ONTARIO POWER GENERATION KEY UPDATE 2013 AUDITOR GENERAL S REPORT ON HUMAN RESOURCES OPG has made substantial progress in implementing the Auditor General s six recommendations at the first six month mark. All planned management actions have been completed on schedule and future actions are on track. In addition, OPG remains committed to continuous improvement beyond the Auditor General s recommendations. The following is a list of completed and forward looking actions as of June 30, 2014. AUDITOR GENERAL S RECOMMENDATIONS 1) To ensure that staff levels are reasonable and that the right people in the right positions to meet its business needs, OPG should: Evaluate and align the size of its executive and senior management group with its overall staffing levels Address imbalances between overstaffed and understaffed areas in its nuclear operations Review and monitor compliance with its recruitment Review and monitor compliance with its security clearance processes. Business Transformation Multi-year business transformation launched in 2011 with 120 key initiatives to reduce labour costs. Initial transformation plan validated by third party. Suggestions for improvements incorporated. Achieved headcount reductions of ~1,900+ since Jan. 2011 with cumulative savings to date of $400 million ($9 million since Q2 2013). Reassessed transformation initiatives to accelerate headcount reductions: planned additional reductions of ~ 400+ by 2016 for a total estimated savings of $1 billion over six years (2011-2016) ($381 million from Q2 2013 to 2016). Third party reviewed revised business transformation plan and confirmed the initiatives, controls and oversight were reasonable to achieve the business transformation 2016 headcount reduction target of 2,300. Continue to manage high levels of attrition, hiring in some high skilled areas per plan. Senior Staffing Levels Reduced senior management headcount by ten per cent since 2013. Hiring of all director and above positions now requires CEO approval. Eliminated thirteen senior executive positions. Continue to closely monitor numbers. Reduced total base salary costs for management in 2013 by 3 per cent compared to 2012. Assessing senior management and executive headcount against leading practices and establishing target structure (Q4 2014). Nuclear Staffing Levels Federal regulator (CNSC) and external peer groups confirmed that Nuclear stations operate safely. Changes to nuclear staff levels and organization structure for 2013 reflected in updated benchmarking results. Decreased headcount from 17 per cent over benchmark in Feb. 2012 to 8 per cent in April 2013. Draft 2014 benchmark report complete. Results indicate a further reduced headcount to 4 per cent over benchmark as of March 2014, which represents approximately 260 staff. Used 2014 benchmarking results for input to 2015-2017 Business Planning. High level action plans being developed to meet business plan targets (Q1 2015) 1 P a g e
Recruitment Centralized recruitment function to improve efficiency, controls and compliance with the hiring process. Implemented standards and education/support to aid hiring managers. Analyzed the 700 pairs or groups of OPG employees residing at the same address (referenced by the AG). Implemented improvements to increase compliance with hiring rules. Embedded clear expectations for hiring in Code of Conduct. Rules are supported by disciplinary actions. Commenced compliance reviews for both internal and external vacancies in Q4 2013. Implementation plan for hiring panels will be developed (Q4 2014) and implemented (Q2 2015). Security CNSC and CSIS reviews confirm OPG has industry-leading nuclear security clearance program. Ensured all employees requiring access to a nuclear site or sensitive nuclear information have appropriate security clearance. Ensuring new hires have appropriate security clearance. Ensuring ongoing compliance for existing employees. Security clearance for two new Board members underway. Clearances finalized for all other Board members. All non-nuclear employees have been assessed for appropriate clearance levels. Notifications commenced March 21, 2014 for employees who must obtain, renew or upgrade security clearance. A follow-up process is in place. Ensuring future compliance control mechanisms are effective using enhanced monitoring tools (Continuous Improvement Initiative). 2) To ensure that employees receive appropriate and reasonable compensation in a fair and transparent manner, OPG should: Make its Annual Incentive Plan (AIP) more effective by creating a stronger link between awards and staff performance based on documented annual evaluations Stronger Links between Performance and Awards Management staff required to enter performance objectives into electronic system that allows for compliance monitoring. There is 100 per cent compliance in 2014. Fleet scorecards eliminated to create a stronger link between individual performance and meeting key OPG financial and operating deliverables. Individual 2014 scorecards for key leaders include fleet-specific operational and financial metrics. Reduced number of metrics on Corporate Balanced scorecard to create sharper focus on key metrics and increased score variability. Changed calibration of management performance ratings for greater consistency and broader distribution in scores. Review salary levels and employee benefits, including pensions, to ensure that they are reasonable in comparison to other similar and broader-public-sector organizations and that they are paid out in accordance with policy, adequately justified and clearly documented Salary level comparison to Compensation and Pension Benchmarking Management costs are generally at 50th percentile level relative to market as recommended by Arnett Panel and confirmed by benchmarking completed for OEB. Compliance with Arnett Panel recommendations will be maintained. Continue to seek collective agreements consistent with government direction and appropriate benchmarks. Conducted extensive study on options to ensure financially sustainable pension and benefits. Actively participated in government reform initiatives. Implementing pension reform for management group to reduce costs by moving to 50/50 cost sharing. Participating in provincial electricity sector working group (Dependent on Ministry of Finance). Revising OPG s Management Compensation Program - changes include segmenting benchmarking peer 2 P a g e
similar & public sectors mgmt. Salary level comparison to similar & public sectors union Benefits relocation, travel, misc., allowances Salary and benefits are paid in accordance with policy. groups into Licensed/Authorized Nuclear (North American market), Utilities (Canadian market) Corporate (GTA/provincial market). This will ensure compliance with the Arnett Panel and allow for differentiated compensation. Develop recommendations to align compensation to peer groups (Q4 2014). Compensation Levels for Management Staff 2013 performance pay for all management was reduced by 10 per cent. Compensation for all senior management frozen. Jan. 2009 - Voluntarily implemented Ontario government wage constraints: no base pay increases for senior management; set base pay budgets of 1.5 per cent for employees earning $150,000+ and 2 per cent for remaining employees (below average market increases of 3.5 per cent). 2009 - Rolled back all incentive payments by 5 per cent. 2010 - Imposed a base pay budget limit of 1.5 per cent (tied to competency and performance levels). There were no across-the-board increases (below average market increases of between 2.3-3.0 per cent). 2010 - Rolled back all incentive payments by 10 per cent. Fully compliant with Bill 16 and Bill 55 (Province s wage constraint legislation). Jan. 2011 - No management base pay increases; salary structure remained frozen. Compensation restrictions remain. Reduced total base salary costs for management in 2013 by 3 per cent compared to 2012 and 11 per cent since 2010. Compensation Levels for Unionized Staff Arbitrator froze Society (union) wage scale progressions for two years but provided wage increases of 0.75 per cent in 2013, 1.75 per cent in 2014, and 1.75 per cent in 2015. Achieved collective agreements that reflect government compensation constraints. Relocation Policy Ontario Public Service Relocation policy adopted for management employees. Reviewing OPS relocation policy against collective agreements to determine what if any changes are required. Reviewed practices and controls related to employee relocation, including guaranteed house values, to ensure robustness of processes and controls and compliance with policy. Staff Above Band Staff numbers (in this category) are declining at an average rate of 12 per cent (1,605 in 2010 to 973 at the end of June 2014) and are expected to be negligible by 2020 based on attrition. No management staff have received salary increases to move them above band maximum since 2010. Controls have been put in place (e.g. sign offs by supervisors) to ensure band maximums are not exceeded. 3) To ensure that its non-regular and contract resources are used costefficiently, OPG should: Improve succession planning Succession Planning/ Hiring Contractors Succession planning and knowledge transfer plans for critical/at-risk roles strengthened and implemented. Succession plans must be updated semi-annually and reviewed and approved by senior management and the Board in May and November. 3 P a g e
knowledge retention and knowledge transfer processes to minimize the need to rehire retired employees for extended periods Conduct an open competitive process for outsourcing its information technology services before the current contract expires Manage and monitor closely the hours reported by the contractors to avoid the risk of overpayment. Expanded Emerging Talent program to all Nuclear groups to further improve succession planning. New policy in place for re-hiring former OPG employees: must wait 12 months before returning to OPG work; there is a 12-month limit on their return. For Nuclear refurbishment, and to ensure project success, there s a six-month waiting period and a three-year limit. Supply chain governance updated to include additional business case and approvals requirements for hiring contractors. Expanding high potential/emerging talent offering company-wide to increase effectiveness of succession planning (Q4 2014). IT Contract Competitive process conducted in 2001 when IT originally outsourced. Alternatives assessed in 2007: third party validated that restructured contract renewal was the best value. Achieved savings far in excess of target price approx. $105 million over the term with 65 per cent of costs in variable pricing providing additional savings (target market price determined by third party firm). Also saved $25 million in transition costs; avoided service impact and potential labour relations challenges. IT Outsourcing Agreement put out to competitive bidding in May 2014. Contractor Hours 2012 - Implemented new contracting strategies to control vendor terms and conditions. Fully implemented new technically-advanced time-tracking system at Nuclear sites for contractors. Conducting a comprehensive assessment of contractor controls, including time capture and approval processes to identify any areas of improvement. Commenced contractor audits to verify correct hours charged. 4) To ensure that overtime hours and costs are minimized and monitored, OPG should: Decrease overtime costs for outages by planning outages and arranging staff schedules in a more costbeneficial way Review other ways to minimize overtime. 5) To minimize the cost of sick leaves and avoid potential misuse or abuses of sick leave entitlements, OPG should: Review its sick leave plan for staff Auditor General concluded that OPG overtime is consistent with benchmark levels and that overall OPG has reduced overtime amounts. Conducted cost benefit analysis of specific station outage critical path work to identify opportunities to reduce overtime within bargaining agreement framework. Implemented crew shift changes resulting in reduced overtime during outages. Enhanced management processes, approvals and controls to limit individual overtime in Nuclear including the overtime ceiling. A tool will be developed in the future for automated work-flow pre-approval process based on prescribed overtime limits and notification of overtime usage to appropriate authority levels (Continuous Improvement Initiative). Introduced targeted program in work groups with high absenteeism (2009). Provided training and support for managers to address attendance issues. Reduced short term absences by three per cent since 2009. In 2012, the average number of short term sick days was 4.9 (less than OPS average, acknowledged by Auditor General). 4 P a g e
who joined prior to 2001 Monitor the results of sick leave management programs to identify and manage unusual sick leave patterns. 6) To ensure that its employees are adequately trained for their jobs, OPG should: Continue to review and monitor the adequacy, quality and completion rates of its nuclear training programs in order to identify areas for improvement, and address the areas that have already been identified Review the nature and timing of its mandatory training requirements as well as its delivery methods for hydro/thermal staff to ensure they are meeting business needs costeffectively. Medical Absence Reports (doctor s verification) required after four days for employees represented by Power Workers Union (down from five days). Implemented new centralized disability management process, utilizing a third party provider for sick leave management. Currently enhancing the sick leave management process to identify and manage unusual sick leave pattern through the use of enhanced management and supervisory compliance monitoring metrics and reports (Q4, 2014). Plan to identify and provide direction to management to mitigate any issues (Q2, 2015). Nuclear training programs are extensively benchmarked against industry best practices and routinely audited by CNSC and the World Association of Nuclear Operators (WANO). Audits conducted in 2014 identified no opportunities for improvement. Implemented new improved Non-Licensed Operator qualification program, CNSC License Training program and new Orange Radiation Protection Badge training requirement. Examples of improvements and cost savings include: Optimized the duration of the on-shift training component of the non-licensed training program from 36 to 24 weeks. Discontinued training for 603 people identified as not requiring Orange Radiation Protection Badge in Nuclear stations resulting is cost saving of $1.8 million annually. Identified redundant refresher training and reduced refresh frequency of some training resulting in a reduction of 1,230 trainee-days saving $2.8 million annually. Deactivated or discontinued courses and changed the delivery methodology from classroom to Computer Based Training resulting in savings of $2.9 million annually. Implemented previously identified action plan for improving training programs. Implemented improved CNSC license training program and reduced the overall duration from 27 to 24 months. Centralized Hydro/Thermal training programs and achieved 90 per cent commonality within Hydro/Thermal. Completed review of mandatory training requirements for Hydro/Thermal staff and implementing recommendations to ensure a consistent approach to role based training. Targets developed to improve training attendance by Hydro/Thermal staff and are being monitored by senior leadership team. Complete all improvement initiatives to consolidate the function, rationalize required training and streamline processes to further improve cost-effectiveness of required training (Q2, 2015). 5 P a g e