Senate Leadership
November 8, 2007
Williams, Fonfara Seek to Restrict Utility Company Rate Hikes for Executive Pay and Bonuses
Senate President Donald E. Williams, Jr. (D-Brooklyn) and Senator John Fonfara (D-Hartford), who is co-chairman of the legislature's Energy and Technology Committee, announced today that they will seek to enact legislation in 2008 that would prohibit any utility company's ability to pass along the cost of executive bonuses and various other special benefits to rate payers, instead of having shareholders pay for those costs.
Sens. Williams and Fonfara made their proposal after a recent news story detailed a request from the Connecticut Light and Power Company (CL&P) to the state Department of Public Utility Control (DPUC) to pass along to ratepayers the cost of $3.5 million in annual bonuses for 15 executives, and an additional $1.5 million to enhance executive retirement plans. According to the news report, CL&P is seeking an overall 4.6 percent rate increase, or $75 more per year for a typical household. The request is included in CL&P's docket before the DPUC, which is number 07-07-01.
"Are the executives receiving bonuses because they held down electric costs for consumers? That's not what we've seen in the past year," Sen. Williams said. "If Connecticut Light and Power wants to pay bonuses to executives because CL&P stock has gone up, it should do so at the expense of the shareholders who have benefited. But it is wrong to saddle consumers with the cost of bonuses when they have been hit with multiple rate increases. Maybe we should let consumers vote on whether the executives should receive any bonuses at all."
"We presently prohibit utility companies from building the cost of their advertising into the rate base," Sen. Williams said. "The same should be true for bonuses and perks. I look forward to revising our statutes in the next session to make this clear. Ratepayers should be paying for only those basic costs that pertain to generating power."
"Connecticut families and businesses are struggling everyday with punishing electric rates," Sen. Fonfara said. "Most of those costs are due to factors out of our control. Over the last three years our mission as legislators has been to do everything possible to reduce costs in areas we can control. I fail to see how requiring ratepayers to bear even greater costs associated with executive compensation is, in any way, consistent with that mission. There could be no worse time to raise such a notion."
The DPUC's draft decision on CL&P's rate request is scheduled to be announced on December 19, with a final decision issued on December 27.
Sen. Williams said a letter from the Senate Democratic Caucus opposing the inclusion of executive bonus and other such perks in any rate base hike will soon be sent to the DPUC.
Connecticut law already establishes principles the DPUC must follow in regulating utilities, including setting rates.
The most significant principle is that "...the level and structure of rates be sufficient, but no more than sufficient, to allow public service companies [utilities] to cover their operating and capital costs, to attract needed capital and to maintain their financial integrity, and yet provide appropriate protection to the relevant public interests, both existing and foreseeable..."
In addition, there are several cases where the legislature has disallowed the recovery of specific costs in rates.
For example, CGS Sec. 16-19d bars gas and electric utilities from recovering their costs of political, institutional, or promotional advertising from rates. CGS Sec. 16-41 prohibits the recovery of DPUC civil penalties in rates, and CGS Sec. 16-19v prohibited the recovery, in rates, of cost overruns for the Seabrook I (New Hampshire) nuclear power plant.
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