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    As CPS Energy hunts for new CEO, interim Garza says he'll likely vie for the job

    May 13, 2022 - Diego Mendoza-Moyers, San Antonio Express-News


      May 12—As CPS Energy hunts for a new leader, interim CEO Rudy Garza said he will likely seek the job.

      If CPS' five trustees "are happy with the work that my team and I have done and want me to consider the permanent role ... I would consider it," he said.

      Garza was named the interim chief executive in early November after then-CEO Paula Gold-Williams resigned. She stepped down amid the political and financial fallout from last year's deadly winter storm and a scandal stemming from then-Chief Operating Officer Fred Bonewell's personal spending with company money. Gold-Williams had promoted Bonewell just months earlier.

      CPS Energy's five-member board hired an executive search firm early last month to find potential CEO candidates.

      Until now, Garza had avoided publicly signaling his desire for the job.

      Since last fall, he has been a fixture at city meetings and public events as the city-owned utility crafts a master plan to generate cleaner electricity in the coming years and reduce bills for lower-income ratepayers in San Antonio.

      Janie Gonzalez, the trustee leading the CEO search, heaped praised on Garza at an event in late April.

      "I don't want to be part of an organization that's so bureaucratic that a CEO believes they live in a glass castle and you cannot make yourself available, and I think that that's the drastic difference between the previous CEO and the current CEO," Gonzalez said, referring to Gold-Williams.

      "I would not back up (Garza) if I didn't feel he was an authentic leader that really cares about being available to the community," she said. "That's the kind of CEO I want."

      Inside track?

      As an in-house candidate, Garza likely has an advantage over any other prospects, said Carl Mycoff, a Denver-based consultant who helps utilities hire executives.

      Mycoff's firm helped CPS hire former CEO Milton Lee in the 2000s, as well as Austin Energy's current general manager, Jackie Sargent. In the hunt for new leaders, utilities hire internal candidates about 60 percent of the time, Mycoff said.

      "Because familiarity doesn't breed contempt, it breeds contentment," he said. "The job the board is going to be doing is balancing the uncertainty of somebody they don't know with somebody they do know."

      CPS chief executives' compensation has been controversial over the years.

      Gold-Williams, an in-house candidate hired for the top position in 2016, made about $1 million annually after factoring in bonus pay. Her earnings were below what most CEOs at large utilities earn, but many San Antonians thought her pay was excessive in a city with pervasive poverty.

      Early in the COVID-19 pandemic, CPS suspended its bonus pay program. As CEO, Garza makes the same base salary as Gold-Williams — $415,000 — but he doesn't receive a bonus on top of that.

      Annual compensation for CEOs at 19 major investor-owned utilities ranged from $6.5 million to nearly $28 million in 2019, according to the Energy and Policy Institute.

      The pay is also substantial at some public, nonprofit electric companies.

      Meanwhile, the Pedernales Electric Cooperative delivers power to more than 370,000 customers throughout the Hill Country and pays its CEO just shy of $500,000 annually. Bluebonnet Electric, which serves 116,000 electric customers in a service area east of Austin, paid its CEO $630,000 in 2019, according to tax filings.

      In its most recent fiscal year ending Jan. 31, CPS posted revenue of about $2.8 billion. The utility serves more than 870,000 electric customers.

      "You take people running co-ops, if it was CPS' size, they'd be making over $1 million a year," Mycoff said.

      Still, CPS is the nation's largest municipally owned gas and electric utility, so it's hard to compare compensation at CPS to pay at investor-owned utilities or electric cooperatives. CPS pays about 13 percent of its revenue to the city every month, a burden most electric and gas utilities don't face.

      Executives looking to work at city-owned utilities "already decided to put themselves into a market that pays less," Mycoff said. "The question really is the relative 'less.'"

      Former CPS trustee Ed Kelley led a 10-month CEO search in 2015 and 2016 that ended with the board selecting Gold-Williams after an unidentified outside candidate rebuffed CPS' offer, saying the salary was too low.

      Kelley, whose 10-year term on the board ended in January, has urged CPS to include a performance bonus in the next CEO's pay structure. He also has said Garza should be considered for the CEO position.

      Without bonus pay to offer, Garza said last month that CPS would have to offer a higher base salary to him or whoever is the final candidate, according to the San Antonio Report.

      "If I was doing the search, I would bracket $500,000 to $1 million" as the salary range, Mycoff said. "You might get somebody for $600,000, $700,000, or for $450,000. But I would make it relative to the person and what they bring to the table."

      He said the CEO search, which began last month, likely will take another five months or so.

      Mycoff pointed to the Jacksonville Electric Authority, another city-owned utility that provides power for 478,000 customers in the north Florida city. JEA's former chief executive was indicted in March for scheming to sell the utility and pocket cash from the transaction.

      Amid the scandal, JEA in late 2020 hired a new CEO at an annual salary of $560,000 with no bonus pay.

      "CPS is bigger, a lot more complex. It doesn't have quite the level of problems (JEA is) trying to resolve," Mycoff said. "So (CPS) might do $700,000 for somebody."

      It's tempting to compare CPS with Austin Energy, which is also a city-owned utility — and it's usually as hot or as cold in Austin as it is in San Antonio. But there are a couple of significant differences.

      Austin Energy serves about half as many electric customers as CPS, and it's only a power utility. Unlike CPS, it doesn't operate a natural gas system in its service area.

      Sargent, Austin Energy's general manager, earned about $400,000 in 2020. But her hiring was a unique case, Mycoff said.

      Mycoff helped recruit Sargent in 2016. At the time, she was working at a utility in Colorado. Sargent had worked at Austin Energy a few years earlier, and she wanted to be near family in Central Texas, Mycoff said.

      "If you were trying to recruit Jackie to go to San Antonio, she probably wouldn't come because of family considerations. So compensation is not relevant — location was the driver," Mycoff said.

      "If your search firm has somebody that says, 'Yeah, I'll take $450,000 because I've got another reason to be in San Antonio,' then (CPS) can have a win," he said. "If your search firm is doing the job right, they should come back with those types of options."

      The green ceiling

      The CEO's salary effectively sets a ceiling for other executives. So underpaying a CEO could make it difficult to keep other executives and managers who might receive higher offers elsewhere.

      Garza has tried to stanch the flow of employees leaving CPS since the utility suspended bonuses. Earlier this year, utility officials said CPS had as many as 400 job vacancies. The ability to work remotely during the pandemic made it harder for the utility to retain employees who got job offers from higher-paying companies in other cities.

      In CPS' upper echelon, each of the nine senior executives that CPS listed in its most recent annual report — published in early 2020 — have left the utility, except for Garza and Chief Information Officer Vivian Bouet.

      The 10 top executives under Garza earn annual salaries of about $290,000 on average, according to CPS. Lifting Garza's current salary would give the utility room to bump up other executives' pay to keep them around, Mycoff said.

      "If all of a sudden you send the signal to people that 'We're going to be penny-wise and pound-foolish with our CEO,' what have you told the staff?" he said. "You've said, 'Go somewhere else, because you're not appreciated.'"

      Mycoff hasn't worked with Garza directly but said "his reputation in the business is good."

      As the CPS executive search picks up, Mycoff said the utility has to assess the risk of offering inadequate compensation to the next CEO as much as it considers the risk of overpaying someone.

      "If you get a CEO who's not as strategic, was it worth it?" he said. "I say no."



      (c)2022 the San Antonio Express-News

      Visit the San Antonio Express-News at www.mysanantonio.com

      Distributed by Tribune Content Agency, LLC.


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