PG&E Seeks OK for $454M in Employee and Executive Bonuses

SAN FRANCISCO (CN) – Mere days after telling a federal judge it would be “financially unsustainable” to keep a workforce of 5,500 tree trimmers this year, Pacific Gas and Electric asked another judge to approve up to $454 million in bonuses for employees and senior executives.

PG&E filed a motion with the bankruptcy court late Wednesday night seeking approval of two incentive programs. One plan would dole out up to $266 million to 10,000 workers. Another would reward 400 senior employees and executives with $187.8 million in stock in a reorganized PG&E.

(AP Photo/Ben Margot, File)

In a 30-page motion, PG&E insisted the short-term and long-term incentive programs “are not bonus plans.”

“Rather, they are incentive-based compensation plans expressly designed to incentivize eligible PG&E employees to perform in line with key goals of the enterprise, and to enable those employees to realize a level of compensation competitive in the debtors’ industry,” the company wrote.

The request comes three days after PG&E sent an 18-page memo to another federal judge overseeing its criminal probation for felony convictions related to the fatal 2010 San Bruno gas line explosion. In that brief, PG&E asked U.S. District Judge William Alsup not to make the company hire more tree trimmers.

PG&E increased its workforce of tree trimmers last year from 1,400 to 5,550. However, the company said it cannot continue to pay a “significant premium” for out-of-state contracted tree trimmers, which make up a large portion of the labor pool.

“While PG&E has maintained that workforce in the first months of 2020, it will likely be both unnecessary and financially unsustainable to retain the current number of tree trimmers for all of 2020 when the vegetation management work can be conducted at a steady pace throughout the full year,” PG&E wrote to Judge Alsup.

At a hearing last month, PG&E urged the judge not to impose new probation terms that would force it to hire more inspectors and tree trimmers in-house and deny bonuses to executives unless PG&E meets specific safety goals.

The company acknowledged that it failed to meet every risk reduction target in its wildfire safety plan in 2019, a requirement of its probation. The company also said it could not certify perfect compliance with state wildfire safety regulations, another probation requirement, due to the sheer size of its territory and inability to constantly monitor every tree and piece of equipment in its power system.

Despite those limitations, the company argues that incentive programs are necessary to retain employees and motivate workers and executives to achieve safety and financial goals.

A $235 million employee bonus plan approved last year awarded compensation based 65% on safety, 25% on financial performance and 10% on customer service.

The $266 million bonus plan proposed for 2020 would be based 75% on safety, reliability and customer service. Another 25% would be based on “financial stability.”

A PG&E spokesman said the company redesigned the incentive plan to more closely tie compensation to safety and customer service outcomes.

“Under the proposed plan, incentive compensation would only be paid if the company meets challenging performance metrics focused primarily on safety and customer experience,” PG&E spokesman Andy Castagnola said by email.

A separate proposal would award up to $187.8 million in PG&E stock to 400 senior employees and executives. That program would be based 50% on safety and 50% on customer service before a “total shareholder return” modifier is applied to reduce or increase each stock bonus based on PG&E’s financial performance.

PG&E notes in its motion for approval that state lawmakers specifically found that executive compensation should be based on “a mix of safety and financial considerations” when they passed Assembly Bill 1054 last year.

A PG&E lawyer made that same argument before Judge Alsup last month, insisting that state legislators found a private utility’s financial viability is a key factor in its ability to deliver safe, reliable and affordable energy.

Last year, U.S. Bankruptcy Judge Dennis Montali rejected a proposed $16 million bonus plan for 12 senior PG&E executives.

Castagnola of PG&E noted that the company has not asked for rate increases to cover executive compensation in recent years and plans to “continue this practice.” Senate Bill 901, a state law passed in 2018, bars private utilities from seeking rate increases to cover executive pay over $1 million for five years after a safety violation that leaves ratepayers on the hook for over $5 million.

PG&E expects to pay $25.5 billion in settlements to fire victims, insurers and government entities for wildfires sparked by its equipment in 2015, 2017 and 2018. The company was also hit with a record $2.14 billion fine by state regulators last week for its role in sparking wildfires in 2017 and 2018.

Californians for Energy Choice coordinator Eric Brooks said while he believes PG&E’s rank-and-file employees deserve compensation, he thinks the bonus package for executives is inappropriate. He considers it an example of why the profit motive should be eliminated from the equation. That’s why he supports a bill introduced by Sen. Scott Wiener that would turn PG&E into a publicly owned entity.

“PG&E funds, all of them need to be dedicated to solving the wildfire problems and shifting PG&E to public ownership,” Brooks said. “PG&E shouldn’t exist anymore.”

The request for bonuses also comes as PG&E works to allocate its limited resources in a way that will reduce the 10-year timeline PG&E CEO Bill Johnson predicted it would take to harden and bury power lines, trim trees, deploy micro-grid technology and take other steps to eliminate the need for widespread fire-prevention power blackouts.

A hearing on the motion for approval of PG&E’s proposed bonus plans is scheduled for March 25 in San Francisco.

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