2018 Guide to Effective Proxies

2.17.9 Performance metrics | 453 6 TH EDITION | GUIDE TO EFFECTIVE PROXIES CompensationDiscussionandAnalysis RestrictedStockUnitsSubjecttoService-BasedVesting TheseRSUs,grantedin2017,vestuponthethirdanniversaryofthegrant,providedthattheNEOremainscontinuouslyemployeduntil suchanniversary.Theyserveasanimportantcontinuityandretentiontool.EachRSUrepresentsoneshareofourcommonstock. DividendequivalentsarecreditedoneachRSUduringthevestingperiodtothesameextentthatdividendsarepaidonsharesofour commonstock,butsuchdividendequivalentsarepaidsolelytotheextenttheunderlyingRSUvestsbasedonthesatisfactionofthe servicerequirement.AwardswillvestonaproratabasisforNEOswhoareatleast55yearsofageandhave10yearsofserviceinthe eventthatanysuchNEOleavesthecompanyforanyreason,otherthanwithcause,duringthetermofthegrant. For2017,theCEOwasawarded32,004RSUsandtheotherNEOswereawardedfrom4,555to6,278RSUs. ThePerformanceShareandRSUgrantsareincludedintheGrantsofPlan-BasedAwardsTableonpage43. Settlementof2015-2017LTIAwards For2015,thelong-termincentiveprogramhadtwocomponents—PerformanceSharesandRestrictedStockUnits.Thefollowing sectiondescribestheresultsoftheseawardgrantsforthethree-yearperiodendedDecember31,2017. PerformanceSharesbasedon theCompany’sRelativeTSR PerformanceSharesbasedon CarbonDioxideEmissionsReduction 30% 100% 200% Maximum: 85thpercentile Result: 94thpercentile Target: 50thpercentile Threshold: 30thpercentile TargetPerformance:50thpercentile ActualResult:94thpercentile 30% 100% 200% Maximum: 26% reduction Result: 28% reduction Target: 23% reduction Threshold: 19% reduction TargetPerformance:23% reduction ActualResult:28% reduction TSRisameasureofshareholdervaluecreationandourranking illustratessuperiorperformanceoverpeercompanies.The performanceoutcomeisatthe94 th percentilewhichresultsina 200percentoftargetpayout. Resultisduetoimplementingrenewables,beingaleaderin resourceplans,energyefficiencyprogramsandfavorable marketconditions.Theperformanceoutcomeisabovethe maximumpayoutora28.3 1 percentreductionover2005levels, whichresultsina200percentoftargetpayout. 1 CO 2 emissionsassociatedwithallownedandpurchasedelectricity, whetherservingourcustomersorsoldintothemarket. Earnedawards: • CEO:165,188 • OtherNEOsrange:15,533to32,120 Earnedawards: • CEO:99,112 • OtherNEOsrange:9,391to19,272 Theseawardsincludedividendequivalentscreditedoverthethree-yearperformancecycle. RestrictedStockUnitsSubjecttoService-BasedVesting In2015,wegrantedeachNEORSUsthatvesteduponthethirdanniversaryofthegrant,providedsuchNEOremainedcontinuously employedforthethree-yearperiod. TheCEOearned33,038RSUsandtheotherNEOsearnedawardsrangingfrom3,131to6,424RSUs,allofwhichincludeddividend equivalentscreditedoverthethree-yearcycle. ThePerformanceSharesandRSUsawardsthatwereearnedareincludedintheOptionExercisesandStockVestedTableonpage45. 36 | 2018 XcelEnergyProxyStatement Targetperformance:50thpercentileactualresult:94thpercentileTargetperformance:23%reductionactualresult:28%reduction Total of 03 pages in section CompensationDiscussionandAnalysis Long-Term Incentives Grantof2017-2019LTIAwards Long-termincentivecompensationisapproximately70percentoftheCEO’stargettotaldirectcompensationand55perce ofthe averageoftheotherNEOs’targettotaldirectcompensationandisprimarilyperformance-based.Priortovesting,long-te mincentive awardsmaynotbesold,encumberedorotherwisetransferredbytheparticipant.Stockearnedunderlong-termincentivecompensation issubjecttoourStockOwnershipPolicy(seepages37to38). For2017,ourlong-termincentiveprogramhadtwocomponents,whichprovidedabalancebetweenperformance-orientedopportunities andservice-basedopportunities: • Performancesharestargetedtodeliver80percentofeachexecutiveofficer’slong-termincentiveopportunity;and • RSUstargetedtodelivertheremaining20percent. Thefollowingsectiondescribestheperformance-basedlong-termincentivegrantsforthethree-yearperiodendingDecember31,2019. PerformanceSharesbasedon theCompany’sRelativeTSR PerformanceSharesbasedon CarbonDioxideEmissionsReduction 30% 100% 200% Maximum: 85thpercentile orAbove Target: 50thpercentile Threshold: 30thpercentile TargetPerformance:50thpercentile XcelEnergy’sTSRpercentile rankingvspeergroup 30% 100% 200% Maximum: 36% reduction orAbove Target: 33% reduction Threshold: 30% reduction TargetPerformance:33% reduction Threeyearaveragepercent reduction inCO 2 emissions Forperformancebetweenpercentiles,thenumberofperformancesharesearnedshallbedeterminedbystraightlineinterpolation. BasedontheachievementofspecifiedlevelsoftheCompany’s TSRrelativetoourpeergroup,withthepayoutrangingfrom 0percentto200percent. Basedontheachievementofspecifiedr ductionsincarbon dioxideemissions,withthepayoutrangingfrom0percentto 200percent. Thegoallinkstheinterestofexecutiveofficerswithshareholders byrewardingmanagementforcreatingshareholdervaluewhen comparedtoutilityindustrypeercompanies. Thisgoalsupportsourstrongenviron entalstewards ip. Dividendequivalentsarecreditedoneachgrantedawardduringthethree-yearcycletothesameextentthatdividendsar paidon sharesofourcommonstock. Crediteddividendequivalentsarepaidsolelytotheextenttheunderlyingperformancesharevestsbasedontheachievementofthe applicableperformancegoal.Iftheapplicablethresholdperformancegoalisnotachievedattheendofthethree-yearperformance cycle,thenallassociatedperformancesharesanddividendequivalentswouldbeforfeited. EachperformancesharerepresentsoneshareofXcelEnergycommonstock. Grantawards,atTarget: • CEO:80,010 • OtherNEOsrange:11,386to15,694 Grantawards,atTarget: • CEO:48,006 • OtherNEOsrange:6,832to9,417 Paidascash,sharesoracombination,aselected. Generallypaidasshares. 2018 XcelEnergyProxyStatement | 35 50%30%20%performanceshares—relativetsrperformanceshares—carbonemissionsreductionrestrictedstockunits—service-basedtargetperformance:50thpercentilexcelenergy’stsrpercentilerankingvspeergrouptargetperformance:33%reductionthreeyearaveragepercentreductioninco2emissions XCEL ENERGY CompensationDiscussionandAnalysis Annual Incentive InFebruary2017,ourmanagementrecommendedgoalstotheGCNbasedonanevaluationofpriorperformanceandavailable objectivemetricsandbenchmarks.Thesegoalsaredesignedtodiscourageshort-termthinkingorbehaviorthatcouldthreatenthe valueoftheCompanyortheinvestmentofitsshareholders.TheCommitteeestablishedtheannualincentiveprogram(“AIP”),which determinesawardsbasedonthesegoalsasapprovedandCompanyfinancialperformanceasfollows: • Upto150percentofatargetaward,whichisdeterminedbymultiplyingbasesalaryandthetargetpercent,isbasedonthe weightedactualachievementofouroperationalmetricsoutlinedbelowandafundingfactormultiplier,thatisbasedonongoing EPSresults,whichcanbeadjustedforcertainidentifiedfinancialimpacts. • Uptoanadditional50percentisbasedonattainingsuperiorfinancialperformanceasmeasuredbyongoingEPS. • Whencombined,awardpayoutsrangefrom0percentto200percentofaparticipant’stargetaward. ThetablebelowdisclosestheGCNapprovedcorporateoperationalgoalsandactualresultsfortheAIPin2017: 2017 Corporate Goals KeyPerformance Indicator Threshold Performance Target Performance Maximum Performance 2017Actual Performance %Payout %Weight Weighted Calculation Customer NetPromoterScore (Residential Customers) 40 th percentile 60 th percentile 70 th percentile 47 th percentile 67.50% 20% 13.50% PublicSafety (DamagesPer1000 Locates) 1.45 1.34 1.25 1.24 150.00% 20% 30.00% O&MGrowth (over2016) (1) 1.8% 0% (1.8)% (1.0)% 127.78% 20% 25.56% Reliability ElectricSystem Reliability (SAIDI) 99 93 87 84 150.00% 20% 30.00% Employee EmployeeSafety (DART) (2) 0.68 0.52 0.48 0.47 150.00% 20% 30.00% ResultsonOperationalMetrics 100% 129.06% (1) TheO&Mgrowthexcludes:(1)anynon-ongoingO&Mexpensereportedexternally;and(2)anyregulatorycostdeferrals/amortizationsorexpensechanges withclearlyidentifiedrevenueoffsetsinexcessof$5MandapprovedbytheCFO(i.e.,mutualaid). (2) DARTwillbereducedtoThresholdlevelifanemployeefatalityoccursorincreasedtoMaximumlevelifnoemployeefatalityoccursandtherearenodirect personalprimaryvoltageelectricalcontactsthatresultinanDARTRecordableinjuryorunplannednaturalgasignitionsandtheDARTRecordableIncident RateisaboveThreshold. Annualincentiveawardsare,inpart,basedonongoingEPS,whichcanbeadjustedforcertainidentifiedfinancialimpacts.For2017,no adjustmentsweremadetoongoingEPS.WhenongoingEPSisbelowacertainthreshold,awardswillnotbepaid.IfongoingEPSisin thelowerendofinitialearningsguidance,or$2.25to$2.35,thenoperationalresultscanbemodifiedbyafundingfactormultipleof50 percentto100percent.IfongoingEPSisat$2.31orgreater,thentheoperationalresultscanbemodifiedbyafu dingfactor ultipleof 100percentto150percent,nottoexceeda200percentoftargetpayout.For2017,theoperationalresultswerenotmodifiedbythe fundingfactor,resultingin129percentoftarget,asnotedintheabovetable. TheGCNthenconsideredindividualperformanceintheachievementofcorporateoperationalandfinancialgoalstodetermineaward amounts.TheGCNfocusedoncontributionsmadetoO&Msavingsrelatedtocontinuousimprovementefforts,aswellasoperational andfinancestrategiesthatresultedinstrongfinancialperformance.Asaresult,theGCNadjustedawardsupwardsby$100,000for eachofMessrs.Frenzel,LarsonandMcDanielinrecognitionoftheirleadershipontheseinitiatives.Finalawardvaluesareshownin the“Non-EquityIncentivePlanCompensation”columnoftheSummaryCompensationTableonpage41. 34 | 2018 XcelEnergyProxyStatement