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While authorizing Providence Gas Co., a natural gas local distribution company (LDC), to raise its rates by a total of $3.99 million, the Rhode Island Public Utilities Commission (PUC) reduced the LDC's proposed expense allowance for executive incentive compensation by 60 percent, to match the portion of a performance incentive award designed to reward shareholders. The PUC said that 40 percent of the

performance-based awards under the company's executive incentive payment rules were based on criteria related to cost of gas and operations and maintenance expense. It assigned shareholders the portion of incentive awards based on net income and rate of return as well as the "discretionary" portion of the award. In a dissenting opinion, Commissioner Kate Racine said that executives were fairly compensated without the awards and should need no further inducement "to do a good job." She added that any awards should be given to executives and staff on an equal basis, using similar criteria. Re Providence Gas Co., Docket No. 2286, Nov. 17, 1995 (R.I.P.U.C.).

While approving a $30.95-million rate increase for Massachusetts Electric Co., an investor-owned electric utility and wholly owned-subsidiary of New England Electric System, the Massachusetts Department of Public Utilities (DPU) has disallowed a $5.59-million increase in union and nonunion compensation expense and health-care costs. The DPU found that the utility had failed to support the request with sufficient analysis of comparative salary levels at regional utilities and firms that compete in the same labor market, relying instead on historical data regarding its own nonunion wages and details of recently signed contracts with union workers. Re Massachusetts Electric Co., D.P.U. 95-40, Sept. 29, 1995 (Mass.D.P.U.).

While approving an annual rate increase of $889,000 for United Cities Gas Co., an LDC, the

Missouri Public Service Commission (PSC) rejected a proposal to disallow a portion of the LDC's

incentive-compensation plan costs because the performance standards were not state- specific. Certain plan components were tied to overall company financial performance, while others were specific to performance of the local operating unit, satisfying concerns that Missouri ratepayers benefit from superior management actions rewarded under the plan. The PSC also rejected a proposal to disallow costs for employee year-end "Christmas" bonuses. Re United Cities Gas Co., Case No. GR-95-160, Oct. 10, 1995 (Mo.P.S.C.).

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