PSEG Long Island executive pay remains secret under state deal

Executive compensation for PSEG Long Island's 18 top officials is not subject to state scrutiny or public disclosure in the company's 4 percent rate hike request because of provisions in the LIPA Reform Act, a PSEG attorney said.

PSEG has declined Newsday requests to release the current and planned salaries of its 18 top executives, all of whom are paid in part through a PSEG management fee that will increase to $73 million in 2016 from a current $45 million. The total fee includes other expenses.

"That management fee is fixed, it can't be changed, and under the LIPA Reform Act, it can't be questioned," said Bruce Miller, an attorney for PSEG in the three-year, 4 percent per year rate proposal. "It's by contract, and under the Reform Act the [state] Department of Public Service isn't even allowed to question it," Miller said.

That differs from the practice of PSEG's sister company, PSE&G, in New Jersey and other investor-owned utilities in New York State.

Miller acknowledged the LIPA-PSEG relationship is a "different animal" than what is typical for investor-owned utilities regulated by their respective states. The Long Island Power Authority and the state agreed to an extended contract with PSEG as part of the reform act, including the management fee. PSEG pays executives from the fee at its discretion.

Miller acknowledged that with investor-owned utilities in rate proceedings, "executive salary is always a big issue." Salary information is generally "requested as part of the rate calculus." For instance, with New Jersey-based utility PSE&G, "like any other utility, because each component is part of the rates, it is fair game" in the rate case, Miller said.

Lack of disclosure

PSEG Long Island's lack of disclosure of its executive pay stands in contrast to all LIPA employees, whose salaries and other financial disclosures are publicly available.

For example, LIPA chief executive John McMahon made $275,018 last year, and finance chief Tom Falcone, $228,846. Of LIPA's 53 employees in 2014, 27 made more than $100,000, and six made more than $200,000. Some have since transferred to PSEG or taken other jobs. LIPA, which was downsized as a result of the reform act to a largely oversight and financial role, now has 40 employees.

LIPA officials are also subject to financial disclosure requirements, listing all other sources of income and financial holdings. McMahon, for instance, has a Con Edison retirement plan valued at more than $10 million, and is paid $50,000 to $75,000 as a consulting director to Macquarie Infrastructure and Real Assets, a company with holdings in energy, among other things. His securities holdings encompassed hundreds of pages of disclosures, according to a spokesman for the state Joint Commission on Public Ethics, with which the statements are filed.

Ratepayers say it's only fair that PSEG Long Island officials should disclose their pay as well. "If they're serving the public it should all be transparent," said ratepayer Richard Rosner, an engineer from West Sayville. "We should be able to know."

Added Richard Siegelman of Plainview, "I hold that against Gov. [Andrew M.] Cuomo or whoever in the state agreed to such a thing. . . . I think we're entitled" to know the PSEG salaries.

Julia Bovey, director of the Department of Public Service's Long Island office, said the agency generally gets a "lump sum" salary figure with other utilities, and that specific executive salary data often come from Securities and Exchange Commission filings of utilities that are public companies. "That's not to downplay that there's a tremendous amount of information to analyze in this filing," she said.

It's not just salary information PSEG wants to keep secret. PSEG Long Island is supplementing the stacks of public documents filed in its 2016-18 rate-increase request with a growing list of requests to keep information from public view.

Since March 3, PSEG has made more than a dozen separate "exception from disclosure" requests with the DPS, which is reviewing the three-year rate hike of 4 percent annually.

DPS and other parties in the rate case who agree to confidentiality agreements can see the documents PSEG wants to keep private, but if the requests are granted, they cannot be publicly released.

Requests are common

Miller said the confidentiality requests are common in rate proceedings. Utilities have an obligation to protect infrastructure information that could compromise the system if bad actors sought to bring down the grid, for instance, he said. They're also obligated to protect their contractors' proprietary information, and their own trade secrets.

Among other documents that PSEG seeks to keep secret is "PSEG LI Change Initiative Update-December 2014." It is part of a document request by the state seeking "all strategic operating plans" that describe LIPA and PSEG's "current or prospective corporate goals and objectives."

PSEG said it wants the document kept secret because "it outlines the status of customer services, electric T&D [transmission and distribution], and corporate/business services change initiatives." Public release "would likely cause substantial injury to the competitive position of PSEG LI," the company said.

In response to a separate state request for "project justification" documents for budgeted electric-system projects, PSEG has requested they be kept confidential because they are "critical infrastructure information." Release of the documents, PSEG said, "would reveal information about systems, assets, places or things so vital to the state that the disruption, incapacitation or destruction of such could jeopardize the security of the state, its residents or the economy."

Miller said the company requested to keep that information private because the document is "almost like a road map on how to take down a system."

LIPA also is requesting that certain documents be kept secret, including the state's request for cost contracts between the authority and Caithness Long Island, Cross Sound Cable Co. and Neptune Regional Transmission System.

Release would cause "substantial injury" to LIPA and the companies' "competitive positions," the request states.

By Mark Harrington

mark.harrington@newsday.comMHarringtonNews

Mark Harrington, a Newsday reporter since 1999, covers energy, wineries, Indian affairs and fisheries.