2022 Executive Compensation at Eversource

As a public service, the Office of the Consumer Advocate is sharing the report we received from Eversource today, showing that last year its New Hampshire ratepayers forked over $4,437,471 to the top executives of New England's biggest utility conglomerate.  Eversource agreed to make this annual filing in the settlement agreement that resolved the rate case filed by the utility with the New Hampshire Public Utilities Commission 14 years ago, in 2009.

"Make no mistake, the senior executives of Eversource are lavishly compensated," said Consumer Advocate Don Kreis.  "But, at the same time, I would caution ratepayers not to read too much into this information."

For example, last year Eversource's top executive, President and CEO Joseph R. Nolan, Jr., received nearly $13 million in total compensation.  According to Eversource, 5.4 percent of that compensation -- about $700,000 -- was charged to the company's captive customers in New Hampshire.  Eversource's New Hampshire subsidiary -- Public Service Company of New Hampshire -- actually accounts for a much greater percentage of the company's annual revenue -- it's about 10 percent of that revenue.

"More than half of Mr. Nolan's compensation last year consisted of shares of Eversource stock awarded to him," Kreis noted.  "That means it is ultimately investors, and perhaps potential investors, who have the real interest in making sure he is not being overpaid via this aspect of his compensation."

Kreis added that he would like to take this opportunity to correct certain misunderstandings that have proliferated in the wake of his recent column in which he referred to Mr. Nolan's annual compensation as well as that of two other energy executives (the CEOs of NextEra and Constellation, New England's two most dominant generation owners).

"When and if executive compensation becomes excessive, it is a shareholder problem first and foremost, and not necessarily a ratepayer problem," said Kreis.  "That's why publicly traded companies like Eversource, NextEra, and Constellation must disgorge extensive information about executive compensation, and how it is determined, via annual proxy statements and other documents furnished to shareholders and federal regulators."

"Therefore," said Kreis, "it is simplistic and perhaps even unhelpful to focus on executive compensation as the focus of outrage as people struggle with the astronomically high electricity rates that have spread through New Hampshire in the past 18 months.  I simply highlighted executive compensation in my column as a way of getting people's attention -- hoping they would focus, instead, on the ways in which these companies find ways to collect too much money from captive customers."

According to Kreis, the problem at Eversource is its extensive transmission assets as regulated at the federal level.  Most of the costs associated with Eversource's transmission assets are essentially going unscrutinized, as recently pointed out by the New England States Committee on Electricity (NESCOE).  "It's hardly surprising that its transmission business is by far Eversource's most profitable enterprise," said the Consumer Advocate.  "New Englanders pay the highest transmission charges of anyone in the country."

When an electric utility files a rate case with the New Hampshire Public Utilities Commission to increase its distribution charges -- as we expect Eversource to do next year -- the Office of the Consumer Advocate focuses on the overall contribution made by residential utility customers to the utility's administrative overhead.  "If that contribution is excessive, we object strenuously," noted Kreis.  "We are less interested in what individual executives make, although we take a look at that as well."

Kreis noted that the reasonableness of any individual executive's compensation, for good or ill, is generally a function of what comparable utilities and energy companies around the country are paying their leaders.  And he stressed that Eversource does not make a profit on its default energy service because it acquires the energy at wholesale, from providers like Constellation and NextEra, and simply passes the cost onto default energy service customers without any kind of mark-up.

"I would also like to take this opportunity," said Kreis, "to disagree with the call I heard at a State House press conference yesterday for a ban on utility rate increases.  I as concerned as anyone about the soaring cost of electricity and energy in New Hampshire.  But neither the PUC nor the Legislature can simply ban rate increases by fiat.  States that do that find themselves being sued in federal court by a utility, which then successfully argues that preventing the company from recovering its reasonably incurred costs is a violation of the Takings Clause of the Fifth Amendment to the U.S. Constitution."

"Ergo," according to Kreis, "those of us who are outraged by the high cost of electricity cannot avoid the need to do the hard work of figuring out how to make the grid a more affordable proposition.  In large part that means reining in our reliance on natural gas as the region's dominant technology for producing electricity."