they've gone out of their way," said Tory finance critic Vic Fedeli.

"It was available before the election, it was available while the legislature was sitting and they did not release it then. They released it on the Friday of a long weekend in the middle of the summer more than four months later. That's all very suspect, but very typical for this government."

Skyrocketing hydro bills are the biggest concern for most of the people he spoke to during the pre-budget hearings, Fedeli said.

"When you see the cost of these pensions and you know that that transfers directly to hydro rates, it infuriates people in Ontario even more," he added.

Beckie Codd-Downey, a spokeswoman for Energy Minister Bob Chiarelli, said the government will "review the report in consultation with union representatives to assess the recommendations."

Note to readers: CORRECTS lede to show that taxpayers putting in $5, not $6.

The Canadian Press

Read more Business News


Recent Trending

Today's Market
S&P TSX14779.35+15.369
S&P CDNX678.18-0.79
S&P 5002051.82-11.33
CDN Dollar0.8050-0.0018
Natural Gas2.967+0.132

Okanagan Companies
Pacific Safety0.115-0.005
QHR Technologies Inc1.38+0.06
Anavex Life Sciences0.1810.00
Metalex Ventures0.040.00
Russel Metals24.48+0.32
Copper Mountain Mining1.10-0.02
Colorado Resources0.155+0.005
ReliaBrand Inc0.006+0.001
Sunrise Resources Ltd0.055+0.03
Mission Ready Services0.22+0.02



1876300734 Kuipers Crescent, Kelowna, BC
5 bedrooms 6 baths
more details
Click here to feature your property
Please wait... loading

How to price: workbook approach

In 2008 Self Counsel Press published my book - Pricing Strategies for Small Business. The book is now available in Europe, India, Russia and the United States. The purpose of the book was to make avai...

Ailing Parents: Tax Issues

If your parent has become ill, there can be several tax issues that come into play depending on the nature of their illness, their age and the role that family members are playing. For example, if you...

What do I pay ICBC for anyway?

If you have had ongoing dealings with ICBC as a result of a car accident than you have likely had the pleasure of dealing with at least two sides of ICBC. Initially the relationship starts off pleasan...



Member of BC Press Council