Electric Utility Week
Pacific Gas & Electric in an attempt to assuage concerns expressed by a U.S. bankruptcy court in San Francisco that its reorganization plan may not be legally viable, filed a modified plan March 7th, following a decision by Judge Dennis Montali that the earlier restructuring plan could not be approved because it relied too heavily on wholesale pre-emption of state laws and regulations.
Under the revised proposal, PG&E asked the court to pre-empt state Public Utilities Commission law in three areas — the sale of property and assets, issuance of debt or equity securities, and rules governing affiliate transactions. PG&E initially asked for pre-emption of all state laws and regulations it is presently under that would get in the way of its reorganization design.
Since Montali did not feel it was within his legal purview as a federal judge to allow a blanket pre-emption of state laws and regulations, he asked PG&E to revise its plan, indicating only the key areas it would need pre-emption and the economic justifications for why it needs the pre-emption. Details of PG&E‘s plan will be scrutinized at a hearing next week.
The new proposal also addressed a key concern of many state officials over the earlier plan to dispose of the approximately 132,000 acres of lands associated with the utility’s hydroelectric facilities.
Under Thursday’s plan, as much as 60%, or approximately 78,000 acres, will be retained or ultimately reside within the reorganized utility. ”Only the land directly related to operating the ERC-licensed hydroelectric generating facilities ultimately will be owned by the new generating company,” it said.
”PG&E continues to believe that its plan of reorganization is the only feasible solution for making these businesses investment grade and allowing the state to get out of the power buying business,” said Robert Glynn, chairman of the utility’s parent company PG&E Corp. ”The hallmarks of the plan of reorganization remain paying all valid claims in full without selling assets or asking the Bankruptcy Court to raise rates or the state for a bailout.” But as the utility struggles to get out of bankruptcy court by year-end, PG&E Corp. in a proxy statement released Wednesday, detailed how eleven PG&E and utility executives received more than $ 4.6-million in 2001 bonuses. The proxy statement will be used by shareholders at their April 17 annual meeting in San Francisco.
According to the proxy statement, while Glynn earned $ 900,000 in base salary last year, an amount equal to what he was paid in 2000, the company also awarded Glynn a nearly $ 1.2-million bonus and $ 3-million in stock in 2001. Glynn received no bonuses in 2000. PG&E Corp. Chief Financial Officer Peter Darbee in 2001 saw his salary increase from $ 415,000 to $ 455,000 with a bonus of $ 328,578 and $ 1.125-million stock reward.
The utility also rewarded its executives last year with bonuses. CEO Gordon Smith maintained his 2000 salary of $ 630,000, but received $ 664,808 bonus and a $ 1.75-million stock reward. CFO and Treasurer Kent Harvey saw his salary rise from $ 260,000 to $ 285,000 with a bonus of $ 213,465 and a stock reward of $ 625,000.
PG&E senior vice presidents lucky enough to have had bonuses in 2000 received higher awards last year. Thomas Boren, president of PG&E‘s unregulated power producing arm National Energy Group, saw his salary increase to $ 690,000 from $ 630,000 with his bonus rising from $ 441,790 to $ 679,478. His stock reward was $ 1.75-million. NEG COO of Trading L.E. Maddox, NEG COO of East Region P. Chrisman Iribe and NEG COO of West Region Thomas King saw salary increases of $ 25,000 to $ 425,000 and bonus increases of $ 6,914 to $ 306,914. They saw stock rewards of $ 1.125-million each.
In the proxy statement, PG&E attributed the bonuses to ”achievement of corporate and organizational objectives” over the past three years. The stock rewards, which fluctuate with market value, were offered ”to retain certain key personnel to ensure a continued workforce of experienced and knowledgeable employees in light of the energy crisis, bankruptcy proceedings and the proposed Plan of Reorganization.” The shares automatically vest in December 2004, the statement said.
The news of bonuses and stock rewards did not sit well with consumer advocates, which claimed the executives should not benefit from operations that have led to bankruptcy and raised utility rates to all-time highs in California.
”PG&E executives killed their own utility. They deserved to be dumped and not showered with gifts,” said Doug Heller of the Foundation for Taxpayer and Consumer Rights.
Mindy Spatt of The Utility Reform Network, said the bonuses show that, ”The fat cats are getting fatter at the expense of ratepayers and taxpayers.”