Retirement incentives paid to N.B. Power employees who were already leaving, auditor says
An early retirement program offered by N.B. Power in the 2023 fiscal year to save money paid more than $1 million to a group of employees who had already announced plans to leave the utility for free, according to a review by New Brunswick Auditor General Paul Martin.
"Eight individuals accepted to the early retirement program had previously notified NB Power of their plans for retirement in advance of the program being offered," Martin wrote in his report.
But $1.15 million was still paid "in incentive costs" to get these people to retire, Martin said.
The finding was one of several criticisms by Martin of the utility's attempt to shed itself of older workers as one of several cost-saving measures it adopted in 2022 and 2023.
Martin estimated that most of the 148 employees who were paid to retire under the scheme likely would have left on their own without an incentive and "potentially only an additional 44 retirements" were generated by the program.
He said $17.1 million in cash and benefits were ultimately paid by N.B. Power to the retiring group.
N.B. Power has been under significant financial pressure for several years and in October 2022 announced the early retirement program as a way to save money. At the utility's rate hearing in front of the New Brunswick Energy and Utilities Board February 2023, N.B. Power president Lori Clark highlighted the retirement plan as an example of how seriously the company was about cutting costs.
"We have engaged the assistance of external expertise to assist us in finding these savings and have started the process with the elimination of almost 150 positions through a staff optimization program that will save approximately $13 [million] to $15 million in the upcoming fiscal year alone," Clark said.
To work, the retirement program required what was eventually 148 participating employees to leave by a mandatory retirement date of March 31, 2023 but Martin found 23 stayed longer than that, including one employee who was able to stay on until March of this year, two years past the mandatory date.
In addition, although participating in the program was supposed to permanently end an employee's relationship with the utility, Martin said three were eventually rehired on contracts that ran between six months and two years following their official retirement.
Martin noted that N.B. Power's board of directors had approved the plan unanimously at a meeting in September 2022 but said "limited analysis" was provided to board members to support that decision.
Martin also pointed out that despite the unanimous approval, electronic board records showed two of N.B. Power's 11 board members had not accessed a briefing note about the plan prior to the board voting on it.
N.B. Power has reported the early retirement program did eventually generate savings in labour costs of $11.3 million.
That is well below its own initial estimates of what would be achieved, and Martin made five recommendations for the utility to improve its planning, execution and monitoring of programs in the future.
In its response, N.B. Power agreed to all five recommendations and pledged to document in writing "the status of the positions eliminated in the 2022/23 Workforce Reduction Program and in any such program in the future, for a five-year period."
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