State laws blocking Southern California Edison and other utilities from liability for wildfires triggered by their equipment come with a capture: If their company's safety records drop, top utility executives will be forced to cut salaries.
Edison's safety record did drop last year. The number of fires caused by its equipment soared to 178, 90 in the previous year and 39% higher than the five-year average.
Employees suffered 56% more severe injuries than average. Five contractors engaged in electric systems died.
Because of this performance, Edison International, the parent company of the utility, told California regulators in an April 1 report that it cuts administrative bonuses for 2024.
Sergey Trakhtenberg, a compensation expert at the company, said the planned executive cash bonus was cut by 5% for Edison International employees, while executives in Southern California, saw their bonuses shrink by 3%.
But, according to Edison's separate report of federal regulators, four of Edison's top five executives actually increased their cash bonuses by 17% last year. Their long-term bonuses for stocks and options are also more valuable and are not closely related to security.
Among the top five executives, only Edison International CEO Pedro Pizarro saw his cash prize drop. The company said he received a cash bonus of 128% of his salary due to a security failure, rather than 135% of his plan, including a total compensation, including a $13.8 million salary.
Edison General Rewards Director Trakhtenberg said that while safety-related deductions increased, cash bonuses for the other top four executives increased. He said that if it weren't for the safety-related reduction, the bonus would have been higher.
“The structure of compensation is to promote safety,” said Trakhtenberg, calling it “a major focus of the company.”
Consumer advocates say that despite the decline in safety, bonuses add to the flaw of AB 1054, a flaw in the 2019 law, which reduces the liability of for-profit utilities like Edison to damage the wildfires ignited by their equipment.
AB 1054 created a wildfire fund to cover fire losses to ensure that billions of dollars in losses are not required to ensure that utilities do not go bankrupt.
In return, the legislation says that the administrative bonus scheme for utilities should be “structured to promote safety as a priority and to ensure public safety and financial stability of utilities.”
“All of these responsible measures taken will be toothless,” said Mark Toney, executive director of the Utilities Reform Network, a consumer advocacy group in San Francisco.
“If executives don't drop significantly when wildfire safety incidents are significantly increased, the incentives are gone.”
Edison General Counsel Adam Umanoff is the executive who received an increase in cash bonus.
Umanoff is expected to receive 85% of his $706,000 salary, or $600,000, as a cash bonus, as his goal at the start of the year. Trakhtenberg said deductions for security failures reduced bonuses. However, Umanoff's performance on other goals was “above the goal and above the goal”, thus increasing the cash bonus to 101% of his salary,
So despite the security failure, Umanoff received a $717,000 cash bonus, 19% more than he expected to receive.
“If you can make it up elsewhere, the incentives are gone,” Tony said.
The utility recently told its investors that if it was found that its equipment triggered the Eaton fire on January 7, AB 1054 would protect it from billions of dollars in potential liability, killing 18 people and destroying thousands of homes and commercial buildings.
The cause of the fire is still under investigation, and the video captures a burning video under the Edison Transmission Tower. Pizarro Main Theory The cause of the fatal fire.
The 2019 legislation was passed within weeks to strengthen the financial position of the state's for-profit electric company, which is at Camp Fire in Butte County, which is caused by Pacific gas and electric transmission lines.
Wildfires destroyed Paradise Town, killing 85 people, and the damages helped push PG&E to bankruptcy.
At the bill signing ceremony, Gov. Gavin Newsom touts It says the language of utility can’t get money from the new state wildfire fund and limits its liability for the fires caused by its equipment unless they link executive compensation to safety performance.
In April, Edison submitted a mandatory annual safety performance indicator report to the Utilities Commission as it seeks to approve a 10% increase in customer electricity bills this year.
Edison said in the report that his safety record deteriorated to certain key indicators in 2024, his executives took a “total deduction of 18 points” on the 100-point scale for determining bonuses.
“Safety and compliance are the basis of SCE, and incidents such as employee deaths or serious harm to the public may result in meaningful deductions or the complete elimination of administrative reward compensation,” the company wrote.
Edison did not explain in the report that the 18-point deduction is actually what it means to executives, which is a frustration for consumer advocates trying to determine if the executive compensation plan really complies with AB 1054.
“If you don’t see the dollar figures, you can’t determine whether the incentive compensation plan for utilities is justified,” the state Public Advocate Office of Public Advocates wrote in a 2022 letter to wildfire safety regulator.
To determine the security targets missed last year actually affected the compensation from Edison executives, The New York Times studied a separate federal securities report, which Edison filed for investors known as agent statements.
In that March report, Edison detailed how much of his compensation for executives is appreciated rather than safe based on their profits and stock prices.
Security helps determine about 50% of the cash bonus paid to executives each year, the report said. But more valuable are long-term incentive bonuses, which are paid in shares of stocks and stock options and are based on earnings.
The utility reform network, also known as the turn, pointed out these stock bonuses in a 2021 letter to regulators, in which questions whether Edison and two other large for-profit utilities in the state actually tied executive compensation to safety.
“Good financial performance does not necessarily mean that utilities prioritize safety,” Turn employees wrote in the letter.
Trakhtenberg disagrees, saying the company's “long-term incentives focus on promoting financial stability.” A key part of that, he said, is the company’s ability to “provide reliable, affordable power safely”.
Trakhtenberg noted that the state’s office of energy infrastructure security approved the company’s executive compensation plan in October, saying it meets AB 1054 requirements and the agency’s annual presence since its inception in July 2021.
The Times asked the Energy Security Office whether it reviewed the utility's compensation report or tried to determine how much money Edison executives lost due to security failures.
The agency spokesman Sandy Cooney said the office “has no legal authority…to review executive compensation structures.” He forwarded the reporter to Edison for information on how much dollar compensation actually dropped due to the missed security targets.
Tracktenberg said the Edison board member committee determined the goals that would be relevant to safety and whether they were achieved.
Although five contractors died last year while using Edison's electrical system last year, the commission did not target contractor safety, according to the company's documents.
The commission said the company met its goal of protecting the public even as three people died from equipment, while the public death toll rose by 27% and severe injuries compared to the five-year average.
Tracktenborg said most of the serious injuries occur to people who cause theft or vandalism, which is why the committee said it achieved its goal.
Edison told regulators that the committee could decide to cancel cash bonuses from executives if its equipment starts catastrophic wildfires.
But the company's documents show that it has not yet canceled or even reduced the bonus for Riverside County 2022 Fairview Fire, which caused two people, destroyed 22 homes and burned 28,000 acres.
In 2023, investigators accused Edison of igniting a fire, saying one of his commanders had contacted the telecom cable, creating sparks in the vegetation.
Tracktenburg said the board's compensation committee reviewed the fire that year and found that the company had taken action “cautiously” in maintaining its equipment. He said the committee decided not to reduce the administrative bonuses for the fire.
In March, the Utilities Commission fined $2.2 million for the fire, saying it violated four safety regulations, including failure to work with investigators.
Tracktenburg said the compensation committee will reconsider its decision to fine executives who died at the next meeting.
Turn has repeatedly asked regulators not to approve Edison's compensation plan, detailing its committee's “excessive discretion” when setting goals, and then determining whether the target has been met.
But the Energy Security Office approved the plan anyway. Tony said he believes that responsibility for reviewing compensation plans and the safety of utilities’ wildfires should be transferred back to the Utilities Commission and the work will not be completed until 2021.
He said the rules of the Office of Energy Security make the review process less transparent than the committee.
“The whole process, we think it's good for the utilities,” he said.
