WisBusiness.com: Trade Group Links ‘Outrageous’ Pay, Rising Power Rates

By Brian E. Clark
WisBusiness.com Editor

Power rates aren’t the only thing that have gone up in the past seven years.

The head of a business trade group is blasting as “outrageous” the sizable compensation package increases that top executives at four state public utilities received from 1997 to 2004.

At the same time, Wisconsin’s power rates rose more than 30 percent and went from being the lowest in the Midwest to the highest, charged Nino Amato, head of the Wisconsin Industrial Energy Group.

Bill Skewes, executive director of the Wisconsin Utilities Association, said he had not seen Amato’s report and could not comment on it.

But in a recent interview, Wisconsin Energy Corp. spokesman Rick White defended the compensation of company CEO Gale Klappa. He called it “fair” for the leader of a Fortune 500 company.

But Amato said the pay and bonus package for the CEO of the Milwaukee-based utility increased by nearly $2 million. That was a jump of 353 percent from the $585,000 the CEO earned in 1997, Amato said.

During that same period, the compensation package for the top executive at Green Bay-based Wisconsin Public Service Corp. increased from $250,000 to $1.4 million, a jump of 450 percent, Amato said.

Compensation for the CEO at Madison’s Alliant Energy went up 73 percent, from $651,000 to $1.1 million. And the compensation package for the chief at Madison-based MG&E went up 91 percent, from $287,000 to $548,000, Amato said.

Pay and bonus rates for other top executives increased from a low of 48 percent at MG&E to 289 percent at We Energies, Amato said.

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.

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

White said the board’s policy is 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.”

We Energies is the state’s largest utility, serving southeast Wisconsin, the Fox Valley and parts of Michigan’s Upper Peninsula. The company has more than one million electric customers and one million natural gas clients.

Amato said he believes ratepayers and taxpayers will be stunned to see how much executives pay climbed while power bills were going up. Historically, he said, Wisconsin utility executive compensation was “modest and respectable.”

“How tragic it is to discover that between 1997 and 2004 and after Wisconsin has lost its low-cost competitive position. We are now witnessing skyrocketing compensation for those at the top,” he said.

And rates probably are only going to go up, because Badger State utilities are going to be building new power plants in coming years to meet growing needs.

Amato claimed the state’s utility regulator, the Public Service Commission, was overly generous in granting rate increases.

“What’s crazy about these outrageous compensation increases is that these companies are utility monopolies that are given the financial ability by the PSC to have a guaranteed profit (Return on Equity), while small business owners and the Fortune 500 companies have no profit guarantees,” he said.

“So when the utility monopolies public relations spin masters tell you that they need to provide competitive compensation, they are not comparing apples to apples to the real world of businesses that have to compete in a global economy,” he said.

Amato said he hopes the PSC, which recently got a new chairman in Dan Ebert, will clamp down on the guaranteed rates of return it gives to utilities.