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THIS IS PEGGY HAGG, CHAIR OF THE HUMAN RESOURCES AND GOVERNANCE COMMITTEE, AND WELCOME TO THE JUNE 20TH, 2023 HUMAN RESOURCES AND GOVERNANCE COMMITTEE MEETING.
[1. Call General Session to Order]
CALL THIS MEETING TO ORDER.THIS MEETING IS BEING WEBCAST LIVE TO THE PUBLIC ON OUR CO WEBSITE.
SINCE WE DO NOT HAVE A QUORUM OF THE PUBLIC UTILITY COMMISSION OF TEXAS, WE DO NOT, UH, NEED TO CALL A PUC MEETING.
I'D LIKE TO HIGHLIGHT TO COMMITTEE MEMBERS THAT THE ANTITRUST ADMONITION IS SECURITY MAP ARE INCLUDED WITH POSTED MEETING MATERIALS.
THE FIRST ORDER OF BUSINESS ON TODAY'S AGENDA IS ITEM TWO.
[2. Notice of Public Comment, if Any]
ANY.TODAY'S MEETING AGENDA WAS POSTED PUBLICLY ON JUNE 13TH AND PROVIDED INSTRUCTIONS FOR THE PUBLIC FOR COMMENTING AND PURPOSE.
UH, TODAY NO ONE HAS EXPRESSED INTEREST IN COMMENTING.
IS THAT CORRECT, CHAD? THAT IS CORRECT.
[3. April 17, 2023 General Session Meeting Minutes]
AGENDA ITEM THREE.APRIL 17TH, 2023, GENERAL SESSION MINUTES.
THERE'S A DRAFT OF THE MEETING MATERIAL.
DOES ANYONE HAVE ANY COMMENTS OR WISH TO MAKE A MOTION? COURTNEY MOVES.
DO I HAVE A SECOND? I'LL SECOND.
ANY, UH, NO OR S HEARING NONE THE MOTIONS PASSED UNANIMOUSLY.
[ 4. Human Resources Operations Report]
FOUR, UH, MARA, SPARK, SPAC, SORRY, MARA.WE'LL PRESENT, UH, THE HUMAN RESOURCES OPERATIONS REPORT.
AND, UH, I'D ASK AS WE GO THROUGH THIS FOR THE COMMITTEE MEMBERS, I'VE HAD SOME DISCUSSIONS WITH MARA, AND SHE, SHE MAY TALK ABOUT THIS, BUT WE ARE, WE DO THIS REPORT EVERY MEETING AND WE ARE THINKING ABOUT, IT MIGHT MAKE MORE SENSE TO DO IT TWICE A YEAR AS OPPOSED TO EVERY MEETING.
AND ALSO WANT TO TALK ABOUT AND GET YOUR INPUT EITHER TODAY OR BETWEEN BEFORE THE NEXT MEETING ONTO HOW TO MAKE THE, UM, MATERIALS MORE MEANINGFUL FOR YOU.
SO, UM, WE WELCOME ANY INPUT ON THAT.
CERTAINLY, AND ANY FEEDBACK YOU HAVE OR ANY TOPICS THAT YOU WANNA HEAR FROM ME ON, UM, FEEL FREE TO SEND THEM MY WAY OR STOP ME AND WE CAN TALK THROUGH THAT.
AND I WAS TELLING PEGGY YESTERDAY THAT WE JUST ENGAGE AN OUTSIDE COMPANY TO WORK WITH ON ENGAGEMENT SURVEYS, NEW HIRE SURVEYS, UM, EXIT INTERVIEW SURVEYS.
SO WE'RE GONNA BE INCORPORATING ALL OF OUR SURVEYS INTO THIS COMPANY FORMAT.
AND SO I THINK GOING FORWARD, I'LL BE ABLE TO GIVE YOU INSIGHT ACROSS THE ORGANIZATION AND THEN IN SPECIFIC AREAS THAT THERE MIGHT BE OPPORTUNITIES FOR IMPROVEMENT IN CERTAIN TOPICS THAT I THINK THAT YOU'LL FIND IN INTERESTING FOR ME TO REPORT ON.
SO, TODAY'S REPORT COVERS THE HR OPERATIONAL ACTIVITIES THROUGH MAY.
OUR CURRENT HEADCOUNT RIGHT NOW IS 836 EMPLOYEES, WHICH IS AN INCREASE OF 18 SINCE MY LAST REPORT IN APRIL.
AND WE HAVE 46 CONTINGENT WORKERS, WHICH IS AN ADDITIONAL FOUR SINCE MY LAST REPORT.
THE RECRUITING TEAM CONTINUES TO BE BUSY.
WE'VE ONBOARDED 73 FULL-TIME EMPLOYEES SINCE JANUARY.
AND, YOU KNOW, OVER THE LAST COUPLE OF YEARS, AT ANY POINT IN TIME WE WERE SOURCING FOR 70 PLUS POSITIONS.
AND AS OF THIS MORNING, WE'RE DOWN TO ONLY 31.
SO A HUGE THANK YOU TO THE SOURCING TEAM AND THE RECRUITING TEAM FOR ALL THE WORK THAT THEY'VE BEEN DOING TO FILL OUR OPEN POSITIONS.
WE'VE ALSO JUST WELCOMED OUR 12 INTERNS FOR OUR INTERNSHIP CLASS OF 2023.
THERE'S ALWAYS THIS WAVE OF ENERGY AND ENTHUSIASM THAT COMES INTO THE ORGANIZATION WHENEVER OUR INTERNS JOIN US.
SO WE'RE THRILLED TO HAVE THEM ON BOARD.
SOME OF THEM ARE WORKING OFFSITE AND SOME ARE WORKING ON, UM, BUT WE ARE BRINGING ALL OF THEM TOGETHER AS A GROUP TWICE DURING THE INTERNSHIP.
UM, THE FIRST TIME IS NEXT WEEK, WE'RE ACTUALLY GOING TO BE GIVING THEM AN OPPORTUNITY TO NETWORK IN PERSON, MEET SOME OF OUR MANAGEMENT AND LEADERSHIP TEAM, AND THEN WE'RE ALSO SENDING THEM ON A TOUR OF THE CAPITAL, UM, TO HEAR ABOUT THE WORK THAT WE PERFORM THERE.
AND THEN A MEMBER OF THE PUC WILL BE JOINING US AND TALKING ABOUT THE WORK THAT ERCOT AND THE PUC DO TOGETHER.
AND THEN THEY'LL RETURN IN AUGUST ON SITE TO GIVE THE, THE MANAGEMENT TEAM AND THEIR PEERS A PRESENTATION OVERVIEW OF THE WORK THAT THEY'VE DONE WHILE AT ERCOT AN AN UPDATE ON THE PROJECTS THAT THEY CONDUCTED WHILE THEY WERE HERE.
AND THEN YESTERDAY, I JUST WANTED TO PAUSE AND TALK ABOUT THE NEW DEVELOPMENT PROGRAMS AT ERCOT.
YESTERDAY, THERE WAS QUITE A BIT OF TALK DURING THE BUDGET PRESENTATION ABOUT THE TWO NEW
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DEVELOPMENT PROGRAMS THAT WERE LAUNCHING AT ERCOT.UM, YOU KNOW, A LOT OF COMPANIES LIKE ERCOT HAD BEEN WRESTLING WITH SOME OF THE SAME RETENTION AND RECRUITING CHALLENGES, AND THE LABOR POOL HAS SHRUNK.
EMPLOYEE EXPECTATIONS ARE JUST DIFFERENT NOW POST COVID 19 ENVIRONMENT.
AND SO, YOU KNOW, THERE'S A LOT OF CREATIVE THINKING RIGHT NOW ON WHAT CAN WE DO TO KIND OF FACE AND MITIGATE THOSE RISKS WITH THE RETENTION AND RECRUITING CHALLENGES.
AND, YOU KNOW, ONE OF THE THINGS WE BEGAN TALKING ABOUT AS A LEADERSHIP TEAM IS ARE THERE OPPORTUNITIES ACROSS THE ORGANIZATION FOR OTHER DEVELOPMENT PROGRAMS? AND, YOU KNOW, WHERE COULD WE PUT THOSE IN? AND I WANNA THANK DAN WOODFIN AND JP PERTH FOR YOUR SUPPORT IN LAUNCHING THESE DEVELOPMENT PROGRAMS IN YOUR AREA.
SO THE TWO NEW DEVELOPMENT PROGRAMS WILL BE OUR SYSTEM OPERATORS AND OUR GMS TEAM.
SO THANK YOU FOR YOUR SUPPORT, AND IT'S A LOT OF WORK ON THE TEAMS TO PUT THOSE PROGRAMS TOGETHER TO BUILD A CURRICULUM AND, AND GET IT READY FOR SUCCESS.
SO THANK YOU FOR ALL YOUR TEAM'S EFFORT AS WELL.
UM, AND THEN ALSO THANK YOU TO WOODY DICKERSON BECAUSE HE HAS LED THE ENGINEERING DEVELOPMENT OR EDP PROGRAM FOR YEARS NOW, AND WE'VE SEEN A LOT OF, YOU KNOW, A LOT OF GREAT THINGS COME OUTTA THAT PROGRAM.
SO HE TOOK THE TIME TO SIT WITH US AND KIND OF TALK ABOUT LESSONS LEARNED.
AND NEXT I'LL TURN TO ATTRITION.
OUR CURRENT ATTRITION RATE IS 13 TOTAL ATTRITION, AND THEN OUR VOLUNTARY ATTRITION IS DOWN TO 10.4.
AND THAT'S ACTUALLY THE LOWEST VOLUNTARY ATTRITION THAT WE'VE SEEN SINCE 2021.
OUR TOTAL YEAR TO DATE TERMINATIONS IS 27 WITH 18 THAT ARE VOLUNTARY, AND NINE ARE INVOLUNTARY.
AND THEN THIS SLIDE IS AN OVERVIEW OF THE RESPONSES THAT RE RECEIVE ON THE EXIT INTERVIEW SURVEYS, WHENEVER EMPLOYEES LEAVE THE COMPANY.
THESE ARE THE AVERAGES YEAR TO DATE.
AND THE TAKEAWAY FROM THIS IS ALL OF OUR SCORES ON THE SURVEY ARE ABOVE AVERAGE.
AND A HUNDRED PERCENT OF THE RESPONDENTS YEAR TO DATE CONTINUE TO SAY THAT THEY WOULD RECOMMEND ERCO AS A PLACE TO WORK FOR.
AND THEN FINALLY, IF I, IF I CATEGORIZE ALL THE TERMINATIONS, THE SECOND LEADING REASON THAT PEOPLE CITE FOR LEAVING OR CAUGHT YEAR TO DATE IS BETTER OPPORTUNITY.
SO THIS TELLS YOU WITHIN THAT BETTER OPPORTUNITY CLASSIFICATION, THE REASONS THAT THEY'RE LEAVING.
AND THAT CONCLUDES MY REPORT FOR YOU TODAY, AND I'LL OPEN IT UP TO ANY QUESTIONS YOU MAY HAVE ANY QUESTIONS.
SO ONE OF THE THINGS I ASKED MARA TO GO BACK AND LOOK AT IS WE GET THIS EXIT INTERVIEW INFORMATION EACH TIME, AND IT'S A SNAPSHOT, THE NUMBERS CAN MOVE AROUND A LITTLE BIT.
AND IS THERE A WAY TO PRESENT IT IN A WAY THAT WOULD BE MORE MEANINGFUL FOR, FOR THE COMMITTEE, CAN SHOW TRENDS, YOU KNOW, THAT WOULD HELP US IDENTIFY RISK, UH, AND TO PRESENT IT IN A DIFFERENT WAY THAT COULD BE BE MORE HELPFUL.
SO SHE'S GONNA TAKE THAT BACK AND LOOK AT IT.
[5. Recommendation regarding 2024-2028 Strategic Plan]
ON THE AGENDA IS ITEM NUMBER FIVE, RECOMMENDATION REGARDING 20 24, 20 28 STRATEGIC PLAN.AND KRISTY HOBBES IS PRESENTING.
AS YOU RECALL, DURING THE APRIL COMMITTEE MEETING, WE RECEIVED AN UPDATE ON THE STRATEGIC PLANNING PROCESS AND PROVIDED SOME GOOD IN INPUT, UH, TO CHRISTY TO TAKE BACK TO ON THE DRAFT THAT SHE PRESENTED.
AND, UH, CHRISTY'S BACK TODAY WITH A FINAL SET OF OBJECTIVES AFTER HAVING MET WITH THE CORPORATE MEMBERS, UH, AND IS GONNA PROVIDE THE HIGH LEVEL PRIORITIES FOR THE 20 24 20 28 STRATEGIC PLAN.
AFTER DISCUSSION, WE'LL VOTE ON A RECOMMENDATION TO THE BOARD ON THE OBJECTIVES AND THE HIGH, UH, LEVEL PRIORITIES.
SO, AND KRISTY, AS YOU GO THROUGH THIS, CAN YOU HIGHLIGHT, UM, ANY SIGNIFICANT CHANGES FROM WHAT WE SAW WITH THE LAST TIME? ABSOLUTELY.
ALL RIGHT, WELL, GOOD MORNING TODAY.
UM, AS YOU'RE AWARE, WE'RE BACK HERE TO ASK FOR YOUR RECOMMENDATION TO THE BOARD ON THE APPROVAL OF THE NEXT STRATEGIC PLAN.
OUR CURRENT STRATEGIC PLAN IS SET TO EXPIRE AT THE END OF THIS YEAR.
UM, SO WE ARE LOOKING FOR OUR NEXT 2024 TO 2028 STRATEGIC PLAN.
AND I'LL JUST REMIND YOU ABOUT THE PROCESS THAT WE WENT THROUGH TODAY, AS WELL AS, UH, HOW WE CAME IN TO FOCUS ON THESE THREE HIGH LEVEL OBJECTIVES THAT FOCUS ON RELIABILITY, ECONOMICS AND ERCOT BEING AN EMPLOYER OF CHOICE.
SO WE STARTED THIS PROCESS ALMOST A YEAR AGO, SO LAST AUGUST WHERE WE STARTED WORKING, UM, DISCUSSIONS WITH YOU ALL ON ABOUT HOW WE WOULD LIKE TO MOVE FORWARD, GETTING YOUR INPUT, UM, ON HOW WE SHOULD START THINKING ABOUT DEVELOPING THE STRATEGIC PLAN.
WE THEN PUT TOGETHER A TEAM OF UP AND COMING LEADERS FROM OUR ORGANIZATION, ABOUT EIGHT FOLKS THAT EXPAND ACROSS THE ORGANIZATION, THAT WERE ABLE TO HELP
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GIVE US INPUT AND INSIGHT TO THE EMPLOYEES THOUGHTS, UH, THE EXPERTISE FROM THEIR DIFFERENT FIELDS THAT THEY REPRESENTED, AND REALLY HELPED US TO START ANALYZING THE ENVIRONMENT IN WHICH WE OPERATE BOTH INTERNALLY AND EXTERNALLY, AS WELL AS LOOKING AT OUR STRENGTHS AND OUR WEAKNESSES.AND WE TOOK THAT THROUGH A LENS OF LOOKING AT DIFFERENT ASPECTS LIKE THE POLITICAL ENVIRONMENT, UM, THE ECONOMIC ENVIRONMENT, UH, SOCIAL, UM, TECHNOLOGICAL AND LEGAL.
AND WITH THAT, THE TEAM CAME TOGETHER AND DEVELOPED A LI LIST OF HIGH, UM, PRIORITIES AND OBJECTIVES THAT THEY BROUGHT TO THE EXECUTIVE TEAM AND THAT WE ITERATED THROUGH, UM, TAKING US THROUGH THE PROCESS, UM, THAT PEGGY MENTIONED WITH YOU ALL LAST MONTH, AND THEN WORKING WITH THE STAKEHOLDERS.
AND SO NOW WE'RE READY TO FINALIZE THAT PLAN.
I WANNA TELL YOU A LITTLE BIT, UM, ABOUT THE FEEDBACK THAT WE GOT FROM THE STAKEHOLDERS.
VERY PLEASED WITH THE DIRECTION THAT YOU PROVIDED.
WE GOT REALLY GOOD FEEDBACK FROM THE STAKEHOLDERS, HAD GOOD DISCUSSIONS.
WE HAD ABOUT NINE SEGMENT MEETINGS WITH JUST UNDER A HUNDRED DIFFERENT MARKET PARTICIPANTS THAT PARTICIPATED IN THOSE VARIOUS MEETINGS.
UM, AND THEY CAME WITH GOOD CRITIQUE OF OUR PRODUCT, AND WE HAD A GOOD DIALOGUE.
SO WHAT WERE THE DRIVERS THAT LED US TO THE THREE OBJECTIVES THAT WE CAME TO? IF YOU THINK BACK TO OUR BUDGET PRESENTATION YESTERDAY, PABLO HAD A SLIDE IN THERE THAT LOOKED AT THE HISTORY, UM, THAT THE ORGANIZATION HAS MOVED THROUGH.
CHRISTY, MAY I INTERRUPT YOU? SORRY TO DO THIS, BUT I THINK WE NOW HAVE A QUO THAT PC.
SO WANTED TO SEE IF, UH, UH, CHAIR LAKE, WANTED CHAIR LAKE JACKSON THANK ONE TO CALL PC MEETING.
THIS MEETING OF THE PUBLIC UTILITY COMMISSION OF TEXAS WILL COME TO ORDER TO CONSIDER MATTERS THAT HAVE BEEN DULY POSTED WITH THE SECRETARY OF STATE FOR THE STATE OF TEXAS FOR JUNE 20TH, UH, 2023.
UH, WE HAVE, UH, COMMISSIONER WILL MCADAMS AND COMMISSIONER JIMMY GAUDETE HERE, UM, TODAY.
AND, UH, SORRY FOR THE INTERRUPTION, KRISTY.
SO IF YOU THINK BACK TO YESTERDAY DURING OUR BUDGET PRESENTATION, WE REALLY TALKED ABOUT THERE WAS A SLIDE, UM, THAT HAD, YOU KNOW, FROM LEFT TO RIGHT, THE NUMBER OF YEARS, AND YOU WENT FROM TOP TO BOTTOM.
AND IT SHOWED THE LEVEL OF COMPLEXITY IN HOW THINGS HAVE CHANGED.
AND THAT'S REALLY WHAT YOU SEE IN SOME OF THESE KEY DRIVERS.
WE'VE SEEN INCREASED GRID MODERNIZATION AND COMPLEXITY, THE LEVEL, THE CHANGES OR THE TYPES OF RESOURCES WE'RE SEEING, THE CHANGES THAT WE'RE SEEING ON THE DISTRIBUTION SYSTEM, HOW CUSTOMERS ARE REACTING DIFFERENTLY THAN THEY DID SAY 10 YEARS AGO.
AND ALL OF THAT IS DRIVING MARKET DESIGN AND BEHAVIOR CHANGES.
SO THOSE WERE ALL THINGS THAT WE TOOK INTO CONSIDERATION.
ANOTHER DRIVER, UH, FOR HELPING US SHAPE OUR OBJECTIVES WAS OUR REPUTATION AND THE PUBLIC PERCEPTION OF ERCOT.
WE ARE ALL VERY AWARE OF HOW THAT PERCEPTION CHANGED WITH WINTER STORM URI AND HOW CAN WE WORK TO RESTORE THAT TRUST WITH THE CONSUMERS OF TEXAS.
WE ALSO LIVE IN AN ENVIRONMENT WHERE, UM, INCREASED CYBER, UM, AWARENESS IS IM IMPERATIVE TO THE SUCCESS OF OUR ORGANIZATION.
WE ALSO KNOW THAT OUR, UH, ADVERSARIES ARE UPPING THEIR GAMES.
SO WE HAVE TO CONTINUE TO UP OUR GAME SO THAT WE'RE PREPARED FOR IN ELIMINATING ANY OF THOSE VULNERABILITIES, THE TECHNOLOGICAL ADVANCEMENT, BOTH FROM THE EQUIPMENT THAT'S OPERATING ON THE GRID TO THE EQUIPMENT THAT WE USE TO MANAGE AND MARKET THE, THE GRID AND, AND MARKETS.
AND THEN FINALLY, WE RECOGNIZE THE CHANGING WORKFORCE AND THE INCREASING COMPETITION FOR TALENT, ESPECIALLY IN THE CENTRAL TEXAS REGION.
AND HOW DO WE BETTER PREPARE OURSELVES TO CONTINUE FACING THOSE CHALLENGES IN THE YEARS AHEAD? SO I'M GONNA JUMP RIGHT ON IN.
UH, WE DID NOT MAKE, UM, VERY SUBSTANTIAL TA WE DIDN'T ACTUALLY MAKE ONE MINIMAL CHANGE, UM, ON THESE OBJECTIVES.
UM, BUT I'M GONNA JUMP RIGHT IN TO THE FIRST OBJECTIVE AND KIND OF WALK YOU THROUGH WHAT, UH, WE UPDATE AND WHAT WE SAW HERE.
SO THE FIRST OBJECTIVE IS TO BE AN INDUSTRY LEADER FOR GRID RELIABILITY AND RESILIENCE.
WE RECOGNIZE THAT THE MISSION OF ERCOT, THAT RELIABILITY IS JOB NUMBER ONE.
AND SO THAT'S WHY WE PUT THAT AS A PRIMARY FOCUS OF OUR FIRST OBJECTIVE AND HOW WE'RE GOING TO PRIORITIZE OUR WORK FOR THE NEXT FIVE YEARS.
FOR THE FIRST PRIORITY ITEM, ANTICIPATE AND RAPIDLY RESPOND TO CHANGES IN MARKET OPERATIONAL AND PLANNING NEEDS.
THE KEY WORDS HERE ARE ANTICIPATE AND RAPIDLY RESPOND.
UM, AS YOU'VE HEARD US TALK OVER THE LAST TWO DAYS, THE AMOUNT OF CHANGE THAT WE'RE SEEING ON THE GRID, WE HAVE TO BE ABLE TO ANTICIPATE THAT AND QUICKLY RESPOND TO IT.
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AND AT THE END OF THE DAY, WE'RE DOING ALL OF THESE THINGS FOR THE CONSUMERS OF TEXAS.SO, AS YOU WERE MAYBE LOOKING AT THE OTHER, UM, DOCUMENT, YOU SAW THAT WE ADDED SOME LANGUAGE, UM, TO MAKE IT CLEAR THAT WE ARE DOING THE WORK THAT WE DO IN SUPPORT OF THE CONSUMERS OF TEXAS.
THAT WAS SOME OF THE FEEDBACK THAT WE HEARD THROUGH, UH, THE SEGMENT SESSIONS UNDER 1.2, FACILITATE THE RELIABLE MARKET OPERATION OF NEW AND EXISTING GENERATION AND LOAD RESOURCES AT BOTH THE TRANSMISSION AND DISTRIBUTION LEVEL.
UH, THIS IS ONE WHERE WE ACTUALLY DID MAKE A CHANGE TO THE, THE PRIORITY BEFORE WE JUST SAID RESOURCES AT BOTH THE TRANSMISSION AND DISTRIBUTION LEVEL.
WHEN WE USE A LOWER CASE ARE IN ERCOT TOM TERMINOLOGY.
THAT MEANS BOTH GENERATION AND LOAD RESOURCES.
BUT WE RECOGNIZE TO, UM, THE OUTSIDE READER THAT MAY PICK UP OUR STRATEGIC PLAN THAT MIGHT NOT BE AS CLEAR TO THEM.
SO WE ADDED IN THE, THE LANGUAGE TO MAKE IT CLEAR THAT HERE WE'RE TALKING ABOUT BOTH GENERATION AND LOAD RESOURCES.
UM, AT THE TRANSMISSION AND DISTRIBUTION LEVEL, WE RECOGNIZE, UM, THAT THE WAY THEY OPERATE, UH, IS CHANGING BY, UH, THE WAY THAT THEY VARY THEIR DEMAND, UM, HOW THEY RESPOND MORE QUICKLY.
UH, WE SEE THE INCREASING, UH, UTILITY SCALE, SOLAR ENERGY STORAGE, DISTRIBUTED ENERGY RESOURCES.
WE'VE GOT TO BE ABLE TO WORK TOWARDS IMPLEMENTING THOSE AND APPROVING APPROPRIATE TECHNICAL REQUIREMENTS, GETTING AHEAD OF THEM.
UM, SO THAT WE'RE ABLE, AGAIN, GOING BACK TO PRIMARY PRIORITY ONE, ANTICIPATE AND RAPIDLY RESPOND.
1.3, UH, DEVELOP AND IMPLEMENT A LONG TERM TRANSMISSION STRATEGY, MEANING TEXAS' POLICY OBJECTIVES.
SO WE'VE GOT TO COLLABORATE, UH, WITH THE COMMISSION AND WORKING ON SETTING WHAT OUR NEXT SET OF TRANSMISSION POLICIES ARE, UM, TO MAKE SURE THAT WE'VE GOT A PROACTIVE AND HOLISTIC STRATEGY TO ENSURE A ROBUST TRANSMISSION INFRASTRUCTURE.
THERE WERE NO CHANGES ON THIS ITEM.
UNDER ITEM 1.4, LEAD THE DEVELOPMENT OF COST-EFFECTIVE CHANGES TO REGULATIONS OR STANDARDS IMPACTING THE ERCOT GRID.
UM, FOR THIS ITEM COST-EFFECTIVE, WE ADDED THAT VERBIAGE IN THAT WASN'T IN THE PREVIOUS DRAFT THAT WE DISCUSSED WITH YOU.
AND AGAIN, THAT CAME FROM FEEDBACK THAT WE HEARD FROM THE SEGMENT SESSIONS ABOUT WE HAVE TO AGAIN, RECOGNIZE THAT WHILE RELIABILITY IS JOB ONE, WE ALSO HAVE TO BE CONSCIOUS OF THE COST THAT WE'RE PUTTING ON THE CONSUMERS OF TEXAS.
AND SO WE NEED TO, UM, ALWAYS KEEP BOTH OF THOSE ITEMS IN MIND.
AND THEN THE LAST ITEM IS ADVANCE ARCOT.
INC'S, RESILIENCY, SECURITY, BUSINESS CONTINUITY, AND DISASTER MANAGEMENT CAPABILITIES.
I'M RECOGNIZING THE CRUCIAL ROLE THAT ERCOT PLAYS FOR PROVIDING, HELPING PROVIDE ELECTRIC SERVICE TO THE CONSUMERS OF TEXAS.
WE'VE GOTTA ENSURE THAT EVEN IN, UM, YOU KNOW, CRITICAL SITUATIONS, WE'RE ABLE TO MAINTAIN OUR CORE BUSINESSES AND SERVICES THAT WE PROVIDE.
SO WITH THAT, I WILL PAUSE TO SEE IF THERE'S ANY OTHER QUESTIONS OR FEEDBACK ON OBJECTIVE ONE BEFORE I MOVE TO OBJECTIVE TWO, I WOULD, ANY COMMENTS, QUESTIONS? OKAY.
FOR OBJECTIVE TWO, THIS IS WHERE WHEN WE GOT INTO THE SEGMENT SESSIONS, WE PROBABLY HAD THE MOST CONVERSATIONS, UH, IN FEEDBACK AND INPUT FROM THE STAKEHOLDERS.
UM, SO THERE WERE NO CHANGES TO THE HIGH HIGHEST LEVEL OBJECTIVE, WHICH IS ENHANCED ERCOT REGIONS ECONOMIC COMPETITIVENESS WITH RESPECT TO TRENDS IN WHOLESALE POWER RATES AND RETAIL ELECTRICITY PRICES.
UM, AS YOU CAN SEE, OBJECTIVE ONE AND OBJECTIVE TWO KIND OF BLEND TOGETHER.
WHILE RELIABILITY IS JOB ONE FOR PROVIDING SERVICE TO THE CONSUMERS OF TEXAS, WE ALSO HAVE TO BE MINDFUL, UM, THAT THE CHOICES WE'RE MAKING ARE ECONOMIC AND COST EFFECTIVE, UM, FOR THE SERVICES WE PROVIDE.
2.1, UH, DID CHANGE SOMEWHAT, UM, FROM THE FIRST TIME THAT YOU SAW IT, UM, BEFORE IT WAS IDENTIFY AND IMPLEMENT MARKET EFFICIENCY WITHOUT COMPROMISING OR, UH, RELIABILITY OR RESILIENCE.
AND NOW IT STATES ADVOCATE AND SUPPORT EFFICIENT MARKETS WHILE DELIVERING ON RELIABILITY AND RESILIENCY EXPECTATIONS.
UM, YOU KNOW, WE RECOGNIZE THAT AGAIN, UH, RELIABILITY IS OUR PRIORITY FOR THE ORGANIZATION, BUT COSTS ALWAYS HAVE TO BE CONSIDERED.
UM, WE'LL STRIVE TO HELP, UM, UNDERSTAND AND THEN WORK WITH THE STAKEHOLDER PROCESS, WORK WITH REGULATORS, WORK WITH YOU, THE BOARD, TO ADVOCATE AND SUPPORT THOSE SOLUTIONS THAT'LL HELP US BRING EFFICIENT MARKET DRIVEN
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SOLUTIONS.UM, WE ALSO ADDED IN SOME LANGUAGE IN THE SUPPORTING DOCUMENTS TO HIGHLIGHT ALSO THE NEED FOR CONTINUOUS IMPROVEMENT.
UM, AS YOU'VE BEEN PREPARING FOR THE BOARD THE LAST, UH, COUPLE YEARS AS YOU'VE BEEN ON, YOU'VE NOTICED THERE'S A LOT OF CHANGE THAT COMES THROUGH AND A LOT OF, UM, MARKET CHANGES, AND WE'VE GOT TO BE CONSCIOUS OF THAT.
AND ONCE WE APPROVE SOMETHING, GOING BACK AND TAKING THAT STEP TO MAKE SURE, DID WE GET THAT OUTCOME THAT WE WERE ANTICIPATING? AND DID, DID IT DELIVER, UM, THE SERVICE, UH, OR THE COST SAVINGS TO THE CONSUMERS THAT WE WERE ANTICIPATING? 2.2, UH, THERE WERE NO CHANGES TO THIS ONE, WHICH WAS INVOLVED TOWARD MORE ORGANIZATIONAL AGILITY AND IMPROVED QUALITY ASSURANCE.
SO ERCOT CAN IMPLEMENT CHANGES EFFICIENTLY AND EFFECTIVELY TO MANAGE A RAPIDLY CHANGING ENERGY ENVIRONMENT.
AGAIN, GOING BACK TO, UH, THE SLIDE THAT WE REVIEWED YESTERDAY, IT'S A FAST CHANGING ENVIRONMENT.
AND SO WE HAVE TO MAKE SURE WE'VE GOT THE SYSTEMS AND PROCESSES PUT INTO PLACE SO THAT WE'RE AGILE AND CAN, WHEN WE ANTICIPATE THOSE, THAT WE CAN RAPIDLY CHANGE AND NOT BE BEHIND THE EIGHT BALL IN, IN DELIVERING OUR SOLUTIONS.
SO HOW CAN WE IMPROVE OUR PROCESSES? HOW CAN WE IMPROVE OUR SYSTEMS? UM, AND THEN MAKING SURE THAT WE DO THAT WITH A MIND FOR QUALITY ASSURANCE, UM, SO THAT WE'RE NOT COMPROMISING RELIABILITY WHEN WE INTRODUCE THOSE CHANGES.
THEN FINALLY, UNDER OBJECTIVE TWO IS PROMOTE INNOVATION, CONTINUOUS IMPROVEMENT IN TRANSPARENT DATA-DRIVEN DECISION MAKING.
AND THE, THE TWEAKS THAT YOU'LL SEE HERE, WE ADDED TRANSPARENT IN TO MAKE SURE, UM, WE HAVE A LOT OF DATA THAT ARCOT CAN PROVIDE, AND SO MAKING SURE THAT WE'RE HELPING GET THAT DATA IN A WAY THAT'S EASY FOR, UM, STAKEHOLDERS TO UTILIZE SO THEY CAN MAKE DATA DRIVEN DECISIONS SO THAT POLICYMAKERS CAN MAKE DATA DRIVEN DECISIONS WHEN THEY'RE MAKING CHANGES.
WE ALSO REMOVED THE LANGUAGE FROM THE END THAT SAID, TO ACHIEVE ERCOT INC'S GOALS BECAUSE REALLY, UM, THE, IT'S NOT JUST ABOUT HELPING US ACHIEVE OUR GOALS, IT'S ABOUT HELPING THE MARKET AND ADVANCING, UM, THE INDUSTRY AS WELL.
AND SO IT'S NOT JUST ABOUT OUR GOALS, IT'S ABOUT THE GREATER GOOD QUESTIONS OR FEEDBACK ON OBJECTIVE TWO.
UM, AND I KNOW WE TALKED ABOUT THIS ON OUR, WHEN WE MET, UM, I STILL DON'T SEE THE WORD CONSUMER ANYWHERE IN HERE, AND I KNOW THAT YOU MENTIONED IT JUST NOW, SO I THINK YOU'RE DRIVING AT IT, BUT I REALLY THINK IF YOU SAY THE WORD, IT'S GOING TO BE MORE EFFECTIVE.
AND I'M NOT QUITE SURE WHY WE'RE HIDING THAT IN THE MESSAGING.
SO RATES OBVIOUSLY DIRECTLY GO TO CONSUMER, SO IF YOU'RE WANTING TO HAVE RATES THAT ARE NOT, YOU KNOW, THAT MATCH THE RETAIL AND MATCH THE MARKET, I DON'T KNOW WHY YOU WOULDN'T SAY, YOU KNOW, WITH KEEPING THE CONSUMER IN MIND OR SOMETHING TO THAT EFFECT.
SO SOMETHING LIKE AT THE END OF THE OVERALL OBJECTIVE, UM, POSSIBLY, UH, WITH RESPECT TO TRENDS IN WHOLESALE POWER RATES AND RETAIL ELECTRICS, SAY PRICES FOR CONSUMERS FOR THE BENEFIT OF, WOULD THAT MEET YOUR, WOULD THAT HELP OR JUST EVEN WITH KEEPING THE CONSUMER IN MIND SO THAT YOU'RE NOTING THAT, YOU KNOW, THERE IS A COST AND THAT YOU'RE KEEPING YOU, YOU'RE NOT JUST GOING TO RAISE THEM TO WHATEVER YOU WANT.
YOU'RE KEEPING THE FACT THAT SOMEONE PAYS THESE, THAT'S ALL THE MESSAGE NEEDS TO BE, I THINK.
ANY THOUGHTS, PABLO? YEAH, I'M, I'M, I, UM, I HEAR YOUR POINT.
UM, COURTNEY, AND I'M, I DON'T OBJECT TO IT AT ALL.
I, I THINK WHEN I READ THIS, I, WHEN I SEE WHOLESALE POWER RATES TO ME, THAT'S, YOU KNOW, CLEAR THAT THAT'S, YOU KNOW, THE WHOLESALE POWER RATES THAT TAKE PLACE BETWEEN THE BUSINESSES THAT TRANSACT.
UM, AND THEN RETAIL ELECTRIC PRICES TO ME SPEAK DIRECTLY TO CONSUMERS.
THAT'S WHERE CONSUMERS PAY, RIGHT? AND YOU GET THE MARKET, BUT THE AVERAGE PERSON DOESN'T KNOW WHAT THAT MEANS.
SO THAT'S WHY I'M SAYING IF YOU COULD SAY THE WORD CONSUMER, YOU'LL SAVE YOURSELF.
WHY DON'T WE TAKE BACK AND SEE IF WE CAN WORK THAT IN.
WE CAN DO THAT UNLESS THERE'S SOME OBJECTION.
NO, THERE'S, THERE'S NO OBJECTION TO THE, TO THE POINT.
JUST MAKING A NOTE SO I MAKE SURE I GET IT RIGHT.
ANY OTHER, ANY OTHER COMMENTS? YEAH, I, I, THE CHANGES THAT, THAT WAS WERE SUGGESTED IN 2.1 THAT YOU CALLED OUT.
YEAH, I DON'T HAVE ANY OBJECTION TO THAT.
YOU, YOU DISCUSSED THE, UM, CHANGES TO 2.1 THAT WERE REQUESTED, AND I THINK THOSE ARE APPROPRIATE.
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ALL RIGHT, LET'S GO TO OBJECTIVE THREE.UM, THE GENERAL FEEDBACK THAT WE GOT FROM THE SEGMENTS, EVERYONE WAS VERY SUPPORTIVE, COMPLIMENTARY OF THE, THE STAFF OF ERCOT IN SUPPORTIVE, UM, OF PUTTING THE FOCUS ON BEING AN EMPLOYER OF CHOICE BECAUSE, UM, YOU KNOW, REALLY WHAT'S BEHIND THIS OBJECTIVE IS WE, UH, OUR GREATEST ASSET IS, ARE OUR PEOPLE, AND WE NEED TO MAKE SURE TO BE SUCCESSFUL.
UM, WE'VE GOT, YOU KNOW, HAPPY EMPLOYEES THAT ARE THERE DOING THE JOB FOR US DAY AFTER DAY.
AND SO THIS REALLY PUTS THE FOCUS, UH, BACK INTERNALLY.
UM, THE ONE CHANGE THAT WE DID MAKE TO THIS HIGH LEVEL OBJECTIVE, IT WAS JUST KIND OF A RE REWORDING.
UM, SO BEFORE IT WAS ADVANCE ERCOT AS A LEADING INDUSTRY EXPERT IN AN EMPLOYER OF CHOICE BY FOSTERING INNOVATION, PROMOTING INDEPENDENCE, INVESTING IN OUR PEOPLE AND INVESTING, EMPHASIZING THE IMPORTANCE OF OUR MISSION.
UM, SO WE, WE STRUCK PROMOTING INDEPENDENCE AND JUST PUT IT, UH, HERE AS A DESCRIPTOR AT THE FRONT.
UM, THE FEEDBACK WE GOT WAS, WE FEEL LIKE YOU ARE INDEPENDENT ERCOT, YOU'RE NOT, IT'S NOT SOMETHING YOU'RE STARTING AND TRYING TO DO.
UM, AND SO THIS WAS TO HELP BETTER COMMUNICATE THAT, UM, THERE WAS NO CHANGES TO 3.1, CULTIVATE A HIGHLY SKILLED WORKFORCE, CREATING A REWARDING WORK ENVIRONMENT AND DRIVING SUCCESS FOR THE ORGANIZATION.
AGAIN, THIS GOES BACK TO PRIORITIZING THE DEVELOPMENT OF OUR INTERNAL SKILLS.
HOW DO WE PUT PROGRAMS IN PLACE? UH, YOU HEARD DISCUSSIONS YESTERDAY FROM, UM, DIFFERENT OF THE EXECUTIVES AS THEY WERE DEFENDING THEIR NEXT BUDGET ON THOSE PROGRAMS THAT WE WANT IN PLACE FOR DEVELOPING OUR PEOPLE AND GROWING THE TALENT WITHIN THE ORGANIZATION.
AND SO THOSE ARE SOME OF THE ACTIONS THAT'LL BE BEHIND, UH, 3.1 UNDER 3.2, IMPLEMENT A WORKFORCE AND A LEARNING STRATEGY, CREATING GREATER CAPACITY FOR DEVELOPING INTERNAL EXPERTISE AND THOUGHT LEADERSHIP.
AGAIN, IT'S CONTINUING TO DEVELOP THAT TALENT GIVING, UM, AN OPPORTUNITY FOR ENGAGEMENT ACROSS EMPLOYEES.
HOW DO WE HAVE THAT STRATEGY FOR, UM, MAKING TIME? UH, RIGHT NOW WITH THE, THE WORKLOADS THAT FE FOLKS HAVE, THEY DON'T HAVE TIME TO DO THAT EXTRA, MAYBE THOUGHT LEADERSHIP OR WORKING TOGETHER ACROSS TEAMS. SO PROVIDING, UM, THAT OPPORTUNITY FOR THEM TO WORK TOGETHER.
3.3, STRENGTHEN ERCOT CULTURE BY IMPROVING INTERNAL COMMUNICATIONS AND ENHANCING THE EMPLOYEE EXPERIENCE.
UM, YOU KNOW, WE HEARD SOME OF THE COMMENTS I THINK BOB MADE YESTERDAY ABOUT, AS WE ONBOARD NEW PEOPLE, UM, AS WE MAYBE LOSE PEOPLE, AND WE HAVE TURNOVER IN THE ORGANIZATION AS WE'RE IN, UM, AN ENVIRONMENT WHERE MORE PEOPLE ARE WORKING FROM HOME, IT'S IMPORTANT THAT WE MAINTAIN THE CULTURE OF THE ORGANIZATION AND WE ESTABLISHED WHAT THAT IS AND WHAT WE EXPECT, UM, FROM OUR EMPLOYEES.
UM, SO THAT IS, UH, WHAT WAS DRIVING 3.3.
NOW, 3.4 IS PROBABLY THE ONE THAT GOT THE MOST CONVERSATION THROUGH THE SEGMENT SESSIONS UNDER OBJECTIVE THREE.
UM, THERE WAS ONE MINOR CHANGE.
IT USED TO SAY, CONTINUE BUILDING CREDIBILITY AND TRUST WITH EXTERNAL STAKEHOLDERS, BUT WE CHANGED THAT TO ALL STAKEHOLDERS.
UM, THERE WAS SOME FEEDBACK THAT BY JUST SAYING EXTERNAL AND MADE IT SEEM LIKE A US VERSUS THEM, WHEN WE'RE ALL IN IT TOGETHER WORKING TOWARDS THE SAME COMMON GOALS.
UM, AND SO WE, WE MADE THE DECISION TO MAKE THAT CHANGE.
UH, WE RECOGNIZE THAT AFTER WINTER STORM URI, THERE'S DIFFERENT EXPECTATIONS FOR COMMUNICATION.
UM, WE NEED TO BE OPEN, TRANSPARENT WITH OUR COMMUNICATIONS.
UM, AND ANOTHER PART OF THE FEEDBACK THAT WE GOT, UM, THAT YOU'LL SEE IN THE MORE DETAILED INFORMATION IS WE UPDATED IT TO TWO-WAY COMMUNICATION.
IT'S NOT JUST ABOUT ERCOT TELLING PEOPLE.
IT'S ABOUT ERCOT LISTENING, UM, TO, TO FOLKS AS WELL, AND TAKING THAT FEEDBACK AND HAVING THAT TWO-WAY COMMUNICATION.
AND THEN, THEN THE LAST PRIORITY ITEM IS EXPAND ERCOT POSITION AS A LEADING INDUSTRY EXPERT BY INCREASING EXTERNAL COLLABORATION AND LAB LEVERAGING KNOWLEDGE TRANSFER.
UM, AGAIN, YOU SAW, YOU HEARD, UM, AS KON TALKED, I RECALL HIM SAYING, YOU KNOW, SOME OF HIS INCREASES IN HIS BUDGET WERE TO HAVE MEMBERSHIPS IN ORGANIZATIONS THAT ALLOW OUR EXPERTS TO GO AND PARTICIPATE AND SHARE KNOWLEDGE AND GAIN KNOWLEDGE, HELP LEAD, UM, DIFFERENT REVIEWS OF PROBLEMS, UH, AND PROVIDE SOLUTIONS.
AND SO, UH, IT'S CREATING THAT SPACE FOR THAT TYPE OF THOUGHT.
LEADERSHIP WORK IS GONNA BE A PRIORITY OF THE ORGANIZATION IN THE COMING YEARS.
AND I KNOW THAT'LL MAKE COMMISSIONER GLOT FILTHY.
UM, SO WITH THAT, ANY, ANY THOUGHTS, UM, ABOUT THE MINIMAL CHANGES ON OBJECTIVE THREE?
[00:30:01]
ALL RIGHT, SO NEXT STEPS.UM, YOU KNOW, WE WOULD LIKE YOU TODAY TO CONSIDER WHETHER YOU'D RECOMMEND APPROVAL, UH, TO THE BOARD.
WE'D REALLY LIKE TO HAVE YOUR SUPPORT AND THE BOARD SUPPORT IN, UM, MAKING SURE THAT WE WANNA MAKE SURE WE'RE ON THE SAME PAGE FOR WHERE WE'RE GONNA FOCUS OUR PRIORITIES AND OUR RESOURCES IN THE COMING YEARS, AND HOW WE WANT THE ORGANIZATION TO EVOLVE.
UM, IF WE GET THAT APPROVAL FROM YOU, WE'LL GO BACK INTERNALLY, WE'LL BE WORKING WITH THE COMMUNICATIONS TEAM TO CLEAN UP THE PACKAGE, PUT IT MORE INTO A FORM THAT WOULD BE SUITABLE FOR, UH, SHARING WITH OTHERS AND PUTTING ON OUR WEBSITE TO HELP COMMUNICATE THAT MESSAGE.
AND OUR GOAL WOULD BE TO HAVE THAT FINALIZED BY AUGUST SO THAT IT CAN SUPPORT, UM, OUR, OUR BUDGET FILING.
UM, ANY QUESTIONS? CAN I MAKE A QUESTION? COME, THE, THE SLIDE FROM YESTERDAY, THE, UH, BUDGET DRIVERS FOR GRID AND RELIABILITY CHANGES WAS, WAS EXCELLENT IN TERMS OF A LONG TERM VIEW OF WHAT'S HAPPENING.
IT'S A STRATEGIC KIND OF, UH, VIEW OF THE HISTORY, BUT ALSO WHERE WE'RE GOING.
IF THERE'S A POSSIBILITY TO MAKE THAT PUBLIC IN YOUR STRATEGIC PLAN, UH, I WOULD RECOMMEND THAT BECAUSE IT KIND OF PUTS THINGS IN CONTEXT ABOUT HOW IT'S GONE FROM PRETTY STRAIGHTFORWARD TO VERY COMPLEX.
AND WE'LL LOOK AT HOW WE HELP COMMUNICATE THAT AND MAYBE PUT THAT INTO A GRAPHIC.
UM, YOU KNOW, KUDOS TO DAN, WHEN HE AND I WERE INITIALLY TALKING ABOUT WHAT ARE, WHAT'S DRIVING THIS STRATEGIC PLAN, YOU KNOW, HE KIND OF DREW IT ON THE BACK OF A NAPKIN AND GOT IT STARTED.
SO IT, IT'S BEEN A USEFUL COMMUNICATION TOOL FOR US.
JOHN, YOU HAVE COMMENTS? YEAH, I THINK THE ONE THING THAT WOULD MAKE THAT EVEN BETTER IS SOME NUMBERS.
UM, AND I DON'T THINK YOU WANNA PUT NUMBERS.
I MEAN, YOU CAN TURN IT INTO A COMPLETE, YOU KNOW, NUMBERS CHART IF YOU WANT TO, BUT I WAS THINKING MORE, THERE'S SOME OF THOSE, WE'RE TALKING ABOUT THE STACK, THE STACK CHART, RIGHT? UM, I THINK IF YOU PUT SOME NUMBERS AND, AND WOODY QUOTED SOME OF THEM ON THAT CHART ITSELF, IT ILLUSTRATES THE SCOPE OF THE CHANGE.
I MEAN, THEY'RE IN THE FOLLOW ON DECK OF PRESENTATION, BUT IF YOU'RE GONNA TAKE OUT THAT ONE CHART, I THINK IT'S BETTER IF YOU PUT SOME NUMBERS ON IT.
AND AS A PART OF, UM, JUST WHAT WE'RE, WE'VE KIND OF GOTTA OUTLINE PLAN FOR IT.
UM, OF COURSE WOULD BE A LETTER FROM PABLO, AND THEN THERE'S THINGS TALKING ABOUT THE ORGANIZATION.
UM, BUT WE CAN PUT THAT CHART IN AND PUT SOME COMMENTARY AROUND IT TO HELP EXPLAIN IT.
SO SOMEONE THAT'S LOOKING FOR IT, LOOKING AT IT FOR THE FIRST TIME, UNDERSTANDS WHAT WE'RE TRYING TO COMMUNICATE.
ANY ADDITIONAL COMMENTS? IF NOT, I'D LIKE TO ENTERTAIN, UH, A MOTION IS SET FORTH THEN THE MATERIALS FOR THE H R G COMMITTEE TO RECOMMEND THAT THE BOARD APPROVE THE OBJECTIVES AND HIGH LEVEL, UH, PRIORITIES IN THE, UH, STRATEGIC 20 24, 20 28 STRATEGIC PLAN.
SO, CHAIRMAN, JUST TO MAKE SURE Y'ALL, Y'ALL HAD A DISCUSSION AROUND STRATEGIC OBJECTIVE TOO, AND MODIFYING SOME OF THE LANGUAGE.
SO DO YOU WANNA JUST PROVIDE DIRECTION TO STAFF TO ADDRESS THAT ISSUE? YES.
FOR THE BOARD'S CONSIDERATION TOMORROW? YES.
TODAY, OR SORRY, TODAY, UM, SORRY.
SO I JUST WANNA MAKE SURE THAT WE'RE CAPTURING THAT POINT IN THE, IN THE DISCUSSION AS WELL.
SO, DO I HEAR, HAVE A MOTION? I'LL MAKE A MOTION.
ANY ABSTENTIONS NOS? HEARING NONE.
THE MOTIONS UNANIMOUSLY PASSED.
WANNA THANK YOU ALL, UH, FOR THE SUPPORT Y'ALL PROVIDED AS WE WORKED ON DEVELOPING AND THE GUIDANCE, UM, THROUGH IT.
AND I THINK I, I MISSED, UM, THANKING THE STAKEHOLDERS AS WELL FOR THEIR INPUT AS WELL DURING THE SEGMENT SESSIONS.
WELL, THANK YOU FOR YOUR HARD WORK ON THIS EFFORT.
[6. Recommendation regarding Board Compensation]
UP IS AGENDA ITEM SIX, RECOMMENDATION REGARDING BOARD COMPENSATION.UH, AS, AS WE'VE DISCUSSED THAT, YOU KNOW, THE HUMAN RESOURCES AND GOVERNANCE COMMITTEE CHARTER REQUIRES THAT THE COMMITTEE REVIEW THE BOARD'S POLICIES AND PROCEDURES ADDRESSING DIRECTOR'S COMPENSATION, WHICH IS SET BY THE BOARD OF ERCOT.
UH, PURSUANT TO THE BYLAWS, DIRECTOR'S COMPENSATION HAS NOT BEEN CHANGED SINCE 2011, UH, QUITE, QUITE A LONG TIME.
UH, EARLIER THIS YEAR, THE, THE, THE BOARD RETAINED MERIDIAN COMPENSATION PARTNERS TO PERFORM A BENCHMARKING ANALYSIS
[00:35:01]
AND MAKE A RECOMMENDATION, UH, REGARDING BOARD COMPENSATION.UH, AND WITH US TODAY, WE HAVE TOM MCNEIL, UH, WITH MERIDIAN PARTNERS, WHO YOU'VE MET BEFORE TO PRESENT THEIR ANALYSIS AND RECOMMENDATION.
AND I'D JUST LIKE TO MENTION, I THINK, UM, DAVID BIXBY WITH MERIDIAN'S BEEN A BIG PART OF THIS PROCESS.
HE'S NOT HERE TODAY, BUT, UH, UH, WE WANNA THANK DAVID FOR HIS WORK, TOO.
UH, THIS MATERIAL PRESENTS THE RESULTS OF OUR MARKET BENCHMARKING STUDY OF THE COMPETITIVENESS OF PAY PROGRAM FOR ERCOT DIRECTORS, ALONG WITH RECOMMENDED CHANGES TO THE PROGRAM.
IN PREPARATION OF OUR ANALYSIS, UH, WE MET WITH, UH, AS PEGGY SAID, WE MET WITH THE HR AND G COMMITTEE AND THE FULL BOARD TO REVIEW OUR METHODOLOGY TO DISCUSS THE COMPARATOR GROUPS REFERENCED IN OUR STUDY, AND TO ALSO REVIEW PRELIMINARY FINDINGS OF OUR STUDY, UH, IN OUR, EXCUSE ME, IN OUR BENCHMARKING STUDY.
UH, AS WE'D PRE PREVIOUSLY DISCUSSED WITH THE COMMITTEE AND THE, AND THE BOARD, UH, WE USED A COMMON INCREDIBLE, UH, APPROACH TO ASSESS THE COMPETITIVENESS OF THE PROGRAM THAT INCLUDED, UH, THE USE OF MULTIPLE DATA SOURCES AND MARKET PERSPECTIVES.
WE USED THAT TO DEVELOP AN AVERAGE DIRECTOR COMPENSATION PROFILE, UH, FOR BOTH ERCOT AND FOR THE COMPARATOR COMPANIES AND ENTITIES, UH, REVIEWED, UH, THAT DIRECTOR, UH, AVERAGE DIRECTOR PROFILE EXCLUDES BOARD LEADERSHIP ROLES, SPECIFICALLY THE, THE CHAIR AND VICE CHAIR.
BUT WE DID ALSO LOOK AT AND CONSIDER THE COMPENSATION FOR THOSE, UH, ADDITIONAL LEADERSHIP ROLES.
ADDITIONAL INFORMATION ABOUT OUR METHODOLOGY, UH, IS PROVIDED IN APPENDIX B TO OUR REPORT.
BEFORE WE GET INTO, UH, THE FINDINGS AND, UH, OBSERVATIONS AND RECOMMENDATIONS REGARDING DIRECTOR COMPENSATION, WE FIRST WANTED TO DISCUSS THE APPLICATION OF BENCHMARKING DATA TO COMPENSATION DECISIONS.
UH, AS A GENERAL MATTER, THE PURPOSE OF BENCHMARKING IS NOT TO DETERMINE WHAT THE RECOMMENDATION IS, IT'S TO ESTABLISH, UH, A COMPETITIVE RANGE OF MARKET PRACTICES, BOTH IN TERMS OF THE QUANTUM OF DIRECTOR COMPENSATION, AS WELL AS THE STRUCTURE OF THE COMPENSATION PROGRAM.
SPECIFIC FACTORS, WHICH LEAD TO, UH, DECISIONS AND SHOULD INFORM DECISIONS REGARDING DIRECTOR COMPENSATION, UH, HAVE, UH, SHOULD INCLUDE SEVERAL FACTORS SPECIFIC TO THE ORGANIZATION.
WE'VE IDENTIFIED, UH, IN THREE CATEGORIES, A NUMBER OF THOSE FACTORS THAT, UH, WE CONSIDERED, INCLUDING THE HIGH VOLUME AND THE COMPLEXITY OF THE WORK FOR THE ERCOT DIRECTORS, RECRUITMENT CONSIDERATIONS, AND THE EXTERNAL OPTICS AND STANDARDS, UH, INCLUDING THE REGULATORS, UH, CUSTOMERS, THE MEDIA, AND SO FORTH.
UH, THIS SLIDE PROVIDES THE, A SUMMARY OF OUR MARKET OBSERVATIONS.
FIRST OF ALL, UH, WE WANTED TO IDENTIFY THAT THE, UH, COMPANY, OR I'M SORRY, THE ENTITY ERCOT, IS POSITIONED FROM A REVENUE PERSPECTIVE, UH, AT APPROXIMATELY THE 75TH PERCENTILE OF THE ISO COMPARATOR GROUP THAT WAS USED.
AND BETWEEN THE 25TH AND 50TH PERCENTILES OF THE BROADER GENERAL INDUSTRY COMPARATOR GROUP THAT WAS USED.
THOSE WERE THE TWO PRIMARY MARKET REFERENCES.
WE ALSO LOOKED AT A COUPLE OF ADDITIONAL REFERENCES, BUT AGAIN, FOCUSED PRIMARILY ON THE ISOS AND THE, UH, UH, GENERAL INDUSTRY COMPANIES OF COMPARABLE SIZE.
AND I SHOULD ALSO POINT OUT, REVENUE IS THE MOST COMMON METRIC FOR MEASURING ENTITY SIZE, UH, IN THESE TYPES OF ANALYSES.
IN TERMS OF THE, UH, OBSERVATIONS REGARDING THE QUANTUM OF PAY AND STRUCTURE OF THE PAY PROGRAM, UH, OVERALL, UH, ERCOT CURRENT PROGRAM IS POSITIONED BELOW THE 25TH PERCENTILE OF BOTH THE ISO GROUP COMPARATOR GROUP AND THE BROADER COMPARATOR GROUP.
THAT SAME POSITIONING APPLIES TO THE TOTAL COST OF THE BOARD.
UH, AND AS PEGGY MENTIONED, THE LAST SET OF CHANGES TO THE PROGRAM ARE MADE IN 2011.
THE STRUCTURE OF THE PROGRAM IS, UH, UH, COMPOSED ENTIRELY OF CASH, OBVIOUSLY WITHOUT AN EQUITY COMPONENT, UH, FOR ISOS.
[00:40:01]
UH, ONE THING THAT IS NOT CONSISTENT IS, UH, MOST COMPANIES, UH, MOST, UH, ISOS, UH, HAVE A VERY HIGH, UH, USE OF MEETING FEES, UH, AND ERCOT DOES NOT, TOM, ON, ON THAT POINT.I GUESS THERE'S A TREND AWAY FROM MEETING FEES.
CAN YOU EXPLAIN THE RATIONALE BEHIND THAT TREND? CERTAINLY.
THERE'S BEEN A BROADER TREND, UH, ACROSS PUBLIC CORPORATIONS WITH REGARD TO DIRECTOR PAY TO ELIMINATING MEETING FEES, UH, AND, UH, AND, AND THAT WE THINK IS PRIMARILY, UH, IN AN EFFORT TO SIMPLIFY THE OVERALL PROGRAM AND TO PROVIDE GREATER TRANSPARENCY AS TO HOW DIRECTOR COMPENSATION IS, IS EARNED.
UM, IT'S, IT'S NOT UNCOMMON THAT IF THERE ARE, UH, AN EXCESSIVE NUMBER OF MEETINGS, UH, THEN, UH, AT SOME POINT, UH, ADDITIONAL MEETING FEES MAY BE TRIGGERED OR ADDITIONAL FEES.
BUT AS A GENERAL MATTER, MEETING FEES ARE NOT PART OF THE COMPENSATION PROGRAM FOR A MAJORITY OF PUBLIC COMPANIES.
UH, BASED ON THE COMPETITIVE POSITIONING, UH, THAT I MENTIONED, UH, A MOMENT AGO, UH, WE SUGGESTED THAT, UH, ERCOT, UH, THAT THE HR AND G COMMITTEE AND THE FULL BOARD CONSIDER CHANGES TO THE, UH, VALUE OF THE PROGRAM.
UH, WE PROVIDE, EXCUSE ME, WE PROVIDE SOME SUGGESTED, UH, UH, RANGES FOR CONSIDERATION, UH, FOR THE COMMITTEE, UH, FOR THE COMMITTEE IN FULL BOARD TO CONSIDER ON THE FOLLOWING PAGE.
UH, WE ALSO SUGGESTED THAT THIS TYPE OF BENCHMARKING STUDY BE DONE, UH, ON A SORT OF AN EVERY TWO YEAR BASIS, UH, TO ASSESS THE COMPETITIVE COMPETITIVENESS ON AN ONGOING BASIS.
AND THAT CHANGES BE CONSIDERED AS WARRANTED.
SO, AS I MENTIONED, WE DEVELOPED CONSIDERED RANGES INITIALLY TO REVIEW WITH, UH, WITH THE HR AND G COMMITTEE AND THE FULL BOARD.
UM, AND THESE RANGES WERE REALLY INTENDED TO POSITION BOTH THE AVERAGE PER DIRECTOR VALUE OF THE PROGRAM, AS WELL AS THE TOTAL BOARD COST OF THE PROGRAM, UH, AT A LEVEL THAT'S CONSISTENT WITH ERCOT SIZE, AGAIN, AS MEASURED BY REVENUES RELATIVE TO BOTH THE ISOS AND RELATIVE TO THE GENERAL INDUSTRY, UH, COMPARATORS OF COMPARABLE SIZE.
UH, AS I MENTIONED, WE, WE, WE, UH, ALSO, UH, DID NOT SUGGEST, UH, ANY CHANGES TO, UH, OR ANY ADDITION OF MEETING FEES, UH, AGAIN, BECAUSE THEY ARE A, UM, A, A, A MINORITY MARKET PRACTICE.
I'D ALSO POINT OUT THAT, UH, FROM A COMPETITIVENESS STANDPOINT, BEYOND, UH, THE TWO PRIMARY COMPARATIVE GROUPS, THE ISOS AND THE GENERAL INDUSTRY COMPANIES OF COMPARABLE SIZE, UH, THE OVERALL QUANTUM OF THE COMPENSATION PROGRAM CHANGES RECOMMENDED HERE, UH, ARE WELL BELOW, UH, DIRECTOR PAY LEVELS FOR, UH, FOR COMPANIES AND ENTITIES, UH, WHERE A NUMBER OF THE DIRECTORS CURRENTLY SIT, UH, JUST AS A MARKET REFERENCE, UH, IT'S WELL BELOW.
SO, FOLLOW UP FOLLOWING SOME DISCUSSION, UH, AND FURTHER CONSIDERATION OF NOT ONLY THE MARKET POSITIONING AND THE MARKET VALUES, BUT ALSO FACTORS, UH, MENTIONED ON, UH, A FEW PAGES.
UH, WE RECOMMEND, UH, THE CHANGES TO THE PROGRAM SUMMARIZED IN THIS TABLE.
UH, THE TOTAL BOARD COMPENSATION ON AVERAGE, PER DIRECTOR, UH, EXCLUDING LEADERSHIP FEES, WOULD BE SLIGHTLY ABOVE $169,000.
THAT WOULD POSITION, UH, THE PROGRAM AT, UH, SLIGHTLY ABOVE THE THREE, UH, SORRY, 3% ABOVE THE 75TH PERCENTILE, UH, AMONG THE ISOS.
AND, UH, THE, THE TOTAL BOARD COST WOULD BE SLIGHTLY BELOW THE 75TH PERCENTILE OF THE ISOS AND 4% BELOW THE MEDIUM.
UM, WE THINK THAT THIS POSITIONING IS NOT ONLY COMPETITIVE, IT ADDRESSES THE FACTORS PREVIOUSLY MENTIONED, UH, BUT IT ALSO FOLLOWS ALONG WITH THE, THE TIMING OF, UH, UH, OF THE REVIEW OF, OF THE PROGRAM.
IT FOLLOWS A VERY TYPICAL LEAD LAG APPROACH WITH RESPECT TO DIRECTOR COMPENSATION.
UH, UNLIKE, UH, UH, EMPLOYEE COMPENSATION, UH, WHICH IS REVIEWED AND ADJUSTED ON A, ON A FAIRLY ANNUAL BASIS, DIRECTOR COMPENSATION TYPICALLY IS NOT ADJUSTED ANNUALLY.
IT TYPICALLY RUNS ON SORT OF A TWO OR THREE YEAR CYCLE FOR MOST COMPANIES.
[00:45:01]
AND SO, UH, THIS LEAD LAG APPROACH IS, IS, IS VERY COMMON, UH, AND APPROPRIATE OVERALL.WE DO, WE THINK THAT THIS IS A VERY FAIR AND APPROPRIATE VALUE.
IT MAINTAINS, UH, THE SIMPLISTIC, UH, SIM SIMPLICITY, UH, THAT WE SEE IN, IN, IN SORT OF LEADING COMPANIES IN THIS REGARD.
AND ADDRESSES, AGAIN, THE FACTORS THAT I MENTIONED ON PAGE TWO.
THE NEXT SLIDE PROVIDES, UH, THE CURRENT AND RECOMMENDED PROGRAM ON A PER DIRECTOR BASIS RELATIVE TO EACH OF THE COMPARATOR GROUPS THAT WE CONSIDERED WITH A PRO, A FOCUS, AS I MENTIONED, ON THE ISOS AND ON THE GENERAL INDUSTRY COMPANIES THAT ARE, AGAIN, COMPARABLY SIZED.
AND YOU CAN SEE, UH, THE POSITIONING, UH, RELATIVE TO THOSE, THOSE, UH, REFERENCES.
THE NEXT SLIDE DOES A SIMILAR, UH, COMPARISON, UH, OF THE TOTAL BOARD COST, UH, ON A CURRENT AND PERSPECTIVE BASIS, RECOMMENDED BASIS, UH, TO, AGAIN, EACH OF THE MARKET REFERENCES.
AND I THINK, ONCE AGAIN, THE, THE PROGRAM FROM OUR VIEW, UH, FROM OUR PERSPECTIVE IS, IS, IS FAIR, UH, AND, AND APPROPRIATE FOR, UH, THE ORGANIZATION GIVEN THE MARKET DATA, AND AGAIN, THE OBJECTIVE, UH, THE, THE, UH, THE, THE FACTORS THAT WE DISCUSSED.
WITH THAT, I'LL, UH, OPEN IT UP FOR ANY QUESTIONS OR DISCUSSION, QUESTIONS, COMMENTS.
DO ALL, DO ALL THE ISOS, UM, HAVE TO REPORT THEIR MARKET DATA? CAN, CAN YOU GET A PRETTY BROAD PICTURE OF, OF THE US? UM, YES IS THE SHORT ANSWER.
UH, WITH ONE EXCEPTION, THAT BEING PJM, WHICH IS TECHNICALLY, UM, NOT A, UM, NONPROFIT, UM, AND FOR WHICH WE WERE NOT ABLE TO FIND ANY PUBLICLY DISCLOSED INFORMATION FOR THE OTHER FIVE ISOS, UH, THAT WE FOCUSED ON, UH, THEY ALL ARE REQUIRED TO FILE FORM NINE 90 S.
THE ISSUE, HOWEVER, IS THAT THE TIMELINESS OF THEIR FILINGS, UH, VARIES, UH, FROM 2019 TO 2022, RIGHT? SO, UM, THE WAY THAT WE, UM, UM, TOOK THAT INTO ACCOUNT WAS WE, UH, AND THIS IS, UH, UH, IDENTIFIED IN OUR METHODOLOGY SLIDE, IS THAT WE AGED THE DATA USING, UH, WHAT WE VIEWED AS SORT OF A CONSERVATIVE, UH, GROWTH RATE, SLIGHTLY BELOW THE AVERAGE, UH, GROWTH RATE, UH, UH, FOR PUBLIC COMPANIES OF COMPARABLE SIZE, WHICH IS THE, THE MOST APPROPRIATE AND AVAILABLE, UH, REFERENCE POINT FOR THIS MA UH, THIS MATTER.
OTHER QUESTIONS, COMMENTS? PEGGY? I'M NOT A MEMBER OF THE COMMITTEE, BUT I WOULD LIKE TO, UM, ADD MY INPUT.
FIRST OF ALL, I WANNA THANK THE MERIDIAN TEAM FOR THE GREAT WORK THEY'VE DONE ON THIS.
UM, I THINK WE LEARNED DURING THE STRATEGIC PLANNING PROCESS THAT ERCOT IS A VERY COMPLEX ORGANIZATION AND IT TAKES A VERY ENGAGED PERSON TO BE PART OF THE GOVERNANCE FUNCTION OF THE ORGANIZATION.
UM, SO I THINK THE, UM, THAT, UM, AS WELL AS THE FACT THAT BEING A MEMBER OF THE ERCOT BOARD REMOVES YOU FROM BEING ELIGIBLE TO SERVE ON CERTAIN OTHER, OR FOR CERTAIN OTHER TYPES OF GOVERNANCE ACTIVITIES, UH, COMBINED WITH THE FACT THAT WHEN WE REACH INTERVIEWED BY THE SPECIAL COMMITTEE, IT WAS ALWAYS ENVISIONED THAT BOARD COMPENSATION WOULD BE SET AT A MARKET RATE.
SO I, I SUPPORT THE WORK THAT'S BEEN DONE HERE AND THINK THAT THE LEVELS THAT RADI HAVE RECOMMENDED SEEM TO BE TOTALLY APPROPRIATE TO ME, UH, GIVEN, UH, HOW, AGAIN, HOW COMPLEX AND INVOLVED THIS JOB IS.
UM, ANY OTHER COMMENTS, QUESTIONS? I'LL, I'LL JUST MAKE A, A QUICK COMMENT.
I, I, UM, FIRST OF ALL, ECHO BILL'S COMMENTS AND, AND THANK THE MERIDIAN TEAM.
I THINK YOU GUYS DID A, DID A GREAT JOB, UH, GUIDING US THROUGH THIS.
UH, I, I SUPPORT THIS BECAUSE I THINK IT IS JUST VITALLY IMPORTANT, UM, CONSISTENT WITH WHAT WE'RE DOING THROUGHOUT THE ERCOT ORGANIZATION AND TRYING TO SET COMPENSATION LEVELS, UM, AND RETENTION EFFORTS, UH, AT A LEVEL WHERE WE CAN RETAIN AND, UH, ATTRACT AND RETAIN GOOD TALENT.
AND, UH, THAT THAT NOT ONLY GOES FOR THE ENTIRE ORGANIZATION, BUT IT'S, IT'S VITALLY IMPORTANT FOR THE BOARD AS WELL AS WE, UH, TACKLE ALL THE CHALLENGES THAT WE HAVE TO FACE.
[00:50:03]
I'LL, I'LL ASK ONE QUESTION.UM, DID YOU LOOK AT ANY, UH, NONPROFIT PEER GROUPS THAT WOULD, UH, ERCOT KIND OF IN BETWEEN, UH, FOR-PROFIT AND A NONPROFIT? AND, UH, I KNOW GENERAL INDUSTRY WOULD PRIMARILY BE, AS I UNDERSTAND IT, UH, FOR-PROFIT, UH, PUBLICLY TRADED BOARDS.
DID YOU HAVE ANY NONPROFITS IN THERE? WE, WE HONEST, WE, WE DID CONSIDER, UM, UM, CERTAIN NONPROFITS.
UM, WHAT WE FOUND WAS, I WOULD SAY PROBABLY TWO THINGS.
ONE, THE NATURE OF MANY NOT ALL NONPROFITS, UH, IS, IS SUCH THAT THE, THE COMPARATIVE, UM, THE FACTORS I MENTIONED ON PAGE TWO IN TERMS OF SOME OF THE COMPLEXITIES OF THE ORGANIZATION, THE COMPLEXITIES AND CHALLENGES OF RECRUITMENT AND SO FORTH, UM, DON'T ALWAYS RISE TO THE LEVEL, UH, OF, OF AN ORGANIZATION LIKE ERCOT.
UM, AND, UH, THAT I THINK IS PART OF, UM, WHY THE, THE, UH, STRUCTURE AND FRANKLY, THE QUANTUM OF COMPENSATION FOR MANY, UM, NONPROFITS IS, IS, UM, SIMPLY NOT COMPETITIVE WITH WHAT WE THINK, UH, UH, IS, IS APPROPRIATE FOR RECRUITING AND RETAINING THE CALIBER OF DIRECTORS THAT ERCOT, UH, WOULD, WOULD REQUIRE.
UM, THE OTHER ISSUE I WOULD MENTION IS THAT, UH, MUCH LIKE THE, UH, THE ISOS UM, UH, THE FILING OF FORM NINE 90 S SEEMS TO BE A BIT OF AN ISSUE AND THE TIMELINESS OR, OR LACK THEREOF.
UM, AND SO, UM, WHILE WE DID CONSIDER, UH, OTHER NONPROFITS, UH, ULTIMATELY WE LED TO WHAT WE THOUGHT WAS THE MOST APPROPRIATE MARKET FOR DIRECTOR TALENT FOR, FOR ERCOT.
AND THAT REALLY WAS THE ISOS AND, AND THE GENERAL INDUSTRY COMPANIES OF COMPARABLE SIZE, AND CORRECT ME IF I'M WRONG, I THE ICE OF THOSE THAT ARE INCLUDED IN THE, THE BENCHMARKING, THEY ARE NONPROFITS, THEY ARE, WITH THE ONE EXCEPTION BEING PJ, RIGHT? YEAH.
CAN YOU, UM, EXPLAIN FURTHER, AND YOU TOUCHED ON THIS, UH, YOU KNOW, IF YOU LOOK AT THIS JUST SUPERFICIALLY, THE RECOMMENDATION IS, YOU KNOW, BASICALLY AT SLIGHTLY ABOVE THE 75TH PERCENTILE AND WHY IT'S APPROPRIATE TO GO TO THAT RATHER THAN THE 50TH PERCENTILE.
WE, WE, WE FELT THAT, UH, AGAIN, BASED ON THE COMBINATION OF THE SIZE, UH, WHICH IS, IS TYPICALLY THE, UH, THE BASIS, UM, FOR, FOR, FROM A, UH, FOR SELECTING THE, THE, A PEER GROUP, A COMPARATOR GROUP FOR BENCHMARKING COMPENSATION, WHETHER IT'S DIRECTOR, UH, EXECUTIVE EMPLOYEE, UM, THE SIZE OF THE ORGANIZATION IS, IS IS THE STARTING POINT.
UM, AND AGAIN, AS I MENTIONED, UH, ERCOT FROM A REVENUE PERSPECTIVE IS POSITIONED RIGHT AT THE 75TH PERCENTILE, OBVIOUSLY ONE OF THE LARGER, UM, THE, THE OTHER, UH, REASON AGAIN WAS, UM, SOME OF THE COMPLEXITY, UH, COMPLEXITIES RATHER, UH, OF, UH, THE, AND THE CHALLENGES OF RECRUITING AND RETAINING DIRECTOR TALENT, UH, IN THE CURRENT EN ENVIRONMENT.
AND SO WE FELT THAT POSITIONING IT RIGHT AROUND THE 75TH PERCENTILE, AGAIN, FOLLOWING THIS LEAD LAG APPROACH WAS, WAS MOST APPROPRIATE.
AND IS IT FAIR TO SAY THAT MOST BOARDS WHEN THEY'RE LOOKING AT THEY FOLLOW THIS LEAD LAG APPROACH? YES, MOST DO.
CAN WE EXPLAIN THAT A LITTLE BIT MORE? CUZ WE HAD A DISCUSSION ABOUT THAT AND I FOUND IT TO BE VERY HELPFUL.
YEAH, SO AGAIN, IT'S, AS I MENTIONED, EMPLOYEE COMPENSATION IS TYPICALLY REVIEWED AND ADJUSTED ON AN ANNUAL BASIS.
UH, COST OF LIVING ADJUSTMENT, MERIT INCREASE, WHATEVER YOU WANNA CALL IT.
UH, DIRECTOR PAY IS TYPICALLY MORE ON A STAIR-STEP APPROACH.
UM, IT'S IT, AND THERE'S A VARIETY OF REASONS FOR THAT, INCLUDING JUST, UM, DIRECTOR PAY DOESN'T MOVE AS DRAMATICALLY OR AS, AS, AS, UH, AS IN AS LINEAR A WAY AS, UH, AS DOES EMPLOYEE PAY.
UM, THERE'S THE EXTERNAL OPTICS FOR PUBLIC COMPANIES OF NOT WANTING TO ALWAYS BE MAKING ADJUSTMENTS TO DIRECTOR PAY EVERY YEAR.
UH, AND SO MOST COMPANIES FOLLOW THIS LEAD LAG APPROACH WHERE THEY WILL SET AN OBJECTIVE OF WHERE THEY WANT TO BE POSITIONED RELATIVE TO THEIR, UH, APPROPRIATE MARKET REFERENCE.
UH, AND THEY WILL, UH, STRIVE TO POSITION THE TOTAL VALUE OF THE PROGRAM ON A, ON A PER DIRECTOR BASIS, AND IN TOTAL, SLIGHTLY AHEAD, UH, OF WHATEVER THAT MARKET OBJECTIVE IS.
IN THIS CASE, WE FELT THE APPROPRIATE MARKET OBJECTIVE WAS THE 75TH PERCENTILE.
[00:55:01]
AND THEN, UH, HOLD THE PAY PROGRAM AT THAT LEVEL FOR WHATEVER, 2, 3, 4 YEARS, WHATEVER, WHATEVER IS APPROPRIATE, PERIODICALLY REVIEWING THE COMPETITIVENESS OF THE PROGRAM AND THEN MAKING ADJUSTMENTS, UH, AS WARRANTED.UM, THE THOUGHT BEING THAT, AGAIN, YOU'D GET OUT AHEAD BY MAYBE THREE OR 5% OVER THE NEXT COUPLE OF YEARS, THE MARKET WOULD CATCH UP AND, AND, AND PASS, UH, THAT, UH, LEVEL.
AND, UH, AND THEN THERE WOULD BE ANOTHER REVIEW AND YOU'D BE LAGGING AND, UH, MAKE AN ADJUSTMENT IF, IF IT WAS APPROPRIATE.
ISN'T IT ALSO THE CASE THAT CERTAINLY IN PUBLIC COMPANIES, THE COMPARATORS ARE TYPICALLY COMING OFF PROXY STATEMENTS, PROXY STATEMENTS TEND TO BE A LAGGING INDICATOR.
AND SO WHEN YOU DO THE COMPARISON OF PAY, YOU'RE USUALLY LOOKING AT DATA FROM A YEAR OR TWO AGO TO START WITH, AND THEN THE IMPLEMENTATION PHASE.
SO IT'S USUALLY, THERE'S USUALLY ABOUT A TWO YEAR LAG YEAH.
IN PUBLIC COMPANIES, THAT'S RIGHT.
BETWEEN THE ACTUAL REPORTED DATA AND THE IMPLEMENTATION.
UM, SOME COMPANIES WHEN THEY MAKE CHANGES TO THE DIRECTOR PROGRAM, UH, PAY PROGRAM WILL WHAT WE CALL FORWARD DISCLOSE IT SO YOU HAVE SOMETHING THAT'S, UH, TRULY CURRENT.
UM, IF THEY DON'T, THEN IT'S AT LEAST, AS YOU SAY, AT LEAST A YEAR OLD, SOMETIMES TWO, BECAUSE OF THE TIMING OF THE REPORTING CYCLES.
ONE THING I SHOULD POINT OUT AGAIN, IS, UM, UH, AT LEAST AS IT RELATES TO THE GENERAL INDUSTRY DATA, WE DID NOT AGE THAT DATA.
IF WE DID AGE, AGAIN, THE, THE ISO DATA, SIMPLY BECAUSE SOME OF IT, UH, SEVERAL OF THE ISOS, IT WAS JUST, IT WAS SO, SO OLD GOING BACK TO 2019, UH, WAS THE LAST YEAR IT WAS DISCLOSED.
UM, I JUST WANTED TO, I, I KNOW THAT THE, THE COMMISSION WILL CERTAINLY CONSIDER WHATEVER THE, THE BOARD RECOMMENDATION IS LATER AND DELIBERATE ON IT.
BUT, UH, AS I PREVIOUSLY, UH, STATED, I DO BELIEVE ERCOT IS IN A, A UNIQUE POSITION.
THE WORKLOAD INCUMBENT UPON THE BOARD, THE GOVERNANCE STRUCTURE, THE EXECUTIVE MANAGEMENT TEAM OF THE SYSTEM IS, IS GREATER BECAUSE OF THE, THE DYNAMIC NATURE OF THE SYSTEM, UM, AND THE ENERGY TRANSITION THAT ALL OF THE GRIDS ARE ENDURING RIGHT NOW.
THE WORK THAT YOU'VE ALREADY DONE HAS BEEN, HAS EXCEEDED, UH, YOUR PEERS, UM, AND THE WORK THAT THAT IS TO COME, UH, FOR BOTH THE COMMISSION AND, UH, THE DIRECTORS AND THE MANAGEMENT TEAM HERE IS GOING TO EXCEED WHAT YOUR PEERS ARE GOING TO, TO BE FACING IN THE NEXT TWO YEARS.
SO, I, I THINK THESE ARE IMPORTANT CONSIDERATIONS.
AND I WOULD ALSO SAY THAT I MANAGED A, A NONPROFIT, UM, WHICH WAS A TRADE ASSOCIATION AND CERTAINLY FAMILIAR WITH THE LAG AT NINE 90 REPORTING.
AND THAT'S ALWAYS AN ANNOYING FACTOR IN TRYING TO, UH, ADVOCATE FOR, FOR, UH, ADEQUATE COMPENSATION.
BUT YOU, YOU, YOU HAVE TO TRY TO STAY AHEAD OF WHERE THE MARKET IS AND WHERE IT'S GOING, ESPECIALLY WHEN YOU'RE ON TWO YEAR BUDGET CYCLES.
UH, I'M VERY FAMILIAR WITH THAT.
I THINK WE ALL ARE AT THE COMMISSION NOW.
AND SO, UM, SO I, I THINK IT'S IMPORTANT AS, AS WE CONSIDER, UM, WHAT THE APPROPRIATE LEVEL OF COMPENSATION FOR, FOR EVERYONE IS HERE, AND THE, THE ERCOT BUDGET IS WE WANT TO STAY AHEAD AND WE WANT TO COMPENSATE APPROPRIATELY FOR THE LEVEL AND DEGREE OF WORK THAT YOU'RE HAVING TO PUT IN.
I KNOW I WOULD HOPE THE LEGISLATURE CONSIDERS THAT WHEN LOOKING AT OUR SALARIES.
UM, BUT WE NEED TO DO THE RIGHT THING.
AND I KNOW THAT WHEN WE LOOK AT RELIABILITY STANDARD, WHEN WE LOOK AT RESILIENCY ON THE SYSTEM, UH, YOU'VE ALREADY PUT IN A GREAT DEAL OF WORK ON FIRM FUEL SUPPLY SERVICE.
THESE ARE ALL MAJOR DECISIONS THAT INVOLVE AN INVOLVED BOARD.
SO, UM, THESE, THESE ARE THE TYPE OF FACTORS THAT I'M GONNA BE CONSIDERING AS, UH, AS YOU MAKE YOUR RECOMMENDATION AND, AND WE CONSIDER IT FOR APPROVAL.
BUT, UH, I LOOK FORWARD TO THE CONVERSATION AT THE COMMISSION AND, AND I APPRECIATE THE DATA THAT YOU'VE, UH, YOU'VE PUT FORWARD THUS FAR.
NOT A MEMBER OF THE COMMITTEE, BUT SINCE I GUESS EVERYBODY'S COMMENTING ONE MORE.
UM, FIRST OF ALL, UH, WE DIDN'T JOIN THIS ORGANIZATION FOR THE COMPENSATION.
WE UNDERSTOOD THIS WAS REALLY AGED, YOU KNOW, THAT THE LAST ADJUSTMENT WAS IN 2011.
SO OBVIOUSLY NOT KEEPING UP WITH THE TIMES, THAT'S, UH, THE LEVEL OF, UM, DEDICATION I THINK THAT'S NEEDED IS, UH, SUBSTANTIAL.
SO THAT'S SOMETHING THAT WE'VE ALL COME TO KNOW.
BUT AGAIN, THE GOAL HAS BEEN TO SERVE, UH, CALLED TO SERVE.
[01:00:01]
IS, AND I REALLY APPRECIATE THE DATA, CUZ I THINK THAT SHOWS THE RANGES INCLUDING REAL FOR-PROFIT VERSUS OTHER TYPES OF ORGANIZATIONS.I THINK THAT'S VERY IMPORTANT TO NOTE FROM THAT PAGE.
UM, AND SECOND, WELL, WE, WE LOST THE DIRECTOR.
SO
SO FOR THAT PURPOSE, UM, ALONG WITH ALL THE OTHER, UH, FOLKS THAT HAVE OPINED, I, I SUPPORT THIS.
JULIE, I APPRECIATE ALL THE DATA AND RESEARCH THAT WENT INTO THIS.
UH, UNLIKE, UH, EMPLOYEE COMPENSATION WHERE THERE'S ALSO A SCALE OF, UH, YEARS OF EXPERIENCE OR EXPERTISE THAT DOESN'T HAPPEN IN BOARD COMPENSATION.
HOWEVER, PEOPLE MAY NOT BE AWARE.
ALL OF US WERE, UH, RECRUITED BECAUSE WE HAD OVER 10 YEARS OF BOARD EXPERIENCE.
SO WE'RE LOOKING AT, UH, IF WE COULD BREAK THIS OUT BY YEARS OF EXPERIENCE.
WE'RE LOOKING AT A EXPERIENCE GROUP, I MIGHT SAY SENIOR, BUT NOT EVERYONE MIGHT APPRECIATE THAT APPROACH,
UH, COULD YOU COMMENT A LITTLE BIT ABOUT HOW THAT VARIES? YEAH.
UH, E EVERY ORGANIZATION, EVERY COMPANY, UM, WHEN IT, UH, GOES OUT TO DO A, UM, UM, UH, A SEARCH FOR FOR DIRECTORS, UM, HAS ITS, ITS OBJECTIVES, ITS CRITERIA, AND, UH, WHETHER IT'S, UM, YOU KNOW, OPERATIONAL OR TECHNICAL EXPERTISE, WHETHER IT'S, UH, FINANCIAL EXPERTISE, WHETHER IT'S, UH, UM, MARKET AND COMMERCIAL, WHETHER IT'S DIVERSITY, WHATEVER, WHATEVER THE REQUIREMENTS ARE, UM, THAT, THAT, THAT, UH, I, I THINK ONE OF THE REQUIREMENTS OR WHAT ARE THE CRITERIA IS ALWAYS EXPERIENCE.
WHETHER IT'S, AGAIN, ONE OF THOSE FACTORS OR JUST, UM, KIND OF EXPERIENCE IN THE BOARDROOM AND, AND THE GOVERNANCE PROCESS, UM, IN, IN, IN EVALUATING DIRECTOR PAY.
UM, IT'S NOT EXPLICITLY, UH, A VARIABLE AS IT IS IN, IN, IN, IN EMPLOYEE PAY.
UM, UH, YOU, YOU, YOU, YOU HAVE AN EMPLOYEE PAY, YOU HAVE RANGES, UH, BY GRADE, BY ROLE.
UH, THOSE ARE BASED ON PERFORMANCE, UH, AND, AND, UH, SENIORITY, TENURE AND SO FORTH.
UM, AND SO WHILE IT'S NOT EXPLICITLY A CRITERIA WHERE THERE'S A SCALE, UM, UH, IT'S SORT OF ONE SIZE FITS ALL, ONCE, ONCE, UH, THE PROGRAM IS PUT IN PLACE, UM, IT, IT, IT IS CONSIDERED PROBABLY MORE WHAT I WOULD DESCRIBE AS MAYBE ON THE FRONT END ON, ON, ON WHO ARE YOU RECRUITING AND WHAT DOES IT TAKE TO, UH, ATTRACT, UH, THOSE, THE, THE PEOPLE WHO MEET THOSE CRITERIA, UH, AND THEN KEEP THEM, UH, OVER TIME.
SO, UH, HOPEFULLY THAT ANSWERS THE QUESTION.
ANY OTHER COMMENTS, QUESTIONS? OKAY.
SO NEED A MOTION TO RECOMMEND, UH, I NEED A MOTION TO RECOMMEND THAT THE H R G COMMITTEE RECOMMEND THAT THE BOARD APPROVE THE COMPENSATION AS SEPARATE WITHIN THE MATERIALS.
I MOVE JOHN MO COURTNEY SECOND.
ANY? NO ABSTENTIONS, UH, HEARING NONE, THE, UH, MOTION IS UNANIMOUSLY PASSED.
AND THANK YOU VERY MUCH, MERIDIAN.
DID I, I THINK A VERY EXCELLENT PROFESSIONAL JOB ON THIS, AND WE, UH, REALLY APPRECIATE THE HELP.
[7. Review Conflict of Interest Disclosures Submitted by Employees and Directors]
IS, UH, AGENDA ITEM SEVEN, REVIEW OF CONFLICT OF INTEREST DISCLOSURES SUBMITTED BY EMPLOYEES AND DIRECTORS.UH, THIS IS A COMMITTEE CHARTER ITEM, UH, THAT WE WAS PUT INTO THE, UH, CHARTER THIS YEAR TO REGULARLY REVIEW POTENTIAL CONFLICTS OF INTEREST TO CLOSE DISCLOSED BY THE COMPANY'S EMPLOYEES BOARD AND THE BOARD, UH, CHAD'S GONNA PRESENT THIS UP.
OKAY, SO WE'VE GOT ABOUT A EIGHT PAGE SLIDE DECK HERE.
AND AS PEGGY INDICATED, THIS IS A, A CHARTER REQUIREMENT, AND THIS CONFLICT OF INTEREST DISCLOSURE PROCESS IS MANAGED BY THE LEGAL DEPARTMENT.
AND ACTUALLY, JOHN LEVINE KIND OF OVERSEES US AND ANALYZES
[01:05:01]
ALL THE CONFLICTS THAT COME IN, UH, WITH, WITH HIS TEAM.SO THE, THE KEY TAKEAWAYS HERE IS, YOU KNOW, WE HAD ONE BOARD MEMBER CONFLICT OF INTEREST DISCLOSED LAST YEAR.
THAT WAS INTI THAT WE ANALYZED AND DETERMINED THAT IT WAS A CONFLICT AND HE HAD TO RESIGN.
UM, AND SO THAT'S THE, THE BOARD MEMBER SIDE OF IT FROM EMPLOYEES.
UH, THERE'S A CHART LATER IN HERE THAT TALKS ABOUT KIND OF THE AVERAGE TREND OF THE LAST THREE YEARS, AND THAT IS ABOUT 66 DISCLOSURES BY EMPLOYEES.
THESE ARE POTENTIAL CONFLICTS THAT WE HAVE TO ANALYZE, UH, THE MOST COMMON DISCLOSURE IN 2022, UH, WHICH SHOULD BE NO SURPRISE AS A SPOUSE OR FAMILY MEMBER WORKING FOR A PARTICIPANT OR VENDOR, AND HOW WE GO ABOUT APPROACHING THAT.
AND THEN WE DID HAVE ONE OFFICER POTENTIAL CONFLICT THAT WAS DISCLOSED AND WE DETERMINED THAT WAS NOT A CONFLICT AS WE'LL.
JUST KIND OF WALK THROUGH THIS.
UH, THE NEXT SLIDE IS A CHARTER REQUIREMENT, AS PEGGY INDICATED THIS WAS ADDED TO THE CHARTER IN 2022.
SO THIS WILL BE AN ANNUAL DISCUSSION THAT WE HAVE.
UM, WHEN YOU LOOK AT SLIDE FOUR, THIS GIVES YOU THE OVERVIEW OF THE BOARD OF DIRECTORS REQUIREMENT TO DISCLOSE POTENTIAL CONFLICTS, WHICH IS OBVIOUSLY LAID OUT IN THE PUBLIC UTILITY REGULATORY ACT.
UM, 39,151 G THREE, AND THEN INCORPORATED INTO OUR BYLAWS AS WELL, IN WHICH NO BOARD MEMBER HAS NO FIDUCIARY DUTY OR ASSETS IN THE ERCOT ELECTRICITY MARKET.
AND SO THIS IS THE, THE GOLD STANDARD THAT THE BOARD SELECTION COMMITTEE UTILIZES WHEN THEY GO OUT AND REQUEST, UH, AND, AND RECRUIT NEW DIRECTORS.
UM, AND THEN OBVIOUSLY THERE'S ADDITIONAL OBLIGATIONS TO REPORT THESE CONFLICTS AND WE KEEP THEM WITHIN OUR CORPORATE RECORDS.
AND THEN YOUR ETHICS AGREEMENTS ALSO REINFORCE THESE PROVISIONS TO REPORT RELATIONSHIPS AND, UH, ADDS THERE TO THE VENDOR AND QUALIFIED FINANCIAL INSTITUTION OBLIGATIONS AND JUST REINFORCES THOSE OBLIGATIONS.
SO YOU SEE THE COMPLIANCE AND AWARENESS ON HOW WE MANAGE IT WITH THE BOARD LEVEL.
UH, THE CONFLICTS, CHECKS UPON ONBOARDING.
UM, WE'RE GOING THROUGH THAT EVERY TIME THE BOARD SELECTION COMMITTEE IS LOOKING AT CANDIDATES TO UNDERSTAND WHAT THOSE POTENTIAL CONFLICTS WOULD LOOK LIKE, UH, YOUR ETHICS AGREEMENTS, ONBOARDING AND ANNUALLY.
AND THEN WE SEND THE BOARD MEMBERS QUARTERLY REMINDERS BECAUSE OUR MARKED PARTICIPANTS CHANGE ALL THE TIME ALONG WITH OUR VENDORS.
AND YOU NEED TO UNDERSTAND THOSE RELATIONSHIPS IN ORDER TO DO AN ASSESSMENT OR REPORT WHETHER THERE'S A POTENTIAL CONFLICT.
AND AGAIN, HERE ON THE RIGHT, YOU SEE THE, THE ONE EXAMPLE THAT WE HAD LAST YEAR AT THE END OF LAST YEAR WHERE ZEN, UH, LOOKING AT THE PARTICIPANT LIST DID, UH, NOTIFY US TIMELY OF A CONFLICT.
AND WE DETERMINED THAT, THAT THAT WAS A CONFLICT UNDER THE PUBLIC UTILITY REGULATORY ACT.
AND SO HE HAD TO RESIGN AND THEN WE GAVE NOTICE TO EVERYONE AROUND THAT.
SO THAT'S THE BOARD SIDE OF IT.
WHEN YOU GO TO THE NEXT SLIDE, YOU LOOK AT THE EMPLOYEE SIDE.
AND AGAIN, THIS IS MANAGED PRIMARILY BY THE LEGAL DEPARTMENT IN COORDINATION WITH HR.
AND THERE'S THREE WAYS IN WHICH WE DO THIS ONBOARDING FOR EVERY EMPLOYEE.
THEY GO THROUGH A PROCESS TO REPORT THAT.
UM, WE HAVE AN ANNUAL ETHICS TRAINING THAT WE TYPICALLY DO IN SEPTEMBER, AND THEN THERE'S AD HOC REQUESTS AT ANY TIME IN WHICH AN EMPLOYEE DETERMINES THAT THERE'S A POTENTIAL CONFLICT OF INTEREST.
THERE'S A FORM THAT YOU CAN SUBMIT THAT GOES THROUGH A WORKFLOW PROCESS.
THE ONE THING I WOULD ADD IS THAT INTERNAL AUDIT IS INVOLVED IN THIS EVERY YEAR AFTER WE GO THROUGH OUR ANNUAL ETHICS TRAINING AND WE HAVE ALL EMPLOYEES SUBMIT A REFRESHED ETHICS AGREEMENT, AND WE GO THROUGH THAT CONFLICT ANALYSIS, THEN INTERNAL AUDIT COMES IN AND LOOKS AT EVERYTHING AS WELL.
AND SO YOU GET THAT REPORT, UM, EITHER AT THE END OF THE YEAR OR IT ROLLS OVER INTO THE NEXT YEAR, DEPENDING ON THE TIMING OF WHEN THAT'S COMPLETED.
SO THEN LEGAL REVIEW CONDUCTS THE REVIEW THROUGH THIS WORKFLOW PROCESS.
WE MAKE A DETERMINATION OF WHETHER THERE'S A CONFLICT OR NOT, AND THEN WE HAVE A RESOLUTION PROCESS THAT WE ALL MANAGE THROUGH OUR WORKDAY, UH, TOOL.
ON THE NEXT SLIDE, YOU CAN SEE THE EMPLOYEE TRENDS THAT PREVIOUSLY SPOKE ABOUT.
UM, THIS PAST YEAR IN 2022, WE HAD 86 DISCLOSURES, SO IT WAS A HIGHER DISCLOSURE.
WE THINK THAT'S KIND OF RELATED TO REEMPHASIZING, UH, DUAL AND EMPLOYMENT WORK WHERE PEOPLE REALLY WANTED TO MAKE SURE THAT THERE WAS NO DIRECT CONFLICT.
SO WE SAW A RAMP UP IN THAT LAST YEAR.
ON THE NEXT SLIDE, YOU SEE KIND OF A BREAKDOWN, THE TYPES OF DISCLOSURES IN A PIE CHART, AND AGAIN, YOU'LL SEE THE SECONDARY EMPLOYMENT WAS AROUND 26 OF THOSE DISCLOSURES.
BUT AGAIN, MOST OF THEM TIE BACK TO, UH, SOME RELATED PARTY WORKING FOR A MARKET PARTICIPANT OR A VENDOR THAT WE END UP ANALYZING.
AND THEN JUST TO GIVE YOU A FEEL OF HOW WE TYPICALLY RESOLVE THAT ON THE LAST SLIDE, YOU CAN SEE SOME OF THE COMMON RESOLUTIONS.
UH, IT OBVIOUSLY IT'S FACTUALLY SPECIFIC DEPENDING ON WHAT THE EMPLOYEE IS DOING WITHIN THE ORGANIZATION.
AND SO THE TYPICAL RESULT IS AN ADMONISHMENT THAT IS SENT AND RECORDED IN OUR WORKDAY APPLICATION THAT BOTH THE EMPLOYEE AND THE MANAGER ACKNOWLEDGES.
[01:10:01]
PART OF YOUR, UH, EMPLOYEE FILE.WHEN WE GET INTO OWNERSHIP OF MARK PARTICIPANT STOCKS, WE HAVE A CORPORATE STANDARD THAT DEALS WITH THAT.
OBVIOUSLY NO EMPLOYEE CAN OWN SPECIFIC MARK PARTICIPANT STOCK.
UH, THERE IS KIND OF ONE EXCEPTION ON CONCENTRATION THAT WE GO THROUGH EVERY YEAR TO LOOK AT CONCENTRATION.
AS YOU CAN IMAGINE, THE MARK PARTICIPANT POOL CONTINUES TO GROW AND THERE ARE BANKS THAT HAVE AFFILIATES OR OTHER COMPANIES THAT HAVE AFFILIATES THAT ARE PLAYING IN THE MARKET.
AND WE GO THROUGH THIS ASSESSMENT OF WHAT THEIR MARKET ACTIVITY IS.
AND THAT'S GONNA CONTINUE TO BE A PROBLEM FOR THIS ORGANIZATION AS MORE PLAYERS COME INTO THE MARKET AND HAVE AFFILIATE RELATIONSHIPS.
SO WE HAVE A PROCESS IN WHICH WE GO AND ANALYZE, UH, THE IMPACT THAT THE MARKET PARTICIPANT HAS AS FAR AS ENERGY TRANSACTIONS, REVENUE GENERATED, AND PUT THAT OUT THERE FOR THE EMPLOYEES SO THEY KNOW WHETHER THAT'S A TRUE CONFLICT OR NOT AND WOULD HAVE TO DIVEST ON THE VENDOR SIDE.
WE HAVE A STANDARD AS WELL, UM, THAT YOU CAN'T OWN, YOU KNOW, MORE THAN 1% OF, OF A, OF A COMPANY.
OF COURSE, YOU KNOW, MOST PEOPLE WILL NEVER ACHIEVE THAT.
UM, IF YOU'RE TALKING ABOUT DELL STOCK OR SOMETHING LIKE THAT, APPLE STOCK NOT REALLY GONNA BE AN ISSUE.
BUT THAT'S ALL CODIFIED IN OUR CORPORATE STANDARD THAT WE MANAGE.
AND PEOPLE DO A GOOD JOB OF REPORTING THAT BECAUSE WHEN THEY GO THROUGH THE ONBOARDING PROCESS, WE'RE GIVING THEM THIS LIST OF OUR QUALIFIED VENDORS AND OUR MARK PARTICIPANTS, AND THEY'RE REALLY GOING THROUGH THAT.
AND AGAIN, THEY HAVE THE ANNUAL OBLIGATION AND THE AD HOC OBLIGATION TO REPORT THAT.
THIS KIND OF GIVES YOU YOU THE TYPICAL RESOLUTION.
THIS OBVIOUSLY DOESN'T ENCOMPASS EVERY DISCRETE ISSUE THAT WE COME ACROSS, UM, BUT THIS IS HOW WE HANDLE OUR CONFLICT OF INTEREST PROCESS, COMMENTS, QUESTIONS.
SO JUST TO, SO JUST TO CLARIFY, THERE IS AN ANNUAL AT, AT A STATION.
I MEAN, IT'S NOT JUST WHEN YOU'RE HIRED, BUT YOU REAFFIRM EVERY YEAR.
EVERY YEAR IN SEPTEMBER, WE GO THROUGH ETHICS TRAINING TO REINFORCE OUR CORPORATE STANDARD HERE, WHICH IS, UH, UH, 5.18 AND REEMPHASIZE HOW IMPORTANT THIS IS.
AND SO THEY HAVE TO GO THROUGH THE WORKDAY TOOL AND CONFIRM THAT THEY EITHER HAVE NO CONFLICTS OR DISCLOSE THAT.
AND SO, YOU KNOW, SOMEBODY THAT'S HAD A POTENTIAL CONFLICT FOR FIVE YEARS WILL CONTINUE TO REPORT THE SAME CONFLICT IF YOU'VE BEEN AT THIS COMPANY AND WILL CONTINUE TO LOOK AT IT AND SAY, OKAY, NOTHING FACTUALLY HAS CHANGED.
AND SO IT'LL LIKELY RESULT IN THE SAME TYPE OF OUTCOME.
YEAH, YOU KNOW, YOU JUST MADE A A GOOD POINT WHEN YOUR RESPONSE, IT'S POTENTIAL CONFLICTS THAT ARE BEING DISCLOSED, UH, AND NOT NECESSARILY WHAT WE BELIEVE IS A CONFLICT.
AND, AND THAT'S WHAT WE WANT AND THAT'S WHAT WE'RE DRIVING TOWARDS, IS TO EDUCATE EMPLOYEES OF WHAT THE RESTRICTIONS ARE, POTENTIAL CONFLICTS ARE THAT COULD BE PERCEIVED AS A CONFLICT OF INTEREST AND GET THEM TO DISCLOSE SO THAT YOU CAN LOOK AT IT AND EDUCATE THEM ABOUT IT.
AND SO I, YOU KNOW, ONE COULD LOOK AT THE NUMBER 86 AND SAY, THAT'S, THAT'S A BIG NUMBER.
WELL, I LOOK AT IT AND SAY THAT THAT'S GOOD THAT THE EMPLOYEES ARE UNDERSTANDING THE POLICY IN OUR ING ON HOPEFULLY ING ON THE SIDE OF DISCLOSURE, WHICH IS WHAT WE WANT.
OF THOSE 86 DISCLOSURES, DID ANY OF THEM RESULT IN, IN SOMEBODY HAVING TO LEAVE THE COMPANY? UM, I DON'T BELIEVE SO.
I THINK THERE, THERE HAVE BEEN EXTRAORDINARY CIRCUMSTANCES WHERE THERE'S A CONFLICT WE CAN'T RESOLVE AND AN ADMONISHMENT WON'T DO THAT.
AND IN THE PAST, SO FOR THIS LAST YEAR, I DON'T RECALL ANY THAT RESULTED IN THAT EXTRAORDINARY CIRCUMSTANCE IN THE HISTORY OF THIS.
YES, THERE HAVE BEEN CIRCUMSTANCES WHERE THAT DIRECT RELATIONSHIP, THERE'S JUST NO WAY TO, UH, MOVE FORWARD.
AND SO WE HAVE TO EITHER TRANSITION THE EMPLOYEE TO ANOTHER ROLE WHERE THE IMPACT IS NOT THE SAME OR ULTIMATELY EXIT THE EMPLOYEE.
SO THAT HAS HAPPENED IN THE PAST.
UH, PEGGY, THIS IS JUST OUT OF CURIOSITY.
AS AS THE ENERGY FOOTPRINT IN ERCOT BECOMES MORE COMPLEX, TAKE ADRS, UM, AND MORE, UH, COMPANIES PARTICIPATE AND AVAIL THEMSELVES OF THAT MARKET.
HOW DOES ERCOT DRAW THAT LINE, UH, IN, IN LOOKING AT THAT? SO THAT'S REALLY WHERE WE GET INTO THE, I MEAN THE MAIN THING IS THE NOT SO MUCH.
IF YOU HAVE A RELATED PARTY WORKING AT ONE OF THOSE, WE'LL STILL GO THROUGH THE SAME ANALYSIS ABOUT WHAT IS YOUR JOB HERE, TALK TO YOUR MANAGER, SEE WHAT THE RELATED PARTY IMPACT IS ON THE, ON THE MARK PARTICIPANT SIDE.
I THINK IT BECOMES MORE OF IF THERE'S ANY TYPE OF STOCK OWNERSHIP OF THAT COMPANY.
AND THAT GOES BACK TO THAT PREVIOUS COMMENT ABOUT WE DO HAVE A PROCESS.
IT'S A VERY COMPLEX PROCESS THAT WE LOOK AT ON WHETHER IT'S MATERIAL FOR THE SAME POINT THAT WE ALL KNOW THAT EVERYBODY'S INTERESTED IN THE ELECTRICITY MARKET TRYING TO MANAGE THEIR
[01:15:01]
COST.AND SO WE'RE GONNA SEE A LOT MORE DIVERSIFIED PLAYERS WHERE YOU HAD STOCK IN AN, IN A HOLDING COMPANY THAT NOW HAS AN AFFILIATE IN OUR MARKET.
UM, ALL THE ISOS HAVE A SIMILAR PROCESS.
IT IS COMPLICATED THOUGH BECAUSE OF THE, THE AS BECAUSE OF THE TRANSITION OF WHAT'S GOING ON WITH THIS GRID AND THE AMOUNT OF PLAYERS WANTING TO COME IN.
SO WE SPENT A LOT OF TIME GOING THROUGH THAT ANNUALLY TO LOOK AT WHAT THAT IS.
SO ARE OBVIOUSLY MORE CLEARLY DIRECT AND YOU GO, NO, YOU CAN'T HAVE ANY OWNERSHIP IN THAT.
BUT WHEN YOU GET INTO THE HOLDING COMPANIES, THE AFFILIATES AND WHAT'S REALLY GOING ON, WHERE THE TRADITIONAL HOLDING COMPANY WAS NOT AN ENERGY PLAYER, BUT THEY DECIDED TO HAVE SOME KIND OF SMALL AFFILIATE THAT WANTS TO PARTICIPATE IN THE MARKET, THAT'S WHERE YOU HAVE TO START TO LOOK AT THAT.
ANY OTHER COMMENTS, QUESTIONS, JUST FOLLOWING UP ON PAUL'S COMMENT? YEAH, I, I JUST WOULD SUGGEST THAT IF YOU GET INTO A SITUATION THAT'S DICEY OR A CLOSE CALL, YOU KNOW, I, IT MAY MAKE SENSE TO BRING IT TO THE BOARD, UH, TO GET SOME GUIDANCE.
UH, PROBABLY THOSE DON'T ARISE VERY OFTEN, BUT THEY CAN ARISE.
AND, UH, I ASKED CHAD AND UH, I THINK IT'S APPROPRIATE THAT IF, IF THERE'S A DISCLOSURE BY AN OFFICER OR A DIRECTOR THAT THAT BE BROUGHT TO THE COMMITTEE SO THAT WE CAN LOOK AT THAT.
NEXT STEP IS AGENDA ITEM EIGHT.
[8. Future Agenda Items]
AGENDA ITEMS. MAR.SO LOOKING FORWARD TOWARDS THE AUGUST COMMITTEE MEETING, THERE'S ONE CHARTERED ITEM THAT WILL BE UP FOR DISCUSSION AND THAT'S A REVIEW OF THE EXTERNALLY AUDITED FINANCIAL STATEMENT FOR THE 401K SAVINGS PLAN, WHICH IS REQUIRED FOR THE 5,500 FILING.
THE LAST ITEM BEFORE WE MOVE INTO EXECUTIVE SESSION IS THE AGENDA ITEM NINE, OTHER BUSINESS.
IS THERE ANY OTHER BUSINESS, ANY COMM ME MEMBERS WISH TO RELEASE? OKAY, AT THIS TIME THE COMMISSION
[Convene Executive Session]
WILL ADJOURN, UH, GENERAL SESSION AND WE'LL CONVENE AN EXECUTIVE SESSION.UH, WE'RE GONNA TAKE A LITTLE BREAK, UH, AT 9 35.
UH, NO VOTING ITEMS ARE ANTICIPATED DURING EXECUTIVE SESSION, SO GENERAL SESSION WILL NOT BE RECONVENE AFTER THE CONCLUSION OF EXECUTIVE SESSION.
UH, UH, GENERAL SESSION IS, UH, HEREBY ADJOURN AND THE WEBCAST WILL BE CONCLUDED.
UH, AND THEN THE MEETING, UH, CHAIR JACKSON, YOU WANNA CONCLUDE THIS? YES, SIR.