Baltimore's Constellation Energy Group said yesterday that it no longer will guarantee up to $32 million in performance and retention payouts for executives after facing sharp public criticism over the incentives.
The reversal comes two days after the awards were revealed by Th e Baltimore Sun. The disclosure sparked anger from consumers concerned about higher energy bills. And state lawmakers criticized the payouts, which became public during a national backlash involving bonuses to executives at insurance giant American International Group.
When Constellation agreed to sell half of its nuclear power business to France's largest utility for $4.5 billion, it had negotiated the incentive deal to retain its senior managers. Constellation is the parent of Baltimore Gas and Electric Co., Maryland's largest utility with 1.2 million customers.
The 135 top Constellation executives would still be eligible for long-term incentives if company performance goals are met, but they would no longer be guaranteed payouts that they would have received under an original deal with billionaire Warren Buffett.
After agreeing to sell itself to Buffett's MidAmerican Energy Holdings Co. to head off a bankruptcy last fall, Constellation scrapped that deal in favor of Electricite de France's bid in December.
EDF will still pay up to $32 million to Constellation if the deal closes, under the purchase agreement. But the money will be used to "help stabilize and run the business" instead of being earmarked for executive retention incentives, spokesman Rob Gould said.
Acknowledging the fallout over executive compensation recently, Constellation Chairman and Chief Executive Officer Mayo A. Shattuck III said, "This program has been misconstrued by some as a potential cost to our BGE customers, who we recognize are struggling with high energy bills.
"The funds for this program were coming entirely from EDF and would have not impacted BGE rates," Shattuck said yesterday in a statement. "Nonetheless, we have determined that this issue has become a significant distraction to the important long-term benefits for Maryland that our strategic partnership with EDF represents."
Because the outlook for Constellation's financial health has improved, the company decided to "remove this compensation issue from the critically important review of our transaction with EDF," Shattuck said.
