In his six years leading ElectriCities, Graham Edwards won changes to his employment contracts that dramatically increased his compensation as he neared retirement from one of the best-paying jobs connected to state or local government.
His initial contract paid him a $530,000 annual salary, and it included a 10 percent annual bonus just for staying on the job. It also required the utility to pay any taxes Edwards would owe for business and automobile allowances and unused vacation time. Subsequent amendments added a $330,000 bonus if he helped solve a major debt issue, and a new part-time job as CEO emeritus that would last for one year after he retired.
Edwards, 63, retired last year. His perks, salary and bonus brought him $1.45 million in his final year as head of the government-created nonprofit, which buys and sells power for more than 50 public utilities across the state. That pay was about double what he made in any other year.
And since his contract required that he make half of that final year’s pay in the CEO emeritus role, Edwards received $726,439 for a temporary job advising his successor in which he was to work no more than 1,000 hours. That’s slightly less than 20 hours a week for the year. He has been serving in the role from Charleston, S.C., where he moved when he retired.
Edwards and ElectriCities’ board chairman, Wilson City Manager Grant Goings, said Edwards earned the pay. During his tenure, he succeeded in cutting electric rates significantly and slashing a crushing, long-standing debt mostly triggered by an ill-timed investment in nuclear power roughly 35 years ago. ElectriCities’ budget is mostly funded through management fees to its member utilities, which are public agencies connected to municipalities.
“They are big numbers,” Goings said of Edwards’ final pay, “but they are miniscule compared to the savings.”
Edwards said his pay is well below a utility CEO in the private sector. For example, Lynn Good, CEO of Charlotte-based Duke Energy, made $10.8 million in total pay last year; Duke is far larger, with nearly 9 million electric and natural gas customers compared to 600,000 customers in the municipalities served by ElectriCities.
Edwards estimated that his pay with perks ranked in the top 10 nationally in public-sector utility pay. As ElectriCities’ CEO, he said he needed to be versed in engineering, communications, public relations, politics, utility operations and safety.
“This is not your typical 8-to-5 job,” he said. “It’s very complex.”
But some of those officials in the towns and cities whose utility companies helped pay Edwards aren’t so sure the big pay bump was justified. They said they were unaware of his late-term pay agreements until contacted by a reporter.
“I don’t know the particulars of it, but that seems like an awful lot of money,” said Boyd Sturges, a lawyer and Louisburg council member. “And I would argue that reducing rates is what you are paid to do anyway. I would think that is part of your core job.”
Two members of ElectriCities’ board said they did not realize Edwards’ employment contracts would result in the big payouts. But they also say Edwards deserves the money for a job well done. The $330,000 bonus was an additional incentive to prevent him from retiring until a major debt-reduction project was completed.
“I don’t love the numbers but I do love the outcome,” said John Craft, the town manager for La Grange and an ElectriCities board member. “I don’t think I would do anything any differently.”
An important sale
Last year, La Grange, Louisburg and Wilson were among 32 Eastern North Carolina cities that benefited when Edwards negotiated the sale of their interest in two nuclear power plants and two coal-fired generation plants. Their ownership in the nuclear plants had proven disastrous as construction costs greatly exceeded estimates and left them with soaring debt payments.
Their interest in the plants was sold to Duke Energy Progress for $1.25 billion, dramatically reducing the debt and allowing the utilities to cut their electric rates by as much as 18 percent. The first year of savings alone amounted to $132 million among the 32 municipal utilities.
Louisburg’s residential rates dropped by 10 percent, while La Grange cut its rates by 8 percent and expects them to stay there for the next five years. Goings said Wilson cut its residential rates by nearly 18 percent; its ratepayers’ overall annual savings are nearly $19 million.
Those rate reductions make these Eastern North Carolina communities more competitive with the Triangle and other parts of the state for businesses looking to relocate or expand.
An expert on executive compensation in the public sector said the way Edwards managed to set up his employment contracts shows the ElectriCities board either didn’t understand the contracts, or it failed to convey to the public the contracts’ financial implications.
“That type of compensation is remarkable and it’s just unusual and it’s an outlier,” Thom Reilly, a professor and director of Arizona State University’s Morrison Institute for Public Policy, said of the vacation payout and CEO emeritus arrangement. He is also a former CEO of Clark County, Nev., which includes Las Vegas.
Value in vacation
ElectriCities’ board hired Edwards in 2009 to replace Jesse Tilton, whose tenure was turbulent. Edwards had led the Midcontinent Independent System Operator, a organization that manages electric power transmission for a large swath of the Midwest, before coming to ElectriCities.
Board members say Edwards got the nonprofit back on track, and two years later, when Edwards received an offer to go elsewhere, they added more perks to his contract to get him to stay. Edwards declined to name the competitor, but he said it was willing to pay him $1 million annually.
The perks the board added include raising the number of vacation days he could carry forward from year to year from 60 to 75. The 60-day vacation carry-over policy, which is standard for all ElectriCities employees, is far more generous than what many state and local governments in North Carolina allow. Most state employees can only accrue up to 30 days of vacation.
Records at the state treasurer’s office show three other ElectriCities executive staff received hefty vacation payouts upon retirement. Edwards allowed one of them, Steve Shelton, a former chief operating officer, to exceed the vacation carry-over limit, so that he could collect on 70 days’ worth.
Edwards said he made the exception because Shelton couldn’t take the time off while ElectriCities was negotiating a rate reduction agreement.
Shelton received $96,249, Senior Vice President Ken Raber received $67,787 and Chief Financial Officer Al Conyers $53,943.
Edwards said he was so busy with work related to the asset sale that he took no vacation in his final year, so he was due 25 days for what he earned that year, plus 75 days he had accrued from previous years. But that final year began on July 1, 2015, so he only worked as CEO for four months. He was entitled to the full vacation accrual because the days are earned at the start of each year of service, said David Barnes, ElectriCities’ lawyer.
But that’s not all ElectriCities owed. Edwards’ contract required ElectriCities to cover the tax implications of that vacation payout. As a result, nearly half of the $390,000 given to Edwards for his vacation time was to pay the tax bill. This perk didn’t extend to his salary.
It may be the largest vacation payout ever of the roughly 1,244 state and local agencies who belong to the state pension system. Public pay data at the state treasurer’s office, which goes back to 2008, show no one else came close to what Edwards received.
ElectriCities justified the vacation payout by producing a survey of 19 public power agencies. Roughly half reported similar vacation carry-over policies. The survey didn’t indicate whether the agencies would also cover the tax implications of those payouts.
Edwards had sought the tax break on his vacation payout. He couldn’t name another public or private employer that offered such a perk.
Charles Elson, a University of Delaware professor and expert on corporate compensation, said covering the tax bill on perks is frowned upon in the private sector by stockholders.
“Why should the company pay your taxes?” he said.
Since the vacation payout took place in Edwards’ final year and was counted as compensation, it meant he would receive $195,000 toward his CEO emeritus position.
A hefty bonus
The ElectriCities board created the CEO emeritus position in 2011. Craft, of La Grange, and Scott Stevens, a board member from 2010 to 2013 who is now Goldsboro’s city manager, expected Edwards’ compensation for that work would be roughly half of his typical annual pay with perks, which was in the $720,000 range.
“I would have never envisioned his final compensation being the amount you had,” Stevens said in an interview.
The final big boost to Edwards’ pay came in 2014, when the board offered a $330,000 bonus if he succeeded in selling the Eastern North Carolina members utilities’ interests in two nuclear power plants and two coal-fired plants. Only those utilities would be required to pay the bonus.
But two months after announcing the deal, Edwards filed for retirement, which meant the $330,000 bonus would be paid in his final year. That, in turn, hiked his CEO emeritus pay by another $165,000.
Edwards said he was upfront about his retirement plans before the board offered the bonus. The board’s closed-session minutes show Edwards had sought, and received, $590,000 for a bonus pool to be spread among ElectriCities staff if the asset sale went through. The board then added the $330,000 bonus for Edwards.
Goings said he and others on the board were aware of the potential ramifications for the bonus, but they offered it because they didn’t want him to retire in the middle of the asset sale negotiations.
Edwards finished his CEO emeritus term in November. He said he advised new CEO Roy Jones, introduced him to various officials and represented ElectriCities at meetings of utility organizations. Edwards did not keep track of his hours; the ElectriCities board didn’t require that.
It does not appear Edwards’ late-term pay will translate into a hefty state pension. His relatively short time as CEO and a federal pension cap limit how much he can receive. State records list his monthly benefit at $2,171 a month, which would be $26,052 a year. It’s unclear how much that might change as he leaves the CEO emeritus position.
Jones is the former chief operating officer at ElectriCities. He joined the nonprofit in 2009, the same year as Edwards, and has more than 35 years experience in the utility business. His starting annual pay was $80,000 less than Edwards’ (it was recently increased to $490,500), and the perks have been scaled back.
Goings said that’s because Jones doesn’t have previous CEO experience, and the utilities served by ElectriCities are on much firmer footing following the asset sale.
“I believe that for our organization, Graham was a uniquely qualified individual that we brought in to do a deal of a lifetime,” Goings said.
News researcher David Raynor contributed to this report.
Accrual for others
Former ElectriCities CEO Graham Edwards isn’t the only state or local agency leader given the opportunity to cash in more vacation days than rank-and-file employees.
The last contract for Steve Beam, the former Raleigh Housing Authority executive director, upped his vacation accrual from 48 days to 60. It also increased his annual vacation allowance from 24 days to 30. The housing authority board provided those increases while also preventing Beam from generating compensatory time amid concerns he was using it to pursue a side business as a magician.
When Beam retired at the end of 2014, he received $54,049 for 58 unused vacation days, Jennifer Morgan, the housing authority’s finance director, said in an email. Beam and the board chairman, Kyle Dilday, could not be reached.
Carl E. Harris, Durham’s schools superintendent from 2006 to 2009, was allowed at the end of each year to cash in up to 10 unused vacation days beyond the 30-day state limit in place when he was hired. Two years into the job, the board upped it to 15 days. When he retired at the end of 2009, he was paid $30,219. It reflected payouts for the 2008-09 and 2009-10 academic years.
Harris said it was difficult to take vacation while running the state’s eighth-largest school district. He said he earned every vacation day he was paid for.
Pay from two boards
While Graham Edwards worked for ElectriCities, he also served as a paid director on two regional electricity transmission boards.
Edwards became a director for the Western Electricity Coordinating Council in mid-2011 and worked for it until 2014, when he then became a director for Peak Reliability, an agency that split off from the council. He worked for Peak until March 2016. Both agencies reported to the IRS that he spent between four and five hours a week in the role. He earned $29,250 in 2011, $66,500 in 2012, $97,020 in 2013 and $91,705 between the two agencies in 2014. Edwards said through a spokesman that Peak paid him $93,000 in 2015 and $22,500 in 2016.
In January 2016, Edwards became a board member for the Southwest Power Pool. Edwards estimated he would be paid $88,000 this year.
Edwards’ ElectriCities contract allowed him to serve on no more than two corporate, civic or charitable boards at any one time. David Barnes, ElectriCities’ lawyer, said service on boards allowed Edwards to stay on top of issues and trends.