Pacific Gas and Electric (NYSE:PCG)
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2 Months : From Jun 2019 to Aug 2019
By Soma Biswas
A federal bankruptcy watchdog is objecting to California utility PG&E Corp.'s request for approval of a $3 million payment to new Chief Executive William Johnson, according to a court document.
Acting U.S. Trustee Andrew Vara, a Justice Department employee monitoring the utility's bankruptcy case, took aim Wednesday at a $3 million "transition" payment that PG&E paid to Mr. Johnson, the former head of the Tennessee Valley Authority. The trustee is also balking at a provision for $2.5 million in severance payable to Mr. Johnson if the CEO is terminated without cause, according to a filing in U.S. Bankruptcy Court in New York.
U.S. bankruptcy law generally prohibits severance payments to company insiders, except under certain narrow conditions. Mr. Vara wants a bankruptcy judge to deny approval of the employment pact, saying PG&E has failed to establish that the severance and "above market" transition payments are in line with prevailing levels in the industry.
Mr. Johnson's employment contract also calls for an annual base salary of $2.5 million. The CEO's base salary is significantly higher than the base salaries for CEOs at such comparable energy companies as Edison International and Sempra Energy, Mr. Vara said.
Mr. Johnson is also eligible for annual equity awards tied to safety and financial performance measures totalling $3.5 million. PG&E has long been criticized by California residents who blame PG&E's poor safety record for contributing to a series of deadly wildfires in northern California.
The Wall Street Journal reported last week that PG&E knew for years that hundreds of miles of high-voltage power lines could fail and spark fires, yet it repeatedly failed to perform the necessary upgrades. The utility has offered to set up a $100 million fund for victims of the 2017 and 2018 blazes that have been linked to PG&E's equipment.
Separately, the Utility Reform Network, an advocacy group representing California ratepayers, is opposing the company's incentive bonus program earmarked for 12 key insiders.
The ratepayer group said PG&E has failed to prove that the compensation isn't a disguised retention plan. Under the bankruptcy code, companies are prohibited from providing pay and benefits meant to induce top executives and other insiders to stay.
The awards under the key employee incentive plan to the 12 insiders range from $5.5 million to more than $16 million based on a performance scale.
A PG&E representative couldn't immediately be reached for comment.
Judge Dennis Montali has scheduled a hearing on the compensation requests for July 24 in San Francisco.
Write to Soma Biswas at firstname.lastname@example.org
(END) Dow Jones Newswires
July 18, 2019 16:13 ET (20:13 GMT)
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