Board Members present: Susie Smith, Mike Dyer, Sandra Bishop, Dorothy Anderson, and Peter Bartel.
Others present: Randy Berggren, Terry Bequette, Tom Buckhouse, Sandra DeLuna, Marty Douglass, Dick Helgeson, Libby Henry, Dale Kessinger, Garry Kunkel, Roseanna McArthur, Jean Meyers, John Mitchell, Mat Northway, Dick Varner, Shirley West, and Krista Hince of the EWEB staff; Lance Robertson, member of the public; and Daniel Lindstrom, Minutes Recorder.
Vice President Dyer called the Work Session of the Eugene Water & Electric Board (EWEB) to order at 5:45 p.m.
Human Resource Specialist Jean Meyers referred to a memorandum from her and Financial Services Supervisor Dick Varner dated February 22 distributed with the agenda of the meeting regarding monitoring of merit pay. She reviewed background about the development of the plan to redesign of EWEB's compensation system begun in 1997. She said elements of the plan and differentiation of the roles of the Board and staff in it were explained in the memorandum.
Ms. Meyers stated that the purpose of the Work Session was to respond to questions about the plan and to explain how its implementation would be managed. She said criteria for measuring results of the plan would be discussed and that administrative procedures which would provide internal controls to ensure its success would be shared.
Ms. Meyers described the process being followed in development of the Merit Pay plan. She said approximately seven months had been used by the Board and staff in assessment of the desirability and feasibility of merit pay--understanding compensation practices, reviewing various plan characteristics, and determining if EWEB was "culturally ready" to take on a merit pay plan. She said job performance measures, pay increase elements, and plan administration had been developed.
President Smith joined the meeting at 5:55 p.m.
Ms. Meyers said development of criteria for evaluation of merit plan outcomes was its final preparation stage. She reviewed a model of criteria attached to her memorandum. She described immediate criteria for divisions and departments, as follows:
Ms. Meyers described immediate criteria for individual employees, as follows:
Ms. Meyers described long-term criteria for individual employees, as follows:
Ms. Meyers described long-term criteria for divisions and departments, as follows:
Mr. Varner reviewed a chart attached to his memorandum illustrating the distribution of employees within pay ranges. The chart showed the number of employees in low-pay ranges, mid-pay ranges, maximum pay ranges, and above market pay ranges on January 1, 1999, in year three of the plan, in year five of the plan, and in year ten of the plan. He said employees in low-pay ranges would tend to be those who were new or whose work needed improvement; that employees in mid-pay ranges were employees with good performance records; and that employees in maximum pay ranges were those who were consistently evaluated as performing in an outstanding manner. He explained that ten performance factors had been developed for each EWEB job description. He said that although it was intended that the center of employee distribution be in the mid-pay range, there was a slight bias for it to move toward the maximum range.
Mr. Varner said the financial affordability criteria for evaluating the merit pay program would be based on whether the center of employee distribution was close to what was intended by the Board. He said it would also be necessary to determine if the amount required to be budgeted for merit increases was affordable from the Board's perspective.
Mr. Varner said the evaluation criteria related to pay and performance would take into account the relationship of pay raises and summary performance evaluation scores, but would avoid an inverse correlation--having lower pay raises for higher performance evaluations. He said that location in a pay range would be taken into account, however, and would tend to provide higher pay raises for those in the lower pay ranges. He said the tops of pay ranges would generally be in the 80th to 90th percentile of pay for market equivalent positions.
Mr. Varner reported that the evaluation criteria related to employee progression would be based on a judgement that an employee should not be required to take a large number of years to reach mid-pay ranges. He suggested that a reasonable expectation was that an entry level employee would require three- to five-years to reach such a level.
Mr Varner said that ensuring manager/supervisor consistency in employee evaluations was a high concern among employees, managers, and the Board. He described a system developed for managers and division directors to review supervisor performance evaluations to check for consistency.
Commissioner Bartel said that he believed the number of employees supervised was an element of consistency in evaluations. Mr. Varner agreed and said it was hoped that requiring managers and directors to be involved in employee evaluation processes would reduce its effect.
Commissioner Dyer asked if it was realistic to anticipate that all job performance evaluations would be completed within the time allotted. Mr. Varner said that it was likely that it would be difficult to complete the process in the first year, but that quarterly employee reviews were being established which would make the process go more smoothly in the future. Ms. Meyers added that the first year was seen as a time of transition and that needed changes would be made.
Commissioner Bartel asked what grievance procedures would be available to employees who felt they were given unfair evaluations. Ms. Meyer replied that the currently available procedures would be utilized. She said the procedures set attempts at an initial resolution to take place at the supervisor/employee level, followed by appeals to division directors and ultimately the General Manager.
Commissioner Bartel asked if there was a mechanism established for supervisors to report that the evaluation system was too burdensome. Ms. Meyers said weekly meetings between supervisors and division directors were an established practice. She also described a pilot project to "take the organization's pulse" which was intended to identify programs which were working and which were not.
General Manager Randy Berggren suggested that the employee evaluation program could result in increasing delegation of supervisorial responsibilities and lead to employee growth and structural re-organization.
President Smith said she admired the flexibility of the organization to adjust work responsibilities.
Ms. Meyers reviewed a chart entitled "Project Elements" attached to her memorandum.
Commissioner Anderson asked what progress had been made in resolving concerns about the merit pay plan expressed by EWEB line crew work groups. Ms. Meyers replied that weekly meetings were being held between representatives of the groups and management. She said a pay plan which included an incentive program was approximately half completed and that it was scheduled to be submitted to the Executive Management Team in April. She said the plan met Board objectives and that a complete report would be submitted.
President Smith asked for a copy of the Performance Factors used in the performance evaluations. Ms. Meyers said she would send them to all the other Board members. President Smith determined that there were no further questions regarding the compensation plan. She also determined there was consensus to continue the Work Session with consideration of a report on the 1999 State Legislative Session scheduled for the Regular Meeting of the evening.
The Board took a short recess at 6:50 p.m.
Mr. Berggren reminded Commissioners of the previous report of the 1999 Oregon Legislative Session received from Legislative Representative Libby Henry. He said the Board had been able to give a sense of direction, but adopted no principles during discussion of the report. He requested that the Board provide assurance that EWEB's legislative interests remain as they had been expressed in the past.
Ms. Henry referred to copies of proposed legislation LC1317 distributed at the beginning of the meeting, as follows:
Ms. Henry said the proposed legislation would be considered by a subcommittee of the Senate Committee on Public Affairs chaired by Senator Derfler. She reviewed the merits and short-comings of each of the bills and reviewed the process to be followed in their consideration and enactment. She noted that three of the four bills exempted consumer-owned utilities from direct access; required three percent of operating revenue to be spent for public purposes; and included business principles related to being able to collect stranded costs and retain meter, bill, and collection functions. She said that "clean up" needed to be done to each of the bills and language regarding stranded costs in the Trojan project needed to be included, but that the "direction" of each was similar to what was set in Board policies adopted in 1997.
Ms. Henry reported that she had been working to include EWEB concerns in every bill being considered. She said they were fully included in the Fair and Clean Energy Coalition bill, in a minor way in the bill submitted by Senator Derfler, and all but the public purposes section in the bill supported by the Public Power Association.
Ms. Henry said she had been informed that Senator Derfler intended to "power" his own bill out of committee by the end of March. She said such a strategy called into question the ability of committee members to consider issues in depth. She reported that public utilities hoped to include an "opt out" amendment in the bill as early in the process as possible. She said that financing elements of the bill to be considered would be provided by the House of Representatives.
Ms. Henry suggested that enabling language could "cut the rug from under" EWEB policies in a bill. She asked for affirmation that she should continue to seek to incorporate previously adopted policies in any relevant legislation considered. She also said she would appreciate hearing Commissioners discuss desirable elements of a bill.
President Smith asked for an explanation of information about ancillary services previously supplied regarding Section 13 of LC 2861. Senior Financial/Rates Analyst Dale Kessinger replied that section numbering in the bill had changed from the time when the previous information had been prepared and that it was difficult to identify the concern.
President Smith asked whether there was value in the requirement for utilities to make quarterly disclosure statements of the environmental characteristics of electricity sold. Mr. Kessinger said there was significant support for such disclosure requirements, but recognized, given that electricity is impossible to track, that the reports would include average percentages of a utility's power purchases, in addition to its own portfolio.
President Smith asked if utilities were allowed to include above-market power purchases of "green" resources in rate bases. Ms. Henry replied that no proposed legislation eliminated the right of a utility to be in compete control of its power resource portfolio.
Commissioner Anderson asked if Ms. Henry believed the effort to influence legislation was worthwhile when Governor Kitzhaber had announced that he would veto any bill passed which did not include a requirement that three percent of revenue be spent on public purposes. Ms. Henry replied that issues related to public purposes were clouded by a wide variety of circumstances faced by investor owned utilities and rural public cooperatives.
President Smith suggested that concerns of rural cooperatives could be met by basing public purpose spending on the level of purchased power and not investment in infrastructure.
Commissioners discussed proposed legislation in relation to issues identified as the obligation to connect versus the obligation to serve, and in relation to ancillary services.
Vice President Dyer said that he did not fully understand how public utilities could choose to not allow direct access for retail customers in the face of being forced to allow it for industrial and commercial customers. Ms. Henry explained that without making a choice to allow direct access for retail customers, a public utility could create its own program for direct access, providing for recovery of stranded costs, franchise fees, and public purpose spending.
Vice President Dyer asked if "opting out" prevented a utility from seeking customers in the territory of another utility. Mr. Kessinger replied that such reciprocity was tied to the option of allowing direct access in one's own territory.
Vice President Dyer said he did not believe the decision of a utility to not allow direct access could be maintained for a long period of time because demands of customers for it would be compelling.
Mr. Kessinger said that most larger utilities located in California had agreed to direct access, but that less than one percent of retail customers took advantage of the opportunity. He described how stranded costs had been "securitized" through state-issued bonds. He said that rate surcharges on direct access service made territorial rates competitive after the bonds had been paid off.
Ms. Henry asked if Commissioners would support a bill which provided most, but not all of what EWEB had previously stated was desirable.
President Smith said she was inclined to support the bill sponsored by the Fair and Clean Energy Coalition. Commissioner Anderson said she agreed and that she did not believe it would be possible to influence legislation to incorporate all of EWEB's concerns.
Vice President Dyer asked for an explanation of the proposal related to contribution of at least three percent of a utility's revenue to public purposes. Mr. Kessinger said that it was being proposed that investor-owned utilities pay their contributions into a fund to be controlled by a regulating body and that publicly owned utilities would establish their own programs for investment of such funds. He said public utilities would be required to make reports regarding their use of the funds.
Commissioner Bartel said that he was not willing to support legislation which did not include a requirement at least three-percent of a utility's revenue be spent on public purposes. He said he would prefer to have no bill than one without such a requirement.
Mr. Berggren said he believed it might be possible for a bill requiring three-percent of a utility's revenue to be spent on public purposes, but not provide any other protections sought by publicly owned utilities.
President Smith said she believed that if environmental groups and public interest organizations were finding grounds to support a bill, she was willing to consider also doing so.
Commissioner Anderson said that a complicating consideration in her mind was that the states of Washington and Idaho were not considering legislation related to direct access and the state of Montana had established statutes which did not include a requirement for spending on public purposes.
Commissioner Bartel said he was not fully convinced of the need for legislation. He suggested that whatever was adopted would likely be shaped by last minute compromise and not serve the public well.
Commissioner Bishop said she believed it was important to seek incorporation of policies which would protect publicly owned utilities previously identified by EWEB. She said such protections were only available in the face of the surety of direct retail access through the legislative process.
President Smith said she believed EWEB's position would be made stronger by uniting with others in supporting legislation proposed by the Fair and Clean Energy Coalition. Commissioner Dyer said he agreed that some legislation would be adopted and that EWEB should seek to influence what it contained.
Ms. Henry said that if no legislation were to be adopted by the 1999 Legislative Session, it was likely that de facto direct retail access would be established before the next session.
Commissioner Anderson asked whether investor owned utilities could succeed in establishing direct access without legislation. Ms. Henry said that the Public Utility Commission had already approved direct access to commercial and industrial customers and that the possibility of the approval of direct access to retail customers needed to be acknowledged
President Smith said that the agenda time planned for discussion of legislative issues had been exceeded and asked if the Board wanted to conclude its consideration. She determined there was consensus to continue the discussion for another 20 minutes.
President Smith requested that Commissioners focus discussion on issues related to a requirement of three percent of revenues for public purposes.
Commissioner Bishop said she favored supporting the bill proposed by the Fair and Clean Energy Coalition which included the three percent for public purposes requirement and letting negotiations regarding it determine the final outcome.
Commissioner Anderson said that she agreed with Commissioner Bishop because the Governor's position would guarantee that three percent would be required.
President Smith said she was concerned that some proposals for use of the revenue for public purposes were not acceptable.
Vice President Dyer said that his primary concern about revenue for public purposes was that EWEB retain the ability to determine how its resources were spent
Ms. Henry asked if she should continue to seek to include previously adopted EWEB policies in bills under consideration. President Smith determined there was consensus for her to do so, emphasizing the need for local control and protection of the ability of public utilities to opt out of direct access requirements.
President Smith asked if there was a way for EWEB to express its support for legislation without implying support for direct access. Ms. Henry suggested that emphasizing the local control issue and issuing press releases about that position were tools which could be used.
Commissioner Anderson said she was convinced that EWEB's concerns should be represented during the Legislative Session.
Commissioner Bartel said that he was not fully comfortable "being at the table" because he did not believe the best interests of EWEB's customers would be served by direct retail access.
Vice President Dyer said he believed EWEB needed to participate in the shaping of legislation related to direct access because he did not believe it was entirely negative. He said he believed it could benefit some customers. He said he also believed that any legislation adopted could be reversed if it proved to contain unwise provisions. He suggested that EWEB might prosper with direct retail access.
President Smith determined there was consensus for the Board to consider reaffirming legislative policies adopted for the 1997 Legislative Session during the Regular Meeting of the evening.
The work session adjourned at 8:20 p.m.