Directors needed to fix Ontario electricity sector

- Wanted: Two dozen respected business people interested in public service. Must be willing to risk abuse by politicians, and possibly public humiliation. Must be willing to take the blame if the lights go out. First task will be to divide into teams to fight each other for the best available chief executives. Best if you don't sail, golf or hunt.

Apply to Dwight Duncan, Ontario minister of energy.

It's a good time for anyone who wants to be a director in Ontario's electricity sector.

The province is looking for candidates for three high-profile boards. They are:

- Ontario Power Generation Inc. OPG is still labouring with an interim board headed by former federal energy minister Jake Epp.

The board's first job, whenever it's appointed, will be to find a new chief executive officer to replace the interim chief executive Richard Dicerni.

- The new Ontario Power Authority. Legislation to create the authority was introduced last week, and it's expected to be established by January 2005.

The authority's task will be to forecast Ontario's demand for power up to 10 years in the future, and to ensure that a supply is on hand to fill it. It, too, will need a board of directors, followed by a chief executive.

- The revamped Independent Electricity System Operator, or IESO, taking the place of the Independent Electricity Market Operator, or IMO, needs new directors. Most of its current board members represent sectors of the electricity industry — such as generators, transmitters or local hydro utilities. In future, they'll all have to be independent.

That means staffing three boards of directors, and finding chief executives for OPG and the new power authority.

For good measure, the energy ministry's top bureaucrat, deputy minister Bryne Purchase, has moved on and must be replaced. His heir apparent, Dave O'Brien, has just resigned to take the top job at Toronto Hydro.

How easy will it be to find that much specialized talent in a short time?

Corporate governance expert David Beatty says it's not an insurmountable task. Beatty is managing director of the Canadian Coalition for Good Governance and strategy professor at the University of Toronto's Rotman School of Management.

"It'll be a big job to try to construct three effective boards like that," Beatty acknowledged in an interview. The key is the very first appointment.

"Start with a great chairman, " he said, one who has the knack and patience for building a workable team.

"Would that chairman have a problem finding enough warm bodies? I don't think so. I think it's entirely do-able."

There are plenty of talented people with accounting skills to make up an audit committee, a good number who know how to draw up compensation packages and there are many who understand financial markets, Beatty said.

The toughest part is finding good directors with a solid background in the electricity industry, Beatty said.

That's a sentiment echoed by John McNeil of Barker, Dunn & Rossi, a consulting firm active in the electricity sector.

"We need people who know something about the industry and power trading," he said in an interview. Candidates who know the Ontario power system are important, he said, pointing to the spotty record of some foreign managers who were brought in to work miracles but failed to live up to expectations.

Beatty said good candidates can be found.

"I wouldn't be worried about the numbers," he said.

"I'd be more worried about the challenge of trying to put together an outstanding team."

"I think we found in the case of Enron you can put together an all-star team on paper but it doesn't work at all."

Part of the problem at OPG is its uncertain future. The province has promised to shut down all its coal-burning generators. The Liberals' attitude toward nuclear power is still evolving, and one option is to create a stand-alone nuclear unit.

Meanwhile, much of OPG's output will likely be regulated by the Ontario Energy Board. The province says it will undertake a review of exactly what the company's role should be in the rapidly changing electricity sector.

At the new power authority and the revamped system operator, there will be some uncertainty over how their roles will work out.

Another issue for prospective directors may be the rough treatment that provincially appointed boards and executives have received recently.

Two years ago, Hydro One chief executive Eleanor Clitheroe came under fierce political criticism for her pay, perks and decision to have the company sponsor an ocean racing yacht. When the board of directors refused to fire her, the government, then Conservative, dumped the board and installed a new one willing to dismiss Clitheroe.

More recently, Hydro One chair Glen Wright, the man who cut the ties with Clitheroe, resigned after taking a public drubbing over his own expenses, which included hunting trips paid for by the company.

OPG was handled just as roughly by the Liberals. Energy Minister Dwight Duncan excoriated the company's performance after the Liberals took office last fall.

He then turfed chairman William Farlinger and his entire board, plus chief executive Ron Osborne and chief operating officer Graham Brown.

Duncan made OPG and Hydro One subject to freedom of information rules, which revealed Farlinger's frequent entertaining on golf courses in Canada and Florida.

Beatty said the very public dismissals of previous boards and executives probably won't discourage good candidates from stepping forward to fill the vacancies.

"There's a lot of good will on the part of most senior business people," he said.

A direct appeal by a provincial premier to lend a hand in fixing the province's energy problems is likely to work, Beatty said.

"Somebody may well drop their tools and say, fine, I'll respond to the call of the public and try to devote myself as diligently as I can to it."