2018 Guide to Effective Proxies

2.17.3 Business strategy | 315 6 TH EDITION | GUIDE TO EFFECTIVE PROXIES Compensation Discussion and Analysis Highlights 2017 Performance We are executing our strategy for long-term customer and shareholder value. Our progressive financial, safety and reliability records position us well to maintain affordability as we continue to provide cleaner generation and the options customers want. Financial Results Continue to Improve Safety and Reliability Shareholder Value Strong Operational and Financial Results Sound Corporate Governance • One-, three- and five-year TSR better than our peer benchmarks • Met or exceeded ongoing EPS guidance for 13 consecutive years • Increased our dividend for 14 consecutive years • Best-ever performance in employee safety, public safety and system reliability performance • Solid nuclear operations with a 91% capacity factor and both stations in NRC Column 1 status Lead the Clean Energy Transition Keep Bills Low Enhance the Customer Experience • Announced the largest multi-state investment plan for wind capacity in the country • Reduced carbon emissions by 35% since 2005 • Average residential electricity bill has decreased by 3% since 2013 • Held operating and maintenance expenses relatively flat for the past three years • Launched a program in Minnesota for customers to purchase up to 100% renewable energy • Helped customers save more than 1,000 gigawatt hours through our energy efficiency programs 2017 Compensation No significant changes were made to our executive compensation program for 2017, which continues to be primarily variable compensation based on performance outcomes. We continue to monitor evolving best practices to ensure our talent needs for attraction, motivation and retention are met, and we continue to assess certain features of our programs compared to market practices. Based on a review of recent trends, we updated our stock ownership policy to increase the CEO ownership requirement to six times base salary, up from five times. Our solid operational and financial performance resulted in the following 2017 compensation outcomes: • The 2017 annual incentive program achieved 129 percent of targeted results. This payout is reflective of our strong focus on both operational and financial performance, as described in the Annual Incentive section beginning on page 34. • Performance-based long-term incentive awards that settled in 2017 achieved 200 percent of targeted performance payout. This result is reflective of our very strong relative TSR performance and achievement of our environmental commitment to reduce carbon dioxide emissions, as described in the Long-Term Incentives section on pages 35 to 36. Compensation Philosophy Our executive compensation programs are designed to align the interests of our executives with the interests of our shareholders, customers and employees. Our compensation philosophy is based on the following principles: Performance Based Market Competitive Equity-based Incentive • Majority of executive compensation is at risk, and pay is aligned with performance • Motivates achievement of financial, operational and stock price performance goals • Enables us to attract and retain talented leaders • Compares us to a 21-member industry peer group • Focuses on long-term shareholder value • Aligns executive interests with those of shareholders and rewards for strategic success This philosophy, which includes significant emphasis on pay for performance, is applied consistently across all executives; however, individual compensation may be differentiated based on scope of responsibilities, experience, and contributions to Company results. 2018 Xcel Energy Proxy Statement | 29 Shareholdervaluestrongoperationalandfinancialresultssoundcorporategovernance XCEL ENERGY