Attorney General, OCC Ask FERC To Reconsider Denial Of Request To Rein In Excessive ISO-NE Compensation

February 13, 2009

Attorney General Richard Blumenthal and Consumer Counsel Mary J. Healey is asking federal regulators to rehear their request to rein in excessive compensation for top executives at ISO-New England, which has increased as much as 200 percent in recent years even as their failed policies caused the region's power rates to skyrocket.

The Federal Energy Regulatory Commission (FERC), which has final say over ISO-New England's budget, rejected on December 31 a petition filed by Blumenthal and Healey asking it to slash the grid operator's executive compensation request. In 2007, ISO-New England paid its top five executives salary and other compensation valued at about $5 million.

Blumenthal and Healey called on FERC to hold a hearing so they can challenge the grid operator's primary basis for its excessive compensation budget -- a consulting firm study paid for by ISO-New England.

Blumenthal said, "A change in federal leadership should radically reduce pay for utility regulators who have been rewarded excessively for extreme failure. We hope for another opportunity to make our case against exorbitant compensation to executives who have enabled astronomic electricity rate hikes.

"ISO-New England's wildly inflated compensation packages are an insult to recession-plagued ratepayers and businesses struggling to pay excessive electricity rates. Connecticut's homeowners and businesses have seen rates increase more than 100 percent since 2004 because of wrongheaded policies implemented by ISO executives. Instead of holding top managers accountable, ISO rewarded them with compensation increases as big as 200 percent.

"The era of non-accountability must end. FERC should impose on ISO regulators the same straightforward standard that applies to ordinary Americans: performance determines salary. FERC should significantly slash ISO executive compensation requests.

Blumenthal added, "ISO-New England's justification for its ridiculously inflated executive compensation -- a mumbo jumbo-jammed consultant study it commissioned -- is a flimsy fig leaf. ISO paid for the study, so it's unsurprising that it rubberstamps proposed compensation."

Healey said that "with the change in leadership at the Federal Energy Regulatory Commission (FERC), we hope that FERC will now diligently review ISO-New England's budget, and especially executive compensation. As a 'non-profit' company with relatively few risks, the executives of ISO should not receive salaries and bonuses in the several hundreds of thousands or even a million dollars per year. The public pays these salaries and is suffering from an economic downturn. ISO executives should not be immune from the cost-cutting that is necessarily taking place in today's economy. Utility executives in this state are seeing their compensation reduced by the DPUC in rate proceedings and ISO executive salaries should receive the same treatment by FERC."

According to filings with the Massachusetts Attorney General's Office, total salary and other compensation for the five top ISO-NE executives in 2007, the most recent year for which figures are available, was: Chairman and CEO Gordon Van Weile, $1,214,015; Senior Vice President and Chief Operating Officer Stephen G. Whitley, $845,787; Senior Vice President, General Counsel and Secretary Kathleen A. Carrigan, $1,707,807; Senior Vice President, Market and System Solutions Vamsi K. Chadalavada, $711,967 and Vice President, Treasurer and Chief Financial Officer Robert C. Ludlow, $531,904.

Between 2004 and 2007, Van Weile's total compensation increased 53 percent, Carrigan's 200 percent, Whitley's 58 percent and Chadalvada's 85 percent. During the same period, Connecticut Light & Power customers saw their rates increase 59 percent. Carrigan, who has since moved to ISO-New York, saw her total compensation jump from $660,164 in 2006 to $1.7 million in 2007, about 200 percent.