Does competition justify higher salaries for utility executives? Some regulators have suggested the opposite. Others argue that ratepayers must benefit directly from any incentives offered to utility managers.
The Vermont Public Service Board (PSB) recently forced stockholders to pay a share of executive compensation costs for two utilities (em Green Mountain Power Co. and Central Vermont Public Service Corp. (em that exhibited higher-than-average executive compensation, and capped compensation for rate cases. It acknowledged rising electric competition, but stressed that utilities still acquire the vast majority of revenues from captive ratepayers. Claims by the utilities that competition demands higher pay for executives were rejected as the PSB observed that it might be equally logical to argue that the prospect of competition should exert downward pressures on all costs, including those for executive payroll.
During the evidentiary process, the PSB's hearing officers had leveled sharp criticism at the method used to set salaries in the utility industry. Their report said that the type of market comparison test used to support salary requests for top executives "bids up" compensation and produces incentives at odds with basic regulatory goals of holding down costs and cutting rates. They added that utility
executives were trained at public expense, much like public servants, but routinely earned three times or more than the state's highest-paid managers with comparable departments. Re Compensation of Mgmt. Employees of Green Mtn. Power Corp. & Cent. Vt. Pub. Serv. Corp., Dkt. No. 5546, Apr. 18, 1995. (Vt.P.S.B.)