Law Times

Page 6 January 29, 2018 • Law Times www.lawtimesnews.com COMMENT u EDITORIAL OBITER By Gabrielle Giroday Tax facts T ax issues aren't always front and centre when it comes to me- dia coverage. That being said, and, as many sage tax lawyers know, these issues can permeate the lives of everyday Canadians and impact each person in very definitive ways. This week, a set of features in Law Times looks at tax issues, with a variety of findings. One highlights tax changes that have occurred south of the border, which could impact American subsidiaries operating here. This could hurt Canadian competitiveness, which is especially problematic at a time when Canada is teetering on the edge of the po- tential end of the North American Free Trade Agreement. Another piece looks at who might become the Supreme Court of Canada's next leading voice on tax-related rulings, an area that some lawyers feel is often (sadly) overlooked. In 2017, lawyers across the country had strong feedback to the federal government's proposed changes to private incorporation tax rules. Some even threatened to revoke their Canadian Bar Associa- tion membership in protest. While the federal government has now backtracked considerably on these proposals, Law Times reports that lawyers still see considerable issues with the revised approach. Lawyer Pamela Cross says more consultation should have been done, especially considering "this is the most significant and funda- mental change to our tax system in 40 years." Some are even encour- aging a more comprehensive tax overhaul, with lawyer Claire Ken- nedy noting that, with what's going on in the U.S., "it would be an opportune time to look at corporate taxation in Canada." Taxation issues are complex and usually highly specific. But, as our experts remind us, they could use more scrutiny by most. There are important tax-related rulings anticipated in the months ahead, and all lawyers would be wise to pay attention. LT ©2018 Thomson Reuters Canada Ltd. All rights reserved. No part of this publication may be reprinted or stored in a retrieval system without written per- mission. The opinions expressed in articles are not necessarily those of the publisher. Information presented is compiled from sources believed to be accurate, however, the publisher assumes no responsibility for errors or omissions. Law Times disclaims any warranty as to the accuracy, completeness or currency of the contents of this publication and disclaims all liability in respect of the results of any action taken or not taken in reli- ance upon information in this publication. Publications Mail Agreement Number 40762529 • ISSN 0847-5083 Law Times is published 40 times a year by Thomson Reuters Canada Ltd. 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Karen Lorimer Managing Editor . . . . . . . . . . . . . . Jennifer Brown Editor . . . . . . . . . . . . . . . . . . . . . . Gabrielle Giroday Staff Writer . . . . . . . . . . . . . . . . . . . . .Alex Robinson Copy Editor . . . . . . . . . . . . . . . . . . Patricia Cancilla CaseLaw Editor . . . . . . . . . . . . . . . . . . Leah Craven Art Director . . . . . . . . . . . . . . . . . . . Phyllis Barone Production Co-ordinator . . . . . . . . .Catherine Giles Electronic Production Specialist . . . Derek Welford Change must come from the top at OPG BY IAN HARVEY L ooks like Ken Hartwick, chief fi- nancial officer at Ontario Power Generation, will be sharpening his proverbial red pencil a lot over the next couple of years. That's because the provincial en- ergy rate watchdog, the Ontario Energy Board, has ordered OPG, wholly owned by the province, to cut $150 million in pensions and benefits costs by 2021 and to make another $350 million in cuts over the same period from administration, operations and maintenance budgets. It seems a lot, but it's loose change for OPG, which reported a net income of $463 million on $5.6 billion in revenues for 2016. It produces about 16,210 megawatts — some 50 per cent of Ontario's power — through two nuclear facilities supple- mented by 66 hydro systems, three ther- mal plants burning biomass or oil and gas and one wind turbine that sits on the edge of Lake Ontario in Pickering. Here's where it gets interesting. It is regulated by the OEB, which sets rates and ostensibly drives producers to gener- ate affordable and sustainable electricity while also keeping an eye on the horizon to ensure the demand-supply curve can be met. Ostensibly, the OEB is an independent regulatory body overseeing a natural monopoly, drawing its man- date from a slate of rules and regulations under various pieces of legislation: Ontario Energy Board Act, 1998, Electricity Act, 1998, Mu- nicipal Franchises Act and Statutory Powers Procedure Act. However, critics such as Andrew Roman, a partner at Miller Thomson LLP and a board mem- ber at Energy Probe, a non-governmental organization in Toronto, says that, while the OEB operates under the guise of be- ing an independent adjudicator, it has shifted to "politically directed pricing by publicly owned monopolies." Case in point: the OEB's rejection of the OPG's request to wring $16.8 bil- lion more from ratepayers between 2017 and 2021 to cover costs of operating the Pickering nuclear plant and the refur- bishment at the Darlington nuclear plant along with other costs. In rejecting the bulk of the request, the OEB did allow $5.1 billion for the nuclear plants, but it took a hard line on pension costs, which are double those in other areas of the civil service and other administration, opera- tions and maintenance cuts. The issue is that electric- ity pricing is politically sensi- tive, to the point where it may tip the upcoming Ontario election. The Ontario Liber- als under Premier Kathleen Wynne have devised a plan to lower rates, but they are punting the true costs into the next decade in the form of debt. A cynic might suggest the OEB was all too cognizant of the government's hope for re-election and plans to lower rates and fell into lock-step. A harsher critic would suggest they did what they were told, especially since OPG cheekily suggested in its applica- tion for the rate increase that consumers wouldn't notice the increase given the government's plan to defer rate hikes. Still, a glance at the Sunshine List is eye opening and offers some insight into why the OEB took a stand over those pension costs: President and CEO Jeffrey Lyash tops out at $1.15 million a year — more than double that of the CEO of the OEB — while chief nuclear officer Glenn Jager rakes in $832,000. Hartwick is merely 13 th on the top 20 list at $424,671. It all adds up to $1.1 billion in salaries, among 7,730 employees, a long way away from the battlefield over a $15 minimum wage. Certainly, as CFO, Hartwick is an ad- mirably qualified CFO, a CPA who has worked in the energy field for decades. In his new role, Hartwick will be look- ing for economies and bringing a new message of compliance, that it is time for OPG to come back to the real world. At one point, OPG's pension ratio was one to four to five — that is, for every dol- lar the employee put in, the employer put in $4 to $5. It's since been reduced, but at one to two, it's still double the average Ontario civil service ratio. Both the auditor general and the OEB have remarked on the more than gener- ous pensions, but, now, where to start? Given there are collective agreements in place, it leaves little wiggle room, and Hartwick's austerity program may have to start at the top. uIan Harvey has been a journalist for more than 40 years, writing about a di- verse range of issues including legal and political affairs. His email address is ianharvey@rogers.com. Queen's Park Ian Harvey

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