Governance

Oversight

Directors understand corporate responsibility and sustainability are integral to the company’s long-term success and share management’s commitments in these areas, from long-term and strategic direction to day-to-day business practices company-wide. Each director is expected to examine all major issues affecting an organization and must be committed to the highest ethical standards, accountability, transparency and open dialogue with one another and with management to provide effective oversight.

In fall 2022, the board held a strategic planning and review session with officers of the company. These periodic sessions with officers are designed to review corporate strategy across all aspects of the company’s business and to provide directors with the opportunity to engage senior management on issues of strategic importance, such as generation strategy and planning.

Oversight of executive compensation
MGE Energy’s Board of Directors’ Human Resources and Compensation Committee, composed of independent directors, takes into consideration performance on both short- and long-term corporate strategy, among other factors, when evaluating executive compensation. Directors consider environmental performance, among other factors, such as cost containment and management of day-to-day operations. The committee also considers other performance goals that are critical to company performance, such as earnings, system reliability and customer satisfaction as well as long-term strategic goals, including those related to sustainability and ESG-related matters.

The board regularly reviews how well the company is advancing its goals for carbon emissions reductions as well as progress on its specific strategies for deep decarbonization. Our compensation program is designed to link a significant portion of the compensation of our named executive officers to defined performance standards that promote a balance of the drive for near-term earnings and returns with growth in long-term shareholder value.

The board believes that directors and officers should own and hold the company’s common stock and have a portion of their compensation based upon the performance of that common stock to align further with the long-term interests of shareholders. The company’s guidelines measure that alignment through a combination of minimum stock ownership and long-term compensation awards that are directly tied to the performance of MGE Energy stock. MGE Energy’s annual Proxy Statement provides an explanation of the company’s corporate governance practices and responsibilities.

State and federal oversight
As a public utility, MGE operates under state and federal regulations. These regulations serve to protect the interests of customers, employees and investors as well as protect the environment. MGE is subject to regulation by the Public Service Commission of Wisconsin, which has authority to regulate most aspects of MGE’s business, including rates, terms and conditions of service, accounts, issuance of securities and construction of infrastructure, such as generation siting.

The Federal Energy Regulatory Commission has jurisdiction, under the Federal Power Act, over certain accounting practices and certain other aspects of MGE’s business. MGE Energy’s subsidiaries also are subject to regulation under local, state and federal laws regarding air and water quality and solid waste disposal.

Oversight of ESG matters
Our company seeks to foster a proactive and forward-thinking approach to ESG-related matters, beginning with board oversight of and executive leadership on key topics and emerging issues. The board’s engagement with management and the company’s participation in third-party sustainability benchmarking and evaluation programs help to assess performance and promote continuous improvement. MGE voluntarily participates in statewide environmental performance programs and various industry sustainability and benchmarking groups to help reduce environmental impacts across all areas of the company.

Board oversight of ESG-related matters includes review of environmental risks and mitigation as well as assessment of current and/or future environmental regulations. It also includes review of the company’s environmental and sustainability performance. The board receives timely and relevant information on a regular basis related to the company’s sustainability initiatives and performance and ESG-related matters.

Our sustainability governance structure helps to ensure that oversight and management of ESG- and sustainability-related risks and initiatives throughout the company are incorporated into our long-term strategy and day-to-day management and operations. Our approach to these matters helps to facilitate discussion related to sustainability at every level of the organization, including among the Board of Directors, executive officers, our Sustainability Steering Team, and other leaders and internal subject matter experts. Our Environmental and Sustainability Policy guides our commitment to corporate responsibility and environmental accountability throughout the organization.

Sustainability Management
MGE’s employee-led Sustainability Steering Team serves to help ensure the company takes a global and proactive approach to sustainability throughout the organization. The Sustainability Steering Team is overseen by and receives guidance from MGE’s Executive Sustainability Team, which has officer representation from across MGE and which keeps the Board of Directors informed of the company’s progress.

Sustainability Executive Team

• Has officer representation from across MGE to oversee and to provide guidance to the Sustainability Steering Team.
• Keeps the Board of Directors informed on sustainability initiatives and ESG-related matters.

Sustainability Steering Team

• Composed of employees from across the company.
• Supports sustainability engagement and benchmarking.
• Reviews, evaluates and prioritizes continuous improvement opportunities for the company.
• Assembles the Continuous Improvement Sustainability Teams, which address specific improvement initiatives and tasks.
• Oversees MGE’s Environmental Management System (EMS).

More information about the Sustainability Steering Team is available in the Environmental section of this report.

Green Master
In 2022, MGE earned the Green Master designation for the ninth consecutive year from the Wisconsin Sustainable Business Council. Only the top 20% of applying companies receive the Green Master designation. The independent, points-based benchmarking program evaluates applicants in nine key areas: energy, climate change, water, waste, transportation, supply chain, community outreach, workforce and governance. MGE was the first utility to be awarded the distinction in 2014.

Green Tier
MGE is the only electric utility in Wisconsin to be awarded the highest participating level in the Wisconsin Department of Natural Resources’ (DNR) environmental leadership program, Green Tier. MGE is one of only eight Wisconsin companies to achieve the “Tier 2” level. By participating in the Green Tier program, MGE continues its voluntary commitment to superior environmental performance, setting goals to make significant environmental improvements, in cooperation with the DNR.

In 2017, MGE expanded the scope of our Green Tier contract, and in 2020, we renewed our five-year contract with the DNR for Green Tier certification. MGE’s primary goal in the expanded contract is to cover all MGE operations under our EMS. An EMS is a continuous improvement process that evaluates, prioritizes and manages environmental risks. Participation in the Green Tier program provides certification for our EMS.

The expanded scope of our EMS further demonstrates our commitment to goal setting and environmental accountability. Reporting on the performance of our EMS, including audit results, occurs annually with results available on the DNR website.
 

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