A proxy filed with the Securities and Exchange Commission earlier this month by PG&E Corp. indicated its CEO’s compensation doubled last year, reaching almost $20 million, including stock options. Separately, a spokesperson for the holding company for the Chapter 11-protected Pacific Gas and Electric Co. utility said the firm earlier in the year paid out $83 million in retention bonuses to 17 top executives in the parent, utility and former merchant energy units.

Using the still-open record of a pending general rate case for the PG&E utility, California’s regulatory commission earlier this year launched a probe of the holding company bonus distribution, which included $17 million for PG&E CEO Robert Glynn. A CPUC spokesperson said Friday that then regulatory staff are still investigating the extra compensation.

The proxy information indicated that for 2003, Glynn received nearly $1.1 million in salary, $9.9 million in stock and cash for an executive retention plan, $3.1 million in retirement annuities and travel perks, and $2.2 million in restricted stock, along with another 486,000 stock option shares valued at $2.8 million. This compared to total compensation in 2002 of about $7.4 million.

A California Public Utilities Commission administrative law judge in the PG&E utility’s pending rate case said in a ruling that “it is not clear” the extent to which the bonus retention program that was established before the utility filed for Chapter 11 bankruptcy protection in April 2001 “was disclosed in the record” of the test year 2003 rate case. The ALJ has put aside the completion of the rate case to take evidence on the bonus issue to assess its “ratemaking and public policy” ramifications.

A long list data and information has been requested from the utility including the historic compensation, bonus and/or incentive programs that have been in place each year, beginning with 2001 through 2004, and in regard to the debated retention bonuses, the CPUC ALJ wants to know whether ratepayers or shareholders will be funding them. (The company has maintained it is the shareholders who paid them.)

Among the assurances being sought from the utility and its parent is that none of the funds used for the bonuses or the compensation of nonutility executives has been “derived from ratepayers of PG&E’s utility.” When the added information is filed with the CPUC, the ALJ said it will be made part of the general rate case record, and comments on the issue were due to be wrapped up the end of February. The PG&E rate case overall is still pending.

The payments relate to a “retention program” established by the energy holding company early in 2001 before its utility filed in April 2001 for Chapter 11 bankruptcy with more than $9 billion in unpaid wholesale power bills in the height of California power crisis. “Performance targets” were established for top corporate, utility, and merchant energy unit (former PG&E National Energy Group) executives.

Granting restricted stock, or so-called “phantom shares,” PG&E’s top officers received multi-million-dollar payouts, with PG&E CEO Glynn getting $17.1 million for his 615,385 shares. In total, more than 3 million shares were vested and the company stock price, which more than doubled last year after it had hit single-digit levels in the first months of the bankruptcy, closed 2003 near its 52-week high at $27.77/share.

At one of their public business meetings earlier this year, CPUC commissioners lambasted PG&E’s senior management for giving out multi-million-dollar rewards, some to senior executives who left the company during the past year. And a local San Francisco business columnist and television commentator, David Lazarus, reported that PG&E filings with the Securities and Exchange Commission earlier in January indicated an extra $3.3 million of “long-term incentive bonuses” also may be due to the PG&E Corp. CEO Robert Glynn and his counterpart at the Pacific Gas and Electric Co. utility, Gordon Smith.

“The idea that these executives would massively be rewarded for these past three years is intriguing,” said CPUC Commissioner Geoffrey Brown. “With ratepayers having been forced to pay out billions of dollars to bailout the utility (from Chapter 11), and shareholders having been forced to forego dividends for 13 quarters, it would appear the only ones benefiting (from the three years in bankruptcy) are the very executives who voluntarily brought the company into bankruptcy in the first place. It does make one wonder about extent of shareholder democracy.”

Brown and other commissioners said they are aware the bonuses are to be paid by shareholders — not PG&E utility ratepayers — which normally escapes the purview of the state regulatory commission, but a consumer group, the Greenlining Institute, reportedly was considering a filing to the CPUC to seek its oversight of the executive payouts.

In a letter to Commissioner Brown, the Greenlining group alleged that the PG&E utility “hid the bonuses” in its most recent rate case request that is still being processed by the CPUC, although a settlement is in the works on it, and is part of the modified bankruptcy plan settlement.

CPUC President Michael Peevey, a millionaire and former president and director of Southern California Edison Co., said he agreed with Brown’s remarks. “There is something distasteful about bonuses that for one or two of the recipients will exceed the entire charitable contributions budget of the company. That strikes me as something perverse,” Peevey said, “and I would hope that PG&E unclogs what seems to be a very tin ear and learns to walk without two left feet.”

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