s02v02p01 - app · participants at the tcs workshop in connection with the next tcs. background on...

An EDISON INTERNATIONAL® Company

(U 338-E)

2015 General Rate Case APPLICATION

Workpapers

Human Resources (HR)HR Benefits and Other Compensation SCE-06 Volume 02, P art 01 Chapter II

N ovem b er 2013

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Workpaper - Southern California Edison / 2015 GRC - APPLICATION1

II.

SUMMARY OF THE TOTAL COMPENSATION STUDY

A. Background on Total Compensation Study

Total compensation studies have been an element o f energy utilities’ General Rate Case (GRC)

proceedings for more than 20 years. In accordance with the direction provided by the Commission in

past GRCs, DRA and SCE jointly selected an independent expert to perform the 2015 Total

Compensation Study. Consistent with the Com mission’s direction, the selected independent expert

performed the study and conducted all analyses in regards to benchmarking, job matching, and selecting

comparator companies.

1. Total Compensation Workshop

In the 2012 GRC decision, DRA and SCE were directed by the Commission to hold a

Total Compensation Study W orkshop (TCS W orkshop) and file a Tier 2 Advice Letter describing SCE

and D RA ’s agreement on how the m atter will be handled in this GRC:

To address these concerns the Commission directs DRA and SCE to jointly hold a workshop open to all parties, within 90 days o f the date the decision is adopted, to discuss whether design modifications should be made to the next TCS or an alternative m ethod o f data gathering should be utilized for the next SCE rate case ....

W ithin 30 days o f the workshop date, SCE and DRA shall jointly file a Tier 2 Advice Letter with the Energy Division which describes the resulting agreement between SCE and DRA as to how this matter shall be handled in the next GRC.2

Pursuant to Ordering Paragraph 30 o f D.12-11-051, the TCS W orkshop was held on

January 23, 2013. Besides DRA and SCE, attendees included representatives from the National Asian-

American Coalition (NAAC), the Utility Reform Network, the California Coalition o f Utility

Employees, Pacific Gas and Electric, San Diego Gas & Electric, and Sempra. On February 22, 2013,

SCE, on its own and D RA ’s behalf, filed Advice Letter 2854-E with the Energy Division providing a

report on the TCS W orkshop and describing the agreement between SCE and DRA regarding the 2015

Study.3 On March 21, 2013, NAAC submitted a protest to Advice Letter 2854-E. On May 20, 2013, the

Energy Division found SCE and DRA complied with the Com m ission’s requirements set forth in D.12-

11-051, rejected N A A C ’s protest, and made Advice Letter 2854-E effective March 24, 2013.

2 D.12-11-051, p. 444.

3 The Advice Letter, including Workshop Notes, is included in the workpapers for this Exhibit.

WP: SCE-06, Vol. 2, Pt. 1, pp. 1-28

Exhibit No. SCE-06 / Human Resources / Vol. 02 / Pt.01 / Ch. IIWitness: M. Bennett

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Workpaper - Southern California Edison / 2015 GRC - APPLICATION

2. 2015 Total Compensation Study

In planning for SCE’s 2015 GRC filing, DRA and SCE agreed that a competitive

selection process should be used to select an independent expert who would perform the Total

Compensation Study. In February 2013, a jointly developed Request for Proposal (RFP)4 was sent by

SCE to six consulting firms: Aon Hewitt Consulting (Aon Hewitt), Towers W atson, M ercer, The Domar

Group, Hay Group, and KH Consulting. Three o f the six firms submitted proposals in response to the

RFP. Based on SCE’s and D R A ’s analysis o f the proposals submitted, all three firms were invited to

interview. DRA and SCE jointly interviewed representatives from the three firms on March 21, 2013.

Based on the proposals and the interviews, DRA and SCE jointly agreed that Aon Hewitt perform the

Total Compensation Study. Thereafter, Aon Hewitt was retained, and on April 8, 2013, Aon Hewitt,

DRA, and SCE began the process o f developing the Total Compensation Study (the Study) for SCE’s

2015 GRC.5

All three parties worked cooperatively, made decisions by consensus, and resolved data

gathering and analytical issues for the Study.

Although the methodology o f the 2012 Study was sufficient for estimating the

competitiveness o f SCE’s total compensation levels, DRA and SCE sought to improve the 2015 Study

by: (1) including Paid Time O ff in the benefits valuation; (2) adding municipal utilities (namely, Los

Angeles Department o f W ater & Power and Sacramento Municipal Utility District) and the Commission

itself as comparator companies for valuing executive compensation and benefits; and (3) utilizing SCE’s

historical executive demographic data for executive benefits valuation.

The Total Compensatin Study Report describes in detail the data gathering process and

analysis underlying the Study. The Study encompassed the following steps:

1. Aon Hewitt, DRA, and SCE selected a sample o f SCE jobs from five categories -

Physical/Technical, Clerical, Professional/Technical, M anager/Supervisor, and

Executive. Collectively, the 2015 Study benchm ark jobs represent approximately 76

percent o f SCE’s workforce.

4 The RFP required applicants to disclose if they receive more than 10 percent of their annual revenues from other SCE contracts, in compliance with D.12-11-051, Conclusion of Law 382. An excerpt from “Request For Proposal No. 179022519 for General Rate Case Total Compensation Study” is included in the workpapers for this Exhibit.

5 See SCE-06, Vol. 2, Pt. 2:HR - Total Compensation Study.

WP: SCE-06, Vol. '2, Pt. 1, pp. 29-304


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Workpaper - Southern California Edison / 2015 GRC - APPLICATION3

2. Aon Hewitt, DRA, and SCE identified a marketplace o f employers (comparator

companies) with which SCE competes to fill the jobs in each o f these categories.

3. Aon Hewitt, with input from SCE, m atched the SCE benchm ark jobs to comparable

positions at the comparator companies utilizing well-established, industry compensation

surveys. Executive level SCE benchmark jobs were compared to the jointly selected

comparator companies from those same compensation surveys.

4. DRA validated the matches o f SCE benchmark jobs to comparable positions at the

comparator companies by performing a spot-check.

5. Aon Hewitt calculated the benefit value for each benchmark job for each comparator

company for which they could find a match, in order to present that data on a

cash-equivalent basis for comparison purposes.

6. Aon Hewitt compared SCE’s total compensation to that o f the comparator companies for

each benchmark job in each o f the five job categories.

7. Finally, Aon Hewitt “weighted” the results for each o f the five job categories and, based

on the relative percentage o f that category to SCE’s total 2012 payroll, calculated the

comparison o f SCE’s total compensation to the market.

All o f the foregoing, including the methodology, data gathering, analyses, and results of

the 2015 Study, is detailed in the Total Compensation Study Report.

B. Reasonableness of Compensation Paid by SCE

Table II-1 summarizes the results o f the 2015 Study perform ed by Aon Hewitt for this GRC

proceeding. The percentages in Table II-1 are the amounts by which SCE’s base pay, incentive

compensation, and benefits deviate from the market, both in the aggregate and for each o f the five job

categories into which SCE’s workforce was divided for purposes o f the Study. In this context, total

compensation consists o f the base pay, short-term incentives, paid time off, and benefits received by

SCE’s workforce. For Executives and certain jobs in the M anager/Supervisor category, total

compensation also includes long-term incentives. The Study shows SCE’s aggregate compensation to

be 5.0 percent below market levels. Given the sampling error inherent in such studies, this result shows

SCE’s total compensation to be statistically equivalent to the market average.

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4Workpaper - Southern California Edison / 2015 GRC - APPLICATION

Table II-1 Summary Results o f the 2015 GRC Total Compensation Study

Job C ategory Base PayT otal Cash

Compensation* BenefitsPaid Time

O ffLong-termIncentive

TotalCom pensation

Physical/T echn ica l 8.8% 11.3% -1.1% 90.5% — 9.2%

C lerica l -0 .5% -1.6% 1.9% -25 .7% — -1.1%

Pro fessiona l T echnical -1 0 .9 % -11 .9% -2.8% -4 0 .3% -1 0 0 % -1 2 .3 %

M anager/S uperv iso r -8 .3% -1 0 .4 % -6.3 % -1 8 .9% -9 7 .2% -1 5 .9 %

E x e cu tiv e -3 .0% 13.4% 1 14.3% -1.0% -34 .1% 9.5%

Overall** -3 .3 % -3 .7 % -1.2% 2.6% -15.0% -5.0%

♦T otal C ash C om pensa tion equals b a se p ay p lu s sho rt-te rm incentives ♦♦ O verall n um bers a re payroll-w eighted .

1 Based on the results o f the Study, the Commission should find that the total compensation paid

2 by SCE is at market and reasonable.

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2015 General Rate Case - APPLICATION INDEX OF WORKPAPERS

EXHIBIT SCE-06, Volume 2 Ch. 2

DOCUMENT PAGE(S)Advice 2854 Report on Total Compensation Study Workshop in Compliance with Decision 12-11-051 1-28

Excerpt of Request for Proposal 29-30

Workpaper - South ern California Edison / 2015 GRC - APPLICATION1

SOUTHERN CALIFORNIA

EDISONAkbar JazayeriVice President of Regulatory Operations

An EDISON INTERNATIONAL Com pany

February 22, 2013

ADVICE 2854-E (U 338-E)

PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA ENERGY DIVISION

SUBJECT: Report on Total Compensation Study Workshop in Compliance

In compliance with the California Public Utilities Commission (Commission) Decision (D.)12-11-051, Southern California Edison Company (SCE) on behalf of itself and the Division of Ratepayer Advocates (DRA) hereby submits the following information on the Total Compensation Study (TCS) Workshop which was held on January 23, 2013.

PURPOSE

Pursuant to Ordering Paragraph 30 of D.12-11-051, this advice filing provides a report on the TCS Workshop, held by the DRA and SCE on January 23, 2013, and DRA and SCE’s ensuing agreement to address proposed design modifications made by participants at the TCS Workshop in connection with the next TCS.

BACKGROUND

On November 29, 2012, the Commission iss ued D.12-11-051 in SCE’s 2012 General Rate Case (GRC). Among other things, D.12-11-051 required “DRA and SCE to jointly hold a workshop open to all parties, within 90 days of the date the decision is adopted, to discuss whether design modifications should be made to the next TCS or an alternative method of data gathering should be utilized for the next SCE rate case.”

In addition the Commission stated:

“Within 30 days of the workshop date, SCE and DRA shall jointly file a Tier 2 Advice Letter with the Energy Division which describes the resulting agreement between SCE and DRA as to how this matter shall be handled in the next GRC.”i

1 D.12-11-051, p. 444, also Ordering Paragraph 30. (Note: Ordering Paragraph 30 requires DRA andSCE to hold a workshop within 6 months of the effective date of D.12-11-051.)

P.O. Box 800 8631 Rush Street Rosemead, California 91770 (626) 302-3630 Fax (626) 302-4829

With Decision 12-11-051


2Workpaper - South ern California Edison / 2015 GRC - APPLICATION

ADVICE 2854-E(U 338-E) - 2 - February 22, 2013

On December 21, 2012, DRA and SCE provided notice of the TCS Workshop to all parties on the service list for SCE’s 2012 GRC (A.10-11-015). On January 14, 2012, a follow-up notice was sent to all parties, solici ting proposals to be discussed at the workshop. No proposals were submitted.

Pursuant to Ordering Paragraph 30 of D.12-11-051, the TCS Workshop was held on January 23, 2013, in the Community Room of Opera Plaza at 601 Van Ness Avenue, San Francisco, CA, which is located directly across the street from the Commission offices.

Summary of Workshop

Participating Parties

Individuals partcipating in the TCS Workshop included:

Name Organization

Bill Nusbaum TURN

John Sugar TURN (JBS Energy)

Jamie Mauldin CCUE

Debbie Robinson Sempra

Laura Earl San Diego Gas & Electric Company (SDG&E)

Stacey Hunter DRA

Noel Obiora DRA

Truman Burns DRA

Robert Gnaizda National Asian American Coalition (NAAC)

Mia Martinez NAAC

Janet Lee Redmond Pacific Gas and Electric Company (PG&E)

Shelly Sharp PG&E

Gene Tate PG&E

Mike Klotz PG&E

Pat Adams SCE




Frank McNulty SCE

George DeMaria SCE

Stephen Lumel SCE

A background presentation was presented to help provide a framework for the TCS Workshop. Proposals were then solicited from those in attendance. Proposals were submitted verbally in the meeting and additional ideas were submitted in writing on January 25, 2013. The TCS Workshop Notes, attached hereto as Attachment A, cover the background presentation materials and the suggestions provided by parties regarding “design modifications” for the 2015 TCS. As part of its upcoming GRC, SCE and DRA have agreed that SCE should proceed with securing a vendor for the next TCS and will incorporate consideration of an y proposed design modifications into the Request for Proposal for said vendor.

Both parties agree that any substantial improvement or consideration of alternatives to the TCS would require additional consultation and discussion going forward.

TIER DESIGNATION

Pursuant to D.12-11-051, page 444, this advice filing is submitted with a Tier 2 designation.

EFFECTIVE DATE

Pursuant to General Order (GO) 96-B, Energy Industry Rule 5.2, this advice filing will become effective on March 24, 2013, the 30 calendar day after the date filed.

NOTICE

Anyone wishing to protest this advice filing may do so by letter via U.S. Mail, facsimile, or electronically, any of which must be received no later than 20 days after the date of this advice filing. Protests should be mailed to:

CPUC, Energy Division Attention: Tariff Unit 505 Van Ness Avenue San Francisco, California 94102 E-mail: [email protected]

Copies should also be mailed to the attention of the Director, Energy Division,Room 4004 (same address above).


mailto:[email protected]



In addition, protests and all other correspondence regarding th is advice filing should also be sent by letter and transmitted via facsimile or electronically to the attention of:

Akbar JazayeriVice President of Regulatory Operations Southern California Edison Company 8631 Rush Street Rosemead, California 91770 Facsimile: (626) 302-4829 E-mail: [email protected]

Leslie E. Starck Senior Vice President c/o Karyn Gansecki Southern California Edison Company 601 Van Ness Avenue, Suite 2030 San Francisco, California 94102 Facsimile: (415) 929-5540 E-mail: [email protected]

There are no restrictions on who may file a protest, but the protest shall set forth specifically the grounds upon which it is based and shall be submitted expeditiously.

In accordance with Section 4 of GO 96-B, SCE is serving copies of this advice filing to the interested parties shown on the attached GO 96-B and A.10-11-015 service lists. Address change requests to the GO 96-B service list should be directed by electronic mail to [email protected] or at (626) 302-2930. For changes to all other service lists, please contact the Commission ’s Process Office at (415) 703-2021 or by electronic mail at Process [email protected].

Further, in accordance with Public Utilities Code Section 491, notice to the public is hereby given by filing and keeping the advice filing at SCE’s corporate headquarters. To view other SCE advice filings with the Co mmission, log on to SCE’s web site at http://www.sce.com/AboutSCE/Regulatory/adviceletters.

For questions, please contact Pat Adams at (626) 302-5553 or by electronic mail at [email protected]

Southern California Edison Company

Akbar Jazayeri

AJ:pa:sqEnclosures






http://www.sce.com/AboutSCE/Regulatory/adviceletters



Attachment A

Exhibit No. SCE-06 / Human Resources / Vol. 02 / Pt.01 I Ch. IIWitness: M. Bennett


THIS PAGE INTENTIONALLY LEFT BLANK


7Workpaper - South ern California Edison / 2015 GRC - APPLICATION__________________

ATTACHMENT A

Total Compensation Study Workshop Notes

1/23/2013

Opera Plaza San Francisco

Exhibit No. SCE-06 / Human Resources / Vol. 02 / Pt.01 / Ch. IIWitnnss: M. Bennett


THIS PAGE INTENTIONALLY LEFT BLANK

Exhibit No. SCE-°6 / Human Resources / VoL 02 / R.O1 / Ch. IIWitness: 1V1. Bennett


ATTACHMENT A

Total Compensation Study Workshop NotesIntroduction

Decision (D .)1 2 -l 1-051 directed DRA and Southern California Edison (SCE) to hold a Total Compensation Workshop and file a T ier 2 Advice Letter, w ith the results of the workshop.

To address these concerns the Commission directs DRA and SCE to jo in tly hold a workshop open to a ll parties, within 90 days o f the date the decision is adopted, to discuss whether design modifications should be made to the next TCS or an alternative method o f data gathering should be utilized for the next SCE rate case.

Within 30 days o f the workshop date, SCE and DRA shall jo in tly file a Tier 2 Advice Letter with the Energy Division which describes the resulting agreement between SCE and DRA as to how this matter shall be handled in the next GRC.1

On December 21, 2012, DRA and SCE provided notice of the workshop to all parties on the service list for the 2012 GRC (A.10-11-015), On January 14, 2013, a follow- up notice was sent to all parties, soliciting proposals to be discussed at the workshop. No proposals were submitted.

Pursuant to ordering paragraph 30 of Decision (D.) 12-11-051, a Total Compensation Study (TCS) Workshop was held on January 23, 2013 in the Community room of Opera Plaza located at 601 Van Ness Avenue, San Francisco, CA which is located directly across the street from the CPUC offices.

Participating Parties

Parties participating in the workshop included:

Name OrganizationBill Nusbaum TURNJohn Sugar TURN (JBS Energy)Jamie Mauldin CCUEDebbie Robinson SempraLaura Earl San Diego Gas & Electric (SDG&E)Stacey Hunter Division of Ratepayer Advocates (DRA)Noel Obiora DRATruman Burns DRA

1 D.12-11-051, pg. 444.

2

Exhibit No. SCE-°6 / Human Resources 1 VoL 02 1 R.O1 I' Ch. IIWitnnss: M. Bennett


Exhibit No. SCE-°6 / Human Resources / VoL 02 / pt 01 / Ch. IIWitnnss: M. Bennett

Workpaper - South ern California Ediso n / 2015 GRC - APPLICATION11

ATTACHMENT A

TURN• TURN recommends a brie f public discussion o f the (executive and non

executive) comparator companies selected by DRA and SCE in the next TCS.

• Based on a review o f the PG&E TCS, TURN recommends tha t executive compensation numbers be broken out separately from non-executive numbers in a summary table.

• Comparator company size is fine for executive compensation but not for non-executive positions. Span o f control is a more relevant indicator for the managers/supervisors o f an organization.

• For incentive pay, TURN recommends tha t SCE use ta rge t values rather than actuals in the final results. This was Mercer's recommendation in the recent PG&E study. (Note: PG&E and Sempra TCS reports include both ta rget and actual data.)

• TURN raised the issue o f DRA being understaffed during Sempra TCS process.

CCUE• CCUE recommends tha t the TCS be discontinued entire ly. Rank and file

employees are not shown to be overpaid. Executives are another m atter; however, the impact o f the ir compensation is not relevant to rates.

• Notw ithstanding its position on discontinuing study, CCUE notes: 1) the u tilities should only be comparing jobs to local labor markets (e.g.PG&E, SDG&E, LADWP, and SMUD), rather than looking at national jobs and doing cost o f living adjustments; 2) it is impossible to compare "apples to apples" when matching jobs and 3) the valuation of benefits is subjective.

PG&E• PG&E recommends tha t the utilities still do the TCS and take action on

who covers compensation later; there is a difference between the TCS and what ratepayers/shareholders cover.

• PG&E sought confirm ation tha t the decisions made in the TCS workshop did not impact current PG&E proceedings.

SDG&E• SDG&E asked - "W hat we are looking to accomplish in th is workshop?"

"W hat is the final w ork product?"

• SDG&E sought confirm ation that the decisions made in the workshop did not impact current SDG&E proceedings.

DRA• DRA noted tha t it seems that the Commission wants something to

change going forward; however, DRA is unsure o f the fu ll intention of the Commission's directive.

Exhibit No. SCE-°6 / Human Resources / VoL 02 / R.O1 / Oh. IIWitnnss: M. Bennett

12Workpaper - South ern California Ediso n / 2015 GRC - APPLICATION

ATTACHMENT A

• DRA is listening w ith open ears; will go back and huddle w ith Marek Kanter who could not attend session.

• DRA discussed an interest to go back to past studies, post-energy crisis to look at trends, to examine the impact o f changes in comparator firms on study results.

• DRA solicited opinion of group re: use o f a select group o f comparator companies versus broad-based national surveys, as was used in recent PG&E study.

• DRA w ill review and augment workshop notes fo r the advice le tter.

• The Commission should not rubber stamp the TCS ju s t because DRA participated.

• There is a possible need fo r fu ture workshops to understand past practices and recommend changes going forth .

SCE• SCE covered the workshop directive - to file a T ier 2 Advice Letter

w ith in 30 days o f the workshop date.

• SCE covered the tim eline fo r SCE's TCS; explained tha t based on historical studies, the team is already behind schedule and needs to move quickly to meet filing deadline. (O ther u tilities confirmed an approximate one-year tim eline fo r studies.)

• SCE asked group w hether there was value in having a workshop outside o f a specific u tility 's GRC in order to consider various proposals re: the Total Compensation Study process. (There was mixed reaction to the question.)

Exhibit No. SCE-06 / Human Resources / VoL 02 / R.O1 / Oh. IIWitnnss: VI. Bennett

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j\T T f t c H h £ N T A “ A P P E N D I X B

NAACNational Aslan American Coalition

The National Asian American Coalition’s Response to January 23rd Total CompensationStudy Workshop

To the workshop attendees from the Division of Ratepayer Advocates, Southern California Edison, the Sempra Companies, PG&E, TURN, CCUE and others:

In order to assist ail parties that participated in the January 23rd, 2013, compensation workshop, we are expediting our response. It is our hope that this response will lead to future executive compensation studies that will have the full confidence of the California Public Utilities Commission (CPUC), the parties and most importantly, the ratepayers.

Firstly, Faith Bautista, the CEO of the National Asian American Coalition (NAAC), wishes to express her great appreciation for the commitments of DRA and TURN to reflect ratepayer concerns in a changing environment, particularly as to executive compensation.1

As we stated at the meeting, a large number of organizations are likely to join with us in future GRCs with regard to executive compensation. Please note we will not be involved in addressing compensation of union workers, since we believe the union is an effective representative of its members. We also note that we will not be involved in non-management or low-level management compensation, since we believe, in general, that the market will address most of these issues.

The NAAC, joined by a number o f Asian American, Latino and Black organizations, will, in all future rate proceedings, including the upcoming PG&E GRC, focus on executive compensation. Except, as we set forth, if the utilities wish to have the shareholders pay all the benefits and compensation o f the executives, we, as ratepayer representatives, will not object.

As set forth at the workshop, the economic world in the U.S. is changing, much as the leadership at the CPUC has changed. For example, since the last Edison GRC was filed, four new commissioners were appointed by Governor Jerry Brown. Governor Brown has often spoken out on excessive compensation. Perhaps the best example is the Governor’s extraordinary influence on the extremely bloated executive compensation provided to presidents o f major public

1 A lthough som e o f the parties m ay believe th a t e xecu tive com p en sa tio n is o n ly a sm all fa c to r in overall com pensa tion , the N A A C ’s expert, M ichael P h il lip s ’ un refu ted te stim o n y in the S em pra and E d ison cases is that ex ecu tiv e co m pensa tion and co m pensa tion a t the top sets th e tone and im pacts all com pensa tion . T h is includes not on ly m anagers and p ro fessionals , b u t union dem ands as w e ll. M r. P h illips w ill be ou r expert again in th e upco m in g PG & E case and P G & E w ill have an o p portun ity to c ro ss-ex am in e h im on th is poin t. In add ition , M r. Ph illip s is p leased to m ee t a t th e nex t w o rkshop w ith the parities .

15 Southgate Avenue, Suite 200, Daly City CA 94015 | Office (650) 952-0522 I Fax (650) 952-05301 www.rascoafitiort.org

Exhibit No. SCE-06 / Human Resources / Vol. 02 / Pt.01 I Ch. IIWitnnss: VI. Bennett

http://www.rascoafitiort.org


NAACNational Aslan American Coalition

universities in California. It should be noted that even the highest salary of a UC or college president is far lower than that o f a top-ranking Sempra, PG&E or Edison executive.

We also urge the parties to consider Governor Brown’s January 24thState of the State address on fiscal and financial constraints as they affect all Californians, including utilities.

In a similar vein, President Obama, as set forth in his second inaugural address on January 21st, discussed inequality in America and the dangers it represents.

More poignant and more specifically related were last year’s overwhelming votes by residents of San Diego (Sempra territory) and San Jose (PG&E territory) against inflated and unsustainable pension plans. It should be noted that Governor Brown was the first to raise this in his October 27, 2011 Twelve-Point Pension Reform Plan, many o f whose provisions have been enacted into law by the legislature.

Since pensions are a significant portion of executive compensation, particularly for high-level officials where the overall amount is often in the tens o f millions, we believe it is pertinent as it affects ratepayer opinion.

As set forth at the workshop, and set forth below, are our recommendations to ensure maximum ratepayer support and ensure that Sempra, Edison and PG&E executive compensation plans reflect the realty of the California voters, the Governor’s direction and that of the legislature, which very strongly applauded the Governor’s January 24thcall for fiscal and financial restraint.

We recommend:

1. Comparative companies should be weighed heavily in regard to utility companies, both private and municipal, As part of this, we would urge that any utility with $1 billion or more in assets could fairly be part o f the comparative basis. Similarly, any municipal utility, particularly in California with $1 billion or more in revenue should be part of the mix. Please see, for example, the Joint Parties’ arguments in both Sempra and Edison that Los Angeles Department o f Water and Power (LADWP), with assets equal to SoCal Gas or SDG&E, should be a part of the executive compensation calculation.

2. Given the growing climate to reexamine executive compensation and the concerns of the ratepayers, voters and government officials in California, it would be appropriate to also have comparisons with top state officials in comparably responsible jobs, For example, the compensation for the Governor, other statewide elected officials and the Governor’s cabinet members. In addition, we would suggest the compensation levels of public university presidents be included.

3. Given the Legislature’s concerns, we would urge that at least a small portion of the executive compensation comparator take into account what 120 chief executives (our state legislative officials) earn.

15 Southgate Avenue, Suite 200, Daly City CA 94015 | Office (650) 952-0522 | Fax (650) 952-0530 ( www.naacoalitlon.org

Exhibit No. SCE-06 / Human Resources / Vol. 02 / Pt.01 I Ch. IIWitnnss: M. Bennett

http://www.naacoalitlon.org


NAACNational Asian American Coalition

4. Further, we believe that the disparity between the regulators and the regulated in terms of resources and compensation, should also be a factor. Therefore, the compensation of the five commissioners and the executive director of the CPUC should be a part o f the equation.

5. How to weigh each of these is a matter for a separate discussion. And obviously, we would suggest that some of these comparators must be given less weight than the others. But, it is important for California utilities to in part reflect the executive compensation in the state overall. However, as set forth at the beginning of these comments, utilities should be free to fully compensate at any level, any executives they wish so long as the shareholders bear the full burden of such compensation.2

6. As a growing number of experts and media have commented, there are no so-called independent experts. Hewitt is not an independent expert. As the NAAC’s expert has testified in the Sempra and Edison cases, the so-called independent consultants are often compensated by the same utility for many years and therefore cannot be independent.

However, there is a larger issue as demonstrated by the Federal Reserve and the Office of the Comptroller o f the Currency scandal relating to Independent Foreclosure Review. By their very nature, so-called independent experts are dependent on the goodwill of the corporations for whom they make recommendations. That is, even if an independent expert was not influenced by the $5 million paid to it, it could be influenced by the fact that it could become a pariah among utilities in the U.S. and no longer receive any consulting fees. This is a sad reality, but unfortunately a reality.

We therefore recommend that there be no independent expert and that the parties be required to work this out, particularly at the executive compensation levels.

7. We would define the parties broadly to include DRA and TURN, given TURN’S very long history, and, if possible, we would like, given the long experience of our general counsel, to also be part of the discussion as to executive compensation.

8. The decisions herein will obviously affect the 2015 Edison GRC. It is also assumed that it will affect any other rate cases where evidentiary hearings have not yet commenced, such as the present PG&E GRC and the future Sempra proceedings. What is unclear is whether the advisory letter, even if expedited, which we support, should also affect, albeit it in a different fashion, the present Sempra rate case (the Commission has decided to issue a decision by March 1st and the 30-day expiration of the advice letter requested by the Commission in the Edison rate case is February 22nd).

2 A s ra ised by th e N A A C last y ear, a com prom ise m igh t be to requ ire th a t any com p en sa tio n o f any execu tive or p ro fessional tha t is m ore than tw ice the annual sa la ry o f the G o v ern o r be borne by th e shareho lders (any th ing above $330 ,000). I t shou ld also be no ted that the G o v e rn o r’s com p en sa tio n w ith h is su p p o rt w as low ered by a pp rox im ate ly 5% from th e p rio r year.

15 Southgate Avenue, Suite 200, Daly City CA 94015 | Office (650) 952-0522 | Fax (650) 952-05301 www.naacoalition.org


http://www.naacoalition.org


NAACNational Asian American Coalition

9. Because Mr. Kanter, the DRA’s primary expert was ill, and because TURN’S lead person on executive compensation was not present at the workshop, we would support any DRA/TURN efforts to have a second expedited workshop meeting in order to ensure that the advice letter has the support not just of Edison and DRA, but o f the community organizations that directly represent the ratepayer.

10. We do not share with Edison its narrow interpretation relating to the Commission’s direction to DRA and Edison to hold a workshop to discuss whether designed modifications should be made to the TCS “or a new method of data gathering” should be utilized for the next SCE rate case,

As stated at the workshop, we believe that the CPUC commissioners intended that their concerns be addressed broadly and that implicit within the Commission’s decision was that it would not be “business as usual.” That is, the parties determining the future of executive compensation would not be limited to DRA and SCE. For example, we believe the Commission also wished to have the two other major utilities, PG&E and Sempra, involved, and the key parties who have significant experience and were involved in the Edison rate case (TURN and the NAAC),3

Secondly, we do not share Edison’s view that the Commission does not believe that it is not necessary to have an alternative method for data gathering in the SCE GRC and other GRCs. Although the language in the Commission’s advice letter could be interpreted in such a narrow fashion, we believe the Commission’s decision to, in effect, overturn past precedents, plus DRA, TURN and the NAAC’s strong objections to the methodology in the past SCE case are, in effect, a “polite” direction to change the method of data gathering.

11. The Commission’s politeness in its direction should not be mistaken for any form of approval or condoning of past compensation practices. If any questions exist as to this, we would urge a meeting with President Michael Peevey within the next week since the assigned commissioner in the Edison case, Timothy Simon, has left the Commission.

Most respectfully,

Robert Gnaizda Of Counsel

Shalini Swaroop Senior Counsel

3 A lthough the G reen lin ing in s titu te did not p lay an active ro le in e ith e r th e S em p ra o r E d ison ra te cases, in its p ast histo ry it has p layed a very m a jo r ro le in execu tive com pensa tion and w e w ou ld w arm ly w e lco m e G reen lin in g ’s full partic ipa tion and expertise.

15 Southgate Avenue, Suite 200, Daly c ity CA 94015 | Office (650} 952-0522 | Fax (650) 952-05301 www.naacoalition.org


http://www.naacoalition.org


Exhibit No. SCE-06 / Human Resources / Vol. 02 / Pt.01 / Ch. IIWitnnss: M. Bennett

Workpaper - South ern California Edison / 2015 GRC - APPLICA TION23

ATTACHMENT A - APPENDIX C Workshop Notes

Date: January 24, 2013

To: Total Compensation Study Workshop Attendees

From: Southern California Edison

Subject: January 23, 2013 Workshop Meeting Notes

Attendees:

Name Organization

Pat Adams Southern California Edison (SCE)

Frank McNulty Southern California Edison (SCE)

George DeMaria Southern California Edison (SCE)

Stephen Lumel Southern California Edison (SCE)

Stacey Hunter Division o f Ratepayers’ Advocates

Noel Obiora Division o f Ratepayers’ Advocates

Truman Burns Division o f Ratepayers' Advocates

Robert Gnaizda National Asian American Coalition

Mia Martinez National Asian American Coalition

Bill Nusbaum TURN

John Sugar TURN

Jamie Mauldin CCUE

Janet Lee Redmond Pacific Gas & Electric (PG&E)

Shelly Sharp Pacific Gas & Electric (PG&E)

Gene Tate Pacific Gas & Electric (PG&E)

Mike Klotz Pacific Gas & Electric (PG&E)

Debbie Robinson Sempra

Laura Earl San Diego Gas & Electric (SDG&E)

Exhibit No. SCE-°6 / Human Resources / VoL 02 / R.O1 / Ch. IIWitnnss: M. Bennett



The meeting took place in the Community Room, 601 Van Ness Avenue, San Francisco.

Opening Remarks and Introductions:

• Pat Adams opened the meeting at 9:30am, introduced herself and the SCE team, and briefly described the agenda topics fo r the day

• All attendees introduced themselves

• Robert Gnaizda informed the group that he had to leave early and wanted to make sure therewould be time for him to provide his remarks. Pat confirmed he would have time.

Presentation (see attachment):

• Pat Adams reviewed and discussed each slide of the presentation:

o Workshop scope - SCE and DRA to file a Tier 2 Advice Letter, w ith the results of theworkshop

o Total Compensation Study (TCS) background - provided history ranging from 1984 to the 2012 GRC filing

o Total Compensation Methodology (2012 GRC) - described the job categories,

benchmark job selection and job matching, comparator companies and valuation

Discussion:

Pat asked if there were any additions to discussion topics, as outlined in the presentation materials. None were requested.

Pat gave Robert Gnaizda an opportunity to provide his remarks. Robert expressed concerns with executive compensation.

Robert recommended SCE compare itself w ith Los Angeles Department of Water & Power (LADWP), other municipals and government agencies. If not an equal weighted comparison, at least a little weight should be provided to such organizations. Robert also commented that high executive compensation,

above and beyond inclusion of these additional (municipal and government) comparator groups, is okay; but should be paid by the shareholders. Robert thinks executive jobs in the private sector are more

demanding than those in the public sector and suggested using companies of greater than $1 billion as comparators. Lastly, he questioned the value of the independent compensation consulting firms and the data they use. If Robert has additional comments, he add them within the 30 days.

Laura Earl asked what we are looking to come away from this workshop with, e.g., what will be the work product?

Frank McNulty responded that this workshop was directed by the Commission and that SCE and DRA are to file a Tier 2 Advice Letter, with the results o f the workshop, within 30 days o f the workshop date.

2




Stacey Hunter also responded that the DRAwere not sure what the full intention of the Commission's directive was.

Shelly Sharp recommended that the utilities still do the TCS and take action on who pays what later. The Study is independent to Robert's question (of whether ratepayers or shareholders pay fo r individual elements o f compensation).

Robert followed up by commenting that times have changed and we should re-think how we conduct the TCS. He has concerns with both executive and non-executive pay.

John Sugar provided comments to procedure issues and comparator company issues. He believes there should be a brief public hearing to get all the issues out before the inception of the Study.

Frank commented that we have gotten direction from the Commission.

John recommended a brief public discussion of the comparator companies selected by SCE and DRA for both executive and non-executive groups.

John discussed another topic referring to PG&E's data on the job categories and would like to seethe executive compensation numbers broken out separately from the non executive. The utilities agreed to display sub-totals fo r these groups in future Studies (executive and non executive groups). John also commented that comparator company size would be fine for executive compensation but not for nonexecutive positions. He believes span of control to be a more relevant indicator fo r the

manager/supervisors o f an organization. As for incentive pay he recommends SCE use target values rather than actuals in the final results (as that was Mercer's recommendation in the recent PG&E Study). PG&E and Sempra TCS reports include both data points {target and actual).

Pat went over the timeline fo r SCE's TCS and explained that we are already behind schedule and need to move forward quickly. Each utility's representative discussed the total amount of time it takes to conduct the TCS and all agreed it is about one year in duration.

Jamie Mauldin provided input and recommended the TCS be discontinued entirely. She commented that rank and file employees are not overpaid, although executives are another matter.Notwithstanding her position, Jamie further commented that: 1) the utilities should define their labor markets based on the cost of living, therefore the utilities should be only comparing jobs to local labor markets, e.g., PG&E, SDG&E, LADWP and SMUD, 2) that it is impossible to compare "apples to apples" when matching jobs, and 3) that valuation o f benefits is subjective.

DRA was asked if they had any opinions on what had been discussed thus far and replied that they are

listening with open ears; and that they will go back and huddle with Marek. The DRA will review and augment the workshop notes for the advice letter,

Noel discussed his interest to go back four or five Studies, post-energy crisis, and look at trends over the

Studies. He'd like to look at comparator companies that dropped out and new companies that were added across the Studies, to determine what impact there might be overall.



ATTACHMENT A-APPENDIX C Workshop Notes

Frank responded that SCE's company was very different in the past in that we had a fleet of fossil plants that we no longer have. It would be difficult to do a comparison over the Studies because many of those jobs are no longer relevant,

Stacey requested opinions from the group regarding the use o f comparator companies versus national sample, as was used in recent PG&E Study. George DeMaria commented that use o f comparator companies provided a more accurate comparison of a given labor market, whereby introducing national data may require further data adjustment to reflect the cost o f labor in a given location. Gene Tate commented that Mercer could not do comparator companies for the PG&E Study, based on their survey database. They therefore utilized national data, applying geographical adjustments to the data where necessary.

Frank discussed next steps and that SCE would be working w ith DRA on the jo in t letter.

Noel brought up the possible need for future workshops to understand past practices and recommend changes going forward.

John Sugar commented that during the Sempra case, DRA did not have enough resources allocated to the Study.

Noel confirmed he made a comment about DRA being understaffed based on what he observed.

Noel also made a comment that the Commission should not rubber stamp the Study just because DRA participated.

Frank asked if there would be interest in having future workshops (outside of specific utility GRCs) to address concerns and work out an agreeable, more standardized process, going forward for all utilities. Similar to what was done in the 1980's. He commented that perhaps it should be included in the advice letter to the Commission on a going forward basis, given the time constraints SCE currently has fo r the 2015 TCS. Bill Nusbaum and Jamie both confirmed they would be interested in future workshops.Shelly commented that she's not sure there is a true need, the utilities seem to be pretty similar and maybe it is just a few tweaks here and there and discuss vendors and their capabilities.

Mike Klotz and Laura Earl wanted to confirm that decisions made as result o f today's workshop, were not going to impact the current Studies of PG&E and SDG&E.

Noel asked if SCE had any documents from the 1984 workshop and Frank said he would look for anything he had and send to Noel.

Pat asked if anyone had anything else they would like to discuss. There were no further comments.

Pat closed the meeting thanking everyone fo r their time and comments and that she would distribute the meeting notes soon.

The meeting was adjourned at 11:50am.

4


Workpaper - South ern California Ediso n / 2015 GRC - APPLICATION27

CALIFORNIA PUBLIC UTILITIES COMMISSION

ADVICE LETTER FILING SUMMARY ENERGY UTILITY

MUST BE COMPLETED BY UTILITY (Attach additional pages as needed)

Company name/CPUC Utility No.: Southern California Edison Company (U 338-E)

Utility type:

0 ELC □ GAS

□ PLC □ HEAT □ W ATER

Contact Person: Darrah Morgan

Phone #: (626) 302-2086

E-mail: Darrah.Morgan@ sce.com

E-mail Disposition Notice to: AdviceTariffManager@ sce.com

E X P LA N A T IO N O F U T IL ITY TY PE

ELC = Electric GAS = GasPLC = Pipeline______ HEAT = Heat WATER = Water

(D ate F iled / R ece ived S tam p by C PUC )

Advice Letter (AL) #:____2854-E________________________ Tier Designation: _2_

Subject of AL: Report on Total Compensation Study W orkshop in Compliance With Decision 12-11-051

Keywords (choose from CPUC listing): Compliance, GRC____________________________________

AL filing type: □ Monthly □ Quarterly □ Annual 0 One-Time □ Other

If AL filed in compliance with a Commission order, indicate relevant Decision/Resolution #:

D.12-11-051

Does AL replace a w ithdrawn or rejected AL? If so, identify the prior AL: ___________________________

Summarize differences between the AL and the prior w ithdrawn or rejected AL1: ___________________________

Confidential treatm ent requested? □ Yes 0 No

If yes, specification of confidential information:Confidential information will be made available to appropriate parties who execute a nondisclosure agreement. Name and contact information to request nondisclosure agreem ent/access to confidential information:

Resolution Required? □ Yes 0 No

Requested effective date: 3/24/13____________ No. of ta riff sheets: -0-_________________________

Estimated system annual revenue effect: (%): _______________________________________________________

Estimated system average rate effect (%): _______________________________________________________

W hen rates are affected by AL, include attachment in AL showing average rate effects on custom er classes (residential, small commercial, large C/I, agricultural, lighting).

Tariff schedules affected: None

Service affected and changes proposed1:

Pending advice letters that revise the same tariff sheets:

1 Discuss in AL if more space is needed.

Exhibit No. SCE-°6 / Human Resources 1 VoL 02 1 R.O1 1 Ch. IIWitness: M. Bennett



28Workpaper - South ern California Ediso n / 2015 GRC - APPLICATION

Protests and all other correspondence regarding this AL are due no later than 20 days after the date ofthis filing, unless otherwise authorized by the Comm ission, and shall be sent to:

CPUC, Energy Division Akbar JazayeriAttention: Tariff Unit Vice President of Regulatory Operations505 Van Ness Avenue Southern California Edison CompanySan Francisco, CA 94102 8631 Rush StreetE-mail: EDTariffUnit@ cpuc.ca.gov Rosemead, California 91770

Facsimile: (626) 302-4829E-mail: AdviceTariffManager@ sce.com

Leslie E. StarckSenior Vice Presidentc/o Karyn GanseckiSouthern California Edison Company601 Van Ness Avenue, Suite 2030San Francisco, California 94102Facsimile: (415) 929-5540E-mail: Karyn.Gansecki@ sce.com

Exhibit No. SCE-°6 / Human Resources 1 VoL 02 1 R.O1 1 Ch. IIWitness: M. Bennett





Southern California Edison

REQUEST FOR PROPOSAL

No. 179-022519

fo r

GENERAL RATE CASE TOTAL COMPENSATION STUDY

February 26, 2013

CONFIDENTIAL

P a g e 1 o f 21

CONFIDENTIAL INFORM ATIO N : This Request for Proposal ("RFP") contains information confidential and proprietary to Southern California Edison (" SCE"). This RFP and the information contained herein may not be used, disclosed or reproduced for any purpose other than as required for the preparation of a proposal for the benefit of SCE without the prior written authorization o f SCE, and those so authorized may only use the information for the purpose of evaluation consistent with the authorization. Reproduction of any section of this document must include this legend.

Exhibit No. SCE-06 / Human Resources / Vol. 02 / Pt.O1 / CE. IIWitness: M. Bennett


PROPOSAL REQUEST NO.

REQUEST FOR PROPOSAL 179-022519

6.3 Response Time Requirement

The awarded bidder shall ensure that all required resources are deployed in a timely manner to support all aspects o f the scope o f work: availability within three days o f notification by SCE management. Prompt coordination (or related information) is another essential service requirement.

6.4 Commercial Cost Proposal

Bidders are encouraged to reflect in their proposal the use o f cost effective strategies and measures that offer cost advantages to SCE, while meeting the scope o f work requirements.

Bidders shall provide a breakdown o f their total estimated hours and cost by task/phase as outlined in this RFP, including an estimation o f hours required by each job classification assigned to perform the task/phase.

Bidders must disclose if they receive more than 10% o f their annual revenues from other SCE contracts.

Bidders must furnish a schedule o f hourly billing rates for all personnel (by name and classification) which Bidder anticipates using to perform the W ork requested. This schedule must include the following:

1. Rates must be Time and Material rates and include straight time, overtime, and premium time (if applicable).

2. Rates must be fully loaded billing rates which include all bare payroll costs and other taxes, employee benefits, insurance, overhead (administrative salaries, secretarial and other clerical salaries, furniture, computer and other equipment purchase or leases, cell phones, telephone charges, library research, office leases / rents, office supplies, postage, courier service, reproduction costs, and profit.

3. Rates must be hourly rates or daily rates that can be prorated.4. Rates must be precise - ranges o f rates or average rates will not be accepted.5. Rates must be fixed for the duration o f the Work.6. Subcontractors shall be identified by name and billed at actual cost without markup. The use o f

subcontractors on consulting projects shall be minimized.7. Estimated out-of-pocket expenses. Reimbursement o f miscellaneous out-of-pocket expenses

that are directly related to the project, if authorized, shall be at actual reasonable cost without markup, and shall not exceed 10% o f the overall project cost.

8. Mileage shall be reimbursed at the current Federal mileage rate.

Payment Terms: Bidder shall quote payment discounts in accordance with the following terms:

% 30 d ay s , % 45 days, net 60 days after receipt o f invoice in SCE’s Accounts PayableDivision.

P a g e 16 o f 21

CONFIDENTIAL INFORM ATIO N : This Request for Proposal ("RFP") contains information confidential and proprietary to Southern California Edison ("SCE"). This RFP and the information contained herein may not be used, disclosed or reproduced for any purpose other than as required for the preparation o f a proposal for the benefit of SCE without the prior written authorization of SCE, and those so authorized may only use the information for the purpose of evaluation consistent w ith the authorization. Reproduction of any section of this document must include this legend.

Exhibit No. SCE-06 / Human Resources / Vol. 02 / Pt.01 / Ch. IIWitness: MI. Bennett

s02v02p01 - app · participants at the tcs workshop in connection with the next tcs. background on...

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