The budget-busting sequel: Attack of the Summer Power Bill VII
May 13, 2007 - 9:00 pm
Times are sure good for Sierra Pacific Resources.
The stock is trading near its 52-week high. First-quarter earnings grew 120 percent from the same time last year. In fact, the company’s “recovery” is so complete, Chief Executive Officer Walter Higgins can take his $5.5 million a year and retire.
Meanwhile, the average Las Vegan is facing another summer of massive electricity bills thanks to yet another rate increase. The new one takes effect June 1, just in time for the hazy days of hundreds.
Families with a set budget and seniors on fixed incomes are already adjusting the thermostat upward, struggling to find comfort now at 80 degrees in order to avoid the discomfort of a $300-plus monthly cooling bill.
Over at Sierra Pacific, the parent company of Nevada Power, the executives have been rewarded for steering the company away from bankruptcy. And let’s face it, that would have been really bad for consumers. But the company has restored its financial health largely on the backs of ratepayers, proving once again that Wall Street is still trumping Main Street. Net earnings jumped to $15.6 million from $1.24 million over the same time last year.
When you ask company executives whether the company has recovered from the Western energy crisis, they still see certain signs of illness. Stockholders — assuming there are any left who stuck it out through junk-status time — have not yet seen the restoration of dividends. And the company has not yet been restored to “investment” grade, although that move seems likely.
Steve Wood, senior vice president for administration, said the company is “on the mend.”
“We’re beginning to turn it around,” Wood said. “We’re not there yet.”
One thing that should help is the current rate case before the Public Utilities Commission of Nevada. The PUC is expected to announce its decision May 25 — one week before the increase (it’s always an increase) takes effect.
Las Vegas customers could see an average monthly bill spike 13 percent. Or more. We don’t know what regulators will do.
Last year, Sierra Pacific got slightly more than it requested because of high natural gas prices. The company passes those right down to you and me. Thank you very much.
Wood said the other costs, including personnel expenses, have to pencil out in a prudent manner.
“Both our board as well as the Public Utilities Commission of Nevada have to balance the interests of stockholders and customers,” he said.
Somehow, down here in customer land, it doesn’t seem too fair. We’re screwed at the pumps and we’re screwed at home. Maybe we were lucky enough to get a raise. This summer we’re going to need every penny.
Higgins got a bonus last year. A neat $333,333. That’s on top of his $743,654 salary. But that’s just chump change compared with his $4.5 million in long-term compensation.
The executive moving up to take Higgins job later this summer is Michael Yackira, who made $1.4 million last year.
Two divisional executives, Jeffrey Ceccarelli and Roberto Denis, each made $1.2 million, as did the company’s general counsel, Paul Kaleta.
Wood, the company’s administrative VP, said Sierra Pacific and its two utilities (Sierra Power up north and Nevada Power down here) try to keep pay for all employees in the 50th percentile of a major utility market salary study. The 50th percentile may be prudent, but the past two years have proved that corporate scandal will never stand in the way of big executive pay.
A study conducted for The Wall Street Journal found that bonuses for CEOs at the top 100 companies rose 46 percent in 2005. The median increase was still $1.14 million.
“If a company like ours pays below the 50th percentile, you can get significant turnover,” Wood said. Executive turnover could hurt the company when it asks regulators for rate increases, he added.
Sensitive about public perceptions about executive pay, Wood also mentioned that payroll costs for customers have fallen slightly in the past three years. That just means there were more customers and higher rates — a trend that probably won’t end anytime soon.
So often when lawmakers discuss Sierra Pacific, they ask, “How can I help?” Sen. Randolph Townsend, who chairs the commerce committee, is fond of asking what will “make the company whole.”
In theory, a healthy company will be able to complete its massive new plant in Ely. That will help keep up with demand and also reduce the company’s reliance on natural gas. Greater capacity won’t mean reduced rates for customers, though. Rates have doubled since 1990. We’d probably be happy for a year at the stratospheric status quo.
Higgins will leave July 31, but will remain as a paid member of the board. He will not have a severance package, the company said.
Yackira will undoubtedly get a raise — and with a little luck on Wall Street, enjoy a nice bonus, too.
The only thing we have to look forward to are $300 power bills.
Erin Neff’s column runs Sunday, Tuesday and Thursday. She can be reached at (702) 387-2906, or by e-mail at email@example.com.ERIN NEFFMORE COLUMNS