Thursday, May 17, 2018

Doug Ford seems not to understand our electricity system

Dog-whistle populist Doug Ford has been making a big noise about the compensation of the board of the privatized Ontario electricity utility Hydro One, and particularly of its CEO Mayo Schmidt, in the run-up to the Ontario elections. He has vowed to fire Mayo as one if his first actions if elected Premier.
Ontario's electricity generation is a subject he has latched onto as a potential wedge issue in his bid to be become premier on June 7th. It is something he thinks his potential votes want to hear, and, much like Donald Trump, he doesn't really care how true his allegations are, so long as they earn him some votes. Most recently, he has vowed to cancel Ontario's cap-and-trade system (a mainstay of the province's drive to reduce carbon emissions), and even reduce the regular provincial fuel tax, a move that would cost the province billions in lost revenue, and severely curtail the money available for public transit and other essential municipal services.
Ford calls Schmidt "Kathleen Wynne's $6 Million Man", as though Wynne had anything to do with his compensation package. As of this year, Schmidt did indeed earn $6.2 million, including a base salary of over $1 million. But this not necessarily out of whack with other comparable publicly-traded Canadian utilities. For example, the CEO for Fortis Inc, Canada's largest utility company, earns over $9.2 million; the CEO of Emera earns about $5.8 million; and several others earn around the $3 million mark. American equivalents may earn significantly more, with the top five making well over $15 million. This sounds like an awful lot of money to us Average Joe's, but it seems to be what the market pays for people of a certain calibre to perform a complex and high-responsibility job.
Setting aside the question of whether Doug Ford would be legally able to fire the man - and the weight of evidence suggests not, especially given that Schmidt is not even a government employee, and the province is not even a majority shareholder in the company - such a move would trigger an estimated $10.7 million in severance fees. And then Ford would still have to find someone else to fill the position (a position in which job security will suddenly have become extremely precarious).
And as Liberal Energy Minister patiently points out, Ontario's electricity rates are not set by Hydro One anyway, but by the Ontario Energy Board (Hydro One is just responsible for the complex business of power transmission and distribution), and so taking out the whole board of Hydro One would have no effect on energy prices in the province. As I have explained before, and as the Globe and Mail does a good job of explaining, a variety of different factors and decisions have led to the current high electricity prices in Ontario, some of them going back decades, including an admirable attempt to charge the "real" price (rather than just shoving some costs conveniently under the carpet) and to pursue a low-carbon path, all of which is commendable and necessary. Mayo Schmidt's salary is not one of these factors, and Mr. Ford should be upbraided for his lack of understanding of the issues.

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