FPL takes $37 million in exec raises off the tableby Dara Kam | October 21st, 2009
Florida Power & Light Co. made a second multi-million dollar concession this morning in hopes of nailing down a $1.3 billion rate hike.
The state’s largest utility is scrapping about $37 million in executive pay from its proposed base rate increase, letting customers off the hook for the pay.
FPL already backed off $16 million in aviation costs this morning, lowering its $1.3 billion rate hike by about $53 million.
Read FPL attorney Susan Clarke’s statement at the hearing after the jump.
“The issue of executive compensation has received considerable attention. We certainly agree that it is an important business matter since we believe in competitive pay for top performance. For our customers, that performance has meant typical bills that are the lowest in the state, reliability that is 47 percent better than the national average and a cleaner environment in Florida as a result of our clean energy profile. As evidenced by national benchmarking data, our overall compensation and benefits packages represent very reasonable and prudent operating expenses when compared to the market for similar services, duties and responsibilities.
However, as a practical matter, compensation costs represent only a small fraction of FPL’s overall rate request and we’re concerned that they have the potential to become a very time-consuming distraction from the many other important issues that still remain to be addressed in this proceeding.
Therefore, FPL is taking the following actions with respect to executive compensation costs. OPC has taken the position that 50% of the incentive compensation for FPL’s executives should be borne by shareholders rather than customers. There also have been suggestions at certain points in these hearings that there should be no increases in executive compensation from 2009 to 2010 under the current economic conditions. Accordingly, FPL is reducing its 2010 and 2011 test year O&M expenses by an amount equivalent to making shareholders responsible for 50% of all executive incentive compensation AND equivalent to eliminating all executive raises for 2010 and 2011. Together, those adjustments will reduce test year O&M expenses by approximately $17.2 million in 2010 and $19.3 million in 2011. That is a total reduction for the two test years of approximately $37 million. These reductions will be one-time, lump-sum adjustments to the overall 2010 and 2011 test year O&M expenses.
This approach does not come without a price that has the potential to impact investors and consumers alike. Carried out over the long term, we believe this could hinder our ability to recruit, retain, and benefit from the brightest minds and hardest workers in the energy field. But given today’s unfortunate economic climate, we made the decision to prioritize investing in reliability and efficiency for our customers above all else.
We believe this is an appropriate action that accommodates the views of OPC and others while providing flexibility for changes in the marketplace over time. As I noted previously, we’re also hopeful it will allow us to spend time on this and other matters that is proportionate to their relative size and scale in the context of the total rate request.” — Susan Clark, FPL lawyer.