Xcel Energy Ties Executive Pay to Emissions Goals: Minnesotans Pay the Price
Government-approved monopolies like Xcel Energy operate under a perverse incentive structure in Minnesota. The more these companies spend on new wind turbines, solar panels, and natural gas plants, the higher their government guaranteed profit soar. This is why Xcel Energy’s corporate profits have increased in lock-step with renewable energy generation.
Another factor influencing Xcel Energy’s advocacy of closing down their coal plants decades before the end of their useful lifetimes and building wind and solar is the fact that Xcel is one of the few utilities to tie executive compensation to performance on emissions goals. This incentive was established as early as 2014 — four years before Xcel announced its zero carbon goal in December 2018.
This incentive structure explains a lot about the actions Xcel Energy has taken as a company since 2014.
Xcel Energy CEO Ben Fowke, was the fourth-highest paid CEO in the state with total compensation of $23.3 million, according to an August 2020 report from the Minneapolis Star Tribune. According to an Energy and Policy Institute analysis, the carbon emissions incentive accounts for just under a quarter of Xcel CEO and Chairman Ben Fowke’s total compensation package, or nearly $5.6 million.
It’s important to remember that as a government-approved monopoly, Xcel only makes a profit on new, undepreciated power plants. Every year Xcel Energy operates a power plant, whether it be coal, nuclear, natural gas, wind or solar, it depreciates in value, earning the company less profit, which is represented in the example shown in the graph below (click here for more info).
This is why Xcel wants to close down their coal plants at Sherburne County and A.S. King before the end of their useful lifetimes, even though these plants generate some of the lowest-cost electricity in the state, as shown below.
Xcel’s executive incentives for emissions reductions also explains why its CEO Ben Fowke was present (along with Fresh Energy’s science policy director, J. Drake Hamilton) at the ceremony held prior to President Obama’s unveiling of the Clean Power Plan, which was the former administration’s attempt to regulate America’s reliable, affordable existing coal plants out of business and replace them with wind and solar.
The Clean Power Plan would have been a boon to Xcel’s corporate profits and Xcel’s CEO, but it would have harmed Minnesota families by making electricity more expensive. Minnesota families already paid record high electric bills in 2018 because of rising electricity prices due to wind and solar mandates in our state.
On the bright side, the Trump administration has scrapped the Clean Power Plan, meaning Xcel can no longer blame federal regulations for their plan to shut down their coal plants early. This gives Minnesotans a fighting chance to sign our petition opposing Xcel Energy’s Green New Deal.
This plan will cost $57 billion through 2050, an increase of $1,428 per year for each Xcel customer and have zero impact on the environment.
There is no free market for electricity, and as consumers we are forced by the state to buy electricity from whoever serves our service territory. Minnesota families and businesses should not be forced to foot the $5.6 million bill for Xcel CEO, Ben Fowke’s, bonus.