Corporate Governance

Hydro Ottawa is committed to establishing and maintaining leading governance practices for a company of its size and mandate. This goal requires constant attention, because governance standards are continuously evolving. As such, the company seeks to continuously improve its governance practices.

Hydro Ottawa Holding Inc. is a private company, incorporated under the Business Corporations Act (Ontario). At the same time, the company has a public sector shareholder and a public mandate, and is mindful of its responsibility to be accountable both to the shareholder and to the public. The company’s governance practices are guided not simply by legal obligations, but by best business practices and standards established by independent agencies.

While Hydro Ottawa is not a reporting issuer under the Securities Act, and, therefore, is not required to meet governance standards that apply to publicly-traded companies, the company is guided by these standards and seeks to meet or exceed them. In addition, Hydro Ottawa regularly compares itself to the practices of both private and public sector organizations, and to the standards set by agencies such as the Canadian Securities Administrators and the Ontario Securities Commission.

Governance Structure

Accountability for the effective oversight of the Corporation and its subsidiaries rests with an eleven-member Board of Directors, which provides direction to the Corporation on behalf of the shareholder, the City of Ottawa. The Board provides leadership for the company within a framework of effective controls that enables risks to be assessed and managed, and is responsible for supervising the management of the business and affairs of the company and its subsidiaries.

In carrying out its oversight function, the Board of Directors is guided by a Shareholder Declaration issued by Ottawa City Council and revised from time to time (most recently in June 2006). The company’s Code of Business Conduct, its Director Conflict of Interest and Conduct Guidelines and a Related Party Transaction Disclosure Policy and Process also govern the actions of the Board.

In 2006, a separate Board of Directors was established to oversee the operations of Hydro Ottawa Limited, in accordance with the Affiliate Relationships Code for Electricity Distributors and Transmitters issued by the Ontario Energy Board. The powers and functions of that Board are set out in a Shareholder Declaration issued by the Hydro Ottawa Holding Inc. Board of Directors. Ottawa City Council appoints the members of the Board of Directors of Hydro Ottawa Limited. A majority of the members of both Boards are independent of management and the shareholder.

On a day-to-day basis, the Corporation is led by an Enterprise Executive Team, comprised of the Corporation’s President and Chief Executive Officer, the Chief Financial Officer and the senior executives of the subsidiaries. This team oversees the alignment of business practices and strategies with the goals of the Corporation, and drives performance by managing risks and opportunities. The Executive Team is accountable to the Corporation’s Board of Directors through the President and Chief Executive Officer.

2009 Governance Achievements

In 2009, the Corporation continued to refine its governance practices and improve the functioning of its Boards.

The Board of Directors completed a review of its governance framework with assistance from an external expert in 2009, to streamline the respective roles of the Boards of Directors and their committees and enhance their effectiveness. Changes made as a result of this process have permitted the Board to increase its focus on the consideration and implementation of strategic initiatives. In addition, the separate Audit Committees of the two Boards were consolidated into one, and the mandate of the Governance and Compensation Committee was revised, resulting in a change of name to Governance and Management Resources Committee.

The Corporation also completed the development of a Business Continuity Plan (BCP) and a management succession planning process. Departmental business continuity plans were also prepared for critical processes, to ensure maintenance of these processes during a pandemic or other disruption.

Appointments to the Boards of Directors

In accordance with the terms of the Shareholder Declaration, the City of Ottawa appoints all Directors to the Boards except the President and Chief Executive Officer. In doing so, the City considers candidates recommended by the Nominating Committee of the Board of Hydro Ottawa Holding Inc., but is not obliged to select these candidates. The Nominating Committee is required to utilize the services of a recognized recruitment firm to search for candidates for appointment to the Board.

As set out in the Shareholder Declaration, all candidates for appointment to the Boards must meet certain requirements, including demonstrated integrity and high ethical standards, relevant career experience and expertise, and an understanding of the role of Hydro Ottawa both as a service to local ratepayers and an asset of taxpayers.

In addition, the nomination and selection process is designed to maintain a Board that includes the following competencies among one or more directors: strong business background; a strong financial background including financial accreditation; industry sector experience in the areas of business of the Subsidiary companies; strategic planning and corporate stewardship experience; competitive business experience; an awareness of the needs of the Corporation’s customers; public or private market financing experience; and board experience.

Committees

The following committees were created to help the Boards of Directors carry out their duties. The committees meet regularly and provide feedback on their discussions to their respective Boards.

HYDRO OTTAWA HOLIDNG INC

Audit: The Audit Committee reviews financial statements, accounting practices and policies, auditing processes and the results of internal and external audits and related matters. It also oversees financial risk management and assesses internal controls. In 2009, the committee was consolidated with the Audit Committee of Hydro Ottawa Limited to improve the efficiency of committee oversight, and its membership includes representatives of the Board of Directors of Hydro Ottawa Limited. This committee met five times in 2009.

Governance and Management Resources: The Governance and Management Resources Committee reviews the Corporation’s governance structures and practices to ensure that the Board of Directors can fulfill its mandate. The name of the Committee was changed in 2009 from the Governance and Compensation Committee to better reflect the scope of its mandate. It reviews management resources and compensation practices to ensure systems are in place to attract, retain and motivate qualified management personnel. It also reviews and assesses the performance of executive management, oversees the Board Assessment process, and monitors compliance with codes of conduct. This committee met five times in 2009.

Nominating: The Nominating Committee, with the assistance of outside consultants, identifies and evaluates potential candidates for appointment as Directors. The Nominating Committee makes recommendations to the shareholder (represented by Ottawa City Council) for the appointment of directors.

Board and Committee Meeting Attendance

The following tables illustrate the attendance of members at meetings of the Boards of Directors and their committees.