Who got a raise? PG&E executives. Every time ratepayers pay their bill, they should remember what it’s going to: multimillion dollar pay packages and pensions for the same executives that led the company in mistake after mistake after mistake.
Top executives at PG&E saw their overall compensation decline last year amid an unprecedented series of disasters and setbacks.
But the overall compensation declines were cushioned by across-the-board increases in cash salaries and, in some cases, increases in stock awards, the utility revealed Wednesday in a regulatory filing.
The compensation drop partly resulted from the company’s decision—at the request of PG&E’s senior managers—to not pay out any awards to executives under a short-term incentive plan, PG&E said in the filing. That request was made by executives in recognition of the "challenges" the company faced last year, spokesman Brian Hertzog said.
"The senior management team takes very seriously its accountability for its results," Hertzog said. "This decision was one way to demonstrate that to customers and other stakeholders."
But the move didn’t appease the utility’s critics. In 2010, PG&E experienced a string of failures, including the pipeline explosion in San Bruno that killed eight people and a botched rollout of its new SmartMeters. It also spent $46 million promoting Proposition 16, a move to curtail municipal utilities that was trounced at the polls.
PG&E CEO Peter Darbee’s overall compensation decline from $10.6 million in 2009 to $8.4 million doesn’t go nearly far enough to reflect the utility’s dismal record, said Assemblyman Jerry Hill, D-San Mateo, whose district includes San
"Any other employee would have been fired by now," he said.
Darbee not only lost out on the short-term compensation program, under which he received $1.9 million in 2009, but also saw the value of his annual stock award decline from $6.3 million in 2009 to about $5 million last year.
Counterbalancing that, Darbee’s cash salary rose $46,527 to about $1.2 million and the value of his pension plan and deferred compensation rose $2.1 million, compared with $1.1 million the previous year.
Similarly, Chris Johns, PG&E’s president, saw his overall compensation drop from $3.5 million in 2009 to $3.3 million in 2011. Johns’ short-term incentive pay fell to $0 from $684,431 in 2009.
But PG&E awarded Johns $1.93 million worth of various stock compensation, up from $1.88 million the previous year. And Johns’ salary rose to $672,500 from $593,866 the previous year.
Kent Harvey, PG&E’s chief financial officer, earned $2.6 million in total compensation last year, up from $1.9 million in 2009. Harvey saw his salary increase 18 percent to $537,500 and his stock awards nearly double to $1 million.
Both Johns and Harvey were promoted in 2009, Hertzog noted. Last year was their first full year in their new positions and the first full year to reflect their new rates of pay.
Overall, PG&E compensates executives based on their performance as gauged by a number of measures, Hertzog said. The company also tries to pay salaries competitive with those of equivalent positions elsewhere.
"We evaluate all those factors and make judgments on that," he said.
But PG&E had little to crow about on the financial performance front, even setting aside the pipeline disaster and its other setbacks. Its net income fell 10 percent last year to $1.1 billion, and the cash it generated from operations dropped to $34 million from $135 million in 2009. While the utility’s stock price rose 11.6 percent last year, that increase was in line with how the overall market performed.
PG&E’s decision to not pay bonuses or short-term pay awards to executives should earn it some points with shareholders, said Brian Foley, an executive compensation consultant.
"It’s refreshing to see some restraint," Foley said. "Of course, these are the guys that had the blowup."
The company’s critics urged the California Public Utilities Commission to scrutinize the executive payouts. The value of Darbee’s stock awards are larger than the fine PG&E recently agreed to pay for failing to meet the PUC’s deadline for turning over documents related to the safety of its gas pipelines, Hill noted.
PG&E’s actions in the past year show that its executives clearly don’t deserve the high salaries they receive, said Mindy Spatt, a spokeswoman for The Utility Reform Network, a watchdog group.
"What it tells us is the PUC has set profits and rates much too high for PG&E," said Spatt. "Every time ratepayers pay their bill, they should remember what it’s going to: multimillion dollar pay packages and pensions for the same executives that led the company in mistake after mistake after mistake."
A PUC media representative did not respond to a request for comment. Nor did PUC Commissioner Mike Florio, who was an outspoken critic of the agency and its dealings with PG&E when he worked for TURN, return a call seeking comment.
Here’s what top executives at PG&E and its utility subsidiary made in 2010 in cash salary and overall compensation.
Note: Johns and Harvey were promoted in 2009. Last year represented their first full years at their new salaries.
Source: Securities and Exchange Commission filing