Former chief executive officer, president, and chairman, Reliant Resources
Born: ca. 1959, in San Saba, Texas.
Education: Texas A&M University, BA, 1970.
Career: Haskins & Sells, ?–1977, certified public accountant; Houston Light & Power, 1974–1977, assistant secretary and assistant treasurer; 1977–1978, assistant comptroller; 1978–1983, comptroller; 1981–1983, vice president; 1983–1988, vice president, regulatory relations; 1988–1993, group vice president, finance and regulatory relations; 1993–1997, president and chief executive officer; Houston Industries, 1997–2000, president and chief operating officer; Reliant Energy, 1999–2000, president; 2000–2002, chairman, president, and chief executive officer; Reliant Resources, 2002–2003, chairman and chief executive officer.
Awards: Outstanding Alumnus Award, Lowry Mays College and Graduate School of Business, Texas A&M University, 1998.
■ R. Steve Letbetter helped Houston Light & Power and its parent company, Houston Industries, move from a local energy company to the international energy supplier and provider of energy services and marketing known as Reliant Energy. However, he resigned as CEO from Reliant Resources (an entity that had split from Reliant Energy to handle unregulated energy business) as the company's stock prices fell and several scandals ensued. Letbetter was a leader in his company and was known for helping the company develop a strategy that contributed to its successful expansion. He also helped change the overall approach of the energy business.
A native of San Saba, Texas, Letbetter earned a BA in accounting from Texas A&M University in 1970. He began his professional career as a certified public accountant and worked at Haskins & Sells, a Houston-based accounting firm. Letbetter joined Houston Light & Power in 1974 as assistant secretary and assistant treasurer. He moved through the ranks, holding a number of management and executive positions in the 1970s, 1980s, and 1990s.
Though as a company Houston Light & Power was opposed to the federal deregulation of the energy industry until the legislation was passed in 1992, Letbetter soon saw the potential benefits. By the early 1990s Letbetter was serving as group vice president of financial and regulatory relations before being promoted to president and chief operating officer in 1993. He anticipated that the electric utility industry would be deregulated, and he positioned his company accordingly by emphasizing the diversity of its interests. Letbetter recommended buying up megawatts of generating assets in other states and finding ways to sell them. He also built a strategy for doing business in Europe and Latin America.
In the mid-1990s Letbetter expanded Houston Light & Power's operations by retailing the company's electric product nationally. To facilitate this move, he organized the company into two units, one of which produced energy and the other of which delivered it, in addition to providing customer service and engineering. His success with Houston Light & Power led to his promotion to president and chief operating officer of Houston Industries (HI), Houston Light & Power's parent company.
At the time of Letbetter's promotion, Houston Industries was completing a merger with NorAm Energy Corporation to become the third-largest gas and electric utility company combination in the world. Letbetter headed the merger and over-saw the operations of the three new divisions created within the company: HI Power Generation, HI Retail Energy Group, and HI Trading and Transportation Group. Letbetter continued to create new divisions, such as HIPG Development in 1998, to increase and commercialize assets that could generate power and profits.
In 1999 Houston Industries was renamed Reliant Energy, and that spring it was announced that Letbetter would become chief executive officer of the company in 2000 while remaining president. He added chairman of the board to his titles later in 2000. In October of that year, Reliant was separated into two companies that would be functionally separate and that would eventually be traded separately. This move divided the regulated energy business of Reliant from the unregulated and allowed for different financial goals. The decision was made because the State of Texas was going to allow deregulation of its electric industry by 2002 but required that regulated and unregulated business be separate. Letbetter was put in charge of the unregulated arm, which was eventually called Reliant Resources, and was also the nonexecutive chairman of the regulated business. Unregulated businesses included commercial services, marketing and trading of wholesale energy, power generation, and retail customer services as well as a Houston-based telecommunications business.
By the time of Reliant Resources' initial public offering in 2001, it had $20 billion in annual revenue. Yet Letbetter and Reliant Energy were facing criticism in California, where the company did some of its business. California was embroiled in an energy crisis, which state officials believed had been caused by Reliant and other energy companies. Letbetter was personally accused of contributing to the crisis. His company was cited for contempt by a California senate committee that was investigating claims of price gouging for electricity.
Letbetter faced more criticism in 2002, when it was revealed that Reliant had participated in the shady business practice called "round-trip energy trades" between 1999 and 2002. (Round-trip energy trading involved simultaneously buying and selling the same amount of energy. Such deals were used by certain traders at Reliant to pump up trading volumes and revenues artificially.) Though these trades boosted the company's revenues by 10 percent, the company had to cut revenue reports by almost $8 million in that time period. Because the shareholders were upset about this situation, Letbetter responded by putting procedures in place to make sure that it would not happen again. Despite Letbetter's promises, Reliant Resources was investigated by the Securities and Exchange Commission, and some executives resigned.
Calls for Letbetter to leave the company became stronger when Reliant Energy's stock price began to fall drastically after the scandal involving Enron, another energy company based in Houston, and general investor distrust of energy trading companies. Stock prices for Reliant Resources went from $30 per share in May 2001 to $8.73 per share in early June 2002, with Reliant Energy stock falling from $42.75 to $17.11 within the same year. By June 2002 these problems had prompted shareholders of Reliant Energy (later named CenterPoint Energy) to call for Letbetter's resignation. They believed that the company had failed while Letbetter was in charge. They also had a problem with the $1.7 million bonus that he received in 2001. Letbetter tried to reassure shareholders that Reliant Resources could grow, deal with any regulatory issues, and be profitable as it finished becoming a completely separate entity from Reliant Energy. He was able to refinance the company's debt when it nearly went bankrupt.
Reliant and Letbetter faced more problems in March 2003, when the Federal Energy Regulatory Commission accused the company of having manipulated the price of power during the energy crisis in California. Though Letbetter promised that Reliant would leave the speculative energy trading business, the pressure on him increased, and he finally resigned in April 2003. The controversy surrounding Letbetter continued when he received a severance package worth $7.6 million, further inflaming some shareholders. As part of the deal, he remained a consultant to the company for a year after his departure.
See also entries on Houston Industries Incorporated and Reliant Energy Inc. in International Directory of Company Histories .
Goldberg, Laura, "Ex-Reliant CEO Rakes It In; Letbetter to Get $7.6 Million as Part of Severance Deal," Houston Chronicle , May 2, 2003.
——, "Reliant Chief Stresses 'the Right Way'; Company Takes Steps to Ensure Honesty," Houston Chronicle , June 6, 2002.
Hays, Kristen, "Reliant Resources Chairman, CEO Joins Executive Exodus," Associated Press, April 15, 2003.
"Steve Letbetter; Chairman, President & CEO, Reliant Energy," Utility Business , June 1, 2001, p. 69.