Hartford Courant - November 9, 2007
By MARK PETERS Courant Staff Writer
Connecticut Light & Power agreed Thursday to withdraw its request that ratepayers pick up the cost of bonuses paid to top executives in the face of mounting criticism from customers, elected officials and consumer advocates.
The cost of incentive bonuses has traditionally been paid by shareholders, not ratepayers.
The utility company's decision came four days after The Courant reported how CL&P, the state's largest power company, had asked regulators for permission to pass on the $3.5 million cost of annual executive bonuses through higher electric rates.
CL&P officials had defended the change, contained in hundreds of pages of documents related to its request for a rate increase, as a cost of doing business that should be passed on to customers. They said the incentives help the company recruit top talent and ensure that executives do the best job possible.
The company had been facing sharp criticism from consumer advocates, such as the state Office of Consumer Counsel, but didn't act until top political leaders, including Gov. M. Jodi Rell, voiced opposition.
"While these are legitimate business expenses and recovered by many utilities in Connecticut and across the country, after discussing this today with Governor Rell, I decided now is not the right time to include these costs in our rates," Charles W. Shivery, chairman and CEO of Berlin-based Northeast Utilities, parent company of CL&P, said in a statement.
Rell's office said the governor personally asked Shivery to withdraw the proposal, saying ratepayers shouldn't be picking up the bonus compensation, especially at time of high energy prices. Connecticut has the highest electric prices in the continental U.S.
Just before Rell's statement Thursday, Senate President Pro Tem Donald E. Williams Jr., D-Brooklyn, and Sen. John Fonfara, D-Hartford and co-chairman of the legislature's energy committee, said that the Senate Democratic caucus would write to the state Department of Public Utility Control urging it to reject CL&P's bonus request. The two legislators also said they would pursue legislation to prohibit the practice.
The executive bonus issue resonated with CL&P customers, some of whom contacted legislators and wrote to the DPUC to complain.
"It has drawn a significant reaction from the average constituent," Williams said.
For instance, Barb Garneau of Rocky Hill, already frustrated by the cost of her electric heat, said: "I have recently replaced all of my windows - not cheap! - to try to save on my bills. How dare they line their pockets at our expense?"
About 15 officers at CL&P and NU, including Shivery and CL&P President Raymond Necci, would have qualified for the $3.5 million in bonus money. Shivery's total pay package in 2006 was $4.2 million, according to federal filings.
The request for the change dated to July, when CL&P filed its request with the DPUC to raise rates by 4.6 percent starting Jan. 1. The proposed increase is expected to add about $6.25 a month to the bill of a typical household.
Buried within the complicated rate increase case was the request to shift the cost of bonuses to ratepayers, as well as nearly $1.5 million in costs to enhance executive retirement plans. Rell said CL&P plans to retain its request for the retirement money since ratepayers have historically paid for it.
The state consumer counsel, Attorney General Richard Blumenthal and consumer groups questioned why ratepayers should pay the cost of bonuses when they have traditionally come out of company earnings.
They also questioned whether, at a time when CL&P is being investigated for poor customer service practices and inaccurate meters, company executives even deserve a bonus. And they challenged the idea that the company's goal to increase profits were in line with what customers want from their utility company, and therefore something they should pay to encourage.
The $3.5 million for bonuses represented only a small fraction of the $189 million in additional annual revenue CL&P would be allowed to collect through higher rates. The Edison Electric Institute, an industry trade group, said that including incentive pay, such as bonuses, in electric rates is common practice at some regulated utilities. A filing with the DPUC shows that in Connecticut, incentive compensation programs are included in the rates at United Illuminating and Aquarion Water Co.
A spokesman for Rell said her office began pushing CL&P to withdraw the bonus proposal a day after The Courant reported it. Rell said she was happy the utility agreed.
"Given the current need to keep energy prices as affordable as possible and keep our economy growing, this decision is the right one for both the company and its customers," Rell said in a statement.
Contact Mark Peters at mrpeters@courant.com.
Copyright © 2007, The Hartford Courant
