September board materials carried forward
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September Board Materials carried forward. [Presentation Title] [Date] [Location]. Governance Defined:.

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September board materials carried forward

September Board Materialscarried forward

[Presentation Title]

[Date]

[Location]


Governance defined

Governance Defined:

Corporate governance involves a set of relationships between a company’s management, its board, and its stakeholders. Corporate governance also provides the structure through which the objectives of the company are set, and the means of attaining those objectives and monitoring performance are determined.


Advisory governance considerations

Advisory Governance Considerations

  • Strong Advisory Member Committee – A committee structured to directly advise management and the Board

    • 25% of Board of Directors time in interaction.

    • Forms committees to work directly with Management on specific issues/areas.

  • State and Provincial Advisory Board – A committee structured to directly advise management and the Board

    • 15% of Board of Directors time in interaction.

    • This is WIRAB for the Regional Entity and WIEB for non-Regional Entity


Bifurcation structural considerations

Bifurcation – Structural Considerations

Pros

  • Clarification of roles and responsibilities with resulting focus

  • Allows participation in events analysis

  • Closes compliance monitoring gap

  • Can address budgeting process issues through governance

  • Helps bring focus on reliability rather than compliance

  • Cons

  • Increased costs

  • Potential coordination gaps between functions


Independent board

Independent Board

  • Governance Model:

    • Traditional Management/Board relationship

    • Strong Advisory Member Committee

    • State and Provincial Advisory Board

  • Conceptual Composition:

    • Regional Entity Independent Board could include a mix of Independent (A) and Independent (B) Directors

    • Non-Regional Entity Independent Board would be Independent (A) only Directors.

    • Probably circa 7 Independents


Small hybrid board

Small Hybrid Board

  • Governance Model:

    • Some traditional Management/Board relationship, some Board leadership in Company operations

    • State and Provincial Advisory Board

    • Independent directors hold voting strength

    • Members directors balanced between classes

    • Conceptual composition

      • One member per 1-6 Classes

      • Regional Entity: { [ Independent(A) + Independent(B) ] – RE} votes > 0

      • Non-Regional Entity: { [ Independent(A) ] – RE} votes > 0

      • Probably circa 3 Independents


Thoughts on bifurcation as a structural option

Thoughts on Bifurcation as a Structural option

  • The two companies must cooperate on planning related activities – fix via bylaws

  • The two companies should contract between them for common needs to achieve lowest cost Interconnection result

  • The two companies should address data sharing

  • Bifurcation provides new Optionality: Non-Regional Entity able to cleanly add value in a range of emerging options

  • Allows more focus on both sides: unclouded by inappropriate considerations on the other side.


Thoughts on most common governance model for re small stakeholder board

Thoughts on most common governance model for RE – Small Stakeholder Board

  • While the dominant model, NERC itself has an Independent Board.

  • Appearance of conflicts can be made:

    • Board control of standards to which they will be accountable

    • Board control of budget that regulates the ability of management

    • Board pressure on findings – e.g. Find, Fix, Track determination

  • NERC is willing to accept this option, larger Boards are an issue with NERC

  • Lowest cost approach


September board materials carried forward

Option – 1

  • Pros:

  • Structure Related:

  • Clarification of roles and responsibilities

  • Allows participation in events analysis

  • Closes compliance monitoring gap

  • Helps focus on reliability rather than compliance

  • Governance Related:

    • Appearance of conflicts deleted

    • Small focused board

    • Helps focus on reliability rather than compliance

  • Cons:

  • Structure Related:

  • Increased costs

  • Potential coordination gaps between functions

  • Lack of geographical diversity

  • Governance Related:

  • Members uncomfortable with loss of direct control

  • Members need to organize to provide advice


September board materials carried forward

Option - 7

  • Pros:

  • Structure Related:

  • Clarification of roles and responsibilities

  • Allows participation in events analysis

  • Closes compliance monitoring gap

  • Helps focus on reliability rather than compliance

  • Governance Relate

  • Appearance of conflicts balanced with voting strength of Independent Directors

  • Small focused Board

  • Cons:

  • Structure Related:

  • Increased costs

  • Potential coordination gaps between functions

  • Governance Related:

  • Geographical diversity diminished

  • Appearance of conflict lingers


Advisory board defined

Advisory Board Defined

  • Necessary condition for Independent Board option

  • Advise = organized surfacing of issues and perspectives

  • Participation in setting BOD Agenda

  • Forms its own committees to advise itself and directly work (via teams) with Management on projects


Approved resolutions

Approved Resolutions


Resolution structure

Resolution – Structure

Resolved, That the Western Electricity Coordinating Council (WECC) Board of Directors (Board) determines that WECC should pursue bifurcation into two separate and distinct companies – one Regional Entity Company containing Regional Entity functions (for example, Compliance Monitoring and Enforcement, Standards Development, and Event Analysis) and other functions as appropriate to the mission of that company as a Regional Entity, and a second Registered Entity Company containing the current WECC Registered Entity functions (Reliability Coordinator and Interchange Authority) and other functions as appropriate to the mission of that company. The Board directs the Chief Executive Officer to work with staff, the Governance and Nominating Committee, the Finance and Audit Committee, and the Human Resources and Compensation Committee to take all necessary action so that full details regarding the mission, functional allocation and organizational structure of both companies are available to the Board at the December 2012 Board meeting to permit further approvals and actions which would lead to final work products needed for membership approval at the 2013 Annual Meeting.


Resolution regional entity governance

Resolution – Regional Entity Governance

Resolved, That the Western Electricity Coordinating Council (WECC) Board of Directors (Board) directs the Chief Executive Officer to work with staff, the Governance and Nominating Committee, the Finance and Audit Committee, and the Human Resources and Compensation Committee to complete work on a governance model for the new Regional Entity Company based on an Independent Board with a strong Member Advisory Committee.   Work should commence immediately and advance so that sufficient details of this governance structure are available to the Board at the December 2012 Board meeting to permit further approvals and actions which would lead to final work products needed for membership approval at the 2013 Annual Meeting.


Resolution non regional entity governance

Resolution – Non-Regional Entity Governance

Resolved, That the Western Electricity Coordinating Council (WECC) Board of Directors (Board) directs the Chief Executive Officer to work with staff, the Governance and Nominating Committee, the Finance and Audit Committee, and the Human Resources and Compensation Committee to complete work on a governance model based on a Hybrid Board with one vote per Member Class, said Board and voting to be structured so that the Independent Director votes comprise a majority of the total number of votes eligible to be cast.  Work should commence immediately and advance so that sufficient details of this governance structure are available to the Board at the December 2012 Board meeting to permit further approvals and actions which would lead to final work products needed for membership approval at the 2013 Annual Meeting. The intent of this motion is that prior to the December 2012 Board meeting, the GNC will make a recommendation to the Board on either a hybrid or independent board structure based on then-current information.


Other board observations

Other Board Observations

  • GNC promised to evaluate the Independent Board option for the N-RE entity as a backstop to the Hybrid Board resolution.


Wecc gnc plans sep dec

WECC GNC Plans – Sep-Dec


Coordination

Coordination

  • Management:

    • Primary resources for the Committee

    • Coordination point for the Committee

    • “develop and present options for governance, structure, and funding mechanisms to the Governance and Nominating Committee (GNC) for its review and recommendation to the Board” – September Board

    • “provide support to GNC, Finance and Audit Committee (FAC), and Human Resources Compensation Committee (HRCC) associated activities” September Board

  • Project Management – John Stout, David Godfrey, Kwin Peterson - Overall Project, GNC, Schedule, Deliverables


Project elements

Project Elements

  • Regional Entity:

    • Opportunity Statement

    • Mission

    • Functions

    • Independent Board defined

    • Advisory Board defined

  • Non-Regional Entity:

    • Opportunity Statement

    • Mission

    • Functions

    • Hybrid Board defined

    • Independent Board Defined

    • Advisory Board Defined

  • Committees

    • Board

    • Member

  • Other bylaw considerations

  • GNC Outreach and Communications

  • GNC long term plan


Opportunity statements needs

Opportunity Statements – Needs

  • Scope: Continue to build on Problem Statement and transition to a forward-looking Opportunity Description

  • Define Opportunities that arise given a Regional Entity (RE) and Non-Regional Entity (NRE)

    • Forward looking statements (problem statements look back)


Missions needs

Missions – Needs

  • Define mission of each company

  • Define business philosophy and principles that will drive each company

  • Define how each company will enable an increased focus on reliability and benefits for the region.


Functions needs

Functions – Needs

  • Scope – specify functions to go into each Company

    • Map back to current WECC functions

    • Define drivers for allocation decisions

    • Identify issues related to today’s deployment

    • Identify opportunities related to new structure

    • Identify synergies and potential gaps between companies


Independent board s needs

Independent Board(s) – Needs

  • Scope – define needed characteristics of an Independent Board

    • Role of the Board described

    • Skill and background requirements (survey others, or todays)

    • Number of Directors, terms, etc.

    • Election mechanism (survey others, or todays)


Advisory board s needs

Advisory Board(s) – Needs

Scope – delineate best Advisory Board structure(s)

  • Draft plan and kick-off materials – Bill Chamberlain

    • GNC Class members to solicit and prep 2 members per class to develop a recommendation to the GNC

    • Need Mission and Functions Project to proceed.

    • Cover both the Regional Entity side and the non-Regional Entity side (together or separately)

    • Cover both Members Advisory Board and WIRAB

  • Advisory Board / BOD interaction mechanisms

    • Time spent together

    • Advice vehicles, Class positions, minority positions

    • BOD to AB Response vehicles


Advisory board principles

Advisory Board Principles

  • Pre-engagement with BOD on resolutions

  • Engagement on issues at each BOD meeting

  • Required response to specific AB advice

  • Heavy linkage with Management teams

  • Advice in writing, AB voting shows strength of AB advice.


N re hybrid board needs

N-RE Hybrid Board – Needs

  • Scope – define needed characteristics of a Hybrid Board

    • Role of the Board described

    • Member Classes:

      • Mechanics of 1 dividable vote per class

        One Director per vote ?

        With or without alternate ?

        Multiple Directors per vote ?

      • Role of Class Board members

        Responsible to N-RE ?

        Responsible to Class ?

      • Class 7 status

      • Election mechanism


N re hybrid board needs1

N-RE Hybrid Board – Needs

  • Scope – define needed characteristics of a Hybrid Board (continued)

    • Independents:

      • Skill and background requirements (survey?)

      • Number of Directors, terms, etc.

      • Election mechanism (survey?)


Committees

Committees

  • While the specific structure of the member committees should be decided by the new Boards of Directors and/or Members Advisory Boards the functions considered by the committees are expected to align with the functional split

  • Regional Entity

    • Stakeholder process for standards and regional criteria development

    • Technical input into Regional Entity analysis and coordination

  • Non-regional Entity

    • Regional Business practice and guideline development

    • Direction on new and evolving processes, projects and priorities

    • Technical input into Non-regional Entity projects


Committees needs

Committees – Needs

  • Scope – for the RE and the NRE Companies, what is the transition from the Committee structures of today

    • For each of today’s committees – where do they go and how do they change?


Regional entity nerc

Regional Entity NERC + ?


Regional entity opportunity statements

Regional Entity Opportunity Statements

  • Reliability through independent, unbiased oversight aligned with FERC and NERC requirements and expectations

  • Consistent, fair monitoring and enforcement activities

  • Focus on results and outcomes

  • High performance organization

  • Clear responsibility and accountability

  • Robust stakeholder input

  • Efficient decision making

  • Balance budget control with getting the job done appropriately


Regional entity mission

Regional Entity Mission

[Regional Entity Name] is the steward of reliability for the Western Interconnection. To accomplish this role, [Regional Entity Name] will:

  • Provide impartial and independent review and analysis,

  • Incorporate system experience and knowledge into standards development,

  • Ensure the delivery of consistent and fair monitoring and enforcement activities, and

  • Identify root causes and lessons learned for major system events.


Regional entity functions

Regional Entity Functions


Regional entity committees

Regional Entity Committees

  • Governance and Nominating

  • Finance and Audit

  • Human Resources and Compensation

  • Standards

  • Compliance

  • Reliability Policy Issues

  • Member Representatives


Re independent board defined

RE-Independent Board Defined


Re advisory board

RE-Advisory Board


Non regional entity n re reliability centers

Non-Regional Entity (N-RE)Reliability Centers + ?


Non regional entity opportunity statements

Non-regional Entity Opportunity Statements

  • Reliability through planning and operations

  • Pursue tasks that can be performed at a lower cost centrally that relate to appropriate reliability

  • Focus on results and outcomes

  • High performance organization

  • Clear responsibility and accountability

  • Robust stakeholder input

  • Efficient decision making

  • Business Case focus and Benefit/Cost ratios drive budget


Non regional entity mission

Non-regional Entity Mission

[Non-regional Entity Name]’s mission is to ensure reliability and create value for its membership through cost-effective and efficient services and practices including:

  • Real-time, interconnection-wide independent oversight of the BES

  • Coordinated system planning and modeling in all time-horizons,

  • Secure sharing of critical data, and

  • Robust stakeholder forums.


Non regional entity functions

Non-regional Entity Functions


Non regional entity committees

Non-regional Entity Committees

  • Governance and Nominating

  • Finance and Audit

  • Human Resources and Compensation

  • Transmission Expansion Planning Policy

  • Reliability Practices Issues

  • Market Interface

  • Planning Coordination

  • Operating

  • Western Renewable Energy Generation Information System


Hybrid board defined

Hybrid Board Defined


Outline

Outline

  • Background

    • Board Resolution

    • NRE Mission

    • NRE Board Function

  • Member Structure

  • Board Composition

    • Member Class Directors

      • Selection, Number, Qualifications

    • Independent Directors

      • Selection, Number, Qualifications

    • Chief Executive Officer


Background

Background

  • Board Resolution Resolved, That the Western Electricity Coordinating Council (WECC) Board of Directors (Board) directs the Chief Executive Officer to work with staff, the Governance and Nominating Committee, the Finance and Audit Committee, and the Human Resources and Compensation Committee to complete work on a governance model based on a Hybrid Board with one vote per Member Class, said Board and voting to be structured so that the Independent Director votes comprise a majority of the total number of votes eligible to be cast. Work should commence immediately and advance so that sufficient details of this governance structure are available to the Board at the December 2012 Board meeting to permit further approvals and actions which would lead to final work products needed for membership approval at the 2013 Annual Meeting. The intent of this motion is that prior to the December 2012 Board meeting, the GNC will make a recommendation to the Board on either a hybrid or independent board structure based on then-current information.


Background1

Background

  • Board Function

    • Establish strategy, track implementation & progress

    • Budget approval, ensuring adequate finances

    • CEO selection and performance review

    • Accounting to stakeholders


Member structure

Member Structure

  • Alternatives

    • Current WECC Member Classes

    • NERC

      • (i) investor-owned utility; (ii) state/municipal utility; (iii) cooperative utility; (iv) federal or provincial utility/power marketing administration; (v) transmission-dependent utility; (vi) merchant electricity generator; (vii) electricity marketer; (viii) large end-use electricity customer; (ix) small end-use electricity customer; (x) independent system operator/regional transmission organization; (xi) regional entity; or (xii) government representatives.

    • Functional Classification

      • (1) Investor Owned Utilities, (2) Public Power, (3) Independents/Merchants, (4) Marketers, (5) Consumer Interest, and (6) Environmental Interest.


Member structure1

Member Structure

  • Considerations – stability, familiarity; State/Provincial interest represented by advisory committee; Canadian interest represented by other Member Classes

  • Recommendation

    • NRE membership comprised of current WECC Member Classes 1-4 & 7

    • Result: Hybrid Board with 5 Member Classes


Board composition member classes

Board Composition – Member Classes

  • Selection

    • WECC

      • Nominated by Mbr Class or GNC

      • Elected by Mbr Class

      • Can create perceived/potential conflict of interest between Member interests and WECC interests

    • Considerations – mitigate COI issues, ensure Mbr Class input & representation

    • Recommendation

      • Mbr Class submit candidate pool to GNC

      • GNC nominate slate of candidates for each Mbr Class

      • Directors elected by membership as a whole


Board composition member classes1

Board Composition – Member Classes

  • Number

    • WECC Board – one vote per Mbr Class

      • One Director – One Vote

      • Multiple Directors – One Vote

      • Multiple Directors – Fractional Votes

    • Considerations -- Efficiency, practicality, informed decisions, Mbr Class representation

    • Recommendation

      • One Director per Mbr Class – One Vote

        5 Mbr Classes = 5 votes

      • One Alternate Director per Mbr Class


Board composition member classes2

Board Composition – Member Classes

  • Qualifications

    • WECC

      • No required affiliation with Mbr Class

      • No specified qualifications

      • No Member may have more than one Director associated

    • Consideration – Only 1 Director per Mbr Class, demonstrated ability

    • Recommendation

      • Candidates must be employed by an entity eligible for membership in the Class they seek to represent

      • Demonstrated experience – exec mgmt/Board, law, finance, economics, accounting, engineering, ops


Board composition independents

Board Composition – Independents

  • Selection

    • WECC NADs

      • Nominated by GNC, elected by membership as a whole

      • Efficient, successful in obtaining qualified NADs for the Board

    • Considerations – efficiency, consistency, quality

    • Recommendation

      • GNC nominates slate of Independent Director candidates

      • Elected by membership as a whole


Board composition independents1

Board Composition – Independents

  • Number

    • WECC Board – Independent votes comprise majority of total eligible votes

    • Weighted vs. Non-Weighted Voting

    • Considerations – efficiency, consistency, practicality

    • Recommendation

      • One Director – One Vote

      • Six Independent Directors


Board composition independents2

Board Composition – Independents

  • Qualifications

    • WECC NADs

      • Demonstrated experience – exec mgmt/Board, law, finance, economics, accounting, engineering, regulation, natural resources, markets; or representing end users; Canadian issues

    • Considerations – Mbr Class Directors already represent end users & Canadian interests

    • Recommendation

      • Adopt current WECC NAD qualifications as a starting point, minus end user and Canadian criteria


September board materials carried forward

CEO

  • Recently added to WECC Board

    • Intended to attract more qualified candidates, enable more effective leadership

    • CEO may not cast tie-making or tie-breaking vote, may not be a member of Board Committees

  • Considerations – Similar interests apply to NRE

  • Recommendation

    • NRE Hybrid Board retain authority to make the CEO a member of the Board, subject to voting and committee membership limitations


Hybrid board issues

Hybrid Board Issues

  • Turn-over: "voice" is somewhat dependent on long-term engagement

  • How to represent a class when the class is divided on an issue

  • How do Independents get access to intra-Class differences?


N re independent board defined

N-RE – Independent Board Defined


N re advisory board

N-RE – Advisory Board


Cross reference to existing operation planning functions

Cross Reference to Existing Operation & Planning Functions


Cross reference to existing operation planning functions1

Cross Reference to Existing Operation & Planning Functions


Other gnc work

Other GNC work


Other bylaws considerations

Other Bylaws Considerations

  • CEO on the Board?

  • Canada and Mexico

  • WREGIS


Other bylaws considerations1

Other Bylaws Considerations


Project element gnc outreach and communications plan

Project Element – GNC Outreach and Communications Plan

  • Scope – ensure maximum regional exposure to materials and opportunity to input


Gnc schedule all times mountain

Sept. 12-Oct. 7 – Management projects aligned with delivering full GNC input according to this schedule (18 days)

Sept. 17 – 11:00 call: Finalize work plan

Oct. 8 – 9:00 call: Opportunity Statements, Missions, Functions, Committee Structures

Oct. 15 – 11:00 call: N-RE Hybrid Board

Oct. 22 – 11:00 call: RE Independent Board, Advisory Board

Oct. 29 – 11:00 call: N-RE Independent Board, Advisory Board

Nov. 5 – 11:00 call: Accumulated bylaws issue resolution

Nov. 12 – 11:00 call: Fine tune educational deck

Nov. 19 – 11:00 call: Finalize educational deck

Nov. 28 – 11:00 Board Webinar

Nov 26 – 11:00 call: Remaining issues resolved and Resolutions

Dec. 5: Present GNC findings to the Board

GNC Schedule (all times Mountain)


Bifurcation and governance required approvals

Bifurcation and GovernanceRequired Approvals


Bifurcation and governance required approvals notes

Bifurcation and GovernanceRequired Approvals Notes

  • NERC and FERC approval are not required for the decision to bifurcate. However, NERC and FERC retain the ability to terminate WECC’s delegated authority so any action that impacts WECC’s ability to carry out its delegated responsibilities, or its budget for doing so, is subject to NERC and FERC review.

  • WECC Bylaws section 13.1 requires Member approval ONLY for Bylaws sections 6.2-6.10 (Board composition, selection, qualifications and duties), section 8.4 (has been repealed), Appendix C (Dispute Resolution Procedures), and section 13.1 itself.

  • WECC Bylaws are contained at Exhibit B to the Delegation Agreement so RE Bylaws amendments will likely be forwarded for approval as part of a revised Delegation Agreement package.

  • The process for development and approval of the NRE Regional Tariff has not yet been developed. This will likely be a broad, open, participatory process. It may culminate in an effort to obtain stakeholder approval, although formal approval would not be required. The WECC Board may also want to approve the tariff prior to authorizing its filing for FERC approval.

  • Because the RC will be transferring to a new legal entity, NERC may require a new certification effort. Alternately, as it has done for other entities, NERC may view bifurcation as resulting in only an organizational name change since facilities, personnel and RC footprint will remain unchanged. Staff will explore this issue going forward.


Project element gnc long term plan

Project Element – GNC Long Term Plan

  • Scope – define GNC schedule and activities through to 2 Company launch:

    • ?


September board materials carried forward

Questions?


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