Investor-owned utilities pay top executives millions — are they worth it?

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Corporate America pays its CEOs well — especially those making money for shareholders — and the country’s investor-owned utilities (IOUs) are no exception.

So, as Southern Company’s stock soared in 2019, the compensation of CEO Thomas Fanning more than doubled, from $13.1 million in 2018 to $27.8 million last year.

That eye-popping raise topped a new list from the watchdog group Energy and Policy Institute, tracking the past three years of CEO compensation at 41 IOUs across the country. (The table below is an abbreviated version; the full list is available here.)

Source: Energy and Policy Institute. Note: Where two names appear, the first is a former CEO, whose compensation is in italics. Thus, Geisha Williams preceded William Johnson at PG&E, and Jim Piro preceded Maria Pope at Portland General.

Culled from company filings with the Securities and Exchange Commission (SEC), the figures in most cases reflect total compensation, in which base pay is often dwarfed by bonuses, incentives and stock options. For example, Pacific Gas and Electric’s now-departing CEO William Johnson started with a base pay of $2.5 million a year, but according to EPI’s figures, had a total compensation package of $18.5 million.

Johnson’s predecessor, Geisha Williams, earned only about half that amount, $8.6 million in 2017 and $9.3 million in 2018, reflecting the generally lower pay for female CEOs on the list. Lynn Good at Duke Energy is the outlier here at $15 million, which still puts her on the lower end of 2019’s highest-paid CEOs.

Clearly, these CEOs are overpaid, but it’s harder to gauge the true value they provide as leaders of the utilities that generate and deliver the electricity that makes modern life possible — a fact thrown into sharp relief by the Covid-19 pandemic.  

Pay disparities between IOU executives and essential positions, such as linemen, are one measure. According to the U.S. Bureau of Labor Statistics, the national average salary for linemen is $70,240, a sliver of the compensation for top CEOs such as Fanning, NextEra’s James Robo and Sempra’s Jeffrey Martin. 

Looking at CEO compensation for some of the nation’s larger municipal utilities and electric cooperatives provides another point of comparison — between for-profit IOUs and community-based, nonprofit munis and co-ops. At CPS Energy in San Antonio, the nation’s largest municipal utility, CEO Paula Gold-Williams has a total compensation of $930,669, split about evenly between base and bonus pay. 

Another Texas utility, the Pedernales Electric Cooperative, covers a service area almost the size of New Jersey. CEO Julie Caruthers Parsley earns $437,450 — a figure drawn from the co-op’s tax forms, available on its website. 

Which brings us back to the central question of how to value the performance of utility CEOs, and whether supporting deep grid decarbonization, broad customer choice and truly competitive solar markets are in the mix. Some of the highest-paid CEOs on the EPI  list head utilities — such as Southern Company and NextEra — that have slowed the growth of residential solar in their regions.  

According to its 2018 Sustainability Report, Sempra Energy sold all its renewables and intensified its focus on developing natural gas infrastructure; it also doubled CEO Jeffrey Martin’s pay twice — from $4.2 million in 2017, to $9.3 million in 2018 to $19.8 million last year.