More On Citizens Energy's Overpaid Executives And Rate Increases

The Star's Tony Cook has an excellent story today taking to task the leadership of Citizens Energy for increased pay and benefits for its top management at the same time its seeking huge rate increases before the Indiana Utility Regulatory Commission. Previously, I complained that about the $2.9 million salary paid to the utility's CEO Carey Lykins and how the small, publicly-owned utility now has 16 top executives earning more than $250,000 a year, not counting benefits. Cook's story also finds that Citizens is spending lavishly on its top employees, including gold rings costing more than a $1,000 a piece and costly entertainment expenses.

An Indianapolis Star review found that Citizens CEO Carey Lykins earned $2.9 million in 2012 — nearly double what he made the previous year and more than triple what the leaders of other large municipal gas utilities earned. About $600,000 of that was base salary. The rest was executive and short-term incentive pay.

In an interview with The Star, Lykins defended his pay, saying it’s comparable to what executives make at similarly sized, primarily private utilities. He also emphasized that the company’s incentive system results in payouts every other year, creating the appearance of large raises in alternating years . . .

Citizens also spent thousands of dollars on perks for employees and management, including:

• Nearly $30,000 in gifts for long-serving employees, including 26 gold rings that cost up to $1,115 each.

• A $6,500 holiday lunch catered by the Ritz Charles for management and board members.

• A $2,000 party for retirees.

Consumer advocates are taking issue with the company’s executive pay and its spending on employee perks . . .

When Mayor Greg Ballard proposed the sale of the water and sewer utilities to Citizens Energy, the public was told one of the benefits of the deal was that by combining Citizens' existing utilities with the city-owned utilities, consumers would benefit from lower rate increases flowing from efficiency savings. As we now know, that was nothing but a load of crap. Double-digit rate increases occurred after the city acquired the water utility from NiSource; double-digit rate increases are continuing unabated after Citizens took ownership of it. Naturally, Citizens is using the excuse that the utility was in greater disrepair than earlier thought as the reason for even higher rate increases.

The rate request is the utility’s first since it bought the city’s aging water and sewer systems in 2010 for nearly $2 billion. Citizens, a nonprofit public trust, also operates the city’s gas, steam, and chilled water utilities.

The company’s rate request is getting close scrutiny because cost savings were a central argument for the sale. At the time, Lykins said the acquisition would keep rates 25 percent lower by 2025 than if the city maintained control.

“It’s money in the pocket of our customers,” Lykins said in 2010.

At that time, Citizens predicted in regulatory filings that rates would increase about 7 percent in 2014.

Now the company is seeking an increase more than twice that size. Combined with a nearly 50 percent increase in sewer rates that Citizens is also seeking, the average residential ratepayer would see his or her monthly water and sewer bill increase $17, from $61 to $78, the company has said . . . 

Indianapolis Mayor Greg Ballard said through a spokesman that he continues to support the deal.

“Citizens Energy Group is certainly living up to the promises it made to the ratepayers of this community,” spokesman Marc Lotter said. “It has already achieved savings of about $112 million in the first year and it is keeping its commitments to upgrade the system and clean up our waterways.”

Lykins defended his salary and that of other top executives by claiming the utility had relied on an outside consultant to arrive at the salaries, and that the pay was comparable to the pay of other similar executives. Cook's report found otherwise.

The Star collected information about executive compensation at the nation’s five largest municipal gas utilities, most of which provide electricity or water service as well.

Citizens ranks fourth for number of customers, according to the American Public Gas Association. But when it comes to compensating its top executive, Citizens dramatically outpaces its counterparts.

Utility chiefs in San Antonio, Philadelphia, Memphis, and Omaha earned $206,000 to $820,000 last year — not even close to Lykins’ $2.9 million.

Lykins called that comparison into question.