The New Mexico Public Regulation Commission (PRC) has given five investor-owned gas and electric utilities in the state until Jan. 11 to report pay packages their top executives have received and other financial information from the past decade as part of an investigation into whether executive compensation “is reasonable and just.”
The PRC ordered El Paso Electric Co. (EPE), Public Service Company of New Mexico (PNM), Raton Natural Gas Co., Southwestern Public Service/Xcel Energy and Zia Natural Gas Co. to report pay packages of their five highest-ranking directors and top five highest ranking officers, along with “the portions of the minutes of Board of Directors meetings that reflect, discuss or describe approval of the compensation” for those officers and directors dating back to 1977. The utilities were also ordered to provide company earnings, revenue, rates and the number of customers they serve.
PRC commissioners indicated that they were prompted to order the information by EPE’s 2007 Long-Term Incentive Plan, in which the utility said it plans to issue one million shares of stock as incentives for employees, officers and directors. In a procedural order issued in July the PRC said that at the then-current market price of EPE shares the issuance of stock proposed in the plan could result in transactions with an aggregate value of approximately $25 million in compensation to EPE executives. The potential cost to energy consumers of the EPE plan has the commission wondering how much other utility customers are paying for executive compensation.
“Because all, or some portion, of the cost of a utility’s executive compensation are recovered in rates charged to New Mexico ratepayers…[the commission] became increasingly concerned about the issue of whether the compensation being paid by all investor-owned New Mexico utilities to their executives is reasonable and prudent,” the PRC wrote in the order.
PNM spokesman Jeff Buell told NGI the utility would cooperate with the PRC and provide the requested information. Albuquerque-based PNM, the principal utility of PNM Resources Inc. in New Mexico, is the largest natural gas and electricity provider in the state, serving about 977,000 customers statewide.
“It is an issue of interest here, we recognize that,” Buell said. “What we like to point out whenever this issue comes up is that what we pay our executives is very much in line with what like-size companies pay their executives. That’s by design. We’re competing for the same management talent and we need to offer competitive compensation in order to attract the highest quality management to the company, and we think that has real benefits for our customers as well.”
Only about 22% of PNM executives’ compensation comes from the rates paid by its customers, Buell said.
When it comes to rate increase requests, the PRC has been a tough nut to crack for New Mexico’s utilities. In June the PRC approved a $5.8 million rate increase for EPE, well below the $13 million in additional base rate revenues the utility had requested. PNM has struggled recently to gain support from the PRC for what was originally an $82.4 million electric rate increase. A ruling on that case is not expected until February.
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