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WECC RESTRUCTURING PHASE III GNC UPDATE TO BOARD OF DIRECTORS

WECC RESTRUCTURING PHASE III GNC UPDATE TO BOARD OF DIRECTORS. January 23-24, 2013 Denver, CO. AGENDA. Board Direction – Resolutions from 12/6-7/12 meeting GNC Activities Work Plan Scope - Deliverables Schedule Resources MAWG Charter Current Recommendations

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WECC RESTRUCTURING PHASE III GNC UPDATE TO BOARD OF DIRECTORS

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  1. WECC RESTRUCTURING PHASE IIIGNC UPDATE TO BOARD OF DIRECTORS January 23-24, 2013 Denver, CO

  2. AGENDA • Board Direction – Resolutions from 12/6-7/12 meeting • GNC Activities • Work Plan • Scope - Deliverables • Schedule • Resources • MAWG Charter • Current Recommendations • Functional split between RCCo and Remaining WECC • Governance proposals for RCCo and Remaining WECC

  3. Board Direction – 12/6-7/12 Meeting • Spin Out Reliability Centers Resolution Whereas, • Work to develop the RE and NRE for the purpose of separating registered functions from delegated functions has proceeded on the assumption that the RE would only perform ERO delegated functions under the pro forma delegation agreement and the NRE would assume all remaining WECC functions.  • An alternative method of separating the registered functions of WECC from the delegated functions is to revise the WECC Mission and Functions to exclude the Reliability Centers and other registered functions, creating a new entity to handle those functions with a strong focus on that aspect of maintaining the reliability of the Western Interconnection. • Potential difficulty in providing long-term secure funding for the RC and other registered functions that WECC performs that are important to reliability and the length of time required to develop and receive approval for an effective tariff to achieve this goal has suggested that the spin off of the registered functions to a new entity may be the best and most expeditious way to achieve the separation of functions. Resolved, • The Board therefore directs the GNC and Management to develop a detailed proposal for the spin off of the registered functions that would include bylaws for a new section 501(c)(4) corporation that will provide for the governance of that entity by a five-member independent board with a strong Member Advisory Committee. The Board directs the GNC to bring that detailed proposal to the Board at its March meeting. If approved at that time, the Board anticipates incorporating the new entity and making necessary regulatory filings that would be necessary to ensure secure funding for the new entity prior to completion of the cut-over of these functions from WECC to the new entity. • For the remaining WECC, the Board directs the GNC to re-evaluate the governance structure and bring a proposal to the Board for its consideration at the March Board meeting. The Board would like to consider proposed Bylaws amendments that could be voted on by the WECC Membership at its 2013 Annual Meeting to implement an improved governance structure for WECC. • The Finance and Audit Committee should focus on retaining Section 215 funding for the remaining WECC, and on an interim basis for the RC, until a tariff and/or bilateral mechanism can be developed. • The Board directs the GNC and management to develop and begin the implementation of a transition plan for the RC and other registered functions including separate budgets, development of bylaws, a 501(c)(4) corporation, identifying board members, and developing a leadership structure. • The Board directs the GNC and management to recommend policies and procedures for operating the Reliability Centers in a separable and focused manner with distinct budget and resources to facilitate the anticipated cut over to a new company and to expedite progress on the improvement of the Reliability Centers while they remain in WECC. • The Board directs the GNC to work with a member advisory group to present their class ideas and majority and minority opinions, and address stakeholder concerns to assess the extent to which members support the GNC’s recommendations.

  4. Board Direction – 12/6-7/12 Meeting (2) • WECC & RCCo Class Issues Resolution Resolved, That the Western Electricity Coordinating Council (WECC) Board of Directors directs the GNC to develop proposed bylaws amendments or other policies that will apply to both WECC and the RCCO that will, following the proposed spin off of the registered functions into the RCCO: (1) Maintain existing classes 1-5; (2) Eliminate Class 7; (3) Modify the definition of Class 3 to include developers, consultants, and members at large with a business interest in WECC; (4) Allow existing Class 7 members to reapply for Class 3 membership; (5) Remove members who are inactive for over 12 months from membership; and (6) Allow access to WECC data by non-members who can demonstrate a legitimate business need for the data, pay the incremental cost of providing the data, and sign a universal Data Access NDA. The Class 6 issues are still under review and will be brought back for discussion at a later date.

  5. GNC Activities • December – organizing Phase III effort • Work Plan • 3-Step Approach • Frame issue and assign white paper development • Post white paper for MAWG review and comment • GNC discussions • Receive MAWG comments • Develop recommendations for Board consideration • MAWG formed and charter developed

  6. GNC Activities – Work PlanScope (Deliverables) & Schedule • Detailed proposal for the spin-off of the registered functions (RC and IA) in to the RCCo: • Validation of the functions to be included in the new entity: 1/8-15 • Bylaws with governance under an independent board with a strong member advisory committee • Governance Recommendations: 1/8-23 • Bylaws: 1/23-2/26 • Plan for operating the registered functions in a separable and focused manner to facilitate the anticipated transition and to expedite progress on the improvement of the RCs while they remain in WECC: 1/15-2/5 • Plan for transitioning the registered functions from the current WECC to the RCCo, including board selection process and proposed leadership structure: 2/12-2/26

  7. GNC Activities – Work PlanScope (Deliverables) & Schedule (2) • Detailed proposal for the re-evaluation of the remaining WECC: • Validation of the functions that would remain with WECC: 1/8-15 • Proposal on the future governance structure for the remaining WECC: 1/8-23 • Proposal on amendments for existing WECC Bylaws to move to the restructured WECC: 1/23-2/26

  8. GNC Activities – Work PlanScope (Deliverables) & Schedule (3) • Development of an open and transparent process for engaging the WECC membership in providing their ideas and opinions (majority and minority) with rationale and to address stakeholder concerns. The process should provide a mechanism to assess membership support for the GNC recommendations: 12/18/12-3/15/13

  9. GNC Activities – Work PlanResources • The current resources identified for this effort include the following: • The GNC • The MAWG modeled along the lines of the group used for the MAC review • WECC staff support • Coordination and logistics for GNC and MAWG • Project management • Operations input • Legal (internal and external) for bylaws development

  10. GNC ActivitiesMAWG Charter • Purpose/Responsibilities • Conduct outreach and education to all WECC members on bifurcation options and issues • Provide to the GNC both majority and minority views of each class, and a record of individual MAWG member votes • Actively participate in GNC meetings to present MAWG member perspectives and provide supporting documentation • Group Composition and Governance • 2 individuals per class (Class 1-7) • Leadership • Chair and Vice Chair selected by majority vote of MAWG • Chair: Maude Grantham-Richards (Tri-State G&T) • Vice-chair: Travis Kavulla (Montana Public Service Commission) • Meetings • Open to the public

  11. Current RecommendationsFunctional Split - White Paper Proposal

  12. Current RecommendationsFunctional Split - Comments

  13. Current RecommendationsFunctional Split - GNC Recommendations

  14. Current RecommendationsRCCo Governance - White Paper Proposal • Mission Statement - The mission of the Reliability Coordination Company (RCCo) will be to perform: • NERC registered functions of the Reliability Coordinator (RC) and the Interchange Authority (IA) for the Western Interconnection, • other NERC registered functions that are agreed to by the RCCo Members and RCCo Board, • additional functions that promote BES reliability that are agreed to by the RCCo Members and RCCo Board, • appropriate daily and seasonal system planning studies in coordination with WECC.

  15. Current RecommendationsRCCo Governance - White Paper Proposal (2) • Corporate IRS Structure • IRS 501(c)(4) status as a public welfare corporation. • Funding Mechanism • Initially • Continue to operate under Section 215 funding for the United States portion and existing bilateral contracts for those portions outside the United States • Long-term • Develop suitable tariff and/or bilateral contract arrangements to ensure a secure source of funding that prevents free riders from avoiding paying a fair share of the cost of operating the RCCo.

  16. Current RecommendationsRCCo Governance - White Paper Proposal (3) • Membership Structure • Membership Classes • five classes with the same definitions as existing WECC classes 1-5, except that the definition of Class 3 will be altered to include developers, consultants, and members at large with a business interest in the RCCo; • Members who are classified as inactive for over 12 months will be removed from membership; • Policies will allow access to RCCo data by non-members who can demonstrate a legitimate business need for the data, pay the incremental cost of providing the data, and sign a Universal Data Access Non-Disclosure Agreement; • Canadian and Mexican members who participate in the RCCo will qualify for membership in existing classes 1-5. Ongoing negotiations between WECC Management and WECC’s non-U.S. members may provide for different MAC participation.

  17. Current RecommendationsRCCo Governance - White Paper Proposal (4) • Membership Structure (cont’d) • Sub-Class Organization • Member Classes permitted to divide into as many as three sub-classes for the purpose of electing not more than a total of three Member Advisory Committee (MAC) representatives • Initiated by petition, signed by a simple majority of class members • Entire Class will vote on the proposal with a simple majority required to advance the proposal to the Board of Directors for consideration. The Board will hear both majority and minority opinions from affected members prior to approving or denying the petition. • No more than one MAC member will be associated with an individual sub-class • Sub-class designations will automatically expire five years after approval, but may be re-established

  18. Current RecommendationsRCCo Governance - White Paper Proposal (5) • Membership Structure (cont’d) • Member Advisory Committee (MAC) • Roles and Responsibilities • a committee reporting directly to the Board of Directors that will advise the Board on any matter the MAC deems appropriate, as well as when required by the Board. • MAC members vote in the best interests of the public welfare • MAC chair or designee will sit at the Board table as a non-voting participant to provide advice or clarifications and respond to Director’s questions • MAC will meet in open session separately from the Board of Directors meeting • A quorum is required for the MAC to take any action by a simple majority vote • MAC Members have a responsibility to expose all opinions (both majority and minority) to the Board

  19. Current RecommendationsRCCo Governance - White Paper Proposal (6) • Membership Structure (cont’d) • Member Advisory Committee (MAC) (cont’d) • Composition and Leadership • Each class will determine the need for diversity (e.g., geographic, stakeholder issues, etc.). • Leadership will consist of a Chair and Vice Chair whom will be elected by the membership of the MAC. Chair and Vice Chair of the MAC cannot be affiliated with the same Member Class, or be from the same group of affiliated companies. • Nomination/Election • Nominations can only be made by members of respective classes /subclass. Member representatives need not be from the class they represent. • MAC elections will be held at the annual meeting • Each class/subclass will need to have a quorum • MAC members will be elected by the nominee(s) receiving the most votes

  20. Current RecommendationsRCCo Governance - White Paper Proposal (7) • Membership Structure (cont’d) • Member Advisory Committee (MAC) (cont’d) • Number and Term • Three members per Member Class serving 3 year staggered terms • Qualifications • No required qualifications or class affiliation requirements.

  21. Current RecommendationsRCCo Governance - White Paper Proposal (8) • Board Governance Structure • Nomination/Election • 7 independent directors. • Board Chair appoints Nominating Committee of three MAC Members, with at least one from Member Classes 1 through 3 and at least one from Member Classes 4 or 5, and three Independent Directors not standing for re-election. • Nominating Committee puts forth two names for each vacant Director position, recommending one of the two nominees to the full Board for consideration; except that the Nominating Committee may elect to put forward only one name for consideration in the case of an existing Independent Director standing for re-election. • Board will select one candidate for each vacant position and present the membership with a slate of one candidate per vacancy • membership will vote on each position separately. Election requires majority vote of the members as a whole, as well as by a majority of the Member Classes.

  22. Current RecommendationsRCCo Governance - White Paper Proposal (9) • Board Governance Structure (cont’d) • Appointment of CEO to Board of Directors • may appoint the CEO to the Board of Directors provided that the CEO shall not be a member of any Board committee and shall not vote either to make or break a tie vote on the Board. • Selection of Board Chair • Board will elect its own Chair and Vice Chair. If the CEO is made a member of the Board he or she shall not serve as Chair or Vice Chair.

  23. Current RecommendationsRCCo Governance - White Paper Proposal (10) • Board Governance Structure (cont’d) • Director Qualifications • Skills/Experience • comprised of at least three independent directors with each of the three representing a different area of transmission operations, transmission planning, and generation experience. The remaining four independent directors shall be selected to include experience from the following areas, with each of the four representing a different area of experience: • Regulatory/Legal, • Accounting/Finance/Economics, • Environmental, • Compliance/Standards, • International, • Public Sector, • Distribution/Retail Provider, and • Energy/Commodity Markets;

  24. Current RecommendationsRCCo Governance - White Paper Proposal (11) • Board Governance Structure (cont’d) • Director Qualifications (cont’d) • Affiliation Restrictions • An independent director may not be a full-time employee of any Registered Entity in North America, and may not be affiliated with any Registered Entity registered within the Western Interconnection. The term “affiliated” means: • An employee of, • A contractor for, • An employee of a contractor for, or • Equity owner of. • These affiliation restrictions also include the spouse or minor child of the independent director.

  25. Current RecommendationsRCCo Governance - White Paper Proposal (12) • Approval of By-Laws • Board Approval • TBD • Membership Advisory Committee Approval • TBD • Membership Approval • TBD

  26. Current RecommendationsRCCo Governance - White Paper Proposal (13) • Role of State Regulatory Authorities • WIRAB will have a strong advisory role to the Board so long as such role is appropriate under Section 215 of the Federal Power Act. • If RCCo takes on additional registered functions that do not fall under Section 215, RCCo will invite the states and provinces of the Western Interconnection to form an appropriate advisory body

  27. Current RecommendationsRCCo Governance - Comments

  28. Current RecommendationsRCCo Governance - GNC Recommendations

  29. Current RecommendationsRemaining WECC Governance - White Paper Proposal • Mission Statement: The mission of the Remaining WECC Organization will be to: • Regional Entity Mission: • Provide impartial independent review and analysis • Incorporate system experience and knowledge into standards development • Ensure the delivery of consistent and fair monitoring and enforcement activities • Identify root causes and lessons learned from major system events • Other WECC activities: • Foster reliability in the Western Interconnection and create value for its membership through cost effective and efficient services and practices including: • Coordinated system planning and modeling, • Secure sharing of critical reliability data, and • Robust stakeholder forums

  30. Current RecommendationsRemaining WECC Governance - White Paper Proposal (2) • Corporate IRS Structure • IRS 501(c)(4) status as a public welfare corporation. • Funding Mechanism • Remaining WECC Organization should continue under Section 215 funding • If there are functions performed by the Remaining WECC Organization that are determined to not fall under Section 215 (e.g. WREGIS) other bilateral funding mechanisms will be needed.

  31. Current RecommendationsRemaining WECC Governance - White Paper Proposal (3) • Membership Structure • Membership Classes • Maintain existing classes 1-5; • Class 7 will be eliminated; • Definition of Class 3 will be altered to include developers, consultants, and members at large with a business interest in the Remaining WECC Organization; • Existing Class 7 members can reapply for Class 3 membership; • Members who are classified as inactive for over 12 months will be removed from membership; • Policies will allow access to WECC data by non-members who can demonstrate a legitimate business need for the data, pay the incremental cost of providing the data, and sign a Universal Data Access Non-Disclosure Agreement. • Canadian and Mexican members who participate in the Remaining WECC Organization will qualify for membership in existing classes 1-5. Ongoing negotiations between WECC Management and WECC’s non-U.S. members may provide for different MAC participation.

  32. Current RecommendationsRemaining WECC Governance - White Paper Proposal (4) • Membership Structure (cont’d) • Sub-Class Organization • Member Classes permitted to divide into as many as three sub-classes for the purpose of electing not more than a total of three Member Advisory Committee (MAC) representatives • Initiated by petition, signed by a simple majority of class members • Entire Class will vote on the proposal with a simple majority required to advance the proposal to the Board of Directors for consideration. The Board will hear both majority and minority opinions from affected members prior to approving or denying the petition. • No more than one MAC member will be associated with an individual sub-class • Sub-class designations will automatically expire five years after approval, but may be re-established

  33. Current RecommendationsRemaining WECC Governance - White Paper Proposal (5) • Membership Structure (cont’d) • Member Advisory Committee (MAC) • Roles and Responsibilities • a committee reporting directly to the Board of Directors that will advise the Board on any matter the MAC deems appropriate, as well as when required by the Board. • MAC members vote in the best interests of the public welfare • MAC chair or designee will sit at the Board table as a non-voting participant to provide advice or clarifications and respond to Director’s questions • MAC will meet in open session separately from the Board of Directors meeting • A quorum is required for the MAC to take any action by a simple majority vote • MAC Members have a responsibility to expose all opinions (both majority and minority) to the Board

  34. Current RecommendationsRemaining WECC Governance - White Paper Proposal (6) • Membership Structure (cont’d) • Member Advisory Committee (MAC) (cont’d) • Composition and Leadership • Each class will determine the need for diversity (e.g., geographic, stakeholder issues, etc.). • Leadership will consist of a Chair and Vice Chair whom will be elected by the membership of the MAC. Chair and Vice Chair of the MAC cannot be affiliated with the same Member Class, or be from the same group of affiliated companies. • Nomination/Election • Nominations can only be made by members of respective classes /subclass. Member representatives need not be from the class they represent. • MAC elections will be held at the annual meeting • Each class/subclass will need to have a quorum • MAC members will be elected by the nominee(s) receiving the most votes

  35. Current RecommendationsRemaining WECC Governance - White Paper Proposal (7) • Membership Structure (cont’d) • Member Advisory Committee (MAC) (cont’d) • Number and Term • Three members per Member Class serving 3 year staggered terms • Qualifications • No required qualifications or class affiliation requirements.

  36. Current RecommendationsRemaining WECC Governance - White Paper Proposal (8) • Board Governance Structure – Independent Board • Nomination/Election • 9 independent directors. • Board Chair appoints Nominating Committee of three MAC Members, with at least one from Member Classes 1 through 3 and at least one from Member Classes 4 or 5, and three Independent Directors not standing for re-election. • Nominating Committee puts forth two names for each vacant Director position, recommending one of the two nominees to the full Board for consideration; except that the Nominating Committee may elect to put forward only one name for consideration in the case of an existing Independent Director standing for re-election. • Board will select one candidate for each vacant position and present the membership with a slate of one candidate per vacancy • Membership will vote on each position separately. Election requires majority vote of the members as a whole, as well as by a majority of the Member Classes.

  37. Current RecommendationsRemaining WECC Governance - White Paper Proposal (9) • Board Governance Structure – Independent Board (cont’d) • Director Qualifications • Skills/Experience • comprised of at least four independent directors with each of the four representing a different area of transmission operations, transmission planning, and generation experience. The remaining five independent directors shall be selected to include experience from the following areas, with each of the five representing a different area of experience: • Regulatory/Legal, • Accounting/Finance/Economics, • Environmental, • Compliance/Standards, • International, • Public Sector, • Distribution/Retail Provider, and • Energy/Commodity Markets;

  38. Current RecommendationsRemaining WECC Governance - White Paper Proposal (10) • Board Governance Structure – Independent Board (cont’d) • Director Qualifications (cont’d) • Affiliation Restrictions • An independent director may not be a full-time employee of any Registered Entity in North America, and may not be affiliated with any Registered Entity registered within the Western Interconnection. The term “affiliated” means: • An employee of, • A contractor for, • An employee of a contractor for, or • Equity owner of. • These affiliation restrictions also include the spouse or minor child of the independent director.

  39. Current RecommendationsRemaining WECC Governance - White Paper Proposal (11) • Board Governance Structure – Hybrid Board • Comprised of one Member Class Director per Member Class plus independent directors that will equal the number of member class directors plus one (i.e., independent director majority). Directors will serve three year staggered terms. • Nomination/Election • Independent Directors • Board Chair appoints Nominating Committee of three MAC Members, with at least one from Member Classes 1 through 3 and at least one from Member Classes 4 or 5, and three Independent Directors not standing for re-election. • Nominating Committee puts forth two names for each vacant Director position, recommending one of the two nominees to the full Board for consideration; except that the Nominating Committee may elect to put forward only one name for consideration in the case of an existing Independent Director standing for re-election. • Board will select one candidate for each vacant position and present the membership with a slate of one candidate per vacancy • Membership will vote on each position separately. Election requires majority vote of the members as a whole, as well as by a majority of the Member Classes.

  40. Current RecommendationsRemaining WECC Governance - White Paper Proposal (12) • Board Governance Structure – Hybrid Board (cont’d) • Nomination/Election (cont’d) • Member Class Directors • Each Member Class will nominate and select their respective Class Director • Only one Director per Member Class will serve on the Board at any time. • Member classes nominate and elect their own directors by plurality – using sub-class process if applicable

  41. Current RecommendationsRemaining WECC Governance - White Paper Proposal (13) • Board Governance Structure – Hybrid Board (cont’d) • Director Qualifications – Independent Directors • Skills/Experience • Comprised of at least three independent directors with each of the three representing a different area of transmission operations, transmission planning, and generation experience. The remaining independent directors shall be selected to include experience from the following areas, with each representing a different area of experience: • Regulatory/Legal, • Accounting/Finance/Economics, • Environmental, • Compliance/Standards, • International, • Public Sector, • Distribution/Retail Provider, and • Energy/Commodity Markets;

  42. Current RecommendationsRemaining WECC Governance - White Paper Proposal (14) • Board Governance Structure – Hybrid Board (cont’d) • Director Qualifications – Independent Directors (cont’d) • Affiliation Restrictions • An independent director may not be a full-time employee of any Registered Entity in North America, and may not be affiliated with any Registered Entity registered within the Western Interconnection. The term “affiliated” means: • An employee of, • A contractor for, • An employee of a contractor for, or • Equity owner of. • These affiliation restrictions also include the spouse or minor child of the independent director. • Director Qualifications – Member Class Directors • No affiliation or qualification requirements

  43. Current RecommendationsRemaining WECC Governance - White Paper Proposal (15) • Board Governance Structure – Independent or Hybrid Structure • Appointment of CEO to Board of Directors • may appoint the CEO to the Board of Directors provided that the CEO shall not be a member of any Board committee and shall not vote either to make or break a tie vote on the Board. • Selection of Board Chair • Board will elect its own Chair and Vice Chair. If the CEO is made a member of the Board he or she shall not serve as Chair or Vice Chair.

  44. Current RecommendationsRemaining WECC Governance - White Paper Proposal (16) • Approval of By-Laws • Board Approval • TBD • Membership Advisory Committee Approval • TBD • Membership Approval • TBD • Role of State Regulatory Authorities • WIRAB will have a strong advisory role to the Board of the Remaining WECC Organization – similar to the current structure.

  45. Current RecommendationsRemaining WECC Governance - Comments

  46. Current RecommendationsRemaining WECC Governance - GNC Recommendations

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