Board Members present: Dorothy Anderson, Susie Smith (after 5:45 p.m.), Jeff Osanka (after 5:50 p.m.), Mike Dyer, and Sandra Bishop.
Others present: Randy Berggren, Cathy Bloom, Will Bondioli, Tom Buckhouse, Marty Douglass, Dick Helgeson, Dale Kessinger, Garry Kunkel, Roseanna McArthur, Jean Meyers, Chris Middlewood, Jim Origliosso, Scott Spettel, Dick Varner, Pat Ventura, Debra Wright, John Yanov, and Krista Hince of the EWEB staff; Rick Mackovich, Cardwell Group Consulting; and Kim Kunkel, Minutes Recorder.
President Anderson called the meeting to order.
INCENTIVE PROGRAM FOR POWER MARKETING SCHEDULERS
General Manager Randy Berggren prefaced the presentation by reviewing the events leading up to the development of a proposed incentive program for Power Marketing Schedulers. He said realizing that the recent proliferation of power marketing organizations had resulted in the loss of critical talent within the organization, he requested that staff create and present to the Board an incentive-based compensation package proposal for Power Marketing Schedulers. He said staff would present the proposed structure that evening and return to the Board on January 20 to request action. He encouraged those Commissioners wanting additional information following this Work Session to arrange one-on-one meetings with staff prior to January 20.
Human Resources Specialist Jean Meyers introduced the core group selected to develop the Incentive Program for Power Marketing Specialists, as follows: Scott Spettell, Debra Wright, Garry Kunkel, Rick Mackovich (Cardwell Group Consulting), and herself.
Referring to a series of overhead displays, copies of which were distributed to the Board, Mr. Mackovich reviewed the following:
In reviewing the proposed Power Marketing Incentive Plan, Mr. Mackovick defined its proposed goals, design, and participation and pay levels. He presented median market pay levels for various power marketing positions and recommended threshold, target, and maximum incentives (percentage of base salary) for each position.
Commissioner Osanka inquired as to whether future changes in the responsibilities of Power Marketers will call for changes in the incentive plan. Mr. Mackovich said the incentive plan should be considered a living document that can be modified in response to such changes.
Vice President Smith inquired as to how the Board is to determine how much of its supply and demand should be allocated to variable contracts and what assurance there is that the Board receives accurate information regarding the costs and benefits of maintaining variable as opposed to consistent, long-term contracts. Risk Manager Debra Wright responded that long-term resources are EWEB's protection for using the spot market.
Vice President Smith clarified that she wants to know how the Board can be assured it is receiving accurate information given the fact that the incentive plan inherently supports maintaining a system which affords continued incentive opportunity. Mr. Berggren said that in developing the incentive program, staff is trying to be aware of unintended implications. Vice President Smith said she would look to Mr. Origliosso to expedite the development of an internal balancing and accounting mechanism for use in determining portfolio recommendations. Ms. Wright noted that Risk Management work will be guided by Board policy. She said the Board will likely find that all available loopholes are closed by the incentive plan's structure.
President Anderson expressed interest in how the proposed incentive program fits into EWEB's Resource Plan.
Commissioner Bishop said it sounds as if there are existing standards by which Power Marketers determine the trades that are made. She said she is generally comfortable with the proposed incentive plan, given that Mr. Spettel will monitor the portfolio mix.
Referring to the objective "the plan must be financially responsible," Vice President Smith said she took issue with the implication "the plan should pay out only if the Business Line brings in profits above a minimum expectation." Stressing that the ability to pay out should be determined by the budget, Vice President Smith said the way the aforementioned implication is worded, EWEB would maintain the ability to pay out regardless of poor budget performance. She said the wording of the implication negates the Board's ability to moderate the incentive based on overall budget performance. Mr. Spettel responded that defining the pay out parameters was difficult. He said staff decided that because the profits are derived from an external source, the plan should be designed to pay out regardless of poor budget performance.
Stressing the importance of EWEB's accountability to the community, Vice President Smith questioned the acceptability of raising rates while paying millions of dollars in incentives to Power Marketers. She said there should be an off ramp, triggered by some range of budget difficulties, allowing EWEB to offset the incentives. Mr. Berggren suggested revisiting this question at the conclusion of the presentation.
Referring to the survey he conducted, upon which the median market pay levels are in part based, Mr. Mackovich said it does not include data from publicly owned utilities. Mr. Spettel distributed information specific to Power Marketing positions at EWEB. Mr. Mackovick explained that EWEB's Power Marketing support personnel will not be included in the incentive program due to a decision to limit the number of incentive program participants during the initial generation.
Noting that the incentive program's significance in terms of Board policy, Board agreed to defer the scheduled EWEB Open Access Transmission Tariff discussion until its January 6 Work Session.
Vice President Smith suggested that the Board discuss the possibility of taking an incremental approach to implementing incentives for Power Marketing Schedulers in order to determine the level of market competition appropriate for EWEB. Commissioner Bishop said she was at the other extreme of wanting a more aggressive incentive program, specifically if individual incentives had been considered. Mr. Spettel indicated team-oriented incentives worked much better.
Commissioner Dyer said the Board must decide whether it supports EWEB continuing its power marketing efforts. Noting that there is a cost benefit of retaining EWEB's Power Marketing Schedulers, Commissioner Dyer said a failure to implement a Power Marketing Scheduler incentive program will result in a continued loss of critical talent.
Commissioner Osanka flagged for future discussion the fact that there was no formal Board decision to continue EWEB's power marketing activities as there could have been prior to moving forward with the development of this incentive plan.
Vice President Smith reiterated her issues and concerns related to the proposed incentive program, as follows:
President Anderson expressed support for maintaining some level of Board control over incentive pay out. Commissioner Osanka said he agreed with Vice President Smith's suggestion of including in the plan a mechanism which allows the Board to modify the incentive in response to poor budget performance. He requested information regarding the process by which the Board might determine, at the end of a fiscal year and under extraordinary circumstances, to nullify the plan.
Commissioner Osanka requested that staff consider the possibility of limiting incentives by implementing a team cap equal to half the overages.
Ms. Meyers said the next discussion of the Power Marketing Incentive Program is scheduled for January 20.
The meeting adjourned at 7:30 p.m.