ASU Lodestar Center


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In the news: A nonprofit energy cooperative ignites controversy. Dr. Ashcraft comments on compensation norms in the sector.

June 28, 2024 ( — Last December, senior residents of the Sunrise Hills neighborhood in nearby Fort Mohave found out about plans by local electricity distributor MEC and its regional provider AEPCO, the Arizona Electric Power Cooperative, to construct two quick-start turbines half a mile from their homes. The retirees spoke out against what they saw as deceitful skirting of zoning and notification procedures that left them mistrustful of the utilities’ intentions. [...]

The utilities' unwavering push for a new gas facility despite local opposition and viable clean energy alternatives is also raising questions about potential hidden profit motives for individuals aligned with these not-for-profit cooperatives. [...]

Tax filings reviewed by The Republic reveal that [Tyler] Carlson, MEC’s CEO, was paid $1.35 million by the utility in 2022, with an additional $267,535 in “other” compensation. That’s more than the $1.2 million that SRP, Arizona’s much larger, urban utility company, paid its CEO.

[AEPCO CEO Patrick] Ledger explained it’s not unusual for rural utilities to offer higher salaries to recruit the necessary talent to manage the dynamic challenges of providing electricity to far-flung consumers. At other times, he said employees of utility cooperatives accept lower salaries because they believe in the work. Tax filings show Ledger was paid $740,947 by AEPCO, also a rural electric cooperative, in 2022, with an additional $90,760 in “other” compensation.

What is unusual and hard to explain, according to not-for-profits expert Robert Ashcraft, who directs ASU’s Lodestar Center for Philanthropy and Nonprofit Innovation, is the dramatic fluctuation of Carlson’s salary year to year, which bounces from $1.66 million in 2017 down to $617,483 in 2018, back up to $1.24 million in 2020 and then down to $658,030 in 2021, before doubling again in 2022.

The fact that MEC zeroes out its net income on tax filings each year, matching large revenue numbers with expense numbers, is also odd. In 2022, for example, MEC reported revenue and expenses to exactly match at $96,009,131. Ashcraft said this begs the question of where the surplus revenue is spent in order to even out the financials each year.

“That salary fluctuation rollercoaster is quite fascinating,” Ashcraft said. “You normally don’t see that in nonprofits. You might see it in for-profit shareholding companies, depending upon CEO performance contract details.”

Carlson also received between $27,000 and $42,000 annually for his participation on AEPCO’s board during those years, while his additional “other” compensation at MEC was listed at between $115,009 and $267,535.

Neither Carlson nor Joe Anderson, who oversees executive salary changes as the president of MEC's board, responded to The Republic’s requests for an explanation of how Carlson’s compensation is determined or for copies of meeting minutes when those decisions were made.

Over the phone, Ledger explained that “other” compensation packages, which include items like retirement benefits, company cars and annual bonuses, sometimes reflect performance on project goals, “if I do well.” After a good year, the utility might also issue checks to some of their partners. AEPCO reported a net income of $3.15 million in 2022 and $9.65 million in 2021.

Ledger estimated his own performance bonus last year at less than $40,000, then called The Republic’s line of questioning “grotesque” before abruptly ending the call. Later via email, he clarified that “No employee of Arizona Electric Power receives any direct or special pecuniary gain from the development of new resources. We have a “smart goal” program that provides small incentives for performance linked to our strategic plans and goals.”

But to not-for-profit experts, this closed-door practice suggests the potential for individual profit motives for executives who successfully push through profitable projects.

“When you think nonprofit, it’s really a tax status,” Ashcraft said. “There are so many types of nonprofits and not all are charities. Some of them are billion dollar enterprises. It doesn’t speak to purpose, mission, results, all the rest, which can have bearing on CEO compensation packages.”

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