Eversource doubles pay for CEO as 'skyrocketing' electric bills hit customers
Alexander Soule Feb. 17, 2023
Eversource CEO Joe Nolan Jr. in April 2021 at the utility's office in Hartford. Arnold Gold/Hearst Connecticut Media
As Connecticut lawmakers drill deep into how Eversource records profits amid higher bills this winter for customers, Eversource doubled the pay for its rookie CEO last year, even as other senior executives absorbed pay cuts.
In Joe Nolan Jr.'s first full year as CEO in 2022, Eversource profits hit a record $1.4 billion last year across its Connecticut Light & Power territory and other electric, gas and water businesses in Connecticut, Massachusetts and New Hampshire. CL&P operations contributed $533 million to Eversource's profits, up $131 million from 2021 when the company reached a settlement with Connecticut officials over its restoration preparations and response to a 2020 storm.
Eversource estimated Nolan's compensation last year at nearly $13 million, including the value of stock at assumed rates of appreciation in the years to come. If those assumptions hold, Nolan would double his take-home pay from 2021, and tally about $4 million more than Nolan's predecessor Jim Judge did in his first full year as Eversource CEO in 2017, a nearly 45 percent increase.
Judge took a sharp pay cut in 2020, though at $14.7 million still making more than Nolan did last year.
In an email response to a CT Insider query, an Eversource spokesperson indicated Nolan had no plans to seek any outright reduction in pay this year, while pointing out executives took no salary increases in 2021 during the second year of the COVID-19 pandemic.
"Joe Nolan is uniquely sensitive to the challenges that our customers face and he has been very vocal on the need for change in the wholesale market to find relief for customers," stated Eversource spokesperson Caroline Pretyman. "He knows that cutting executive pay does not help customers one bit, since they do not pay his compensation and all it will do is take the eye off the ball that the real salvation for customers is in the hard work of modifying our approach to the wholesale market.
"Our entire compensation structure is designed to come in at the market median (meaning half of companies above us and half below us), and we have not adopted the pay raise rates that other companies have," Pretyman added. "Our employees, and Joe, are taking that cut in terms of limitations that are implicitly applying to their wage awards."
In its most recent quarterly report on file with the Federal Energy Regulatory Commission, Eversource reported a 3.5 percent wage increase last year on average for nearly 1,100 employees in Eversource's historic CL&P operations, amounting to an extra $3,800 averaged across each employee included in that portion of the payroll, or $4 million in the aggregate.
"These bonuses and extra payments are truly mind-boggling — adding insult to injury for consumers who are struggling with skyrocketing electricity bills," said U.S. Sen. Richard Blumenthal, D-Conn., who has called for a breakup of Eversource as a way to improve responsiveness and service for Connecticut customers. "Instead of giving those consumers a break, they are reporting astronomical profits."
Nolan warned last fall of the prospect of looming bill hikes for customers as natural gas prices boomed used to fuel many power plants in New England, and wrote President Biden asking for federal intervention. Eversource lists options online for customers to pay bills and tips to reduce energy use.
The new rates for Eversource have increased bills by 31 percent to 42 percent for the vast majority of customers. United Illuminating customers are now paying 28 percent to 38 percent more than in 2022. State officials lowered these increases by speeding up a credit related to nuclear power that was set to take effect later in 2023.
On Thursday, the Connecticut Public Utilities Regulatory Authority rejected Eversource's request for a 27 percent increase in rates for its Aquarion subsidiary that provides water services in portions of Connecticut.
During a Tuesday hearing of the Energy and Technology Committee of the Connecticut General Assembly, a manager with the nonprofit Operation Fuel described the pain felt by many of the customers it is providing free heating oil this winter, with extra assistance from Eversource and United Illuminating, whose parent company Avangrid reports its financial results next week.
"We should not all be subsidizing a very-heavily-subsidized, investor-owned, record-profit making industry, at the expense of everyone else," said Gannon Long, policy and public affairs director for Operation Fuel, in Tuesday testimony. "People do not want to get behind on their bills and apply to strangers — through confusing processes — to get help. They want to be able to afford their bills in the first place."
Eversource states it links pay "to performance that will ultimately benefit customers, employees, shareholders and communities served," as described in its annual report filed Wednesday afternoon with the U.S. Securities & Exchange Commission. As the case with other corporations, Eversource benchmarks executive pay against a cohort of similar companies, in its case to include New York-based Consolidated Edison and Dominion Energy, which owns the Millstone Power Station nuclear plant in Waterford.
In a study released two weeks ago, the consulting firm PayGovernance predicted an increase of well below 10 percent for the median pay of CEOs leading companies in the S&P 500 index, which includes Eversource. PayGovernance added it expects even smaller gains for CEOs this year, given inflation and the potential for recession among other factors.
Eversource's compensation committee is chaired by its lead director William Van Faasen, the former CEO of Blue Cross & Blue Shield of Massachusetts. Nolan chairs the board in addition to his role as CEO.
During a Tuesday hearing of the Energy and Technology Committee of the Connecticut General Assembly, lawmakers told Eversource representatives they believe the company's actions suggest it places shareholder profits well above customer service on the totem pole of priorities — and with a portion of executive pay in the form of equity stock, the individuals are going along for the shareholder ride.
After a decade run in which the price of the parent corporation's stock nearly quadrupled through the summer of 2019, Eversource's stock has been volatile in the years since. That reflects disruptions of the COVID-19 pandemic and energy markets gone haywire following Russia's invasion of Ukraine. On Thursday, shares opened at about $79, in line with the price in August 2019.
Eversource shareholders get an annual "say on pay" vote that the board of directors considers in setting executive compensation. Last year, shareholders representing more than 90 percent of Eversource stock voted in favor of the company's compensation schedule.
Other senior executives saw their estimated compensation drop last year, including Werner Schweiger who holds dual roles as CEO of Connecticut Light & Power and chief operating officer of Eversource. Due to no gain in pension values last year, Schweiger's compensation dipped 15 percent to $3.7 million. At year end, Schweiger's accumulated pension value was nearly $13 million, built up over 20 years of employment at Eversource and its predecessor companies.
Nolan's pension accounts were valued at nearly $16 million reflecting gains across his 37-year career with Eversource' businesses. Nolan owns Eversource stock as well, worth nearly $13 million at today's value.
Among several proposals for possible new legislation limiting how utilities record profits, Connecticut lawmakers are weighing whether to include a provision that would allow the state to claw back a portion of executive pay if bills rise by 10 percent over a set period. Both Eversource and United Illuminating customers are paying more this year due to contracts the utilities have in place to purchase electricity at New England power plants fueled by natural gas, which saw prices roar upward last year.
"We have limited impact on corporate senior management compensation, because they operate in many jurisdictions and provide some regulated and some unregulated services," state Sen. Norm Needleman, D-Essex, told CT Insider in an email response to a query. "That said, it’s a statement about the structure of these corporations that allow these type of salaries. Raising executive compensation in public utilities, at a time when so many people are struggling making ends meet, may be allowed but ... just because you can do something, doesn’t mean you should."
After his promotion to CEO nearly two years ago, Nolan acknowledged the need to rebuild Eversource's reputation in Connecticut, after the double-whammy of Tropical Storm Isaias blackouts in August 2020 coupled with sky-high bills that summer amid blistering heat; and lingering memories of restoration timelines after prior storms.
"Does Eversource have an image problem in Connecticut right now?" Nolan said at the time. "Absolutely."
In a Tuesday conference call with investment analysts, Nolan described the latest legislative scrutiny as an expected part of doing business, particularly during times when customers are seeing higher bills.
"There's a different philosophy down there around settlements maybe in Connecticut, but it's no different than any year in terms of what takes place out there," Nolan said. "It's just the first inning of a nine-inning game, and we'll have a seat at the table like we always do and discuss these issues."
Includes prior reporting by Dan Haar, Alex Putterman and Luther Turmelle.
Alex.Soule@scni.com; 203-842-2545; @casoulman