Bonnie Arbittier / Rivard Report
Vast disparities in pay between CPS Energy officials and those at the San Antonio Water System not only mirror a pay gap between power and water utilities across the country, but also coincide with differences in whether the utilities view themselves as government entities or businesses.
A Rivard Report analysis of nearly two years of compensation records for the top executive teams at San Antonio’s two municipally owned utilities indicates a disparity that reflects the influence of the private sector. Not including CEOs, the base salaries of CPS Energy’s 26-member executive team averaged $244,397, compared with $197,083 for the 13-member executive team at SAWS.
Additionally, most CPS Energy executives receive bonuses every year. In the utility’s 2018 fiscal year, the most recent for which the Rivard Report was able to obtain bonus records, these ranged as high as nearly $70,000 for two executives, not including President and CEO Paula Gold-Williams. At SAWS, only President and CEO Robert Puente receives bonuses.
Gold-Williams earns more than any other City-related employee in San Antonio, but still less than many other municipally owned utility chiefs, at least when it comes to base salary. Gold-Williams’ current base is $485,850. In June, the board approved a $444,820 bonus, bringing her total compensation to $930,669.
By contrast, Puente makes less than Gold-Williams overall, yet a survey of news reports and queries to other U.S. utilities indicates he might be the nation’s highest-paid public water CEO, with a base salary of $496,520. Puente earned a $100,000 bonus, for a total of $596,520, for work last year.
For many San Antonio residents, high bonuses and pay for City-related employees has proven to be a political hot-button issue. The looming example is the passage last year of Proposition B, which limited the city manager’s salary to 10 times that of the lowest-paid City worker, or around $300,000. The firefighters union-backed charter amendment grew out of a contract conflict with then-City Manager Sheryl Sculley, who earned $475,000 in base pay before retiring in early 2019.
But while Sculley’s job clearly fit most people’s definition of public-sector, utilities are a bit different. Unlike most branches of government, they generate their own revenue. San Antonio’s utilities also have a measure of autonomy that City departments don’t, something officials at both of them cherish.
Ultimately, the way the utilities view themselves affects how they spend money and their customers’ monthly bills. A recent example came in April, when CPS Energy trustee Ed Kelley argued against the utility’s continued spending on electricity conservation efforts, saying CPS Energy is “a business and not a social agency.”
“Utilities occupy an odd place in the American economy,” said Texas A&M University professor Manny Teodoro, who studies water utility finance and management. “They are part of the government, but they are also operating as … enterprises. Which means that it’s a government agency that operates on a fee-for-service basis. It’s kind of like a business, but it’s also a government.”
Utilities, particularly energy utilities, also face competition from the private sector. Most Americans get their water and wastewater service from a government but their energy service from a private corporation. That competition creates a labor market in which compensation for public energy executives outpaces compensation for water chiefs.
Paul Zummo, director of research for the American Public Power Association, said many communities struggle with paying their public utility employees on a competitive scale with the private sector.
“One of the hesitations to paying public power utilities equitably, or what they might make in a different type of organization, is this idea that, well, they’re just like other city employees,” Zummo said. “We make the argument that public power utilities are independent or quasi-independent agencies that have their own revenue streams. The employees who work there have different skill sets than the traditional city agency employees, for example. They shouldn’t think of the public power utility as just another city agency.”
For San Antonio’s sister utilities, the wide gaps in pay and spending correspond to cultural differences as well.
In many ways, CPS Energy officials see their utility as a business that happens to be owned by a City.
“We are running this utility like any other [investor-owned utility],” Gold-Williams said in a July 26 interview at the Rivard Report office. “It is the same.”
SAWS officials may value their independence as a standalone entity and even promote the benefits of following some business principles, but they tend to think of themselves as a public entity.
Teodoro, who will be working as a consultant for SAWS on an upcoming study to restructure its rates, said the utilities’ similarities with the private sector should extend to pay. He described a “labor market” in which those who run government utilities know they can often earn more in the private sector.
That kind of competition can lead to utility executives, along with other specialized positions like hospital chiefs and public college football coaches, to be paid lavishly compared with people who typically run government departments.
“If you think of the utility CEO in a municipal government like SAWS, you can think of that person as a government bureaucrat, or you can think of that person as the chief executive officer of a larger utility,” Teodoro said. “Depending on which lens you look through, that [executive] is either overpaid or underpaid relative to his peers.”
In a July 30 phone interview, Mayor Ron Nirenberg said public-sector bonuses are becoming an increasingly fraught issue for San Antonio residents. He said he is opposed to any future bonuses paid to utility executives.
“Customers, in general, remain troubled with the bonus component of a public utility executive compensation,” Nirenberg said. “CPS [Energy] and SAWS are not private businesses beholden to shareholders looking for margin. They are entities that serve at the pleasure of the City of San Antonio and to its ratepayers. They are investor-owned utilities, but in this case, the investor is the public and the dividends are important essential services that keep lights on, keep the water running, and, in the case of both utilities, help pave streets and keep police and fire in uniform.”
‘Two Different Utilities’
CPS Energy officials resist being compared to SAWS, which they argue is a much smaller entity and not among the utilities they would consider a peer.
“That’s two different utilities,” Gold-Williams said. “That’s like driving a bike and a motorized bike. … They’re just different. Who’s the bike and who’s the motorized bike, I’m not saying. They’re just different.”
The numbers clearly back that up. CPS Energy has 3,100 employees serving 840,000 electric and 350,000 natural gas customer accounts. SAWS has around 1,700 employees serving 453,000 accounts. CPS Energy’s revenues last year were $2.8 billion, compared with SAWS’ $828 million. CPS Energy contributed $361 million in revenue to the City’s coffers, compared with SAWS’ $18 million.
SAWS has been an independent entity for a much shorter time than CPS Energy, which has been a City-owned, standalone utility since the 1940s. SAWS was created in the early 1990s when the City established a single utility out of three departments responsible for water, sewer, and treated wastewater service.
Asked whether the two utilities should be compared, Puente listed ways in which they’re alike.
“We’re both utilities, we’re both owned by the City of San Antonio, we both provide a very essential service, we’re both totally funded by public money,” Puente said.
A career politician, Puente, 61, has run SAWS since 2008, when he took the job after a 25-year career in the Texas House of Representatives. First elected to his Southside district in 1991, Puente, an attorney, made a name for himself as a water dealmaker, negotiating legislation in 1993 that led to a regional power balance over the Edwards Aquifer, which was, at the time, San Antonio’s only significant water source.
Under Puente’s leadership, SAWS has undergone the biggest diversification in the history of San Antonio water utilities. It now taps every major river, lake, and aquifer in the region. In 2017, it opened its first desalination plant to process brackish groundwater. Next year, water will begin flowing to San Antonio from seven counties away through its Vista Ridge pipeline, San Antonio’s costliest and largest outside water source.
Compared with the CEOs, public works directors, and department heads that run many of the other largest water utilities in the U.S., Puente is paid generously. For example, the head of the Los Angeles Department of Water and Power, which oversees water and energy for America’s second-largest city, made a base salary of nearly $365,000 in 2018, compared with Puente’s $468,194 that year.
Asked whether he’s the highest-paid public water chief in the country, Puente conceded “it could be true.”
“It depends on what you mean by public utility,” Puente said. He jokingly added, “I’m conflicted on whether to be proud of that or shy away from it.”
In a July 31 interview at SAWS headquarters, Puente also acknowledged the private sector’s effect on pay at energy utilities versus water utilities. He added that part of the reason for the difference is in the commodities themselves and the way people view them.
“Water is almost like air,” Puente said. “You almost have a right to it as an individual. You play in water, you clean with water, you bathe in water. You don’t do that with electricity or natural gas … so you have more of an affection with water than power.”
Asked whether he sees SAWS as a business, he said “rarely.”
“We are 100 percent funded by public money, so we are a public entity,” he said. “I hear a lot about how you should run the government more like a business. … I think that’s a fallacy, I think that’s the wrong way to look at things. Private companies, for example, don’t have to sit with you and explain some of the things we’re explaining. They don’t have to worry about open records, open meetings. They just have to worry about their shareholders.”
For both SAWS and CPS Energy, the volunteer members of the utility boards of trustees have the ultimate say over CEO pay. This year, Puente faced a more rigorous set of performance standards, as gauged by outside consultants. Nirenberg, a board member of both utilities in his official capacity, pushed hard for that performance review, which CPS Energy has had in place and shared publicly for years.
Puente met all but four of 24 performance standards used to evaluate him. Board members awarded Puente a 5 percent raise and the $100,000 bonus for his work in 2018.
“Robert led SAWS to another banner year, increasing our presence in the community, improving our customer interactions, solving very difficult operational issues in our favor, and he put this entity in its best financial position in its history,” SAWS Chair Heriberto “Berto” Guerra Jr. said at the meeting.
Consultants also compared Puente’s salary with pay at other public and private water utilities. They found that the average total cash pay for municipalities and municipally owned utilities were around $274,000, compared with $1.3 million for publicly traded, private-sector water utilities, such as Aqua America and American States Water Co.
Puente twice has rejected his SAWS bonus – once in 2010 and again last year, when he called it a “distraction” as SAWS was preparing to raise rates again.
Puente gets to decide who below him should receive bonuses or have their total compensation put in base pay. Unlike at CPS Energy, Puente is the only employee who receives a bonus, a move that he said predated him but that he kept in place because of its effect on morale, including how department directors might view the members of SAWS’ executive team if the bonuses stopped there.
“If they got bonuses, they would have an added hurdle to jump over to justify what they’re doing,” Puente said. “They are all adults, they all came in knowing there’s not that bonus structure. I think they all at least hopefully feel they’re adequately paid, that they have opportunities for increased compensation through regular raises.”
Public Versus Private Pay
Unlike Puente, who has spent most of his career in the public sector, Gold-Williams began her rise in the business world.
When tapped for the CEO job on an interim basis in 2015, Gold-Williams had been at the utility since 2004, after working in executive roles for Luby’s and Time Warner Cable. She rose to become chief financial officer before stepping into the role left by Doyle Beneby, CPS Energy’s CEO for five years.
She runs a utility that for nearly 75 years had been operating with a great deal of autonomy. It consistently keeps electricity prices among the lowest in the state and the lowest among major Texas cities, while still shoring up a third of the City’s budget, often using its power plants to generate big returns on the state electricity grid.
“I have to make the same fiduciary commitments that are required to run a business,” said Gold-Williams, 57. “We are making independent decisions that last 60 years. Some assets can last longer. So we are really, really running a business.”
Until this year, CPS Energy did not hold regular public comment periods at its meetings, did not post supporting documents for its meetings online, and did not broadcast them via video livestream. All such transparency efforts have been commonplace for years at other government entities, including SAWS, the City, Bexar County, and VIA Metropolitan Transit.
In his first term as mayor, Nirenberg pushed for both utilities to adopt some of the others’ best practices. For CPS Energy, that meant opening the utility up to more public-sector practices.
“Some would argue [that] by design, CPS is operated much more like a private business than SAWS has over the years,” Nirenberg said. “There has been noted resistance to incorporating community dialogue. There’s also been concerns about security because of the heightened level of cyberterrorism and other information security issues. … I think they’ve come along way, but SAWS has been ahead of the game in terms of public input.”
The Rivard Report requested the most recent salary comparison used to set Gold-Williams’ compensation. Unlike SAWS, CPS Energy officials declined to share the results of the salary comparison survey, saying it was proprietary to the consultant that developed it. But according to an American Public Power Association report from 2016, the average salary for a public power utility with 100,000 customers or more was $312,220.
For cooperatives and investor-owned energy utilities of that size, the average pay was more than double, at $619,680. This public-private pay disparity continues all the way down the chain from executives to line workers and other lower-level positions, according to the APPA report.
Paying competitive wages to public power employees is essential to retaining talent, argued Zummo, who wrote the report.
“The concern is there’s this competitive pay disadvantage that threatens public power utilities in their ability to retain employees or to attract employees,” Zummo said.
For CPS Energy, perhaps the best recent example is Beneby.
Often described as a transformative leader who set CPS Energy down the path of conservation and swift deployment of wind and solar, Beneby left the utility in 2015 for a job in the private sector. The year he left, the CPS Energy board approved a total compensation package of $739,407.
After Beneby left, Kelley said he worked with consultants to generate a CEO salary package based largely on performance, similar to the way Kelley’s compensation worked at USAA, where he was a senior executive who directed the insurance giant’s real estate business. CPS Energy would pay Gold-Williams a low base salary relative to others in her field, with the option to nearly double it in an annual bonus payment if she met a series of milestones related to reliability, safety, and customer service, among other measures.
Kelley and other board members dislike using the word “bonus” for its executives’ pay and instead call it “compensation at risk.”
“When we looked at salaries and compensation in the industry, it was going to require a big number to hold on to somebody to run this utility,” Kelley said. “I didn’t want to pay that big number; I wanted them to have the opportunity to earn that big number. But I wanted to put roughly half of their compensation at risk.”
After a nationwide search for a new CEO to replace Beneby, board members turned in-house and chose Gold-Williams, who had been serving as interim CEO, for the permanent job in 2016.
Kelley said board members set Gold-Williams’ salary based on comparisons with 12 investor-owned utilities and six municipal utilities. Gold-Williams’ pay as CEO has always been based on a review by outside consultants, including ScottMadden, which specializes in utility management. This year, CPS Energy met all but two of the 13 performance standards used to judge Gold-Williams’ job performance.
“Do I feel bad about her compensation? Yes, it’s too damn low,” Kelley said of Gold-Williams.
This year, signs have emerged of a transition at CPS Energy to an era of more public involvement in day-to-day decision-making. During board meetings, Nirenberg and new CPS Energy trustee Janie Gonzalez have debated with Kelley over the utility’s role and whether it should be run like an investor-owned utility.
Of course, there’s one huge difference between CPS Energy and a private energy business. Under State law, CPS Energy has no competitors for the business of supplying power and gas to San Antonio customers.
Having a government utility that considers itself a business looms large as the utility grapples with what to do to about its sometimes-unprofitable coal plant and aging natural gas units. Chrissy Mann, an activist with the Sierra Club’s Beyond Coal campaign, said the utility has a “fiscal and ethical responsibility to the people of San Antonio” that includes considering the effects its power plants have on rates, public health, and the climate.
“If CPS Energy is a private company that is here just to make money on the backs of ratepayers, then they should just go ahead and enter the market like [a private energy company] without the benefits of a service territory monopoly and guaranteed rate recovery on City Council-approved rates,” Mann said in an email.
In an interview last week, Kelley acknowledged that CPS Energy has a “monopolistic position” but said the utility’s track record proves the system is working.
“We’re still delivering the highest customer service you can do, still delivering the lowest [rates] you can have, and still funding 30 percent of the city budget,” Kelley said. “So there’s no reason to do something [different]. If we have massive rates, if we had lousy customer service, if we weren’t a good corporate citizen, yeah, I could see that. But it’s all just the opposite.”