Sunday, February 19, 2006
Avista Utilities
Avista Utilities CEO gets $2.57 million
Well, this week in Spokane, there's been some hub-bub about the news that Avista Utilities' Gary G. Ely, Avista chairman, president and chief executive officer earned $2.57 million in salary, bonuses and stock options. People are upset because Avista raised their gas and utilities bills last quarter citing reasons of increase in gas prices (Read this Avista News Release). They claim in this release that they need a 23.8% increase to offset the 40% increase of natural gas over the past year. The news release also says, "company revenues will increase by approximately $15.7 million per year, or 23.8%." It also states, "Avista makes no additional profits from these rate changes".
Well, if you are to look at the facts, Avista's profit for the 4th quarter of 2005 rose 12% from the previous year's 4th quarter. Their total revenue for 2005 was $458.4 million, up from $340.4 million in 2004. It is stated that they have a higher revenue due to higher rate increases and higher energy marketing revenue. Source: MSN Moneycentral
Now, I am the first to understand people's outrage when they say they are putting their thermostat at 60 - 64 to save money & the CEO and board members are making these huge sums of money. Frankly, I'm outraged too. I'm not going to defend them. It is ethically and morally wrong.
However, I will go to say that I am not shocked nor surprised that this has happened. To quote Gordon Gekko (Michael Douglas' character in Wall Street), "Greed is Good". Avista is a publically traded company in the New York Stock Exchange (AVA) and has shareholders. Those shareholders expect a return for their investment. Avista answers to their shareholders, not their customers. Name an American Corporation that answers to their customers & not their shareholders. The bottom line is that they want a profit. If the Corporation can bring in a CEO that increases their profit, thus increasing their dividends, they will do it. Now, you also have to understand that Avista has other areas of their business. They did have a higher operating cost in 2005 than 2004 and did post a loss in that department. So, it appears on the surface that their 23.8% rate increase didn't cover their losses. They were able to post profits in other areas of the company.
The other thing I should point out is that after Avista annouced their 4th quarter profits, their stock went up. Which means that people started buying more shares of their stock. So, again, shareholders invested more money into the company, thus more people are going to expect a profit (See 1 year history stock chart). So, as far as the stock market is concerned, this news is good. At what cost? Well, that's for you to decide.
Those are the facts. Now, going back to what I said earlier...I do think it is ethically and morally wrong to pay one individual this amount of money, especially in a utilities company? Yes, absolutely. If Ely had a soul, he'd donate a good amount of that money back into Avista's project share operation, which gives breaks to the low income utility customers. One million dollars would go a long way with Avista's customers.
So, legally is there anything we can do? I don't think so. We are a capitalistic society. Unfortunately, one of the drawbacks to a capitalistic society is greed. People want money. People of power want more money and more power. They feed off of the poor and will take what you give them. It's not a criticism, it's an observation.
Now, I don't know if there's anything we can do, nor do I know the law. But, I would be interested to know if the two commissions that approved these rates can do anything: Washington Utilities and Transportation Commission and the Idaho Public Utilities Commission. Maybe they can investigate on whether or not they think they were lied to.
Anyway, I guess I'm saying I'm just as outraged, but I'm not shocked. As soon as a company stops serving the customers and starts serving the stockholders, the customer loses.
Well, this week in Spokane, there's been some hub-bub about the news that Avista Utilities' Gary G. Ely, Avista chairman, president and chief executive officer earned $2.57 million in salary, bonuses and stock options. People are upset because Avista raised their gas and utilities bills last quarter citing reasons of increase in gas prices (Read this Avista News Release). They claim in this release that they need a 23.8% increase to offset the 40% increase of natural gas over the past year. The news release also says, "company revenues will increase by approximately $15.7 million per year, or 23.8%." It also states, "Avista makes no additional profits from these rate changes".
Well, if you are to look at the facts, Avista's profit for the 4th quarter of 2005 rose 12% from the previous year's 4th quarter. Their total revenue for 2005 was $458.4 million, up from $340.4 million in 2004. It is stated that they have a higher revenue due to higher rate increases and higher energy marketing revenue. Source: MSN Moneycentral
Now, I am the first to understand people's outrage when they say they are putting their thermostat at 60 - 64 to save money & the CEO and board members are making these huge sums of money. Frankly, I'm outraged too. I'm not going to defend them. It is ethically and morally wrong.
However, I will go to say that I am not shocked nor surprised that this has happened. To quote Gordon Gekko (Michael Douglas' character in Wall Street), "Greed is Good". Avista is a publically traded company in the New York Stock Exchange (AVA) and has shareholders. Those shareholders expect a return for their investment. Avista answers to their shareholders, not their customers. Name an American Corporation that answers to their customers & not their shareholders. The bottom line is that they want a profit. If the Corporation can bring in a CEO that increases their profit, thus increasing their dividends, they will do it. Now, you also have to understand that Avista has other areas of their business. They did have a higher operating cost in 2005 than 2004 and did post a loss in that department. So, it appears on the surface that their 23.8% rate increase didn't cover their losses. They were able to post profits in other areas of the company.
The other thing I should point out is that after Avista annouced their 4th quarter profits, their stock went up. Which means that people started buying more shares of their stock. So, again, shareholders invested more money into the company, thus more people are going to expect a profit (See 1 year history stock chart). So, as far as the stock market is concerned, this news is good. At what cost? Well, that's for you to decide.
Those are the facts. Now, going back to what I said earlier...I do think it is ethically and morally wrong to pay one individual this amount of money, especially in a utilities company? Yes, absolutely. If Ely had a soul, he'd donate a good amount of that money back into Avista's project share operation, which gives breaks to the low income utility customers. One million dollars would go a long way with Avista's customers.
So, legally is there anything we can do? I don't think so. We are a capitalistic society. Unfortunately, one of the drawbacks to a capitalistic society is greed. People want money. People of power want more money and more power. They feed off of the poor and will take what you give them. It's not a criticism, it's an observation.
Now, I don't know if there's anything we can do, nor do I know the law. But, I would be interested to know if the two commissions that approved these rates can do anything: Washington Utilities and Transportation Commission and the Idaho Public Utilities Commission. Maybe they can investigate on whether or not they think they were lied to.
Anyway, I guess I'm saying I'm just as outraged, but I'm not shocked. As soon as a company stops serving the customers and starts serving the stockholders, the customer loses.
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