WisBusiness: Top utility chief earned nearly $3 million last year

By Brian E. Clark

Wisconsin Energy Corp. president Gale E. Klappa, who was hired in April 2003, earned nearly $3 million last year as head of the state’s largest utility.

According to company records, received $857,000 in salary, a bonus package of $1.8 million and an additional $213,000 in "other compensation" for 2003. Those figures for 2003, when he worked only seven months, were $458,000, $1.1 million and $132,000 respectively. He also was given $1 million in stock in 2003 as a "long-term" compensation award.

Charlie Higley, executive director of the Citizens Utility Board (CUB), sharply criticized Klappa’s compensation.

"In general, pay for CEO’s in American industry is way out of line," he said.

"In the case of utilities, it comes straight from the pockets of rate payers," he said. "His pay is outrageous.

"He makes many, many times more than the median utility worker and it shouldn’t be that way," Higley said.

Rick White, a spokesman for the utility, defended Klappa’s pay as fair for the leader of a Fortune 500 company.

"His compensation is set by an independent board of directors," White said. "It is not excessive at all."

White said it is the board’s policy to pay executive salaries that are in the middle range for similar positions at other major energy companies.

"Our customers expect us to attract and retain the best and the brightest," he said. "If we want to do that, we must be competitive. His compensation is set by the marketplace and you get what you pay for."

The utility’s main service area is southeastern Wisconsin and the Fox River Valley. It also serves portions Michigan’s Upper Peninsula. The company has more than one million electric customers and one million natural gas clients.

Klappa, who has the title of president, board chairman and chief executive officer at Wisconsin Energy Corp., also wears those hats at Wisconsin Electric Power Co. and Wisconsin Gas LLC.

A native of Wisconsin Rapids, Klappa’s most recent job was with the Southern Company. He was executive vice president, treasurer and chief financial officer at Southern, a public utility holding company serving the southeastern United States. Klappa replaced Richard Abdoo.

Klappa was hired in large part to lead a $6 billion series of construction projects, includng four new plants and upgrading several others.

During Klappa’s tenure, the stock value of Wisconsin Energy Corp. has risen from around $25 to $35.18 on Thursday.

The company posted earnings of $2.57 a share in 2004, an increase of nearly 25 percent. Klappa noted in the corporation’s annual report that Wisconsin Energy was named the United State’s most reliable utility in an independent ranking of 115 utilities nationwide.

The corporation will release its first quarter results on Thursday. Its annual shareholder meeting will be held May 5 at Concordia University in Mequon.

The company’s plans to build two major coal-fired plants has been stalled since a Dane County judge blocked the project in December.

The case is now before the Wisconsin Supreme Court, which is expected to rule early this summer. The high court’s decision on the $2.2 billion project is likely to affect the company’s stock value.

Though Higley and the Citizens Utility Board supported the utility’s request for a successful $500 million rate increase last year to pay for pollution control upgrades on power plants, the consumer group often opposes the corporation’s rate increases.

In action Thursday, the state Public Service Commission (PSC) granted the utility an increase of $54 million to pay for construction costs and an energy efficiency program to encourage customers to reduce demand at peak times.

Residents will see a 3.2 percent increase on their utility bill, or about $2 more per month. Thursday’s action followed the March 17 PSC decision to raise the utility’s rates to pay for higher fuel costs. It will raise bills by an averag of $3.34 a month.

Higley said he expects the utility to ask for "huge" rate hike this summer to pay for the Oak Creek power plants.

Dan Ebert, who was elevated to chairman of the PSC by Gov. Jim Doyle earlier this month, has said the commission will closely scrutinize new rate increases by utilities.

But he also noted that the state needs to pay for new power plants to meet rising demands and avoid power shortages it faced in the 1990s.