The California Public Employees' Retirement System moved Monday to protect its half-billion-dollar investment in power industry stocks by appointing a delegation to meet with managers of the companies to discuss the concerns of the nation's largest public pension fund.
A special CalPERS delegation to be headed by San Francisco Mayor Willie Brown will visit the headquarters of the energy companies in its portfolio.
CalPERS board members are concerned that a backlash in California to the energy crisis could lead to re-regulation of the industry, which could in turn hurt the long-term value of the fund's holdings.
The delegation "will ask companies to sit down and provide information on their long-term strategy and vision for their companies and how shareholder value will be protected," CalPERS spokeswoman Pat Macht said. "Obviously, an emphasis will be placed on urging the companies to act responsibly and within the law."
CalPERS has sizable investments in AES Corp., Dynegy Inc., Duke Energy Co., Enron Corp., NRG Energy Inc. and Reliant Energy Inc., unregulated electricity and natural gas providers whose stocks plunged by double-digit percentages this year, in part because of a series of state and federal probes into alleged price gouging in California.
The board of the retirement fund decided to launch the delegation after a meeting of its investment committee Monday. CalPERS has $544 million invested in energy stocks.
CalPERS directors also voiced concern about "the impact that current generators' behaviors are having on our other investments in California," Macht said. CalPERS has about $20 billion invested in the state in the form of real estate and other holdings.
Additionally, Macht said the board expressed concern over the huge pay packages collected by the executives over the last year that were detailed in a Times report last week.
The lucrative compensation looks out of line compared with what the board considers a "market turndown" in shares of the companies.
The Times reported that Enron Chairman Kenneth L. Lay netted $123 million in option transactions last year, according to a filing with the Securities and Exchange Commission.
That was nearly three times his gains the previous year and nearly 10 times what he made in 1998.
CalPERS owns 2.6 million shares of Enron that were worth $137.6 million at the end of May.
With assets totaling $151.8 billion, including about $60 billion invested in U.S. stocks, CalPERS' scrutiny of companies and industries often serves as an important bellwether for other large public investment funds.
In October, the CalPERS board voted 7 to 5 to divest about $525 million in tobacco stocks, saying an "unprecedented amount" of litigation and regulation made owning those stocks a bad investment.