April 4, 2006
Mayo Shattuck the Third, you are ticking me off
The president and CEO of Constellation Energy Group, right, stands to gain a cool $70 million from a proposed merger with the parent of Florida Power & Light.
(This information comes from an April 2, 2006, article by Jay Hancock, "CEG chiefs' gain could help BGE customers," in the Baltimore Sun. I will refrain from linking directly to the article because Sun links go bad quite quickly.)
These millions are on top of an annual salary of $1 million from Constellation (plus $4 million or more in bonuses). He apparently made $8-10 million a year as the head of Alex Brown, in previous job that he walked away from suddenly the day after 9/11.
Meanwhile, BGE, owned 100 percent by Constellation, is proposing a 72 percent increase in electricity prices this summer, when rate caps expire, costing most people $743 a year more.
What this means for our household, in conjunction with the huge hikes in natural gas prices this winter, is a year-round average of $300 a month for heating (natural gas) and cooling (central air conditioner powered by electricity). And with that, we are not even comfortable!
When I first moved to our Upper Fells Point home in 1990, gas and electric ran $93.40 for my first bill, in February.
Going from $93 to $300 for utilities over 16 years translates to a 13 percent annual increase, with no benefit in return, in fact, considerably less comfort. $3,600 is a lot of money to pay per year to not be comfortable. I predict some level of migration out of Maryland farther south in response to these bills.
In the April 2 Sun, Hancock wrote about a paradox whereby BGE consumers could benefit if Shattuck is motivated by the prospect of $70 million, in his very own post-merger pocket, as part of a contract he negotiated that takes effect if Constellation merges with anyone else. With the Maryland Legislature threatening to block the merger with Florida Power unless the rates are rolled back, Shattuck may have to lower our rates so as to get his mountain of cash.
Mr. Hancock, I follow you in this complicated saga. But what occurs in part of my brain, the part that oversimplifies, is a short-circuit of anger, pretty much a loathing of Mayo Shattuck the Third.
Dude, ya want $70 million? While we get ready to live freezing cold in the winter and boiling hot in the summer?
OK, sure, you can have your money IF you promise me to live like Marylanders did in my childhood, suffering through the sticky summers, with childhood photos showing sweaty bangs stuck to our foreheads. Because that's how a LOT of us are going to be living.
I want you, Mayo Shattuck the Third, to remove all heating and air-conditioning from your car and your Roland Park mansion and your office and your wife Molly's vehicle that ferries her to cheerlead the Ravens at age 39. Sweat and shiver like the rest of us. Or maybe insulate your house's walls with $100 bills.
I am normally pretty laissez-faire re: market forces and executive compensation and so forth.
But the greed of Mayo Shattuck the Third, like that of a villain in a Charles Dickens' novel, hits too close to home. It rubs me the wrong way.
Here is his arrogant defense of his millions in the March 12 Baltimore Sun (article entitled "Constellation's CEO defends rates, merger: Interview with Mayo A. Shattuck III"):
Sun reporter Paul Adams: Your post-merger benefits package will pay you tens of millions of dollars. How do you explain those numbers to people who are worried about a 72 percent increase in electricity costs?Mayo Shattuck the Third: Constellation is the leading power commodity business in the country. We have very talented people here, the most talented in the business. They've created something very special. They get compensated relative to their competitive peers in New York. Now, I could have fielded the junior varsity here to build Constellation, and we would have been crushed by the New York giants. Instead, we made a proactive decision to build the world-class commodity platform, and the individuals that created that need to be rewarded in the same way that the stars at T. Rowe Price and Legg Mason get rewarded. And we're very proud of that, and that adds to the tax base and the health of the community, and I don't believe people should be resentful of that success.
Dream on, Mayo Shattuck the Third. I don't resent your success. I do resent your greed. It completely undercuts every last bit of philanthropy and public service you have ever undertaken.
Maybe it's even worse if you are an economic conservative to see such a naked expression of greed as Mayo Shattuck the Third's. This just provides fuel to those who want the inefficient government to handle things better handled by private organizations.
Our nation's electric grid is mess and in dire need of updating and investment, as we all should have gathered from the blackout in the Northeast United States Aug. 14, 2003.
Deregulation changed how electricity was physically shared around the country, and an aging grid became a problem. Utility rates actually DO need to go up to address an aging infrastructure, see the conclusion of this explanation in The Industrial Physicist:
One widely supported answer is to change the grid physically to accommodate the new trading patterns, mainly by expanding transmission capacity. The [Department of Energy] and [The Federal Energy Regulatory Commission], as well as organizations supported by the utilities, such as the Electric Power Research Institute and the Edison Electric Institute, advocate this approach. In reports before and after the blackout, they urged expanding transmission lines and easing environmental rules that limit their construction. The logic is simple: if increased energy trading causes congestion and, thus, unreliability, expand capacity so controllers can switch energy from line to line without overloading.To pay the extensive costs, the utilities and the DOE advocate increases in utility rates. “The people who benefit from the system have to be part of the solution here,” Energy Secretary Spencer Abrams said during a television interview. “That means the ratepayers are going to have to contribute.” The costs involved would certainly be in the tens of billions of dollars. Thus, deregulation would result in large cost increases to consumers, not the savings once promised. [Emphasis added.]
As an economic conservative, I could with some reluctance buy into increased rates for improved reliability and security. No one wants to be on an operating table and have the hospital's electricity go out.
But higher electricity rates so that Mayo Shattuck the Third can further line his own pockets -- in a merger that has my utility prices decided in Florida?? No way!
Regardless of how Hancock writes this, and how much I understand the workings of capitalism, the brain goes:
- I am going to pay $300 a month and even so I will NOT be comfortable in the summer or winter.
- This is so the already mega-rich Mayo Shattuck the Third can get $70 million for doing God knows what -- apparently, drafting exorbitant contracts with an energy company and getting away with it.
From the Baltimore Business Journal:
Both critics and public relations experts independent of Constellation say the company comes off as arrogant, cold and unfeeling toward the plight of customers, especially seniors and those on fixed incomes. And the issue is getting personal: Activists are planning a protest at Constellation CEO Mayo A. Shattuck III's house on March 29.All of this political turmoil could have a big impact for the company, which is banking on getting the FPL merger approved by the end of this year. Lawmakers are talking about using the merger as a way to extract concessions from Constellation, including relief for ratepayers.
"The way this has been handled has left people very angry," said state Sen. E.J. Pipkin, an Eastern Shore Republican. "They've taken an attitude that everything's just fine."
Baltimore already has people too poor to heat and light their homes, witness this story of an 11-year-old boy rushed to Johns Hopkins, where he later died of burns from a house fire because their power had been shut off, and their home was lit with candles.
As for the rich in their McMansions, they too are going to feel these hikes, trying to heat and cool 4,000 square feet, but presumably they know that if you ride big, you pay big. Or maybe they will wise up and join the Small House Movement?
There are thousands of families like ours, kind of in the big middle, with a more modest-sized house and once-reasonable utility bills, wondering what to do. We are in Upper Fells Point, which bakes like the rest of cemented East Baltimore in the summer, with too few trees and parks. As heated air rises, our vertical rowhouses turn the 3rd floor into a sweatbox. It takes both central a/c and a room unit to make the 3rd floor liveable, because our 1980s rehab-era heating and cooling set-up lacks zoned systems.
The house may already be as weatherproofed as it could possibly be. Some years ago we had a thermal inspection -- from Thermal Inspection Services in Allentown, Pa. For $250, the guy brought an infrared camera and provided us with a written report and a videotape showing air leaks in our house. We have caulked and sealed everything possible. The windows are reasonably new and double-paned.
I'm not sure what we can do barring getting a higher efficiency furnace, which would be extremely expensive. We are probably stuck until the current furnace gives out.
This is going to be tough.
Mayo Shattuck the Third, you gall me. As a consumer, I am just mad enough to live in the dark and cold and keep my money from you. And I will not be happy about that.
For other people, living in the dark and cold will be because they don't have the money to pay their bills and have had their power shut off.
Our governor in Maryland, Bob Ehrlich, didn't help with a proposed $25 million to help the poor with their utility bills. OK, Bob, I'll be living in the cold and dark, AND be taxed more so others can be a little less in the cold and dark? Is that supposed to be a solution to a problem that is going to hit everybody?
Why aren't you pushing for new technologies or an expansion of Maryland's nuclear power? Calvert Cliffs seems to be doing fine. Can you imagine the economic boon to our state if we found ways to provide affordable power to homes and businesses?
Pass the hat to Mayo Shattuck the Third, he's got the $25 million. Maryland taxpayers -- and anyone using heat or air conditioning -- sure don't.
- posted by jbelliveau at 12:08 PM in The Neighborhood
2 Comments
Leave a comment
Jeannette,
I live in Florida and have FPL (Florida Power and Light) as my electric company. I guess I can't complain too much because I have a New York City income and live in a small town in Florida. I pay no city or state tax and everytime someone around here complains about taxes, I'm not sure what they mean.
However, my electricity cuts off briefly on occasion for no apparent reason.
Interestingly enough in your piece you left out a large part of the scandalous equation: misinformation by our federal government on power issues, government protection for corporate big whigs, kickbacks, lobbyists, tax write-offs and tax breaks for the CEO's.
The black out you referred to some years ago was due to someone introducing false information into the system, telling or FLOODING the database with information which would make parts of the power grid to collapse. Don't know if it is purely 'wild speculation', conspiracy or not but it was on National Geographic, plus I read it online someplace. I will surely FWD the link to you if I find the BLOG/ARTICLE.
BTW--Nice web site. Also, I like the picture of Shattuck III, he's quite 'dashing'.
SDH
Isn't it a great country when Jeannette, who is my friend and neighbor, can post something about my employer, and be free from governmental intrusion? And then I can publicly comment on her post, free from getting fired by my employer, while my relationship with Jeannette stays perfectly intact, despite that I like Mr. Shattuck because his brainpower and skills have kept me and 6,000 Marylanders employed? (In defense of Mr. Shattuck's payout from a merger that might actually result in lower energy costs: No one ever got a job from a poor person).
This exchange is a perfect example of why we fought the cold war for 50 years--posting anti-corporate opinions couldn't have been done in the Soviet Union. Thanks for some interesting commentary, Jeannette. And thanks for knowing that I was likely to defend my employer--who bites the hand that feed them? God Bless America, where people can disagree without being disagreeable!