A generous deal between the Ontario government and the Power Workers' Union is calling into question Premier Kathleen Wynne's promise to hold the line on labour costs.

The tentative contract agreement gives employees of Hydro One and Ontario Power Generation raises, lump sum payments and stock options in the soon-to-be-privatized Hydro One. Particularly surprising is the provision granting Ontario Power Generation employees stock in Hydro One, even though they do not work at there. The only thing OPG employees have in common with Hydro One workers is the union that represents them.

The contract stands in sharp contrast to the tough approach the Liberals have taken with other workers. Teachers' unions, for instance, say talks have been rocky as the government demands an end to caps on the size of classes and cuts to teachers' prep time. High school teachers have began rolling strikes across the province; elementary teachers promise job action next week.

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The PWU deal, labour and industry sources said, is politically expedient: the union has refrained from fighting the government over the controversial sale – unlike others, which have launched anti-privatization ad campaigns – and the government wanted labour peace before the initial public offering of Hydro One shares.

Ms. Wynne this week defended the power workers' agreement, saying it is a "net-zero" contract, in which any increases to salaries or benefits are offset by cuts elsewhere. But she would not go into detail because the deal has not yet been approved by PWU members.

"I'm not going to comment on the specifics, because we need to honour that ratification process," she said. "It is a net-zero deal."

PWU president Don MacKinnon did not respond to requests for comment.

The deal has not been made public, but The Globe and Mail obtained an internal PWU memo that outlines its contents. Hydro One and Ontario Power Generation workers will receive 3-per-cent raises, lump sum payments equal to 3 per cent of workers' salaries and Hydro One stock worth between 2.7 per cent and 2.75 per cent of annual pay, handed out every year for the next 12 to 15 years. In an example cited in the memo, the union estimates a share price of $20, which would translate into 121 shares a year for an OPG employee earning $88,000. Over 15 years, this would yield 1,815 shares.

A source with knowledge of the agreement pointed to factors beyond the political ones for the government's kind treatment of PWU. If government had not reached a settlement at the bargaining table, the matter might have gone to arbitration, which often favours the workers. The PWU deals will also be easier for the government to absorb fiscally, because electricity ratepayers, rather than the deficit-saddled treasury, will pay for them.

Regardless of the reason, the treatment of the PWU compared to that of other unions highlights the unevenness the government faces in trying to apply its money-saving mandate.

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Progressive Conservative MPP Lisa McLeod said the government has been "less than consistent in how it deals with labour unions," and that the PWU arrangement means other unions could demand equally rich deals.

"Is this the price of peace before the initial public offering? Is it the price of peace before a major sale?" she said. "It also sets a very dangerous precedent for future collective agreements. You have to remember, there are about 4,000 collective agreements in the province."

Ms. Wynne is planning to sell 60 per cent of Hydro One to the private sector to raise money for new transit construction. Of the $9-billion the province hopes to raise, $4-billion would go to transit and the rest to paying debt.

New Democrat Leader Andrea Horwath said the government is being disingenuous in calling the Hydro One sale a necessary move to pay for transit while hiving off shares for a different purpose.

"It's unfair to Ontarians that the government is selling a bill of goods that isn't actually true," she said. "They're not putting the money … into infrastructure and transit. They're using those shares to negotiate a collective agreement. It's absolutely wrong."