US trustee files objection to PG&E incentive plan for executives

A U.S. trustee has filed an objection to a motion to approve a multimillion dollar employee incentive plan filed by Pacific Gas and Electric Corp. in bankruptcy court.

Acting trustee Andrew R. Vara's objection, filed Wednesday through his counsel, attempts to block approval of PG&E's key employee incentive plan, known as KEIP. The plan could award up to $16.3 million in bonuses to PG&E's senior staff members, including the executive vice president of law, strategy and policy, the general counsel, deputy general counsel and chief financial officer.

That sum is more than 275% of the base salaries of those executives, according to the objection.

The objection states PG&E has not provided any information to the court about how the KEIP is measured, noting the only reference to the metrics are that they are similar to a separate short-term incentive plan approved earlier this year. Vara argued that's not enough to evaluate the executives' performance. In re PG&E Corporation and Pacific Gas and Electric Company, 19-30088. (Bankr. N.D. Cal., filed Jan. 29, 2019).

PG&E argued its KEIP, by nature as an incentive plan, is exempt from bankruptcy statute 503(c)(1), which requires a debtor to prove the recipients of the incentives are not insiders of the company or, if they are, that the payments are not intended to retain those people, according to court documents. Vara's objection questions whether the KEIP is an incentive plan instead of a retention plan.

"The debtors bear the burden of establishing by a preponderance of the evidence that the KEIP is primarily incentivizing, rather than primarily retentive," the objection said. "In other words, the debtors must demonstrate that the KEIP is not retention-based."

PG&E spokesperson Ari Vanrenen did not comment specifically about Vara's objection, but said in a statement, "PG&E's proposed CEO compensation plan aligns incentive compensation with our goals, including, most significantly, those relating to safe operations of our electric and gas systems."

Vara is the trustee for Region 3, which includes Delaware, New Jersey And Pennsylvania. Southern California's trustee, Tracy Hope Davis, recused herself from the case, according to the objection.

The U.S. attorneys representing Vara in the case declined to comment Wednesday.

-- Nicole Tyau