Friday, May 5, 2000
ElectriCities' plan blasted
Triangle Business Journal - by Karine Michael
RALEIGH ¬ A controversial $500,000 compensation plan for the top executive of the ElectriCities of North Carolina Inc. is throwing another wrench in the complicated fight over resolving the state's $5.6 billion municipal debt crisis.
Chief Executive Jesse Tilton III renegotiated his employment contract with ElectriCities' board in January, but legislators only learned of it in the past week.
The contract calls for two payments of $62,500 upon resolution of the group's outstanding indebtedness with Duke Power Co. and Carolina Power & Light Co. He will receive another $125,000 upon approval of a deal by the Legislative Utility Review Commission and another $250,000 upon passage of legislation for providing payment and discharge of all debts.
In each case, the board must agree with the decisions. Tilton's incentives contract is good through September 2002.
ElectriCities is a not-for-profit organization that represents 51 municipalities that operate their own power distribution and generation systems. Most of the debt stems from nuclear generation facilities that the group's municipal power agencies helped finance in deals brokered with Duke Power and Carolina Power & Light Co. in the late 1970s.
At the time, the utilities needed financial backing from the cities, which believed they were tapping a low cost source of power in expectation of sharply rising demand. But demand slowed, the cost of the plants mushroomed, and the debt has risen sharply over the years and now represents two-thirds of North Carolina's overall public indebtedness.
Legislators have argued for years how to resolve the matter and formed a study commission two years ago to come up with a plan by this spring. No resolution has been found, however, and it remains unclear if all North Carolinians will wind up bailing out the 51 cities, which include Wake Forest, Apex and several eastern N.C. towns.
Tilton, 52, joined ElectriCities in 1995 with an annual salary of about $255,000, which has now risen to about $303,000. He also has a severance plan that would pay him about $764,000 if forced out of a job ¬ which is unrelated to the incentives.
Tilton is an electrical engineer who worked for rural electric co-ops in Pennsylvania, New Jersey and Indiana before coming to North Carolina.
He says the revised contract is necessary because he is working himself out of a job and deserves financial security.
"It's legal," says Samuel Noble, the town manager of Tarboro and an ElectriCities director. "The board approved the incentive plan and our attorneys looked the contract over. He's representing our best interest here and we believe he deserves an incentive for his work."
North Carolina law prohibits public employees from receiving incentives based on passing legislation. But Tilton, as chief executive of a trade organization-type nonprofit, is technically not a public employee and therefore not subject to that law, says State Treasurer Harlan Boyles.
But Boyles says some members of the General Assembly are upset over Tilton's contract and he predicts it will be another obstacle for ElectriCities as it seeks resolution of the debt. "The contract is not in their best interest," he says.
Boyles also notes that Tilton's contract is with ElectriCities rather than the two municipal power agencies, which may call into question the contract's validity. Because the assets and liabilities are the responsibility of the agencies, the contract "may not be worth the paper it's written on," Boyles says.
But ElectriCities' board may see the incentive plan as a way to protect the individual cities' distribution systems, including jobs of meter readers and others, says a study commission member, who asked to remain anonymous.
What to do with those systems is one of the toughest political issues in the controversy.
If ElectriCities' members held on to their distribution assets, they would have the money to pay Tilton.
But the cities would probably again have to borrow funds to stay in business, some observers says.
The contract throws a new dynamic into the difficult issue, says Norma Mills, legal counsel to Marc Basnight, president pro tempore of the state senate.
"Everyone on this committee has worked so hard thus far and I hope that these incentives don't compromise Tilton's agenda in acting in the best interest of the industry and citizens he represents," she says.
Friday, May 5, 2000