ESG: Ann Becker

Electric Power, Arizona Public Service, Evergy, Northwestern Energy, PPL Corporation, WEC Energy Group, and Xcel Energy, as outlined below by execs from these companies, have quite decisively accelerated their progress on ESG priorities, through investment, innovation, and a clear intent to be recognized as leaders in ESG at the same time that they continue to deliver safe, reliable, and affordable utility service to the communities that depend upon them, powerfully.

Guidehouse's Dan Hahn: What are the most important things to know about ESG and Xcel Energy?

Frank Prager: Xcel Energy was the first utility to establish a vision of being carbon free by mid-century. We established this in December of 2018, and it is the guidepost for how we approach all ESG issues.

It is ambitious, but the target is one we're proud of. After announcing our 2050 vision, more than two dozen EEI utilities established similar goals. Our vision represents a transformation of the electric sector that was inconceivable just a few years ago.

We also established an interim goal of an eighty percent reduction from 2005 levels by 2030. That goal is one we're already hard at work implementing. We've got energy plans filed in Minnesota and Colorado that will achieve that interim target.

We've already achieved a fifty-one percent reduction across the system. The way we're doing it is straightforward. We're building a lot of renewable energy using the great wind and solar resources that we have in the states we serve.

We're also continuing to operate our nuclear plants in Minnesota, which are an important part of our overall strategy. And we are building some natural gas to maintain reliability along the way, as we retire most of the coal plants in our generation fleet. With this combination of strategies, we're able to achieve a remarkable level of carbon dioxide reductions.

We can do a lot through 2030 with the technologies we have today, but we can't get all the way to a carbon-free system. The intermittency of renewable energy means we will have impacts on the affordability and reliability of the system.

That is why, to achieve a carbon-free system by 2050, we need new technologies. We're working with policymakers and technology developers to develop zero carbon dispatchable technology to displace remaining fossil but that also allows us to control the system to provide affordable and reliable energy to customers.

We're big believers in technology. It will deliver; it just isn't here right now. That's why we set our vision for 2050 to give technology time to catch our ambitions. However, it's an exciting time in this industry. We're proud we have set these ambitious goals and we're well on our way to achieving them.

PUF's Steve Mitnick: You talked about innovation to try to go beyond eighty percent. Talk about how active Xcel Energy has been there.

Frank Prager: Innovation is a big piece of what we are and what we're trying to accomplish. The company is finding ways to create the new technologies necessary to bridge the gap between the eighty percent reduction in the carbon free system.

We are part of Energy Impact Partners, an exciting opportunity to learn about new technologies that entrepreneurs and developers are trying to deliver.

Our former CEO and current executive chairman Ben Fowke made innovation one of his main priorities. It was also one of his priorities during his tenure as chairman of the Edison Electric Institute.

EEI has been pushing Congress to fund research and development efforts through a program called the carbon-free technology initiative. That initiative is designed to develop carbon free dispatchable resources.

Xcel Energy is also working on its own pilots. We have a hydrogen pilot in Minnesota associated with our nuclear plants. This pilot will produce hydrogen using high temperature steam from a nuclear plant as part of the process to create green hydrogen.

We are also working with policymakers. Colorado just passed legislation we've worked on with the governor's office, lawmakers, and environmental stakeholders. It allows us to invest in new technologies to pilot and learn more about them. We're now evaluating many options to pursue moving forward

PUF: ESG has three letters to it. There's an S and a G, so let's discuss the S.

Frank Prager: Let's begin with diversity, equity and inclusion because, with what we've been through over the last eighteen months, it's been a traumatic period for the entire country with the pandemic.

For our employees, the issue of racial justice and reconciliation was huge. The murder of George Floyd in Minneapolis occurred a few miles from our office, and our employees, especially our employees of color, were deeply affected.

Ben showed true leadership during that period. Our current CEO Bob Frenzel continues to develop diversity, equity and inclusion programs that will result in forward momentum. Given events in our community, for the first time, we made DEI part of our annual performance incentives for all employees, including our executives.

We also are looking at how we're working with the communities we serve. As an energy company, we have our assets in every neighborhood and in every state we serve. With our pipes, wires, transmission lines, and power plants in communities throughout the area, we're integral to our communities.

As part of our commitment to the communities we serve, we're hiring minority and women owned businesses and individuals to help us build new energy projects.

We're using that program in Minnesota, where we are building a four-hundred-sixty-megawatt solar project at our Sherburne County, or Sherco, coal plant.

We're also always promoting our Step-Up program, where we're hiring interns for the company, to help give people from underrepresented communities, an opportunity to be a part of Xcel Energy.

Another aspect of the S in ESG is just transition. As we make this energy transition toward a clean energy future, there are going to be folks impacted, especially employees and communities that have long relied on our coal plant operations.

In Minnesota, as I mentioned, we have the solar facility we're putting in at our plant at Sherco. We're also working with communities, to bring in a new data center to the city of Becker where Sherco is located.

That's going to provide two thousand construction jobs and fifty full-time jobs, and it's going to have a significant economic impact in the region.

We are also working with community and union leaders in Pueblo, Colorado, where we have our Comanche station and have plans to retire two of the three coal-fired units.

We're working with EVRAZ, a steel producer in Pueblo near Comanche, to look at ways they can continue to operate the facility and hire the people in Pueblo to work there. We're building a solar facility for them and allowing them to continue to stay in business and use clean energy, to protect the jobs onsite.

Another example is Hayden, a power plant in Northwest Colorado, where we're using advanced technology and other ideas, working with the community and labor, to try to find ways as we transition out of coal to protect the community and make investments in new technologies.

PUF: Xcel Energy is a big company and you're in a lot of states. How do you factor that in, try to reach these goals, and keep pushing, considering you cover so many different parts of the country?

Frank Prager: We are in eight states, and we're in states as diverse as Colorado and Minnesota, which, especially on the environmental front, are quite progressive.

We also serve states like the Dakotas or Texas, which have a different view on certain energy policy issues. We always need to find a balance.

What is most important for us, when we make investments and commitments to our communities, is to make these cleaner energy transitions, in a way the communities and customers appreciate, and most important, in a way that is affordable and reliable for all customers. That is how we'll achieve a more a successful outcome, no matter what the political situation is.

While some policymakers in some of our states may not agree with our focus on greenhouse gas reductions, they do appreciate the investments we're making in their community.

And they like that we're bringing them affordable and reliable power. That strategy is critical in our red states. Of course, it also works well in blue states, as they have an emphasis on environmental leadership.

No state wants overpriced power. If we can keep our eye on affordability and reliability, we can deliver what our states want, no matter what their political viewpoints are. Our strategy is robust, and it works in all the states we serve, no matter the political leadership.

Dan Hahn: What's your role in these initiatives?

Frank Prager: I wear a multitude of hats. I am the CEO's chief of staff. My role is to help Bob Frenzel and before him, Ben Fowke, to think about how the strategies of the company should develop and be rolled out.

I also coordinate the strategy components of what the company has to do. I'm engaged in federal policy, and do a lot of work in Washington, especially now with the budget reconciliation bill pending.

Another part of my job also is to act in the role of the sustainability officer for the company. We have board committees that oversee sustainability as well as our carbon strategy.

We don't do anything at Xcel Energy, from a strategic or a policy point of view, without thinking about, what does it mean for our sustainability? How does ESG play into any decision we make?

It doesn't mean we always make decisions that, for example, environmental advocates might want us to make, but we do a good job of balancing these issues and choosing a path that achieves the clean energy future that the company is committed to.

PUF: What's most rewarding to you in this fascinating job?

Frank Prager: I love my job. I have an opportunity to work on transforming an entire industry. More than that, I work on issues that can allow us to transform the country, and to make a difference in people's lives.

There is nothing you can do with your career that is more valuable than that. I also work with some of the finest people I know, it's an honor to work with the people at Xcel Energy, and with all of the people who work in the utility industry.

Electric utilities in the United States like American Electric Power, Arizona Public Service, Evergy, Northwestern Energy, PPL Corporation, WEC Energy Group, and Xcel Energy, as outlined below by execs from these companies, have quite decisively accelerated their progress on ESG priorities, through investment, innovation, and a clear intent to be recognized as leaders in ESG at the same time that they continue to deliver safe, reliable, and affordable utility service to the communities that depend upon them, powerfully.
 

Guidehouse's Michelle Fay: Ann, share with us the important things we should know about ESG at APS.

Ann Becker: Of course. Arizona Public Service Company announced its clean energy commitment at the beginning of last year. Our commitment is to provide one hundred percent clean, carbon free electricity by 2050, with appropriate milestones.

When we announced our clean energy commitment, our CEO Jeff Guldner also stood up a new organization within APS focused exclusively on sustainability. Before then, we had one person doing ESG reporting, and that was it. We now have a team of seven people who are dedicated full-time to ESG.

We still are focused on ESG reporting. Honestly, it's the most important thing we do. I call it our bread and butter. But we are doing a lot more than just reporting.

We have a team of smart people who are helping shape solutions to some of our most pressing challenges right now, like climate change. It's important to have public policies that support our clean energy commitment and help the environment.

There are creative solutions being floated right now to accelerate decarbonization. We need to find the right balance among clean, affordable, and reliable energy — we need all three, this doesn't work if any one of those elements is missing.

Finally, my team and I are focused on driving our company's ESG performance. We get in people's business and ask them tough questions.

It's great to have the full support of my officer team to play this change agent role for the company. It also helps that we're starting from a position of strength. We are the only North American electric utility company to get double A ratings from CDP in climate and water. But we know we can do more.

Last year, in partnership with EPRI, we conducted our first sustainability materiality assessment, which is a best practice in the ESG space. We engaged a group of about three hundred stakeholders, about one hundred fifty employees, and one hundred fifty external stakeholders, including customers, community leaders and others.

We asked our stakeholders two questions. What are the most important sustainability issues that APS should be focused on? And where do we have the greatest ability to make a difference, given our unique position in the state of Arizona?

We gathered and analyzed a lot of data, and we developed what we call our Priority Sustainability Issues or PSIs. We have twenty-three PSIs. The top four, which we call our Integral PSIs, are clean energy, safety and health, customer experience, and energy access and reliability. A lot of our focus going forward will be in these four areas. But all twenty-three PSIs are important and serve as our sustainability north stars.

Our next step with EPRI will be to talk with companies in our industry that do these things exceptionally well. We want to know what they're doing and how, and how they measure success. We want to learn from them and then improve ourselves.

PUF's Steve Mitnick: What drove the benchmarking and working with EPRI?

Ann Becker: We don't want our ESG team to just be a think tank. We want our ESG approach to be action-oriented and outcome-focused. We want to get better, and the best way to do that is to learn from the pros, the companies who do these things really well. EPRI is going to help us find some opportunities for improvement.

PUF: Why is ESG so important for business success?

Ann Becker: The focus on ESG started in the investment community, and strong ESG performance is certainly critical to ensuring access to capital, which allows us to keep our rates affordable. Today, more institutional investors are insisting that their companies have actionable plans to reduce and ultimately eliminate their carbon emissions.

Investors are using their dollars and votes to express these desires. We're all familiar with the research showing that companies with strong ESG performance routinely outperform their peers on almost every measure.

But the ESG mandate has expanded far beyond the investment community. The climate science is a clear mandate, on its own. The United Nations' climate experts at the Intergovernmental Panel on Climate Change have warned we need to get to a net-zero carbon economy by 2050. That's part of the reason we announced our clean energy commitment — we need to do our part; everyone needs to step up and do their part.

Our employees also want us to be transparent about our environmental and social performance.

Often now, when I am interviewing job candidates, I get questions like, what are your values at APS? What matters to you? What are you doing to make a difference? These questions get to the heart of ESG.

The next generation, my kids' generation, want to work for employers whose values align with their personal values. One of the best ways to access and retain this talent pool is to have strong ESG performance, and to talk out loud and regularly about what matters to us and what we're doing about it — that resonates strongly with this generation.

We've also got customers who are demanding more clean energy. Arizona has become a hub for big tech companies, which is fantastic for Arizona. Growth is important to help spread the costs of the clean energy transition. A lot of the big tech companies want one hundred percent clean energy. We have a clear customer mandate.

Finally, I'll mention that our APS Promise is to do what is right for the people and prosperity of our state. This is our commitment to our customers, our employees, and our communities. We will do the right thing, every time. That, in a nutshell, is the best ESG mandate of all.

PUF: You operate in a difficult political environment. How does the board feel about what you're doing?

Ann Becker: Our board is keenly interested in and supportive of our ESG strategy and work. Our Corporate Governance and Public Responsibility Committee is officially responsible for ESG, but we routinely talk with the full board about these issues.

But you raise an interesting point because politics in Arizona is indeed complicated. We work in politically contentious times, and with a very diverse group of stakeholders.

We've got a Republican state legislature, two Democratic United States senators, and a public utilities commission that is generally evenly split at the moment. We've got people trying to characterize Arizona as red, blue, or purple. It makes navigating ESG complicated, but not impossible.

We have done the work to define our sustainability priorities, and clean energy is at the top of the list. It's important to solicit diverse perspectives and to listen carefully to all of these various perspectives, because they each contribute something valuable, worth hearing, and understanding. It takes all of us to develop solutions that are durable and effective.

For example, we are fully committed to decarbonizing by 2050. I'm proud that our commitment is to eliminate our carbon emissions entirely, not just to achieve net-zero, which allows for continued carbon emissions.

But even as we continue to integrate more renewable energy and to decarbonize our generation fleet, we remain focused on customer affordability and reliability. We can't simply charge forward and ignore these two important elements.

We already have a lot of at-risk and vulnerable customers who struggle to pay their bills. We have to keep them front and center, and we have to design solutions that keep electricity affordable for them.

And we have to keep the lights on. Reliability is a real concern here in the desert Southwest, where we have this uniquely challenging confluence of resource constraints, extreme heat, and growth that outpaces the rest of the nation. Our job, every day, is to find the right balance between clean, affordable, and reliable energy.

PUF: What do you find most rewarding about your job?

Ann Becker: The most rewarding work for me is the work that makes a meaningful difference in people's lives. Work feels incredibly impactful when you know it's changing lives. I'll share one example that makes me proud and grateful to work at APS.

When we started talking about closing our coal plants, we also talked about the economic impact of the plant closures in the rural communities near the plants. The people who live in these communities are our colleagues, our friends, and our family.

We have seen what happens when plants close around the country. The tax base disappears, which impacts the schools. Lease payments are gone, jobs are lost, there's a ripple effect that is incredibly painful for the people who live in these communities.

Our coal plants have been the primary economic engine and the way of life in these rural communities for more than fifty years. And let's not forget that the economic prosperity of Arizona was largely fueled by the energy these plants produced.

We decided to provide economic and transition support to these communities, to help them make this transition. We call this our Coal Community Transition commitment, or CCT.

We've offered to provide a total of one hundred forty-four million dollars in transition support to the Navajo Nation, the Hopi Nation, and the areas around our Cholla Power Plant in northeastern Arizona. This includes cash payments, economic development, and transmission support.

We also are going to help get electricity to more people on the Nation, and we're going to solicit bids for six hundred megawatts of renewable energy projects on or near the Nation, because President Nez told us he wants more clean energy on the Navajo Nation.

It's a robust commitment, and it reflects input from a lot of perspectives — most importantly the Navajo Nation's. We spent a lot of time with leaders of the Navajo Nation, understanding their priorities and areas of concern. We deeply value our longstanding partnership with the Navajo Nation.

We're waiting for a final decision from our regulatory commission. A recent recommended opinion and order recommended CCT funding at about half of what we requested.

But we're going to continue to advocate for full funding, because we believe this is an important part of any plant decommissioning effort, and also because it's the right thing to do. We're not doing this because we have to, we're doing this because it's the right thing to do. That is rewarding.

ESG Powerfully conversations, some with Guidehouse's Dan Hahn and Michelle Fay:

• AEP Managing Director - corporate sustainability Sandy Nessing
• Arizona Public Service VP Ann Becker
• Evergy General Counsel Heather Humphrey and Chief Compliance Officer Ellen Fairchild
• NorthWestern Energy COO Brian Bird
• PPL Corp. COO Greg Dudkin and PPL Electric Utilities President Stephanie Raymond
• WEC Energy Group SVP Beth Straka
• Xcel Energy SVP Frank Prager