Eversource Compensation and the Competition


TwitterFacebookCopy LinkPrintEmail

Eversource has been pushed into the spotlight after a sharp rate hike on July 1 drew outrage from customers, and Tropical Storm Isaias left hundreds of thousands without power soon after, some for over a week.

Eversource’s well-paid executives have drawn scrutiny from customers and politicians in recent weeks, with Middletown Mayor Ben Florsheim noting that the $39.37 million compensation for the utility’s top five executives amounted to more than the town’s combined budget for police, fire, public works and emergency management.

Even in the world of high-paid electric executives, Eversource executives make a lot of money. 

Serving 3.2 million customers across 13,230 square miles in Connecticut, Massachusetts and New Hampshire, Eversource is the fourth-largest, U.S. owned and publicly traded electric provider in the Northeast in terms of customers, after Consolidated Edison, National Grid and Avangrid. But it pays its executives more than any of those companies, and pays CEO James Judge more than any of their individual executives.

Compared to some of the largest electric providers in the United States, Eversource’s executive compensation still appears generous. Eversource executives make more than executives of Dominion Energy, which serves 7.5 million customers. 

Three points of comparison

Next, let’s take a closer look at how Eversource executive compensation stacks up against three other utilities:

  • NextEra, the largest utility in the U.S. by market capitalization
  • Avangrid, a similar-sized company and the owner of Connecticut’s other major electric provider, United Illuminating

Top executives make far more money from incentives than from base salaries, so most of their pay is tied in some way to company performance. Those incentives can either be short-term or long-term, and most companies offer a combination of both.

Short-term incentives usually include cash bonuses companies pay each year to executives based on their ability to meet immediate financial goals like a certain earnings per share or return on equity. They also consider performance goals, like service and reliability. 

Those goals vary by company. NextEra considers customer service, reliability and worker safety, but gives financial goals more weight. Eversource bases 70 percent of its annual performance goals on the company’s financial performance, and 30 percent on operational performance goals like safety and reliability.

The level of short-term incentives also varies between companies, accounting for 10 percent of ConEd executive pay, and 19 percent for NextEra. But all companies use long-term incentives more. Those usually include stocks and stock options and are based on financial metrics averaged over three or four years, and are meant to give an incentive for sustained financial success and avoiding excessive risk-taking.

Long-term incentives were the second-highest category of executive compensation for Eversource (31.2 percent) and ConEd (33.6 percent). It was the highest category for NextEra (63.4 percent) and nonexistent for Avangrid, which reported no long-term incentives in 2019.

The amount earned from increasing pension values and deferred compensation is the top category of compensation for Avangrid (30.6 percent), ConEd (40.4 percent) and Eversource (41 percent). But it’s much smaller for NextEra executives, accounting for just 4 percent of their total compensation.

Comparison #1: Eversource and NextEra

NextEra is the largest gas and electric utility in the U.S. by market capitalization. It serves 5.7 million electric customers across a 34,550 square mile service area, mainly through subsidiary Florida Power and Light. NextEra reported operating revenues of $19.2 billion in 2019, more than double the $8.5 billion reported by Eversource. 

James Robo is the top executive at NextEra, serving as Chairman, President & CEO of NextEra Energy and Chairman of Florida Power and Light. He earned a total of $21.87 million in 2019, including a base salary of $1.45 million and $14.57 million in stock and option awards.

NextEra paid its seven top executives a total of $56.57 million in 2019, an average of $8.1 million, with Robo the top-paid executive and newly-promoted Chief Financial Officer Rebecca Kujawa the least-compensated at $3.2 million. Stock and option awards for the seven NextEra executives total $35.9 million, or 63.5 percent of all executive compensation.

Comparison #2: Eversource and ConEd

ConEd, which provides electric service to most of New York City is similar to Eversource in both revenue and number of customers, though Eversource covers a wider area. ConEd serves 3.8 million customers while Eversource serves 3.2 million. ConEd reported $12.57 billion in operating revenue, Eversource reported $8.52 billion.

Both have five top executives listed on SEC filings, but the smaller Eversource pays $7.7 million more to its executives, and $4.4 million more to its chief executive than ConEd. 

John McAvoy, serving as Chairman, President and CEO of ConEd, earned $15.35 million in 2019, including a base salary of $1.33 million and $5.9 million in stock awards. McAvoy also earned $6.4 million in deferred compensation and the increase in his pension value, accounting for 41.7 percent of his total compensation.

ConEd paid executives a total of $31.59 million in 2019, including $3.88 million in base salary. About a third of executive compensation came from $10.6 million in stock awards, and the $12,782,549 value of deferred compensation and increases in pension values amounted to 40.47 percent of total executive compensation in 2019.

Comparison #3: Eversource and Avangrid

Avangrid serves about 3.3 million customers across 31,335 square miles of New York and New England, including about 220,000 in Connecticut through subsidiary United Illuminating.

Despite having slightly fewer customers, Eversource reported about 34 percent more than the $6.34 billion Avangrid reported in operating revenue in 2019. But the difference in executive pay between the two companies far exceeds the difference in revenue.

In 2019, Eversource paid its five executives a total of $39.37 million, while Avangrid paid its five executives a total of just under $9 million. The mean compensation for Eversource executives ($7.87 million) is almost as much as the total compensation for Avangrid’s executive, who average under $1.5 million in compensation, each.

The key differences between compensation of Avangrid executives and executives of Eversource, ConEd and NextEra are that Avangrid executives don’t earn stock or option awards, and their pension benefits are significantly lower.

Two Avangrid executives, CEO James Torgerson and CFO Douglas Stouver, reported no change in pension value or deferred compensation, though the company listed 401(k) contributions for both. Which is especially significant for Torgerson, who had the highest base salary among Avangrid executives before he retired in June. 

For comparison, Eversource CEO James Judge’s $8.78 million pension and deferred compensation value was over half of that value across all Eversource executives and 44 percent of Judge’s total compensation. 

Judge also earned $6.68 million in stock awards, which no Avangrid executive was reported as receiving. Without his pension value and stock awards, Judge would have earned $4.35 million, just 22 percent of his reported compensation for 2019.