EXHIBIT 99.1
EXECUTIVE COMPENSATION OF
DUQUESNE LIGHT COMPANY EXECUTIVE
OFFICERS FOR 2002 AND SECURITY OWNERSHIP
OF DUQUESNE LIGHT COMPANY DIRECTORS
AND EXECUTIVE OFFICERS AS OF DECEMBER 31, 2002
Compensation
The following Summary Compensation Table sets forth certain information
as to cash and noncash compensation earned and either paid to, or accrued for
the benefit of, the President and the four other named executive officers of
Duquesne Light Company for service during the years indicated. Mr. Roque became
an executive officer in 2001.
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
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Awards Payouts
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(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other Securities All
Annual Restricted Underlying Other
Compen- Stock Performance LTIP Compen-
Name and Salary Bonus sation Award(s) Options/SARs Payouts sation
Principal Position Year ($) ($)(1) ($)(2) ($)(3) (#)(4) ($) ($)(5)
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V. A. Roque 2002 268,833 171,000 - - 89,500 - 4,163
President 2001 254,000 23,275 67,018 - 121,287 - 3,989
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J. G. Belechak 2002 174,250 110,250 - - 24,000 - 5,181
Sr. VP - Operations & 2001 129,000 76,950 - - 21,000 - 5,098
Customer Service 2000 103,934 44,362 - - - - 4,435
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M. L. Hogel 2002 173,833 107,625 - - 24,000 - 8,428
Sr. VP & Chief 2001 136,500 76,950 - - 21,000 - 8,000
Admin. Officer 2000 125,000 60,750 - - - - 8,000
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S. R. Schott 2002 151,667 76,500 - - 15,000 - 7,395
VP & Controller 2001 115,008 67,500 - - 13,000 - 4,041
2000 115,008 46,125 - - - - 7,278
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J. E. Wilson 2002 150,833 79,800 - - 15,000 - 2,901
VP - Corp. Dev. 2001 125,000 11,250 - - 24,940 - 2,375
& Rates 2000 118,750 29,688 - - 15,787 - 2,256
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(1) The amount of any bonus compensation is determined annually based upon
the prior year's performance and either paid or deferred (via an
eligible participant's prior election) in the following year. The
amounts shown are the awards earned in that year but established and
paid or deferred in the subsequent years.
(2) Perquisites or personal benefits are not reported if, in the aggregate,
they do not exceed the lesser of $50,000 or 10% of the named executive
officer's salary and bonus for the covered year. Includes compensatory
tax payments connected to the funding of non-qualified pension benefit
accruals in 2001 for Mr. Roque of $48,559.
(3) None of the named executive officers holds any restricted shares. As
reported in the Long-Term Incentive Plan Awards in Last Fiscal Year
table below, the named executive officers were awarded performance
shares in 2002. Payouts of these awards, if any, may be earned over
two- and three-year periods, depending on total shareholder return. No
payouts will be made if performance targets are not met. No dividends
are paid with respect to performance shares before payout. The total
performance shares awarded to the named executive officers and the
hypothetical aggregate closing market price of such performance shares
($15.24 per share) on the last business day of 2002 were: for Mr. Roque
(17,000, $259,080); Mr. Belechak (5,000, $76,200); Ms. Hogel (5,000,
$76,200); Mr. Schott (3,000, $45,720); and Mr. Wilson (3,000, $45,720).
(4) Includes total number of stock options granted during the fiscal year,
with or without tandem SARs and stock-for-stock (reload) options on
option exercises, as applicable, whether vested or not. See table
titled Option/SAR Grants in Last Fiscal Year. Once granted, the stock
options can be exercised only if they become awarded and vested.
(5) Includes matching contributions under the 401(k) Retirement Savings
Plan for Management Employees in 2002 for Mr. Roque: $4,163; Mr.
Belechak: $5,181; Ms. Hogel: $5,139; and Mr. Schott: $4,478. Includes
amounts for accrued, unused vacation sold to the company in 2002 by Mr.
Roque: $8,654; Ms. Hogel: $3,289; Mr. Schott: $2,917; and Mr. Wilson:
$2,901.
Supplemental Tables
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Individual Grants
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(a) (b) (c) (d) (e) (f)
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Number of % of Total
Securities Options/SARs Exercise Grant
Underlying Granted to or Base Date
Name Options/SARs Employees Price Expiration Present
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V. A. Roque 89,500 20.8 15.015 12/16/2012 151,255
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J. G. Belechak 24,000 5.5 15.015 12/16/2012 40,560
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M. L. Hogel 24,000 5.5 15.015 12/16/2012 40,560
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S. R. Schott 15,000 3.4 15.015 12/16/2012 25,350
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J. E. Wilson 15,000 3.4 15.015 12/16/2012 25,250
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(1) The options become exercisable, if at all, in 50% increments after June
16, 2004 if the average daily closing price of DQE common stock on the
New York Stock Exchange during any 30 consecutive trading day period
exceeds $17.38 and $19.98, respectively. If either price target level
is not met by December 16, 2005, the options associated with that
portion of the grant will be forfeited. If either price target is met
by December 16, 2005, the options associated with that portion of the
grant will remain exercisable until the expiration date set forth in
the table.
(2) The exercise price of the options is the fair market value of Common
Stock on the date such options were granted. The exercise price may be
payable in cash or previously owned shares of Common Stock held for at
least six months.
(3) The grant date present value shown in column (f) gives the theoretical
value of the options listed in column (b) on the grant dates using the
Black-Scholes option pricing model, modified to account for the payment
of dividends. The theoretical value of the option was calculated
assuming an option life equal to the time period between the grant date
and expiration date (10 years); a periodic risk-free rate of return
equal to the yield of the 10-year U.S. Treasury note maturing on the
option expiration date, as reported by Bloomberg Financial Markets on
the grant date (4.159%); and an initial quarterly dividend immediately
following the option grant date ($0.25), with an expected monthly stock
price volatility as reported by Bloomberg Financial Markets over five
years as of the month of the grant (29.88%). No adjustments to the
grant date present values have been made with respect to exercise
restrictions, forfeiture, or early exercise.
The actual value, if any, an executive may realize will depend on the
difference between the actual stock price and the exercise price on the
date the option is exercised. There is no assurance that the value
ultimately realized by an executive, if any, will be at or near the
value estimated.
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Aggregated Option/SAR Exercises in Last Fiscal Year
and Fiscal Year-End Option/SAR Values
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(a) (b) (c) (d) (e)
Number of Value of
Securities Unexercised
Number of Underlying Unexercised In-the-Money
Securities Options/SARs at Options/SARs at
Underlying Value Fiscal Year-End (#) Year-End ($)
Options/SARs Realized Exercisable/ Exercisable/
Name Exercised (#) ($) Unexercisable (1) Unexercisable
- -----------------------------------------------------------------------------------------------------------------------------
V. A. Roque -- -- 151,612/181,000 0/31,325
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J. G. Belechak -- -- 0/45,000 0/8,400
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M. L. Hogel -- -- 0/45,000 0/8,400
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S. R. Schott -- -- 0/28,000 0/5,250
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J. E. Wilson -- -- 26,727/32,000 0/5,250
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(1) The numbers set forth include options/SARs previously granted
(including those granted in 2002) but not yet earned. The number to be
earned will be based on individual and corporate performance and may be
earned by the officer over future periods from one to three years as
established with each option grant.
LONG-TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR
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Estimated Future Payouts under
Non-Stock Price-Based Plan(1)
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(a) (b) (c) (d) (e) (f)
Performance
Number of Or Other
Shares, Units Period Until
Or Other Maturation or Threshold Target Maximum
Name Rights (#) Payout (#) (#) (#)
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V. A. Roque 8,500 1/1/04 2,125 8,500 17,000
8,500 1/1/05 2,125 8,500 17,000
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J. G. Belechak 2,500 1/1/04 625 2,500 5,000
2,500 1/1/05 625 2,500 5,000
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M. L. Hogel 2,500 1/1/04 625 2,500 5,000
2,500 1/1/05 625 2,500 5,000
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S. R. Schott 1,500 1/1/04 375 1,500 3,000
1,500 1/1/05 375 1,500 3,000
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J. E. Wilson 1,500 1/1/04 375 1,500 3,000
1,500 1/1/05 375 1,500 3,000
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(1) Amounts represent the potential issuance of DQE Common Stock to the
named executive officers depending on the level of achievement (i.e.,
threshold, target or maximum) of the performance goals for the two- and
three-year award periods. Participants will not receive any shares of
DQE Common Stock under the program if DQE does not achieve the
threshold level of performance objectives during the respective award
period. Executive officers received awards of performance shares that
are earned based on DQE's "total shareholder return" over two- and
three-year periods. Total shareholder return is calculated by adding
stock price appreciation and dividends over the applicable period and
dividing the sum by the stock price at the beginning of the period.
Payouts will be earned based on (1) DQE's achieving a minimum total
shareholder return during
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the applicable period and (2) a comparison of DQE's total shareholder
return for theperiod with that of the Edison Electric Institute
Index. Depending on that comparison, executive officers may earn
between 0% and 200% of their target awards.
Retirement Plan
Duquesne Light maintains tax-qualified and non-qualified defined
benefit pension plans and arrangements that cover the named executive officers,
among others. The following table illustrates the estimated annual straight-life
annuity benefits payable at the normal retirement age of 65 to management
employees in the specified earnings classifications and years of service shown:
PENSION PLAN TABLE
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Highest
Consecutive
Five-Year Yeras of Service
Average
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Compensation 5 10 15 20 25 30 35
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$100,000 $ 8,000 $16,000 $ 23,000 $ 31,000 $ 38,000 $ 44,000 $ 49,000
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$200,000 $17,000 $34,000 $ 50,000 $ 67,000 $ 83,000 $ 96,000 $106,000
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$300,000 $26,000 $52,000 $ 77,000 $103,000 $128,000 $147,000 $162,000
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$400,000 $35,000 $70,000 $104,000 $139,000 $173,000 $199,000 $219,000
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$500,000 $44,000 $87,000 $131,000 $174,000 $218,000 $250,000 $275,000
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Compensation used for pension formula purposes includes salary and
bonus reported in columns (c) and (d) of the Summary Compensation Table and
stock option compensation prior to March 1, 1994. An employee who has at least
five years of service has a vested interest in the retirement plan. Benefits are
received by an employee upon retirement, which may be as early as age 55.
Benefits are reduced by reason of retirement if commenced prior to age 60 or
upon election of certain options under which benefits are payable to survivors
upon the death of the employee. Pension amounts set forth in the above table
reflect the integration with social security of the tax-qualified retirement
plans. Retirement benefits are also subject to offset by other retirement plans
under certain conditions.
The current covered compensation and current years of credited service
for the named executive officers is as follows: Mr. Roque ($303,193 and 16.3);
Mr. Belechak ($141,926 and 20.9); Ms. Hogel ($169,433 and 13.8); Mr. Schott
($161,921 and 8.5); and Mr. Wilson ($132,173 and 13.3).
Employment Agreements
We have stand-alone non-competition agreements with all of the
executive officers named in the Summary Compensation Table. These agreements
provide for non-disclosure of confidential information, non-competition in a
specified geographic area, non-solicitation of customers and suppliers, among
other provisions, for specified periods of time following termination of
employment.
Beneficial Ownership of Stock
DQE owns all of our outstanding voting stock.
The following table shows all equity securities of DQE beneficially
owned, directly or indirectly, as of March 10, 2003, by each director and by
each executive officer named in the Summary Compensation Table:
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Total Shares of Common Shares of Common Stock/
Stock (1) Nature of Ownership (2)
------------------------- -------------------------------------
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Morgan K. O'Brien 94,202 4,931 IP, VP
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Frank A. Hoffmann 23,424 477 IP, VP
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Victor A. Roque 161,531 9,919 Joint, SIP, SVP
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Joseph G. Belechak - -
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Maureen L. Hogel 136 136 IP, VP
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Stevan R. Schott - -
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James E. Wilson 18,369 392 IP, VP
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Directors and Executive 328,752
Officers as a Group
(8 persons)
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None of the individuals named in the table above owned beneficially
more than one percent of the outstanding shares of DQE Common Stock. The
directors and executive officers as a group beneficially owned less than one
percent of the outstanding shares of DQE Common Stock as of March 10, 2003.
(1) The amounts shown include shares of Common Stock which the individuals
have a right to acquire within 60 days of March 10, 2003 through the
exercise of stock options granted under the Long-Term Incentive Plan in
the following amount: Mr. O'Brien: 89,271; Mr. Hoffmann: 22,947; Mr.
Roque: 151,612; Mr. Wilson: 18,369; and all executive officers as a
group: 312,778.
(2) The term "Joint" means owned jointly with the person's spouse. The
initials "VP" and "IP" mean sole voting power and sole investment
power, respectively, and the initials "SVP" and "SIP" mean shared
voting power and shared investment power, respectively.
Messrs. Hoffmann, Roque, Belechak, Schott and Wilson, and Ms. Hogel
also beneficially own 1,310; 944; 860; 476; 473; and 657 shares, respectively,
of Duquesne Light Preference Stock, Plan Series A as of March 10, 2003. The
Preference shares are held by the Employee Stock Ownership Plan trustee for
Duquesne Light's 401(k) Plan on behalf of the Executive Officers, who have
voting but not investment power. The Preference shares are redeemable for DQE
Common Stock or cash on retirement, termination of employment, death, or
disability. As of March 10, 2003, there were 505,441 shares of Preference Stock,
Plan Series A outstanding. Mr. O'Brien does not own any preference shares.
The directors and executive officers do not own any shares of Duquesne
Light Preferred Stock or DQE Preferred Stock, Series A (Convertible).
Directors' Fees and Plans
All the Directors of Duquesne Light are employees of our parent,
DQE, Inc. and do not receive fees for their services as directors.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires Duquesne
Light's directors and executive officers, and any persons who beneficially own
more than 10% of our equity securities, to file with the Securities and Exchange
Commission initial reports of ownership and reports of changes in ownership of
Preferred Stock. Such persons are required by SEC regulations to furnish the
Company with copies of all Section 16(a) forms they file.
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To our knowledge, based solely on review of the copies of such reports
furnished to us and written representations that no other reports were required,
during the year ended December 31, 2003, all such Section 16(a) filing
requirements were met.
Compensation Committee Interlocks and Insider Participation
We dissolved the Compensation Committee on January 1, 2002. Its
functions are now performed by the full Board of Directors, all of whom are
officers of DQE, including our President, Victor Roque.
Duquesne Light Company Board of Directors
Morgan K. O'Brien. Age 43. Director since June 1999. Previously Vice
President - Finance from November 24, 1998 through May 2000. Vice President -
Finance, Treasurer and Controller from November 1, 1998 to November 24, 1998;
Vice President and Controller from October 1997 to November 1, 1998.
For DQE, President and Chief Executive Officer since September 2001.
Chief Operating Officer from August 2000 to September 2001. Executive Vice
President - Corporate Development from January 2000 to August 2000. Vice
President - Corporate Development from July 1999 to January 2000. Treasurer from
November 1998 to July 1999. Vice President and Controller from October 1997 to
July 1999.
Frank A. Hoffmann. Age 51. Director since October 2001. Executive Vice
President of DQE since October 2001. President and Treasurer of AquaSource, Inc.
since July 2000. Vice President--Operations of DQE Systems, Inc. from January
2000 to July 2000. Vice President of DQE Systems from May 1999 to January 2000.
General Manager, Marketing and Sales of Duquesne Light from 1995 to May 1999.
Victor A. Roque. Age 56. Director since June 1999. President since
October 2001. Previously Senior Vice President from November 1998 through April
2000, General Counsel from November 1994 through April 2000. Vice President from
April 1995 to November 1998.
For DQE, Executive Vice President since November 1998. General Counsel
from November 1994 to October 2001. Corporate Secretary from May 2000 to October
2001. Vice President from April 1995 to November 1998.
6