The greening of Xcel Energy is driven by a chief executive who doesn’t carry the trappings of stereotypical environmentalists.
Dick Kelly owns a Jeep Grand Cherokee and drives it to work every day. He’s an accountant by training and a registered Republican. He prefers shined black oxfords over Birkenstocks.
Yet since taking over, the 60-year-old Denver native has brought an environmental agenda to Xcel Energy, Colorado’s largest gas and electric utility. Kelly is positioning Minneapolis-based Xcel to be a national leader in renewable energy and reduction of carbon emissions believed to contribute to global warming.
While some environmental advocacy groups aren’t yet convinced that Xcel is on a true green path, many others that formerly battled the utility now offer praise for the Kelly-led conversion.
“I think Dick Kelly gets it. He really thinks this is the right thing,” said Ron Lehr, a former chairman of the Colorado Public Utilities Commission who now works for the American Wind Energy Association. “It’s tremendous talk. But we want to see them walk the talk.”
The utility has turned heads for its about-face on wind energy development, its proposed experiment with clean-coal technology and a surprising push for a mandatory national carbon reduction plan.
Kelly’s professed environmentalism isn’t the only factor. Financial pragmatism and public relations drive some of the change, analysts say.
“Dick is certainly committed to being a leader in the environmental area,” said Tom Kuhn, president of the Edison Electric Institute, a utility trade group. “At the same time, he’s a financial guy who wants to do what’s best for his customers and shareholders.”
During the Kelly reign, Xcel has gained electric rate increases of $107 million a year in Colorado and $131 million in Minnesota – the two states where the majority of its customers reside. On Friday, Xcel proposed a $41.5 million rate hike in Colorado for natural gas.
“A very average student”
Kelly’s environmental epiphany isn’t solely a product of recent political and financial events. But neither does it stem from a youth filled with green activism.
He grew up in a modest home at 46th and Lowell in north Denver and attended nearby St. Catherine’s grade school. Kelly recalls being “a very average student” at Regis, where he graduated from high school and college.
To pay for tuition, he sold shoes evenings and weekends at Burt’s Shoes on 16th Street in downtown Denver. In 1965, he landed a summer job reading meters for Xcel predecessor Public Service Company of Colorado. The $3.50-an-hour wage, handsome in its era, “paid for a big chunk of tuition,” Kelly said.
The son of Public Service’s vice president of natural gas operations, Kelly parlayed his summertime job into full-time service with PSCo, first in the auditing department taking inventory of light bulbs. He gradually worked his way up the corporate hierarchy, becoming chief financial officer and senior vice president in 1990.
When former Xcel CEO Wayne Brunetti retired last year, Kelly was named chairman, CEO and president.
“I didn’t spend my whole life figuring out how to be the CEO,” Kelly said in a recent interview at Xcel Energy’s regional headquarters in downtown Denver.
“I liked being chief financial officer. I thought that was the perfect job. I consider myself a very ordinary person who learned at an early age to have a good work ethic. It was not a blind ambition to get to the top – it just worked out that way.”
Brunetti’s predecessor, former CEO Del Hock, hired Kelly at PSCo in 1968.
“Dick is a hands-on guy and a very good people person,” Hock said. “Time after time, I handed him some difficult assignments, and I could always depend on getting a good solution from him.”
Financial markets have been pleased with Kelly’s first 17 months as CEO. Xcel shares have risen 23 percent during that period, closing Friday at $22.85, close to a 4 1/2 year high.
Financial filings show that Kelly was paid a total of $3.67 million in 2005 salary, bonus and other payments.
Kelly’s only visible concession to executive wealth is a six-bedroom, six-bath golf-course home at the Ranch Reserve in Westminster, purchased in 2005 for $2.25 million.
He maintains a modest lifestyle in his downtown Minneapolis apartment, where he spends most weeknights before returning to the Westminster family home on weekends.
The influence of home
Kelly’s environmentalism is a personal ethic, not the stuff of green fundraisers and showy appearances.
“Some of it comes from living in Colorado – it’s such a beautiful place,” he said. “And over the years I’ve seen the brown cloud keep getting worse and worse.”
Before Kelly’s ascent to CEO, Xcel’s track record on environmental issues was viewed as spotty by advocacy groups – launching the popular Windsource voluntary wind power plan, for example, but being forced by Colorado voters to do more after the renewable energy ballot initiative passed in 2004.
Now, that’s changing.
“I have a very strong environmental bent,” he said. “One of the nice things about being CEO is I can push it as fast as I can now.”
In an event that once would have been considered bizarre, Colorado environmental leaders held a recent press conference to laud Xcel’s performance.
“I do believe Xcel is changing its tune,” said Matt Baker, director of the advocacy group Environment Colorado. “This is not the same Xcel we’ve been fighting the past decade over virtually every environmental issue.”
In recent months, Kelly has been the impetus behind a series of Xcel initiatives that have resonated with environmentalists, while at the same time positioning the utility to grow and potentially benefit financially. Among them:
Proposing a nationwide mandate that would require utility companies to reduce carbon emissions from fossil fuel-burning generators. Only a handful of utility companies support that or similar measures. While benefiting the environment, Xcel’s carbon-reduction initiative also could help it avoid financial liability to ratepayers and shareholders if the government begins taxing carbon emissions.
Exploring development of a unique coal-fired power plant in Colorado that would gasify the coal to make it burn cleanly, then capture the carbon emissions and inject them in underground caverns. The proposed clean-coal plant could qualify for up to $200 million a year in federal funding and has permission from the Colorado legislature to begin collecting development costs from ratepayers years before its projected completion in 2013.
Signing deals to triple the amount of wind power in Colorado by the end of next year. While Xcel opposed Colorado’s ballot initiative requiring the use of 10 percent renewable energy sources by 2015, the utility now boasts that it will meet the renewable mandate eight years ahead of schedule.
Some are unconvinced
Acclaim for Xcel’s environmental initiatives is not universal.
The company receives criticism for Kelly’s endorsement of more nuclear power, for Xcel’s construction of a $1.3 billion coal-burning plant in Pueblo and even for the firm’s support of a carbon reduction mandate, which upsets critics who favor tougher regulation.
The 750-megawatt Comanche 3 plant in Pueblo, which will use conventional coal-burning technology as opposed to Xcel’s separate proposal for a clean- coal facility, was the topic of debate during Xcel’s recent Colorado rate case that will increase electric bills.
“That (coal plant) is very hard for the environmental community to come to grips with,” said Tom Konrad, an investment adviser and energy analyst who describes himself as a “pragmatic environmentalist.”
“I think Xcel definitely believes that global warming is caused by COb, and they know they have to be part of the solution,” he said. “If they could make that decision again, I think they would look long and hard at putting in such a large coal-burning plant.”
Kelly defends Comanche 3’s development because Xcel’s Colorado customers will need the extra power before the kinks in coal gasification, carbon sequestration and other alternative power sources can be worked out.
But don’t expect any more of the traditional coal plants from Xcel.
“I have a grand scheme to make this company the leader in clean power and clean energy,” Kelly said, “so that we don’t have to build any more Comanche 3s to meet demand.”
Dick Kelly bio
Age: 60
Title: President, CEO, chairman of Xcel Energy
2005 compensation: $3.67 million
Education: Bachelor’s and master’s degrees in business administration, Regis University
Family: Wife Robin, two sons, one daughter
First job: Meter reader for Xcel unit Public Service Co. of Colorado
Fast food indulgence: Two McDonald’s burgers, medium fries, diet Coke
Broncos allegiance: Season-ticket holder for 20 years, east stands on the 25-yard line
Favorite book: “Flags of Our Fathers”
Favorite movie: “Dances With Wolves”
Business style: Personally answers all letters mailed to him at Xcel’s Minneapolis hub
Typical office hours: 6:15 a.m. to 7 p.m.
Quote: “Addressing climate change is vitally important. Electric utilities can play a key role.”
Staff writer Steve Raabe can be reached at 303-954-1948 or sraabe@denverpost.com.
