Much of the mainstream media coverage of CPS Energy and its President and CEO Doyle Beneby focused on his latest compensation package and its performance-based structure that allowed him to earn a base salary of $500,000 and about 50% more in bonuses.
The public focus on public executive pay is understandable given that the median family income for a family of four in San Antonio is less than $50,000 a year, meaning it would take such a working family 15 years to equal Beneby’s annual pay, more when you calculate the net present value of Beneby’s money in hand.
Still, there has been nothing median or average about Beneby or his performance in his five years as the CEO of the nation’s largest municipal utility, and now, arguably the highest performing one. A much smarter assessment of the Beneby era is to look at the return on investment he delivered over the five years when ratepayers paid him, let’s say, a total of $3 million.
A conservative calculation would put the ROI at more than 100X. Ask yourself: Would you pay one of San Antonio’s most important municipal leaders $1 for every $100 he could save you through smart fiscal management and high-level strategic execution?
That’s why CPS Energy trustees and the search firm they have hired to find Beneby’s successor need to follow the same course followed in 2010 that brought Beneby here: Find a game changer, someone with the expertise, leadership and political skills to take the energy utility to the next level.
It could be one of the four inside candidates at CPS Energy that reliable sources tell the Rivard Report have contacted executive search firm Korn Ferry International to apply. It is just as likely an outsider with broad experience in the energy sector, including the private sector.
Beneby came to the job from Chicago-based Exelon Corp., the nation’s largest nuclear energy plant operator, yet his lasting mark in San Antonio will be his decision to move the CPS Energy portfolio away from carbon fuels and into a diversified portfolio of renewable energy sources.
Beneby’s decision early in his tenure to divert an estimated $500 million in capital funds away from modernizing coal plants to fund the cost of building solar and wind capacity probably was the city’s most important energy diversification investment since it became a partner in the South Texas Plant nuclear facility more than four decades ago.
Had the CPS Energy board chosen an inside candidate five years ago, it can be said with near certainty that a strategic redirection of that scale would have been politically impossible.
- CPS Energy is #1 in solar generation in Texas and #7 among all U.S. cities.
- CPS Energy is #1 in wind-generated energy among all U.S. municipal utilities.
- The opportunistic purchase of the Rio Nogales natural gas plant in Seguin.
- Carbon reduction initiatives in total are equal to eliminating 1.5 million vehicles from area highways and streets.
- CPS Energy has the lowest energy rates of the top ten U.S. cities. Three scheduled rate increases over the last five years have been canceled. Beneby gets less credit for his fiscal management, but he made substantial internal management and operational changes that freed up tens of millions of dollars in overhead, a key reason why rate increases have been deferred.
Beneby’s New Energy Economy has led to the construction of 400 MW of solar generation, the Mission Solar Energy solar cell manufacturing facility at Brooks City Base, the recruitment of several new energy companies to San Antonio and the creation of 700 good jobs and what the utility reports is a $1.1 billion economic impact.
Defining the challenge of “taking CPS Energy to the next level” is not easy, but looking at the politically troubled organization and management team that Beneby inherited in the wake of the fizzled STP nuclear facility expansion, and examining the organization he leaves to his successor, is a good measure of the standard trustees can set for the next leader.
Is someone inside Beneby’s senior leadership team equal to the task? Few of the executives under Beneby are familiar public names. His team gets high marks overall for execution, and represent a mix of longtime CPS Energy executives and others recruited from the outside.
An important challenge for the CEO is to operate as a public official in concert with City Council since San Antonio owns CPS Energy, yet operate the energy utility in the open marketplace, competing with private sector operators. It’s tricky, and most observers would say Beneby did not enjoy the politics. He was known to have wanted to change trustee selection from the current geographic quadrant model to a selection process based on energy and governance expertise. He didn’t enjoy the constant media focus on his compensation rather than the utility’s performance.
The average person in San Antonio earning that median income of less than $50,000 a year celebrated when the Spurs signed LaMarcus Aldridge to a four-year, $80 million contract in July. That’s because people see him as a game changer. Without knowing it, fans calculated the emotional ROI and decided instantly that Aldridge was a winning investment.
San Antonio would be a smarter city if it evaluated its municipal leaders in the same fashion. Take the city’s most important unelected public executives, who happen to share a record of delivering significant ROI on the dollars we pay them. Beneby at $700,000-plus, City Manager Sheryl Sculley at $465,000, SAWS President and CEO Robert Puente at about $425,000, and Bexar County Judge Nelson Wolff at a pittance of $126,000.
Think about the city’s top public players the same way people think about the Spurs and there would be far more attention to performance and why these people earn their pay and more. Everyone knows about Spurs championships. How many also celebrate the fact we are national leaders in city management, energy cost and diversification, and water conservation?
You get what you pay for. Food for thought as we recruit the next leader of CPS Energy.
Full disclosure: Robert Rivard served as a consultant to CPS Energy for several months in 2012 to reorganize its communications department and reduce costs. His wife, Monika Maeckle, consults for CPS Energy on various communications initiatives.
Featured/Top Image: A herd of sheep keep the grass trimmed at OCI Solar Power’s 4.4-megawatt solar farm, Alamo 2. Photo Courtesy of CPS Energy.