Eversource CEO awarded $1.3 million pay raise
Thomas May’s compensation and the stock price of company grow amid a steep rise in electric rates
Thomas May has guided Eversource Energy through a busy time for the utility, which until last month was known as Northeast Utilities, and the company rewarded the chief executive for his efforts with a $1.3 million pay raise last year.
May rose to oversee New England’s largest utility following the 2012 merger of Northeast Utilities and NStar, the company May used to lead. The company, with corporate offices in Boston and Hartford, is pursuing several major new energy projects, at a time when its electricity customers in Massachusetts are paying higher winter bills.
And it’s now broadcasting its name change to its 3.5 million electric and gas customers.
The increased responsibility brings more money for the guy in charge. Eversource disclosed last week that May received a pay package valued at nearly $9 million in 2014. That’s a 17 percent increase from the $7.7 million May earned in 2013.
May’s 2014 compensation included a base salary of $1.2 million and a bonus of $2.25 million, which increased only modestly from 2013. The real increase came in the form of stock awards: $5.3 million last year versus $4.3 million the prior year.
May’s stock awards break down into two types: shares in Eversource that vest automatically over the course of three years if May stays with the company, and shares that vest over a similar time frame based on whether the company hits certain financial goals.
“Oftentimes, companies will continue to give an executive a larger portion [of pay] in equity to drive longer-term performance,” said Aaron Boyd, director of governance research at Equilar Inc., an executive compensation research firm in Redwood City, Calif. “What they’re looking for is for this individual to deliver returns over a multiple-year period.”
The company’s stock price has risen by nearly 20 percent during the past two years, modestly outperforming an index of utility stocks over that time.
Asked about May’s compensation, Eversource spokeswoman Caroline Pretyman said in a prepared statement that the company under May’s leadership outperformed the majority of peer companies in the areas of reliability and financial performance last year.
“One aspect of Tom’s performance that does not necessarily show up in charts and graphs depicting service quality or financial performance is the way in which he works every day to motivate employees to focus on customer service,” Pretyman said.
“He has assembled one of the strongest management teams in the utility industry and is recognized for his strong management skills in that regard. Therefore, his compensation reflects that.”
Christopher Loh, a spokesman for Attorney General Maura Healey, issued a statement saying the AG’s office, as the state’s ratepayer advocate, will “carefully review this pay as part of any proposed rate increase to ensure that excessive compensation is not passed on to consumers.”
Eversource and National Grid, Massachusetts’ two biggest electric utilities, raised electricity rates significantly this winter from a year ago. Eversource’s NStar group, for example, raised electricity rates for residential customers by 29 percent in January. Investor-owned utilities in Massachusetts typically pass their costs of procuring electricity directly to their customers. Those wholesale costs rose significantly in reaction to energy supply constraints and unusually cold weather in New England during the previous winter.
Even though those factors were largely outside of Eversource’s control, that didn’t stop Patrick Mehr of Lexington from criticizing May’s $1.3 million pay increase. As the leader of the Massachusetts Alliance for Municipal Electric Choice, Mehr has pushed state lawmakers to make it easier for towns to break away from for-profit utilities and form municipal electric utilities.
“I’m really sorry for Mr. May that his pay has not increased by as much as what Eversource charges customers for electricity,” Mehr said. “Even if Eversource did not increase its rates, it would still be charging 30 percent more than what municipal utilities [charge], for poorer service.”
It’s not unusual for the top execs at big utility companies to collect multimillion-dollar pay packages, and it’s hard to compare the companies directly because of their varying business lines and sizes. Several peer companies haven’t disclosed their 2014 pay packages yet.
At Consolidated Edison Inc., a larger utility in New York, former chief executive Kevin Burke earned $12.6 million in 2013. For Dominion Resources Inc., a major utility based in Virginia, chief executive Thomas Farrell earned $20.6 million in 2014. And Ben Fowke, the chief executive of Minneapolis-based utility holding company Xcel Energy Inc., earned $15.7 million in 2013.
Eversource also disclosed how much May gained by exercising stock options last year:
He reaped $11.6 million from exercising options that were awarded to him in 2007, 2008, and 2009. And he received $3.9 million in stock that vested last year, through awards handed to him in previous years.