SHARE-BASED PAYMENTS (Notes)

12 Months Ended

Dec. 31, 2019

Disclosure of Compensation Related Costs, Share-based Payments

SHARE-BASED PAYMENTS

The ECP provides for the granting of stock-based compensation, including incentive stock options, nonstatutory stock options, stock bonus awards, restricted stock awards, restricted stock unit awards, performance stock awards and performance unit awards to eligible employees and the granting of stock awards to nonemployee directors. At December 31, 2019, we have 4.3 million shares of common stock reserved for issuance under the ECP. In May 2018, shareholders approved making an additional 1.8 million shares available under the ECP, less the number of shares remaining available for future grants on the effective date. At December 31, 2019, we had approximately 1.8 million shares available for issuance under the ECP, which reflect shares issued and estimated shares expected to be issued upon vesting of outstanding awards granted under the plan, less forfeitures. The plan allows for the deferral of awards granted in stock or cash, in accordance with Internal Revenue Code section 409A requirements.

Compensation expense for our share-based payment plans was $6.8 million, net of tax benefits of $2.2 million, for 2019, $6.1 million, net of tax benefits of $2.1 million, for 2018, and $4.9 million, net of tax benefits of $3.0 million, for 2017.

Restricted Stock Unit Awards - We have granted restricted stock unit awards to key employees that vest over a service period of generally three years and entitle the grantee to receive shares of our common stock. Restricted stock unit awards granted accrue dividend equivalents in the form of additional restricted stock units prior to vesting. Restricted stock unit awards are measured at fair value as if they were vested and issued on the grant date and adjusted for estimated forfeitures. Compensation expense is recognized on a straight-line basis over the vesting period of the award. A forfeiture rate of 3 percent per year based on historical forfeitures under our share-based payment plans is used.

Performance Stock Unit Awards - We have granted performance stock unit awards to key employees. The shares of common stock underlying the performance stock units vest at the expiration of a service period of generally three years if certain performance criteria are met by us as determined by the Executive Compensation Committee of the Board of Directors. Upon vesting, a holder of performance stock units is entitled to receive a number of shares of common stock equal to a percentage (0 percent to 200 percent) of the performance stock units granted, based on our total shareholder return over the vesting period, compared with the total shareholder return of a peer group of other utilities over the same period.

If paid, the outstanding performance stock unit awards entitle the grantee to receive shares of our common stock. The outstanding performance stock unit awards are equity awards with a market-based condition, which results in the compensation expense for these awards being recognized on a straight-line basis over the requisite service period, provided that the requisite service period is fulfilled, regardless of when, if ever, the market condition is satisfied. The performance stock unit awards granted accrue dividend equivalents in the form of additional performance stock units prior to vesting. The fair value of these performance stock units was estimated on the grant date based on a Monte Carlo model. The compensation expense on these

awards will only be adjusted for forfeitures. A forfeiture rate of 3 percent per year based on historical forfeitures under our share-based payment plans is used.

Restricted Stock Unit Award Activity

As of December 31, 2019, there was $3.0 million of total unrecognized compensation expense related to the nonvested restricted stock unit awards, which is expected to be recognized over a weighted-average period of 1.8 years. The following tables set forth activity and various statistics for restricted stock unit awards outstanding under the respective plans for the period indicated:



	Number of Units		Weighted- Average Price
Nonvested at December 31, 2018	109,506		$	63.45
Granted	35,753		$	83.94
Vested	(39,418	)	$	58.60
Forfeited	(1,443	)	$	69.87
Nonvested at December 31, 2019	104,398		$	72.21



	2019		2018		2017
Weighted-average grant date fair value (per share)	$	83.94	$	68.17	$	63.97
Fair value of shares granted (thousands of dollars)	$	3,001	$	2,583	$	2,420

The fair value of restricted stock vested was $3.3 million and $4.7 million in 2019 and 2018, respectively.

Performance Stock Unit Award Activity

As of December 31, 2019, there was $6.4 million of total unrecognized compensation expense related to the nonvested performance stock unit awards, which is expected to be recognized over a weighted-average period of 1.8 years. The following tables set forth activity and various statistics related to our performance stock unit awards and the assumptions used by us in the valuations of the 2019, 2018 and 2017 grants at the grant date:



	Number of Units		Weighted- Average Price
Nonvested at December 31, 2018	219,331		$	69.21
Granted	71,237		$	89.86
Vested	(70,548	)	$	64.06
Forfeited	(1,844	)	$	73.57
Nonvested at December 31, 2019	218,176		$	77.58



	2019	2018	2017
Volatility (a)	18.70%	18.80%	20.70%
Dividend yield	2.38%	2.70%	2.63%
Risk-free interest rate (b)	2.50%	2.38%	1.48%

(a) - Volatility based on historical volatility over three years using daily stock price observations of our peer utilities.

(b) - Using 3-year treasury.



	2019		2018		2017
Weighted-average grant date fair value (per share)	$	89.86	$	74.04	$	68.94
Fair value of shares granted (thousands of dollars)	$	6,401	$	5,882	$	5,110

The fair value of performance stock vested was $12.7 million and $13.7 million in 2019 and 2018, respectively.

Employee Stock Purchase Plan

We have reserved a total of 700 thousand shares of common stock for issuance under our ESPP. Employees can choose to have up to 10 percent of their annual base pay withheld to purchase our common stock, subject to terms and limitations of the plan. The purchase price of the stock is 85 percent of the lower of the average market price of our common stock on the grant date or

exercise date. Approximately 44 percent, 45 percent and 43 percent of employees participated in the plan in 2019, 2018 and 2017, respectively, and purchased 71,613 shares at $71.42 in 2019, 76,231 shares at $63.01 in 2018, and 78,472 shares at $56.80 in 2017.

Compensation expense, before taxes, was $1.5 million, $1.0 million and $1.2 million in 2019, 2018 and 2017, respectively.