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September Board Materials carried forward

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

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September Board Materials carried forward

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  1. September Board Materialscarried forward [Presentation Title] [Date] [Location]

  2. 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.

  3. 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

  4. 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

  5. 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

  6. 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

  7. 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.

  8. 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

  9. 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

  10. 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

  11. 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

  12. Approved Resolutions

  13. 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.

  14. 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.

  15. 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.

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

  17. WECC GNC Plans – Sep-Dec

  18. 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

  19. 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

  20. 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)

  21. 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.

  22. 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

  23. 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)

  24. 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

  25. 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.

  26. 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

  27. 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?)

  28. 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

  29. 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?

  30. Regional Entity NERC + ?

  31. 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

  32. 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.

  33. Regional Entity Functions

  34. Regional Entity Committees • Governance and Nominating • Finance and Audit • Human Resources and Compensation • Standards • Compliance • Reliability Policy Issues • Member Representatives

  35. RE-Independent Board Defined

  36. RE-Advisory Board

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

  38. 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

  39. 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.

  40. Non-regional Entity Functions

  41. 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

  42. Hybrid Board Defined

  43. 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

  44. 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.

  45. Background • Board Function • Establish strategy, track implementation & progress • Budget approval, ensuring adequate finances • CEO selection and performance review • Accounting to stakeholders

  46. 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.

  47. 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

  48. 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

  49. 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

  50. 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

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