Southwest Power Pool HUMAN RESOURCES COMMITTEE MEETING October 19, Dallas Love Field Conference Center, Houston Room. Summary of Action Items

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1 Southwest Power Pool October 19, 2010 Dallas Love Field Conference Center, Houston Room Summary of Action Items 1. Approved minutes of the September 8, 2010 meeting. 2. Approved recommendation to the SPP Board of Directors which includes adoption of a new salary structure, a corporate compensation philosophy and corresponding compensation adjustments. Summary of Follow-Up Items 1. The committee will engage to develop an executive compensation philosophy and structure including identification of appropriate peer groups for benchmarking, establishment of performance metrics, structuring of incentive compensation programs and appropriate total compensation targets for SPP executive compensation. The committee will schedule a teleconference meeting with in November Committee requested staff change the location of the January 2011 meeting to Kansas City, Missouri. Page 1 of 3

2 Southwest Power Pool October 19, 2010 Dallas Love Field Conference Center, Houston room MINUTES Agenda Item 1 Call to Order Phyllis Bernard called the meeting to order at 10:40 am, CDT, on October 19, The following members were in attendance: Ms. Phyllis Bernard, Chair Director Mr. Larry Altenbaumer Director Mr. Darrell Dorsey Board of Public Utilities, Kansas City, KS Mr. Mike Palmer Empire District Electric Company Mr. Noman Williams Sunflower Electric Power Corporation Southwest Power Pool staff in attendance: Mr. Tom Dunn Ms. Malinda See Mr. Nick Brown Phyllis Bernard opened the meeting with public praise for Nick Brown for his leadership on the new Southwest Power Pool corporate campus and ground breaking event. She remarked on Nick s ability to find the right balance between cost containment and the demands of SPP building, staffing and new projects. Agenda Item 2 Approval of Minutes The minutes of the September 8, 2010 teleconference meeting were reviewed. The committee made several amendments to the minutes. Mike Palmer moved the minutes be approved as amended. The motion was seconded by Darrell Dorsey and approved via unanimous voice vote. A copy of the amended minutes is included as an attachment to this document. Agenda Item 3 SPP Salary Structure and Funding Malinda See and Nick Brown presented a compensation philosophy, proposed salary structure and corresponding compensation adjustments to the committee. Malinda addressed concerns about staffing costs, timing, and value. She provided a preliminary analysis of SPP staffing in relationship to other RTO/ISOs, looking particularly at costs, stages of growth, services provided and productivity. She described SPP strategies already initiated to assure each position in the organization is appropriately described in terms of function and whether the position is actually needed. Nick Brown informed the committee that the SPP officers had reviewed the salary structure proposed by, and the corresponding impact analysis on SPP staff. SPP officers recommend adoption of the new salary structure effective January 1, The proposed structure works very well with SPP corporate compensation strategy and career development goals. The estimated financial impact to implement the salary structure is approximately $208,000. Noman Williams moved to amend the recommendation to approve two items: the implementation of the proposed salary structure and the salary adjustments required to implement the new structure for nonexecutive staff. The motion was seconded by Darrell Dorsey and approved via unanimous voice vote. Page 2 of 3

3 Southwest Power Pool Human Resources Committee Minutes October 19, 2010 Agenda Item 4- Future Meetings The committee reviewed the schedule of meetings for The January 2011 meeting will be moved to Kansas City, Missouri. The committee discussed potential meeting conflicts with the Regional Entity on the Monday mornings prior to SPP Board of Director meetings. The committee will not take action to move meeting dates at this time, but will review this at the January 2011 meeting. Future meeting dates are: January 18, 2011 Kansas City, Missouri - Tuesday o Approve funding for 2010 Performance Compensation Plan o Review SPP President 2010 performance and propose 2011 compensation April 25, 2011 Tulsa, OK - Monday o Review SPP benefits Program o Review SPP Compensation Plans o Review 2010 Performance Compensation Process/payout o Review HRC Scope July 18 and 19, 2011 Little Rock, Arkansas (Planning Retreat) Monday & Tuesday o Strategic HR Planning Session o Follow up on SPP Benefit Plans o Follow up on Compensation Plans o Approve 2012 Meeting schedule and agendas o Investment Manager Meeting Review Investment Policy Statements Review/evaluate investment manager performance o Approve funding for 2012 merit and promotions pools October 24, 2011 Santa Fe, New Mexico - Monday o Review training and development programs o Review committee effectiveness Agenda Item 5 Executive Session The committee went into executive session to discuss the executive compensation philosophy, salary structure and compensation adjustments recommendation. Several amendments were made to the recommendation in executive session. The committee noted that work was in progress by SPP staff on clarification of career paths, pay grades, etc. based on the new structure. Agenda Item 9 - Adjourn Phyllis Bernard adjourned the meeting at 3pm. Respectfully Submitted, Thomas P. Dunn Secretary Page 3 of 3

4 Southwest Power Pool, Inc. October 19, 2010 Dallas Love Field Conference Center, Houston Room Dallas, Texas AGENDA 10:00 am 3:00 pm (Central Daylight Time) 1. Call to order... Phyllis Bernard 2. Approval of Minutes... Phyllis Bernard 3. SPP Executive Compensation Philosophy and Recommendation... Malinda See/Nick Brown Malinda See and Nick Brown will present a compensation philosophy recommendation which includes adoption of a new salary structure and corresponding compensation adjustments. 4. Future Meetings... All The committee will discuss the meeting schedules and agendas for Adjourn... Phyllis Bernard Relationship-Based Member-Driven Independence Through Diversity Evolutionary vs. Revolutionary Reliability & Economics Inseparable

5 Southwest Power Pool September 8, 2010 Via Teleconference Summary of Action Items 1. Approved amended minutes of the July 21 & 22, 2010 meeting. 2. Approved the recommendation to the 2010 SPP budget compensation increases equal to 2.9% of projected 2010 salaries paid. 3. Approved the recommendation to the 2010 SPP budget promotion funds equal to 0.75% of 2010 salaries paid to administer promotions across the organization. 4. Reviewed and approved the HRC Self-Evaluation/Assessment document for the time period August 2009 July Summary of Follow-Up Items 1. Committee requested staff present a recommendation to the committee at the October 2010 meeting on officer compensation, based on results from the 2010 Compensation Survey. Amended October 19, 2010 Page 1 of 4

6 Southwest Power Pool September 8, 2010 Via Teleconference MINUTES Agenda Item 1 Call to Order Phyllis Bernard called the meeting to order at 10:05 am, CDT, on September 8, The following members were in attendance: Ms. Phyllis Bernard, Chair Director Mr. Larry Altenbaumer Director Mr. Darrell Dorsey Board of Public Utilities, Kansas City, KS Mr. Mike Palmer Empire District Electric Company Ms. Trudy Harper Tenaska Mr. Noman Williams Sunflower Electric Power Corporation Southwest Power Pool staff in attendance: Mr. Tom Dunn Ms. Malinda See Mr. Nick Brown Ms. Stacy Duckett Guests in attendance: Mr. Mark Murray Mr. James Dickinson Ms. Amy Debaillon Ms. Laura Rickey Ms. Alice Stuart Agenda Item 2 Approval of Minutes The minutes of the July 21 & 22, 2010 meeting were reviewed. Larry Altenbaumer moved the minutes be approved with an addendum to document the executive session held at the July meeting. The motion was seconded by Darrell Dorsey and approved via unanimous voice vote. Staff was instructed to include an addendum to the July 2010 minutes, to be approved by the committee at their next meeting. The proposed addendum to the July 21 & 22, 2010 meeting is as follows: The HRC met in executive session on July 22, 2010 to discuss two specific employment practices actions naming SPP. While reviewing the status of these actions, the HRC was briefed on SPP s employee policies on harassment, training provided to all employees on SPP s harassment policy (includes all types of harassment even beyond sexual harassment), and remedies available to employees who believe they or others have been harassed. Agenda Item 3 Executive Session The committee adjourned to executive session to receive an update on SPP employment practices from the July 2010 meeting. Agenda Item Compensation Report Consultants from presented results of the 2010 Compensation Survey to the committee. The presentation included three parts: Executive Compensation Review, Non-Executive Compensation Review, and Benefits Review. The compensation survey included a review of current compensation programs, a competitive assessment of pay levels for positions throughout the organization, development of a new salary structure, an overview of current benefits, and a competitive assessment of current SPP benefit offerings. A summary of the results by category include: Agenda Item 2 Page 2 of 4

7 Southwest Power Pool Human Resources Committee Minutes September 8, 2010 Executive Compensation Review Towers gathered competitive compensation data from multiple labor markets, including the utility sector (utilities with less than $1 billion in revenues), ISO/RTO s located in the United States, and general industry (companies with fewer than 1,000 employees, including public and private companies). Competitive compensation data were analyzed at the 25 th, 50 th and 75 th percentile levels for the following pay components; base pay, target bonus amounts, and long-term incentives. Towers noted that SPP s executive base salaries and target total cash compensation are at or below the 25 th percentile of the market. Non-Executive Compensation Review Towers gathered competitive compensation data from multiple surveys, which included industry specific positions (peer group ISO/RTO and energy services), and blended industry specific and general industry data. Towers applied a -9% geographic differential for the Little Rock, Arkansas to national market data for SPP jobs in entry level grades, excluding engineering positions. No differential was applied for mid-level positions and above. Generally, SPP s base salaries are slightly (3%) below the 50 th percentile for the market. SPP s incentive targets are slightly above the 50% percentile for the market. This results in SPP s overall compensation (base salary and target incentive) placing SPP base salaries at the 50 th percentile of the market. Salary Structure Recommendation Towers recommends using a hybrid traditional-wide grade structure with narrow grades at lower levels of the organization that gradually widen to wide grades at high levels of the organization. Jobs at lower levels of the organization are managed within narrow ranges reflecting the lesser complexity and variability of performance at lower levels versus higher levels in the organization This proposed structure incorporates advantages of both a wide grade and traditional approach to salary structure design. Benefit Program SPP s benefits programs are close to average for the peer group (utility industry and ISO/RTO). Overall, there is little disparity in total employer provided values for the group as a whole. The committee had specifically asked for an assessment of SPP s retirement plans. SPP s retirement income benefits are slightly above average. (3% higher on total value). When retiree medical and dental benefits are considered, the value of SPP s retirement benefits fall below the average for the peer group (19% lower on total value basis). Defined benefit plans are still prevalent within the peer group (74% offering). Employers only offering defined contribution plans tended to offer higher value plans compared with employers sponsoring both defined contribution and defined benefit retirement plans. In summary, retirement plan values are fairly equal across the peer groups; the type of plan offered is based on employer views on aspects of retirement, such as employer/employee responsibility and the overall benefit program, and corporate strategy. Agenda Item 5 SPP Staff Compensation Report Comments Nick Brown presented staff comments on the 2010 Compensation Report. Nick stated that SPP staff was pleased with the results of the compensation survey. Staff found to be thorough in their approach and evaluation. Staff recommends adopting the proposed salary structure, effective January 1, Agenda Item Merit Pool Recommendation Tom Dunn presented a recommendation to request funding in the 2011 budget for merit adjustments, promotions throughout the organization, and market adjustments for staff. Based on an analysis of regional and local data, SPP management recommended a compensation adjustment pool of 2.9% of projected 2010 salaries paid, and a pool of 0.75% of projected 2010 salaries paid for promotions throughout the organization. SPP executives reviewed in depth the results of the compensation survey, the impact of implementing a new salary structure, and current staff compensation. Based on that analysis, SPP executives recommended a pool of dollars equal to 1% of 2010 salaries paid to implement the proposed salary structure and associated market adjustments for staff. After discussion of the proposal, the committee requested SPP staff present a proposal on executive compensation philosophy prior to acting on the proposed market adjustment pool of dollars. Larry Agenda Item 2 Page 3 of 4

8 Southwest Power Pool Human Resources Committee Minutes September 8, 2010 Altenbaumer moved the recommendation be modified to only include the merit pool of 2.9% of projected 2010 salaries paid and the 0.75% of projected 2010 salaries paid for promotions throughout the organization. Noman Williams seconded the amended recommendation. The recommendation passed with a vote of 4 yes votes, 1 no vote, and 1 abstention. Agenda Item 7 SPP HRC Self-Assessment Malinda See led the committee through a discussion of the self-assessment document. Accomplishments by the group included: establishing a partially self-funded medical plan effective January 1, 2010, administration of a performance compensation program for 2009, and amending the 457(f) plan to include a clause for termination for cause, Issues pending before the group include: structure of SPP retirement plans, overall benefit program design, executive compensation philosophy and structure, impact of National Healthcare Reform on SPP medical plan, and SPP Board and HRC involvement in officer performance review and compensation. Agenda Item 8 Future Meetings and Agendas Future meeting dates are: January 18, 2011 Dallas, Texas (Love Field Conference Center) - Tuesday o Approve funding for 2010 Performance Compensation Plan o Review SPP President 2010 performance and propose 2011 compensation April 25, 2011 Tulsa, OK - Monday o Review SPP benefits Program o Review SPP Compensation Plans o Review 2010 Performance Compensation Process/payout o Review HRC Scope July 18 and 19, 2011 Little Rock, Arkansas (Planning Retreat) Monday & Tuesday o Strategic HR Planning Session o Follow up on SPP Benefit Plans o Follow up on Compensation Plans o o Approve 2012 Meeting schedule and agendas Investment Manager Meeting Review Investment Policy Statements Review/evaluate investment manager performance o Approve funding for 2012 merit and promotions pools October 24, 2011 Santa Fe, New Mexico - Monday o Review training and development programs o Review committee effectiveness Agenda Item 9 - Adjourn Phyllis Bernard adjourned the meeting at 3pm. Respectfully Submitted, Thomas P. Dunn Secretary Agenda Item 2 Page 4 of 4

9 Southwest Power Pool, Inc. HUMAN RESOURCES COMMITTEE Future Meetings and Agendas January 18, 2011 (Tuesday) Location: Dallas, TX Love Field Conference Center Agenda Items: Approve funding for 2010 Performance Compensation Plan Review SPP President 2010 performance and propose 2011 compensation April 25, 2011 (Monday) Tulsa, OK Agenda Items: Review SPP Benefits Program Review SPP Compensation Plans Review 2010 Performance Compensation Process/payout Review HRC Scope July 18 & 19, 2011 (Monday & Tuesday) HRC Planning Retreat Little Rock, Arkansas Strategic HR Planning Session Follow up on SPP Benefit Plans Follow up on Compensation Plans Approve 2012 Meeting schedule and agendas Investment Management Meeting Review Investment Policy Statements Review/evaluate investment manager performance Approve 2011 funding levels for retirement plans October 24, 2011 (Monday) Santa Fe, New Mexico Agenda Items: Review training and development programs Review HR Committee effectiveness Agenda Item 4 Page 1 of 1

Southwest Power Pool, Inc. SPECIAL BOARD OF DIRECTORS/MEMBERS COMMITTEE MEETING Conference Call February 12, Summary of Action Items -

Southwest Power Pool, Inc. SPECIAL BOARD OF DIRECTORS/MEMBERS COMMITTEE MEETING Conference Call February 12, 2018 1. Approved CGC Recommendation - Summary of Action Items - 1 Special SPP Board of Directors/Members