Holy cow! That was our initial reaction to Sierra Pacific Resources annual report showing the company that supplies electrical power to Carson City and much of Nevada gave its top executives sizable bonuses in 2003, at the same time the company lost $140. 5 million.
Chairman and chief executive Walt Higgins got a $50,000 raise, or 8.5 percent, to a salary of $640,000 a year, plus a $326,000 bonus and $565,000 in other compensation. The presidents of Nevada Power Co. and Sierra Pacific Power Co., the subsidiaries in Northern and Southern Nevada, also got raises and bonuses.
Our reaction was a natural one, we think, anyone would have upon seeing that a money-losing company is handing out significant raises to its executives.
From the viewpoint of its customers, who may be looking at another 9.4 percent increase in electrical rates in Northern Nevada beginning June 1, the idea seems preposterous.
But a little perspective might be helpful, especially from the viewpoint of shareholders in the company.
First, the $140.5 million in losses is a substantial improvement over 2002, when the company lost $307 million.
More important to investors, the price of Sierra Pacific stock has rebounded from a low in the past year of $2.85 to a current price of about $7.81. After all, the first responsibility of the company's executives is to its owners.
Higgins made that clear in statements following the release of the annual report. He praised the 2003 improvements, but noted "They are not personally satisfying to me."
The company's goals, he said, will be to strengthen the balance sheet and restore investor confidence, maintain ready access to power supplies, upgrade the Nevada power infrastructure, improve customer relations, and operate more efficiently. You'll notice that customers and efficiency came fourth and fifth.
Sierra Pacific Resources is still trying to recover from the Enron debacle, which remains in litigation and will take years to resolve. It is ramping up rapidly to serve the fastest-growing state in the country.
While customers may choke over executive bonuses, it's ultimately up to the company's owners to decide whether they are justified.
It's up to the state's Public Utilities Commission, however, to decide if rate increases are justified. If the PUC puts customers and efficiency at the top of its priorities, it will find Sierra Pacific still has much to prove.