PG&E Execs Reap Millions in Bonuses

More than $84 million in controversial paper bonuses became reality at the end of 2003 for 17 Pacific Gas & Electric executives, including five former officials. The stock grants, which ranged from $2.7 million to $17 million, were part of an executive retention program created during the energy crisis to deter PG&E parent and affiliate executives from fleeing what appeared to be a listing ship. The bonuses followed the approval of a plan for getting the utility out of bankruptcy. PG&E defended the payouts on restricted stock, stating it had an obligation to make good on the shares because they met established benchmarks set by PG&E. The bonus payouts became a done deal after PG&E?s shareholder value?the total of stock price and dividend payments since 2001?exceeded that of at least nine out of a dozen energy companies. Included in the mix were Enron, AEP, Duke, Reliant, Southern California Edison, Sempra, Southern Company, and TXU. All of those firms have faced financial difficulties. When the increase in shareholder value on December 31 was added up, PG&E ranked number one, said Brian Hertzog, PG&E Corp. spokesperson. The utility has not paid any dividends since the energy crisis, but its stock price at the end of 2003 was $27.77 pershare. In comparison, Duke, which has continued to pay quarterly dividends since 1997, paid an annual dividend of $1.10/share. Since Reliant Energy split into two companies in September 2002, Reliant Resources Inc. has not paid any dividends. PG&E posted a $77 million gain for last November, according to filings with the Securities and Exchange Commission. On paper, PG&E Corp. chief executive officer Bob Glynn will reap more than $17 million for his 615,385 shares, and Gordon Smith, PG&E president, will receive nearly $10 million for his 358,975 shares. Peter Darbee, chief financial officer, will be $6.4 million richer when his 230,770 shares are cashed at their year-end value. Later this week, California Public Utilities Commission member Geoffrey Brown asked the commission to investigate the matter. In addition, Assemblymember Mark Leno (D-San Francisco) told the San Francisco Chronicle that he would introduce a bill to knock out the state tax exemption for the bonuses. According to some analysts, it is not unusual for a corporation to give financial incentives to top management to keep them on board during rough times. The analysts, however, declined to comment on the amount or distribution of the PG&E bonuses. A few days before the CPUC and the bankruptcy court ruled on PG&E?s reorganization plan last month, PG&E Corp. announced it was reviewing its bonus program, which is paid for by shareholders. It stated in mid- December that the potential millions of dollars in bonuses were in ?no way linked with the resolution of PG&E?s Chapter 11 case.? The CPUC- and bankruptcy court?approved deal allowing PG&E to exit from bankruptcy requires ratepayers to pay at least $7 billion over nine years. It includes the creation of a $2.2 billion phantom asset that will be accompanied by a significant return that may be paid off by earmarked rates. The latter, however, has to have the approval of the state legislature. CPUC president Michael Peevey?s alternate decision for boosting PG&E?s investment-grade rating, which did not pass, included a provision that would have prohibited PG&E from paying out bonuses. That prohibition was deleted from the decision approved by Peevey and commissioners Jeff Brown and Susan Kennedy on December 18, according to dissenting commissioner Loretta Lynch. The final bankruptcy reorganization adopted the last-minute deal PG&E reached behind closed doors with The Utility Reform Network. Although they are called ?retention bonuses,? PG&E agreed to pay the grants to five people who were no longer with the company. Four of them were deemed entitled to the money because they were National Energy Group executives whose positions were eliminated as part of the restructuring, Hertzog said. NEG is also now in bankruptcy reorganization. Also found eligible for the bonus was Jim Randolph, chief of utility operations, who retired last November but technically still worked for PG&E at the year?s end with vacation time factored in. Just when the money will be dispersed has not yet been decided, Hertzog said. Who Gets How Much Bob Glynn, PG&E Corp. chair: $17 million Gordon Smith, PG&E president: $9.96 million Peter Darby, PG&E CFO: $6.4 million Bruce Worthington, senior VP: $3.56 million G. Brent Stanley, senior VP: $3.56 million Dan Richard, senior VP: $3.56 million James Randolph, senior VP: $2.7 million Greg Rueger, senior VP: $2.7 million Kent Harvey, CFO: $2.7 million Roger Peters, senior VP: $2.7 million Bonus recipients from affiliate National Energy Group include: Thomas Boren, CEO: $7.4 million Lyn Maddox, senior VP: $4.78 million Chris Iribe, senior VP: $4.78 million Thomas King, senior VP: $4.78 million Steve Herman, senior VP: $2.66 million John Robert Cooper, senior VP: $2.66 million Sarah Barpoulis, senior VP: $2.66 million

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PG&E Execs Reap Millions in Bonuses

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