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Conn. Reviews Executive Compensation

Fortnightly Magazine - April 1 1996

The Connecticut Department of Public Utility Control (DPUC) has finished investigating levels of compensation for selected utility officials. The study followed allegations by the state's Attorney General that certain pay increases to state officials appeared excessive and might contribute to higher utility costs or "adversely affect economic development" in the state.

In particular, the Attorney General cited executive salaries at Connecticut Natural Gas Corp. and Connecticut Energy Corp., parent corporation of Southern Natural Gas Co. The DPUC's investigation included the major utilities in the state, reviewing compensation paid to the chief executive officer and the next five most highly compensated officers at each company.

In a draft decision, the DPUC found that executive pay had increased significantly faster than wages for the general workforce, primarily because of the expansion of performance-based incentive plans and the uninterrupted growth in the U.S. stock market over the last decade, rather than because of any permanent increases in base salary levels. It described each company's compensation policies and incentive programs.

Also, the DPUC identified "best" and "worst" practices among the utilities under review and set out official guidelines for recovery of executive compensation costs in rates for regulated services. The guidelines demand: 1) a rigorous and independent internal review process for executive compensation awards, 2) a reasonableness standard for both the total level and component parts of each pay plan, and 3) an appropriate allocation of compensation between ratepayers and shareholders, as well as between regulated and nonregulated operations. Re Utility Company Exec. Compensation, Dkt. No. 95-02-03, Dec. 27, 1995 (Conn.D.P.U.).


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