Utility CEO pay nears $1 billion as grid spending tops $1 trillion

America’s power companies are about to spend more on infrastructure than at any point in their history. Their chief executives are paid in a way that rewards that spending, and customers are already feeling the bill.

The chief executives of the 15 largest power companies in the S&P 500 Utilities Index hold roughly $993 million in unrealized stock-based pay, about $66 million each on average, according to a June review of company disclosures. Vistra’s James Burke tops the list with more than $100 million, followed by the heads of Constellation, NextEra and Entergy. NextEra’s John Ketchum alone holds restricted stock and option grants worth more than $100 million. At Talen Energy, chief executive Mark McFarland had close to 900,000 restricted shares vest in May. At June prices, those shares were worth about $300 million.

Those figures matter because of where the money comes from. The Edison Electric Institute, the industry’s trade association, projects that investor-owned electric companies will spend more than $1.1 trillion between 2025 and 2029. By June, the S&P 500 Utilities Index was up more than 30 percent since the start of 2024, lifted by data center demand for electricity. Household bills climbed over the same period. By mid-June, average monthly electricity rates were up about 10 percent nationally this year. The Energy Information Administration’s first national count found that utilities disconnected residential customers for unpaid bills about 13.4 million times in 2024.

For boards and regulators, the issue is how pay is designed. Utility executives are paid largely in stock, and utility stock prices rise when companies spend capital. The grid needs that capital, and nobody disputes this. The open question is whether anyone is paid to make sure customers get it at a reasonable price.

How capital spending becomes executive wealth

A regulated utility makes money differently from most businesses. State commissions approve its investments and add them to a pool of assets called the rate base. The company is allowed a set return on that base, which it collects through customer bills. A larger rate base means larger allowed earnings.

Fidelity’s $4 billion Select Utilities Portfolio described the mechanism plainly in an investor update: “Earnings and cash flows increase when the utility invests capital, and the regulator allows an agreed rate of return.”

That arithmetic flows straight through to pay. Long-term incentive plans at large utilities typically reward earnings-per-share growth and total shareholder return. Both rise with capital spending, as long as regulators approve the projects and the allowed return is higher than the company’s cost of capital. Economists described the resulting bias toward capital-heavy solutions more than sixty years ago and called it the Averch-Johnson effect. A utility rewarded for the size of its asset base has little reason to choose a cheaper fix over a new substation it can add to the rate base. Cheaper fixes include better demand management or extending the life of existing equipment.

CEOWORLD Magazine calls the result build-to-earn compensation. In these pay structures, executive wealth grows with the amount of capital spent, whatever that capital costs the customer per unit of reliable power delivered.

Two business models, one incentive problem

The top of the pay list holds a complication that much of the public debate misses. Vistra, Constellation and Talen are mostly competitive generators, not rate-regulated utilities. They do not earn a guaranteed return on a rate base. They earn whatever wholesale markets pay for power and capacity, and those markets are tight.

PJM Interconnection, the grid operator serving 67 million customers across 13 states, shows how tight. Its auction for the 2027/2028 delivery year cleared at $333.44 per megawatt-day, the highest price regulators allow. Even at that price it fell 6,623 megawatts short of its reliability target. The capacity it bought cost about $16.4 billion. PJM forecast roughly 5,250 megawatts of added peak demand for that year, and nearly 5,100 of it came from data centers. In May, Talen told investors that more frequent scarcity events in PJM would make gas-fired generation more profitable.

So the pay story splits in two:

• Regulated utilities such as NextEra’s Florida Power & Light, Entergy, Dominion and Exelon grow earnings by building. Customers pay for whatever regulators approve.
• Merchant generators such as Vistra, Constellation and Talen grow earnings when supply is short. Customers pay through capacity and energy prices set in markets that are running near their limits.

Regulated utility executives are rewarded for spending, and merchant generator executives are rewarded for scarcity. As currently structured, neither model pays a chief executive for keeping bills down.

What the critics and the companies say

Consumer advocates point to bills and executive wealth rising together. “Hardworking families are picking up the bill while utility CEOs and their investors are making guaranteed profits,” said Tyson Slocum, director of the energy program at Public Citizen. Logan Burke, executive director of the Alliance for Affordable Energy (no relation to Vistra’s chief executive), argued that “keeping the lights on for everyday Americans should be part of the compensation calculation for CEOs.”

The companies have a reasonable reply. Exelon said “the vast majority of our CEO’s pay is not recovered from customers,” and that the performance-linked portion supports reliable service and cost control. Many state commissions already refuse to let utilities charge customers for incentive pay tied to financial results, so shareholders fund most of it. Exelon and Dominion both said they offer relief programs to customers who struggle with bills.

The numbers also need perspective. The $993 million in unrealized stock is about 0.09 percent of the $1.1 trillion the industry plans to spend over five years. It is about 6 percent of a single year’s PJM capacity bill. Cutting executive pay would not lower anyone’s electricity costs in any measurable way.

That is the companies’ strongest argument, but the concern is what pay encourages, not what it costs. A pay plan worth $66 million to one person tells that person what the board wants. If the plan rewards earnings growth and share price, and both depend on how much the company spends, the board has told its chief executive to spend.

The Dominion test

The biggest test of these incentives is now before regulators. In May, NextEra agreed to buy Dominion Energy for about $67 billion in stock. The companies say the deal would create the world’s largest regulated electric utility business. Dominion is the main utility serving northern Virginia’s data center corridor. Ketchum would run the combined company. At the announcement he said that “the country needs more energy infrastructure built faster, more efficiently and more affordably than ever before.”

Shareholders of both companies approved the deal on September 3, and the state reviews are under way. Virginia’s State Corporation Commission begins its proceedings this month, South Carolina follows in December, and North Carolina hearings start in February. NextEra has offered Dominion customers $2.25 billion in bill credits over two years, funded by shareholders, and expects to close in the second half of 2027. Virginia’s governor, attorney general and lieutenant governor oppose the deal, and so does the commission’s staff.

NextEra projects more than 9 percent annual growth in adjusted earnings per share through 2032 for the combined company. Regulators reviewing the deal are, in effect, deciding how much of that growth customers should pay for.

A four-question test for utility boards

CEOWORLD Magazine proposes a short test for directors who set pay at power companies during the build-out. It is an editorial framework, not a scored index:

1. Does any part of long-term pay depend on how fast bills grow compared with inflation in the company’s service territory?
2. Do reliability measures, such as outage frequency and duration, carry enough weight to change a payout?
3. Does the plan reward cost per unit of capacity delivered, or only the total amount invested?
4. Do disconnection rates for unpaid bills appear anywhere in the scorecard?

A board that answers no to all four has built a plan that rewards spending and nothing else.

What to watch

Over the next 12 to 24 months, three developments will show whether the pay model is changing:

• The Virginia commission’s ruling on the NextEra-Dominion deal, including any conditions it sets on rates or executive incentives.
• PJM’s next capacity auctions, which will show whether scarcity pricing lasts as new supply comes online.
• The 2027 proxy season, when shareholders will see whether boards add customer-cost metrics to pay plans in response to affordability pressure.

The grid will get its trillion dollars. The demand is real and the projects are needed. Investors and directors should ask whether executives are paid to deliver that investment efficiently. Today, most are paid simply to deliver it.

Executive takeaways

What changed: Utility CEO stock holdings have climbed to nearly $1 billion across the 15 largest companies, at the same time as a $1.1 trillion capital program and rising household bills.

Why it matters: Pay plans tied to earnings growth and share price reward capital spending at regulated utilities and scarcity at merchant generators. Neither type of plan rewards affordability.

What leaders should do next: Directors should test their pay plans against customer-cost, reliability and disconnection measures before the 2027 proxy season. Investors should expect regulators to start asking about this, beginning with the NextEra-Dominion review.

Key insights

• The CEOs of the 15 largest S&P 500 power companies hold about $993 million in unrealized stock-based pay, roughly $66 million each. Vistra’s James Burke and NextEra’s John Ketchum each hold more than $100 million.
• Investor-owned electric companies plan to spend more than $1.1 trillion from 2025 to 2029. Because regulated returns grow with the rate base, that spending raises earnings, share prices and the value of executive stock.
• Vistra, Constellation and Talen are mainly competitive generators. Their earnings come from tight wholesale markets. PJM’s 2027/2028 auction cleared at the $333.44 per megawatt-day cap and still came up 6,623 megawatts short.
• Executive stock is about 0.09 percent of planned industry capital spending, so cutting it would not lower bills. What matters is that today’s incentive design rewards how much a company invests, not how efficiently.
• The NextEra-Dominion merger, worth about $67 billion and facing state reviews from November 2026, is the first big regulatory test of how much utility earnings growth customers should fund.

US Power CEOs: A look at CEO stock-based pay at the largest companies in the S&P 500 Utilities Sector Index

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