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PGW executive bonus secrecy in 'stark contrast' to budget norms, commission says

Philadelphia GasWorks Co.'s lack of transparency about its acquisition-linked executive compensation differed sharplycompared to the utility's other budget disclosures, a municipal oversight body saidrecently.

"PGW's omission from its filed budget of such costs standsin stark contrast to its disclosure of and inclusion in past budgets of similarsalary-related items," Janet Parrish, Philadelphia Gas Commission executivedirector, wrote in an April 6 letter to PGW President and CEO Craig White.

PGW executives were guaranteed bonuses in exchange for theirsupport of the former mayor's failed plan to sell the utility, but they did notdisclose the planned compensation in the utility's annual budget proposal, The Philadelphia Inquirer reported recently.The Philadelphia Gas Commission oversees PGW's budget and has to sign off on theutility's annual spending plans.

A former member of PGW's board has publicly stated that the utilitykept the bonuses, which totaled $333,348 for eight executives, under wraps to avoidconflicts between people who were and were not receiving bonuses, but Parrish inan April 12 interview said she did not see that as a logical explanation.

The utility could have at least described the executive retentionprogram in the budget and could reasonably have included the total figure withoutnaming who the recipients were, she said.

The bonuses were ostensibly intended to provide stability asthe city attempted to sell the municipallyowned utility. Put into place in late 2013, the retention plan saidthat if the planned sale of PGW fell through — which it did in late 2014 — certain executives would receivean incentive payment on the one-year anniversary of the sale termination date aslong as they had supported the sale and stayed at their jobs for the full year,according to a December 2015 board resolution authorizing the bonus payments.

Based on that timeline, by May 2015, when PGW filed its budgetproposal for fiscal 2016 — which began in September 2015 — the utility was alreadywell aware that it intended to issue these retention plan payments, Parrish noted.

In her April 6 letter, she asked White to explain why the retentionplan payments were not included in the budget proposal "in a manner consistentwith the presentation of other incentive payments and special payments," alongwith additional details about the retention plan and how it was created.

White demurred, however, and told Parrish to take that up witheither the city government or the Philadelphia Facilities Management Corp., a nonprofit,city-created entity that is responsible for some managerial oversight at the utility.

But Parrish on April 12 emphasized that White is a PhiladelphiaFacilities Management appointee and de facto representative who should be capableof answering for budgeting decisions. She gave White until April 13 to respond tothe questions.

However, PGW spokesman Barry O'Sullivan reiterated that the utilityhad little to do with designing the executive compensation plan.

"PGW executives … are not the owners of the company. Weare not the architects of the retention plan. We are not the drafters of the specificlanguage contained in the retention plan, and no one who was included in the planis a member of the company's board of directors," O'Sullivan said in an April12 email.

Parrish declined to speculate on how the commission will handlethe situation.

"Now we're in the process of trying to gather information,"Parrish said April 12. "We're not even talking about if there's a businessjustification for this. … Right now we're not talking about whether the gas commissionwould or would not have approved those costs."

She noted, however, that the commission is limited in the typesof disciplinary actions it can take against PGW, because the utility is not investorowned. Any negative financial repercussions for the utility are borne by the ratepayers,Philadelphia's residents.

For its part, the utility said it aims to maintain a constructiverelationship with the commission.

"PGW works closely with the PGC on a very wide range ofissues, and will continue to do so," O'Sullivan said.