By Corinne Murdock |
Energy executives overseeing Arizona’s utility companies stand to gain financially for adherence to Environmental, Social, and Governance (ESG) criteria — namely, whether they stay on track to eliminate carbon emissions by 2050.
According to Arizona Public Service’s (APS) holding company Pinnacle West (PNW) Securities and Exchange Commission (SEC) report last year, they link 20 percent of compensation based on Clean Energy Commitment performance — specifically, the total number of “clean megawatts installed” over a period of three years.
Altogether, PNW’s seven executives made about $21.5 million last year.
PNW’s Clean Energy Commitment is to achieve a resource mix of 65 percent clean energy (45 percent of that coming from renewable energy) by 2030, end APS coal-fired generation by 2031, and ultimately transition completely to carbon-free electricity and eradicate all carbon emissions by 2050.
PNW’s progress on its Clean Energy Commitment has earned it a top-100 ranking with Energy Intelligence since 2019. In 2005, the company had achieved 24 percent clean energy; since 2019, they have maintained 50 percent clean energy. The company projects that they will reach 65 percent clean energy by 2030.
As part of their commitment, APS plans to add at least 2,500 megawatts of clean energy technologies such as solar and storage by 2025. In their 2022 SEC report, PNW projected the addition of 210 megawatts of utility-scale solar energy, 238 megawatts of wind energy, and 341 megawatts of energy storage. They also reported that APS had 2,400 megawatts of renewable capacity at present and over one million solar panels across their 10 grid-scale solar plants.
PNW reports that APS has been integrating ESG practices for nearly 30 years, but have undertaken extra steps in recent years to prioritize it. Their entire board “dedicates a significant amount of time to ESG matters,” and the company formed a Sustainability department to integrate ESG into everyday APS work and an ESG Executive Council to guide the company’s ESG pathway. That latter entity, the council, measures and reports on Clean Energy Commitment actions.
The company also tasked multiple committees to advance ESG: “Environmental” is handled by the Nuclear and Operating Committee, “Social” is handled by both Corporate Governance and Public Responsibility as well as Human Resources Committees, and “Governance” is handled by the Corporate Governance and Public Responsibility Committee.
The Corporate Governance and Public Responsibility Committee also reviews ESG trends that may impact the company. Earlier this year, PNW amended the committee’s charter to include oversight of climate change-related issues and strategies for response.
As for the Tucson Electric Power (TEP) and UNS Energy Corporation (UNS), their owner, Fortis, offers an ESG-related financial incentive of 10 percent for its executives. Fortis executives made over $4.5 million last year.
The ESG incentive is part of Fortis’ “sustainability and people performance,” factored for the first time last year. It carries a 40 percent performance pay incentive; in addition to ESG leadership, it includes the weighting factors of safety (10 percent); diversity, equity, and inclusion (DEI) (10 percent); and reliability (10 percent).
This year, Fortis raised the ESG incentive to 15 percent, and added climate and emissions priorities as well as a DEI objective.
Similar to PNW, Fortis has a 2050 net-zero carbon emissions goal, which includes a 50 percent reduction in greenhouse gas emissions by 2030 and a 75 percent reduction by 2035. They established a Governance and Sustainability Committee to oversee their emissions reduction goals.
Fortis has planned additions of 3,500 megawatts of wind, solar, and storage energy expansions through 2035. In doing so, Fortis projected by 2032 that TEP will achieve a coal-free generation mix and eliminate the use of surface water-generated power and groundwater use by 70 percent. Additionally, TEP is scheduled to have more than 40 percent of its power derived from wind, solar, and battery storage by 2030, and then over 60 percent by 2033.
Last year, Fortis amended its $1.3 billion revolving credit facility to become a sustainability-linked loan; meaning, its pricing adjustments are now linked to goals related to carbon emissions and board diversity.
Both APS and TEP are part of the California Independent System Operator (ISO) Western Energy Imbalance Market (WEIM), established in 2014. The WEIM allows participants to buy and sell renewable energy power based on need, and offers visibility of neighboring grids. If one utility has excess hydroelectric, solar, or wind power, the ISO will deliver that energy where needed elsewhere.
APS entered the WEIM in 2016, and TEP entered in 2022. Also members are the Salt River Project (SRP), joined in 2020, and the Western Area Power Administration (WAPA) Desert Southwest Region, joined in 2023.
As reported earlier this month, the world’s largest globalist investors are now backing the ESG push across Arizona’s utility companies.
Corinne Murdock is a reporter for AZ Free News. Follow her latest on Twitter, or email tips to corinne@azfreenews.com.
