Today’s IBJ report on the Citizens Water’s rate increase hearings

Citizens’ CEO grilled on pay in rate-increase hearing

Dan Human

July 29, 2013


State utility regulators kicked off a week-long hearing Monday on a proposed water rate increase for Indianapolis residents by putting the CEO of Citizens Energy Group on the hot seat.

CEO Carey Lykins—under scrutiny for a significant boost in compensation last year—was the first witness called Monday morning by the Indiana Utility Regulatory Commission.

Lykins tried to make a case for a 14.7-percent increase in water rates for 300,000 Citizens customers in Marion and surrounding counties. He also had to explain his nearly $3 million in compensation last fiscal year, as well as the pay and bonuses other top executives received.

Citizens filed a request with the IURC in February to increase its annual operating revenue from water rates 14.7 percent, or $25.3 million. The hike would raise the average residential customer’s water bill from $31 to $34 per month.

Lykins told commissioners the utility needs to boost its revenue because it previously has relied too heavily on debt to pay for capital projects.

“It’s not a healthy or sustainable system,” he said.

Recent pay bumps for Citizens’ top brass have drawn additional scrutiny of the utility’s need to increase costs for consumers.

Last December, IBJ reported that  Lykins earned $2.84 million in salary, bonus and incentive pay for the year ended September 2012—compared to $1.5 million in 2011.

IURC Chairman Jim Atterholt pressed the issue Monday after Lykins said his and his executives’ pay was in line with market rates based on data from consultating firm Mercer.

Atterholt noted that the Mercer study made comparisons to much larger energy companies. Comparing Citizens, which has 1,200 employees, to those firms would be akin to 1,700-employee ExactTarget paying its leaders like 430,000-employee IBM does, he said.

Lykins criticized Indianapolis media for how it has reported on his pay.

“It seems to me that there have been some sensational sound bites, let me say, around my compensation and others,” he said.

The IURC’s evidentiary hearing on the rate increase is scheduled to run through Friday.

Update on compensation at Citizens Water

Following is a blog post by Gary Welsh of Advance Indiana.   If Citizens Water should ultimately become involved with operating the planned dam and reservoir, the water rates will need to be high enough to support the compensation packages for both management and board of directors.


Outrage: Citizens Energy Board Voted Itself 34-Fold Increase In Its Pay After Water Company Deal

A week after the Citizens Energy board of directors stepped forward to publicly defend a doubling of CEO Carey Lykins’ pay to nearly $3 million a year, along with huge pay raises for its other top executives, the Star’s Tony Cook learns that the board increased its own pay by 34-fold following the approval of the purchase of the city’s water company, which company executives assured Indianapolis ratepayers would lead to reductions in future rate increases before seeking another double-digit rate increase in water rates. Citizen Energy’s board members had been earning a token $600 a year for their service on the nonprofit board before the merger. Immediately after the merger, the board voted to increase its annual pay to $20,600 a year for regular members and to $25,000 for executive committee chairpersons.According to Cook’s story, the board sidestepped a state law limiting the pay of board members to $600 a year by creating additional executive committees to which all the board members were appointed, who may earn a “reasonable” additional compensation under state law. As I earlier reported, Citizens’ Energy’s Chairman, James McClelland, also earns more than $500,000 a year as President of the nonprofit Goodwill Industries of Indiana. Other board members include very high-paid executives, retired and active, and highly-paid nonprofit executives, including: Daniel Appel, Gregory & Appel Insurance; Moira Carlstedt, President, Indianapolis Neighborhood Housing Partnership; Anita Harden, Retired President of Community East Hospital; Jeffrey Good, Director, Milestone Advisors;  Anne Nobles, Retired VP of Eli Lilly; Phillip Terry, CEO, Monarch Beverage
Christina Hicks, VP, Human Resources, Wishard;  J.A. Lacy, CEO, LDI.

Citizens Energy also has a 5-member Board of Trustee, including the following high-paid private and public officials: Dan Evans, IU Health Partners;  Dennis Bland, President, Center for Leadership Development;  Kathryn Bentley, Civic Leader;  Jackie Nytes, CEO, Indianapolis Public Library; John Krauss, Director, IU Public Policy Institute. As a former city-county council member, Jackie Nytes was at the forefront in the push to approve the merger deal with Citizens Energy. She was promptly rewarded with the job as the library’s new CEO earning nearly $150,000 a year. Cook’s story doesn’t mention what, if any, pay they receive for their service.

“How very sad that the greed of Citizens Energy apparently extends beyond their executives and into their self-perpetuating board,” said Kerwin Olson, executive director of Citizens Action Coalition, a consumer advocacy organization. “Clearly, the problem is institutional.” How true that statement is. As Cook’s story notes, the nonprofit trust was established by city leaders like Eli Lilly and Benjamin Harrison to avoid the two evils of profiteering by monopolies and the political patronage systems associated with municipally-run utilities. These people have completely turned the plan envisioned by those great individuals on its head in a sad and pathetic effort to line their own pockets at our expense.

I hope Tony Cook looks into how much of our money these self-dealing individuals are wasting on Colts and Pacers suites, along with a boatload of tickets to the sporting events they pass out to each other and their cronies.

Ann Zwinger on Remenbering Indiana and the White River

“When I think about growing up in Indiana, the image that comes most strongly to mind is that of the White River.  ……It took me a good many years to realize what the intimate presence of a river in your childhood means, and just what a rich heritage it is.  Or what the remembrance of a familiar countryside means…. The imprint of the Indiana landscape–the whole intermeshing of plant and landscape, of sky and earth, of people and place– is distinctively what I remember as the essence of Indiana…. perhaps that heritage doesn’t reveal itself until you’re older.  Until then you’re too busy growing up, and there is certainly the glee in leaving behind the familiar and undertaking the new.  But when you begin your own work, you have to dip back into the reservoir of your life and rediscover.  What was there, tucked away in memory, has become not mere nostalgia but a abase upon which to proceed…. There seems to be something about looking into the natural world that brings satisfactions I don’t see very much elsewhere.  One reason for this must certainly be nature’s continual restoration and continual reaffirmation of a sense of logic.  Nature can indeed be capricious, but overall, nature is organized and has a place for everything  There is cause and effect, not always clear, but the more one studies, the more one becomes aware of a natural progression of events, a natural logic.   We need logic and structure in our lives; we need to be assured that this is after all a rational world.  It’s a thin reassurance if you base it upon the actions of the human species.   People don’t always perform rationally; nature does.  The sun always rises in the east.”

Ann Zwinger, Essay, Remembering Indiana, Audubon Magazine, Jan. 95

Down the RIver with Edward Abbey and CAFOs

Following up on the question from the last post regarding the desirability of an ever-growing central Indiana, this post borrows three pertinent quips about the undesirability of unlimited growth from Edward Abbey’s Down the River:

“Unlimited growth is the ideology of the cancer cell.”, and  

“Like fish, chickens, cows, pigs, and lambs, the rivers too are penned and domesticated and diverted through manifold ingenious ways– some which will not bear witnessing or thinking about– into the bottomless gut of the ever-expanding economy.” , and  

“We are slaves in the sense that we depend for our daily survival upon an expand-or-expire agro-industrial empire – a crackpot machine – that the specialists cannot comprehend and the managers cannot manage.  Which is, furthermore, devouring world resources at an exponential rate.”

Down the River was published in 1981— before the contemporary onslaught of ultra-hi-volume CAFOs— Concentrated Animal Feeding Operations which are now designed to confine many thousands of animals in deplorable and inhumane conditions.

There are a number of CAFOs located within the White River West Fork watershed and upstream of the planned reservoir.   It will be interesting to see to what extent, if at all, the Phase II feasibility study of the dam/reservoir will address the potential risks to water quality posed by CAFOs.

In its last session, the Indiana General Assembly came very close to passing a so-called “ag-gag” bill which would have criminalized watchdog reporting activities such as photographing potentially illegal, unsafe, or inhumane activities occurring in agricultural and other industrial operations.  That legislative and lobbying fiasco is reminiscent of Wendell Berry’s essay titled “Stupidity in Concentration” and his poignant criticism of animal confinement–

 “The principle of confinement in so-called animal science is derived from the industrial version of efficiency.  The designers of animal factories appear to have had in mind the example of concentration camps or prisons, the aim of which is to house and feed the greatest number in the in the smallest space at the least expense of money, labor and attention.  To subject innocent creatures to such treatment has long been recognized as heartless.  Animal factories make an economic virtue of heartlessness toward domestic animals, to which we humans owe instead a large debt of respect and gratitude.”

As quoted in CAFO (Concentrated Animal Feeding Operations)— The Tragedy of Industrial Animal Factories,  Daniel Imhoff, editor, 2010

Citizens Action Coalition questions CEG’s Public Charitable Trust

Yesterday’s Indianapolis Star contains another report on the controversial executive compensation package of Citizens Energy which operates Citizens Water in Indianapolis.

In it, Citizens board president  Jim McClelland was quoted to the effect that management’s remuneration is indeed “competitive”.  However, as the Advance Indiana blog reported (see blog post below) on Wednesday, McClelland himself makes more that a half- million per year managing a non-profit— Goodwill Industries.

The story also quoted Kerwin Olson, Executive Director of the Citizens Action Coalition of Indiana, who provided the following pertinent observations:

“They use the “trust”: to attempt to differential themselves from investor-owned utilities, then use the compensation levels of investor-owned utility executives to establish pay levels for their own people.  You can’t have it both ways.  The mission of the trust is decidedly different from the mission of a private utility, so perhaps it’s time for the legislature to take another look at whether or not this alleged “public charitable trust” remains in the best interest of the residents of Marion County.”  

Water utilities love to expand water service to new outlying areas because it opens up new permanent revenue streams and perhaps also an additional avenue for increasing executive compensation.  Citizens Water has often flatly asserted that Indianapolis and central Indiana will continue to grow– and thus require more and more water.  The unlimited growth presumption of Citizens Water for central Indiana is a rebuttable one.  Do we really want to encourage a sprawling suburban and exurban metropolis covering eight or nine counties? Citizens Water recently acquired the Fortville waterworks following several other recent purchases of exurban systems.  Is Citizens now eyeing the Anderson municipal waterworks for acquisition?  Are they being encouraged to do so by the pro-reservoir commercial interests?  We shall see.  

Granted, the executive compensation issue is more of a concern to Indianapolis residents who must bear the cost than it might be for Anderson area folks who would be impacted in various ways by a reservoir, but who, under their current municipal ownership, presumably would not be required to foot the bill for the high personnel expenses of Citizens Water.


 Wednesday, July 10, 2013

Citizens Energy Board Chairman Defends High Executive Pay, Earns More Than Half Million To Run Nonprofit

Citizens Energy’s board chairman, James McClelland, stepped forward today to defend the $3 million salary paid to the nonprofit utility’s CEO Carey Lykins, double what he earned the previous year, as well as the more than $250,000 earned in annual salaries by at least 16 other executives with the publicly-owned, nonprofit utility that promised reductions in future rate increases through savings but has instead dealt consumers double-digit rate hikes like we experienced under the City of Indianapolis’ incompetent management of the water and sewer utilities. The Star’s Tony Cook reports on McClelland’s statement:

“Appropriate compensation for our executives and all Citizens employees is a key factor in achieving our long-term objectives,” said McClelland, who is president of Goodwill Industries in Indiana. “The overriding goal of our compensation program is to offer salaries and benefits that are competitive with peer companies in the utility industry and private industry.”

McClelland said executive pay at Citizens is established with the aid of an independent study of what similarly situated executives make at other companies with revenues similar to Citizens.

“Currently, compensation for our executive group is just below the 50th percentile,” he said, “meaning about half of the executives in the market make more than Citizens executives and half make less.”

McClelland is not one to judge on the salaries to be paid to nonprofit executives. He serves as the President of Goodwill Industries of Central Indiana where he pulls down a salary and benefits well north of $500,000 annually according to Form 990s the nonprofit files with the IRS. He has seven vice presidents working under him at Goodwill Industries earning between $150,000 and $250,000 a year. Salaries and administrative costs consume nearly $10 million of the nonprofit’s annual revenues. No wonder Carey Lykins handpicked McClelland to serve on Citizens’ board. These nonprofts are nothing but rackets for self-dealing people professing to work for the public good.
State Rep. Ed DeLaney is spot on in his observations to Cook. “It’s just not acceptable for them to get that kind of compensation,” said DeLaney. “I would hope that the board and the trustees were set up to use judgment, and that’s what I think has been missing here.” DeLaney stopped short of calling for legislative changes, suggesting that the IURC should do its job. “I’m not saying I wouldn’t do something about it, but I’m very pleased to see the IURC taking a careful look at it. That is their responsibility. I’m very glad they’re doing that, I’m impressed with their effort on this.”

Posted by Gary R. Welsh at 8:46 PM 1 comment:  Links to this post