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Legislative Memo

BILL:

A.5213-A (Levy)

Support

SUBJECT:

Electric and Gas Executive Compensation Review

 

DATE:

April 12, 2002

 

The Business Council of New York State, Inc., whose membership includes over 4,000 companies, associations, and chambers of commerce, has reviewed the above mentioned legislation and opposes its enactment.

This legislation would require the Public Service Commission (PSC) to review the proposed or existing salary, benefits, (including retirement benefits) bonuses, consulting contracts, and any other form of remuneration of any officer, director, or employee of an electric or gas utility in a high level managerial position to determine if such payments are just, reasonable, and in the public interest. Such a review would take place each time a utility receives a major rate increase, but not less frequently than once every three years. The Public Service Commission would also be given the power to either approve, modify, or reject the recovery of such proposed salaries and benefits.

The Public Service Commission currently requires electric and gas utilities to submit a list of highly compensated employees. When such a utility requests its salary compensation expenses be recovered in its rate structure, it must seek the approval of the PSC to include them within the company's operating expenses. Therefore, the Commission is already empowered to protect the ratepayers from excessive compensation for electric and gas utility executives.

Further, this legislation would interfere with and place overreaching regulations on a company's ability to attract and retain qualified management professionals. In an increasingly competitive environment, imposing unnecessary regulations on the utility industry is inapposite to the intent of the recent move to a free, wholesale market. As companies compete against each other to market a superior product at the lowest cost possible while securing consumer confidence, they will look for the most skilled management executives for leadership. This legislation may interfere with that process.

Moreover, and most importantly, this bill does not recognize that the utility industry has been revolutionized and does not address the same marketplace as encountered in the early 1990s - when the bill was first introduced in the legislature. Now that almost all utility subsidiary companies have been deregulated by the PSC and competition is upon us in the energy industry, the type of oversight that this bill seeks to provide is no longer appropriate.

For the reason articulated above, The Business Council must oppose this legislation and urge its defeat.