Hydro One urged to curb payroll

Hydro One labour costs are rising amid payroll growth, unionized wage increases, collective bargaining pressures, and Ontario Energy Board scrutiny, driven by headcount expansion, transmission projects, and weak productivity benchmarks across the electricity utility sector.

Hydro One should rein in its payroll costs in upcoming bargaining sessions with its workers, the Ontario Energy Board has ruled.

“The board continues to be concerned about the company’s ability to control the growth in head count and labour cost increases, particularly within its collective bargaining environment,” the board says in a decision.

The decision shows that Hydro One had a payroll of $734.9 million in 2010 – up 17.9 per cent from 2009, alongside 6,000 six-figure staff on its rolls that year. The payroll had grown by double-digit percentages in each of the two previous years as well.

Hydro One projects further payroll increases of 8.2 per cent in 2011 and 4.7 per cent in 2012.

The company’s contract with the Power Workers Union expires in March, while its contract with the Society of Energy Professionals expires in 2013.

The energy board notes that 90 per cent of Hydro One employees are unionized, as 2011 uniform transmission rates were being implemented across Ontario at the time. Hydro One is projecting wage increases of 2.5 to 3 per cent for unionized workers in the next two years, the board says.

“The board expects that Hydro One will revisit the proposed increases allocated to compensation,” says the decision. “This should provide a signal for upcoming bargaining.”

Payroll costs are being driven up both by wage increases and by staff increases.

Hydro One is under pressure to build new transmission lines, and to renew aging equipment, including reliability upgrades in Toronto that aim to reduce outages. It was a failure at a Hydro One transformer station last July that blacked out Toronto’s core and much of the west end, affecting Toronto Hydro's city grid across the city too.

Hydro One told that board that its payroll is being pushed up by a shortage of skilled workers, compounded by an aging workforce that’s retiring, and by the company’s increasing work program, which includes new power lines projects estimated at $4 billion overall.

But the board had little sympathy for Hydro One’s complaint that it is hard to hold the line on labour costs because it is forced to keep pace with wage increases at other utilities.

In fact, “the compensation levels at Hydro One have a tendency to push up the amounts that every other utility has to pay their staff,” the board said.

“Hydro One’s compensation costs are still 17 per cent above the market median and ... proposed increases in head counts are excessive. Central to this problem is the lack of any measureable increases in productivity.

“There appears to be a disconnect between the compensation levels as reflected in union settlements, and the productivity being achieved by the corporation. This must change.”

Asked about the board’s comments, Hydro One sent a written response declining to discuss bargaining with its unions.

For non-union staff, it noted, pay has been frozen for the next two years consistent with Ontario hydro salary cuts under the province’s budget restraint rules.

“We are managing staffing levels to ensure we meet our obligations with respect to providing a safe and reliable electricity system for the Province of Ontario while at the same time keeping costs down even as delivery rates go up for many customers,” it said.

Union officials did not return calls.

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