SAN FRANCISCO (CN) – A federal judge Tuesday approved embattled utility giant Pacific Gas and Electric Company’s plan for a controversial $235 million employee bonus program.
PG&E, which is accused of sparking a series of deadly wildfires over the last two years, argued that it needs to provide bonuses if it is to continue offering competitive pay to employees, especially as the company undergoes Chapter 11 restructuring and struggles to comply with new wildfire prevention requirements.
At a hearing in San Francisco Tuesday, U.S. Bankruptcy Judge Dennis Montali overruled the objections of those who have sued PG&E for damages. Counsel for the tort claimants, including wildfire victims, opposed quarterly payments in the bonus plan, arguing the utility would be unable to claw back money from employees if its electrical equipment sparks another wildfire in the future.
PG&E’s original incentive formula was based 50% on safety and 40% on financial performance. In response to criticism of this original bonus proposal, the company modified it to be based 65% on safety and 25% on financial performance. Customer service performance accounts for 10% in the bonus program.
Tort claimants’ attorney Robert Julian, of Baker and Hostetler in Los Angeles, argued that one safety metric in PG&E’s bonus plan does not match the commitments it made to the public, state regulators and a federal judge overseeing its probation in a separate criminal case.
The bonus program includes a performance metric based on PG&E clearing all trees and branches within four feet of its power lines in high-risk areas. Julian said that falls short of the commitment PG&E made in its criminal case to remove all trees and branches within 12 feet of power lines.
Testifying in bankruptcy court, PG&E’s Director of Total Rewards John Lowe said the incentive plan would adapt to conform with any new requirements, as stipulated in an agreement between PG&E and its creditors.
The company and each employee must meet certain goals in order to obtain bonus money, including clearing trees, replacing or burying electrical wires in high-risk areas and quickly updating records on work and inspections in the company’s database.
Lowe testified that the short-term, incentive-based bonuses make up 6% to 20% of 10,000 eligible employees’ annual compensation. An employee earning $80,000 per year could receive a maximum $3,750 bonus.
Lowe, a human resources specialist, added that PG&E has offered the bonus program to its employees since 1986.
In February, PG&E announced that it would cancel $130 million in employee bonuses for 2018 amid mounting criticism.
Last week, Sacramento resident Wendy Hopkins sent a letter to Montali urging him to reject the bonus plan. Hopkins said that the money would be better spent compensating victims of the deadly 2018 Camp Fire in Northern California.
“Allowing them to provide financial incentives to keep business as usual would send a terrible message to the fire victims: You don’t matter,” Hopkins said in the letter.
Despite such objections, Montali approved the bonus plan after a 90-minute hearing Tuesday.
“To suddenly decide that because of a tragedy of such magnitude that thousands of employees should not have the compensation arrangement that has been a consistent pattern in this company seems to be the wrong way to deal with the problem,” Montali said during the hearing.
Monatli added that if PG&E equipment sparks a wildfire later this year and some quarterly bonuses appear “inappropriate” in retrospect, he will “leave it to management to do the right thing going forward.”
The judge’s decision comes a day after PG&E sought permission from the state’s utility regulator to raise utility rates for the average household by $22.67 per month to encourage “energy infrastructure investments.”
The utility giant also revealed in an Securities and Exchange Commission filing earlier this month that incoming CEO Bill Johnson, who takes over May 1, could earn $6 million or more in annual compensation, depending on performance, along with a $3 million signing bonus and stock options.
Earlier this month, a judge overseeing PG&E’s probation in a criminal case relating to the 2010 San Bruno pipeline explosion banned the utility from paying dividends to its shareholders until it clears all wildfire risks from around its power lines.