The Ontario government is forcing a cap of $1.5 million in salary and incentives for the next CEO of Hydro One, blaming the partially privatized transmission utility for not doing enough to trim the pay packets of executives and board members.

Energy Minister Greg Rickford announced Thursday that a directive has been issued under legislation Premier Doug Ford’s Progressive Conservatives passed last summer giving the province more control over the company, which is 47 per cent owned by taxpayers.

Rickford’s move is in response to Hydro One’s proposed cap of $2.78 million for the top job as a search for a new chief executive continues, with company chair Tom Woods — who was appointed by the Ford government — warning that recruiting senior executives will become difficult with stringent salary caps in place.

But the new cap, which limits pay for senior executives to 75 per cent of the CEO level and caps annual payouts to directors at $80,000, will “bring Hydro One’s executive compensation in line with levels with comparable utilities,” Rickford said in a statement.

“We hope they’re taking it seriously,” he later told reporters. “There’s been a culture at Hydro One that the people of Ontario found unacceptable.”

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Hydro One acknowledged receiving the directive in a one-paragraph news release, and said it will “continue to focus on its CEO search” as it posted financial results for 2018 with earnings per share of $1.31, up from $1.11 the previous year.

The company’s board — which includes four directors appointed by the province — stood firm as a showdown took shape last week, stating it needs leeway “to attract, retain and motivate highly-qualified leadership.”

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Hydro One had proposed up to $1.86 million for its executive vice-president and $140,000 a year for directors, with the chair getting $169,500. The chair’s stipend is now set at $120,000.

Less than two hours after Rickford announced the directive, the Progressive Conservative Party put out a fundraising appeal to supporters by email that interim Liberal leader John Fraser called “sleazy.”

The appeal points to Hydro One’s proposed salary cap, stating “you know what they want to pay? $2.7 MILLION per year. For one person! We told them it’s a flat-out no ... click here to donate $1 to make sure we win the next election.”

New Democratic Party Leader Andrea Horwath also criticized the cash plea by the PCs.

“It looks like this announcement was more about trying to get some money out of their base than it was about the CEO salary. But let’s not forget, when it (Hydro One) was a public company, that salary was $750,000 approximately.”

Rickford defended the $1.5-million cap as “reasonable and responsible” and aligned with compensation at with Ontario Power Generation, where departing chief executive Jeff Lyash makes $1.5 million in salary and incentives.

The minister repeated his party’s pledge to cut electricity prices another 12 per cent, and said “stay tuned” when asked if that will be done by channelling Hydro One’s dividends back to ratepayers, as promised during last spring’s election campaign.

Last week, Woods said the government’s proposed CEO pay cap could short-circuit the hiring of a preferred candidate for the job following the government’s ouster of former boss Mayo Schmidt, whom Ford dubbed the “six million dollar man” for his annual pay packet.

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“As you know, we have been in discussion with a very talented prospective CEO, who we believe would accept the role with compensation as contemplated under the proposed framework,” Woods wrote, referring Hydro One’s proposed cap of $2.78 million.

“As we have previously advised, the entire top management team (five individuals) are under retention agreements and it appears likely that all five will depart soon after their agreements mature in the next 2.5 months.”

Critics have warned the government interference in pay levels at Hydro One, whose shares are publicly traded on the Toronto Stock Exchange, will send a chill through the business community.

Hydro One shares fell 10 cents or 0.48 per cent to $20.55 Thursday.

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