I am honoured to serve as Chair of this historic company, with its 115-year legacy of adding economic value through transmitting and distributing electricity to Ontario. Hydro One has an incredibly important mandate in serving the people of our province and in delivering outstanding and cost-efficient service to approximately 1.4 million customers in communities across Ontario. The Board of Directors fully supports Hydro One’s focus on delivering greater value for its customers, employees, communities and shareholders.
Confident leadership, clear vision
In May, following a thorough and competitive international search process, the Board officially welcomed Mark Poweska as Hydro One’s President and CEO. The Board sought a highly regarded leader in the electricity utility sector, one with a proven record in building a strong safety culture, exceeding customer expectations and improving operational performance – along with the ability to develop enduring relationships with Indigenous communities, our stakeholders, and government.
We found all of the above in Mark, whose 25-year career has included responsibility for all aspects of electricity generation, transmission and distribution operations at a major North American integrated utility. Mark’s extensive experience in the electricity sector will help ensure Hydro One is strong now and even better positioned into the future.
To that end, the Board of Directors approved and fully endorses the corporate strategy that Mark and his team developed in 2019. The five-year Ontario-focused strategy sets a clear vision for Hydro One to: build a grid for the future, be the safest and most efficient utility, be a trusted partner, be an advocate for customers, as well as innovate and grow the business.
Sustainable practices, best-in-class performance
Safety remains a priority of the Board of Directors and we support management’s renewed and intensified commitment to continually enhancing Hydro One’s culture of safety. The Board of Directors is equally committed to supporting management’s initiatives to further develop the company’s sustainable business practices.
In 2019, Hydro One achieved a total return to shareholders of 29%, reflecting strong sector fundamentals and stable growth, as well as the company’s ability to capture efficiencies and reduce operating costs. The Board of Directors fully supports company initiatives that have reduced its cost of capital. We are encouraged that equity market investors have re-rated our company upward relative to our publicly traded competitors and our publicly traded debt pricing has improved with the positive rating actions of key credit rating agencies.
Strong governance, diverse viewpoints
I want to thank all Board members for their oversight and deliberations this past year. On their behalf, I welcome Susan Wolburgh Jenah to Hydro One’s Board of Directors. This is a timely appointment of a highly qualified individual and I know we all will benefit from Susan’s exceptional experience, both leading and serving on boards of publicly traded, regulated companies.
Hydro One values diversity at all levels of the organization and our commitment extends to ensuring a gender-diverse Board of Directors. With the announcement of Susan, the composition of our Independent Non-Executive Board is 50% women and 50% men, reflecting best practices in board diversity and surpassing our Catalyst Accord commitment to maintaining at least 30% female board members. Additionally, our commitment to Indigenous representation at the Board level reflects Hydro One’s understanding that it is a strategic imperative to be a best-in-class trusted partner of Indigenous communities and to be inclusive of the many customers and stakeholders we serve across the province.
Enhancing value, delivering results
Our success is due to the diligence and passion of our leaders and employees. First, on behalf of the entire Board of Directors, I want to thank all Hydro One employees for their extraordinary efforts this past year – our employees’ record of service in times of need continues to be exemplary. Secondly, I wish to thank my predecessor Chair, Tom Woods, for his tireless dedication and steady leadership. Finally, the entire Board of Directors would like to recognize the past leadership of our Acting President and CEO Paul Dobson, who led Hydro One through an important period of transition.
In the coming year Hydro One will remain focused on enhancing shareholder value and on delivering safe, cost-efficient and reliable power to customers. On behalf of the Board of Directors, I appreciate your ongoing trust, confidence and investment in Hydro One.
Chair of the Board of Directors
Since joining the company in May, I have had the opportunity to witness first-hand the expertise and dedication of Hydro One’s team members and leadership in carrying out the company’s crucial role of delivering the power that drives Ontario’s economy and energizes every corner of this province. It is an exciting time to lead this organization and I thank employees and the Board of Directors for the trust they have placed in me as we charted a course for the future of Hydro One.
Over the first weeks and months at Hydro One, I had many discussions to better understand what our customers, investors, stakeholders and Indigenous peoples need and expect from Hydro One.
These conversations, along with a substantial amount of research to understand our customers’ priorities, guided the direction of Hydro One’s new five-year corporate strategy, which was developed under the direction of our Board of Directors.
Our new strategy outlines five priorities:
Plan, design, and build a grid for the future
Be the safest and most efficient utility
Be a trusted partner
Advocate for our customers and help them make informed decisions
Innovate and grow the business
These priorities focus on what really matters to customers, Indigenous peoples, communities, stakeholders and investors: an unwavering commitment to exceptional customer service, safety, efficiency and sustainability. You will find more details on these later in this report.
In 2019, we made good progress on improving Hydro One’s financial and operating performance, capturing efficiencies and reducing our operating costs adjusted for Avista related costs by 4.7% during the year.
We improved the reliability of Hydro One’s network while focusing on becoming safer, more customer-driven, sustainable and efficient.
Enhancing safety culture, improving safety reporting
We are deeply committed to continually enhancing Hydro One’s culture of safety.
In March, we tragically lost one of our colleagues who sustained a fatal injury during a forestry incident in the Minden area. While Hydro One’s reportable injuries rates have declined in recent years and are considered industry leading, we have seen an increase in serious injuries. This is not acceptable to me and I personally will not rest until we have eliminated serious injuries from our organization.
In 2019, I created a new role on my executive team, a Chief Safety Officer, dedicated to leading our safety program and driving improvements. Our renewed focus on safety includes the introduction in 2019 of a new, frontline-led Safety Improvement Team to help us determine the actions we need to take to eliminate injuries at Hydro One. We are also making headway on major improvements to our safety reporting and analytics.
Leading emergency response, building resilience
In 2019, we continued to experience storms and weather events, which impacted our customers’ families and businesses. Our entire team – including highly trained crews, grid control centre operators and customer service agents – responded to these emergencies and through careful planning, assessed damage and safely restored power in challenging conditions. In 2019, Hydro One employees travelled out of the province to assist Manitoba Hydro when it experienced a severe winter storm with major impacts to its grid. We will always be proud to support our partners in their time of need.
Hydro One is rightly seen as a North American leader in power restoration. In 2019, our leadership was recognized by the Edison Electric Institute (EEI), which presented Hydro One with an Emergency Assistance Award for our response efforts following the deadly California wildfire in 2018; as well as our 10th EEI Award for helping Manitoba Hydro restore power.
Over the next five years, we plan to invest approximately $10 billion in our transmission and distribution systems to ensure a reliable grid for the future. As we make these investments, we will modernize our grid through the introduction of new technologies to prevent outages, increase resiliency, and protect against physical and cyber threats – while allowing us to restore power faster when we experience outages.
As we prepare for more severe storms, we will continue considering climate change into our planning to increase resilience and reduce our environmental footprint.
Good neighbour, trusted partner
Our success depends on our ability to build trust as a reliable partner to Indigenous peoples, communities, customers and the many stakeholders we serve across Ontario.
In 2019, we strengthened our ties with Indigenous leaders and communities across the province, increasing our procurement spending to $41.3 million with Indigenous businesses – Hydro One’s highest spend ever. In recognition of our work, the Canadian Council for Aboriginal Business selected Hydro One as an Indigenous Procurement Champion. The Canadian Energy Association also recognized us for our efforts in increasing our procurement from Indigenous-owned companies.
In 2019, we completed the Niagara Reinforcement Line (NRL), a new, major transmission project, with our equity partners, the Six Nations of the Grand River Development Corporation, and Mississaugas of the Credit First Nation. This 76-kilometre transmission line was brought to completion by A6N, an Indigenous-owned contractor.
We are also focusing our efforts on partnering with communities and customers to champion economic development opportunities. In southwestern Ontario, we worked with community leaders and customers in Leamington to bring more power to support the region’s booming greenhouse sector. We worked collaboratively with the Independent Electricity System Operator to advocate for a new, major transmission line to provide 400 additional megawatts of power, which will have the added benefit of putting downward pressure on electricity rates. We will continue to work closely with our customers to better understand their emerging needs and ensure we have a power grid that continues to support local economic growth.
Through our community investment program, Building Safe Communities, I’m proud to say that we provided training to about 200,000 youth across Ontario to teach them life-saving skills and how to play safe. We also provided 125 donations and sponsorships to over 70 communities across the province.
Exceptional service, reducing costs
Since 2015, Hydro One has been on a journey to serve our customers better and we made great strides in the last year. In 2019, we achieved a score of 85.7% – the highest residential and small business customer satisfaction score in over a decade. We also earned two customer service awards from the Ontario Energy Association. However, we believe we can do better and we will do better.
As the needs and expectations of our customers evolve, we will continue to find ways to introduce new services that meet their needs and make it easier to do business with us.
Our customers not only depend on us to supply reliable electricity, they expect us to run an efficient company and to look for ways to drive costs out of the system.
In 2019, Hydro One achieved productivity savings of $202.3 million and operating cost reductions of $51 million adjusted for Avista related costs. We will continue to focus on improving our efficiency, while never compromising safety.
In 2020, we will continue to be a champion for our customers and the electricity sector in Ontario. We will create a brighter, sustainable future for Ontarians by building strong partnerships, delivering operational excellence and enhancing shareholder value.
Last year we further solidified our executive team by welcoming some industry leaders to Hydro One and through several internal appointments. In 2019, Paul Harricks joined Hydro One as our Chief Legal Officer and we announced David Lebeter would be joining us as our new Chief Operating Officer. Internal appointments included Chris Lopez as Chief Financial Officer, Saylor Millitz-Lee as Chief Human Resources Officer, Brad Bowness as Chief Information Officer and Darlene Bradley as Chief Safety Officer. I have full confidence in this executive team to deliver on our strategic plan over the coming years.
I want to thank all Hydro One employees for their dedication and service this past year and I look forward to what the future holds as together, we build a better and brighter future for all.
President and CEO