2016 Short-Term Incentive Plan. 1 of 14

Transcription

1 2016 Short-Term Incentive Plan 1 of 14

2 2016 Annual Incentive Goals & Metrics Summary: The table below provides an overall summary of incentive plan metrics and weights. Detailed information including performance criteria for individual metrics is included on the attached pages. Goal Category Weight Operations Metrics: 1. Reliability & Compliance 15% 2. Unit Commitment Efficiency 10% 3. Market Efficiency 10% 4. Process Improvement 5% 5. Operations & Capital Budget 10% 6. Customer Satisfaction Survey 10% Strategic Elements: 40% 7.1 Seams Enhancement 7.2 Clean Power Plan and Other Environmental Regulatory Impacts 7.3 Portfolio Evolution 7.4 Market Enhancement 7.5 Technology Enablement Total Plan Score 100% 2 of 14

3 Metric Wt. Historic Performance Threshold Performance Excellent Performance Reliability 1. Reliability & Compliance 15% results: No severe failures or violations Compliant with CPS1 and CPS2 (or BAAL) Minimal violations for FERC approved NERC reliability standards. No violations for FERC approved NERC reliability standards. Required: Compliant with CPS1 1 and CPS2 (or BAAL for the duration of the field trial) and Zero Disturbance Control Standard violations caused by MISO Balancing Authority. Guidance on Determining Performance: At the completion of the year, the Chief Executive Officer and Chief Compliance Officer shall provide a full disclosure of all compliance matters impacting this goal to the Human Resources Committee of the Board and provide a recommendation on the severity and impact to the organization of any findings. Assessments processed under the NERC s Find, Fix, Track, and Report enforcement mechanism and similar administrative assessment mechanisms will be considered to pose a low risk to reliability. The self-report of a violation will generally only count against this metric if it represents a repeat, willful, or intentional violation of the standard. The Board will be informed of all self-reports and the processing of self-reports by the relevant reliability entities and FERC. MISO Board of Directors will use this recommendation and their discretion to determine an appropriate impact to the incentive payout for this Goal. 1 Control Performance Standard 1 and 2 (CPS1 & CPS2) are rolling 12-month measures of performance. This metric requires MISO to be compliant for each 12-month period throughout the year. BAAL is an alternative to the CPS2 standard, also based on a rolling 12-month measure. 3 of 14

4 Metric Wt. Historic Performance Threshold Performance Excellent Performance Real-Time Operations 2. Unit Commitment Efficiency 10% 98% of days with online 100% 99% generation minimized and 98% 99% 99% sufficient to meet demand and constraints. 95% 90% % of days with online generation minimized and sufficient to meet demand and constraints. This metric is designed to ensure MISO effectively commits generation in its forward and intra-day processes to meet demand and mitigate constraints. Beginning in 2013, the metric includes forward RAC unit commitments which impose a downward pressure on the metric performance. The metric has been a part of the plan since The metric score is based on the average daily score of two unit commitment objectives: Effectively commit generation to meet actual demand and provide adequate ramp capability. Effectively commit and de-commit units to mitigate constraints. The measures of efficiency related to unit commitment and load forecast will minimize excess capacity and the uplift charges from an operational perspective. The ensuing charges will be a result of market participants offers and bids in the market. Performance impact: Each percentage point movement in performance represents 3.5 days of non-optimized unit commitment efficiency. A reasonable estimate for amount of revenue sufficiency guarantee that we may incur per day on a day when we miss the goal is $200,000. Therefore, the total value per percentage point is estimated at $700,000 and the total performance range equals a $1.4M impact. The additional value of this metric is that it encourages a precise and efficient unit commitment process on a daily basis and prevents actions that could result in an even bigger daily cost for our stakeholders. 4 of 14

5 Metric Wt. Historic Performance Threshold Performance Excellent Performance Market Operations 3. Market Efficiency 10% Market Funding Efficiency is at least 94%. 100% 93% 94% 92% 95% 90% 80% 70% Market Funding Efficiency is at least 97%. This metric tracks the alignment between the Financial Transmission Rights (FTR), the Day Ahead Energy Market and the Real Time Market. The ideal value for this metric is one hundred percent (100%). Shortfalls or surpluses in FTR Funding or Net Real Time Congestion Charges impact uplifts which would drive this measure below 100 percent, indicating that Transmission Capacity was oversold or undersold in the forward markets. The metric is calculated as follows: Market Funding Efficiency = (1 - ABS((Financial Transmission Rights Shortfall + Real Time Excess Congestion charge Fund) / (Total Financial Transmission Rights Target Credit)) * 100%) Performance impact: In 2015, each percentage point of the Market Efficiency Metric was worth $15.2M of funding shortfalls. The performance range between threshold and excellent is estimated at $45.6M. 5 of 14

6 Metric Wt. Historic Performance/Results Threshold Performance Excellent Performance Process Improvement 4. Process Improvement 5% 2015 is the first year for tracking this metric. Estimated results are1% cost reductions. Achieve a documented and confirmed 1% cost reduction from prior year actual incurred costs through efficiency improvements. Cost reductions will be reflected in 2017 budget. Efficiency improvements are from the reduction in costs and resources committed to existing processes and procedures for current value proposition projects and/or processes. Achieve a documented and confirmed 2% cost reduction from prior year actual incurred costs through efficiency improvements. Cost reductions will be reflected in 2017 budget. Efficiency improvements are from the reduction in costs and resources committed to existing processes and procedures for current value proposition projects and/or processes. 6 of 14

7 Metric Wt. Historic Performance/Results Threshold Performance Excellent Performance Financial Control 5a. Operations Budget 10% 8% ±2.5% budget ±1.0% budget 5% 0% -5% -10% 0.3% 1.0% -0.5% 1.3% 30% 5b. Capital Budget 2% ±10% budget ±3% budget 20% 10% 0% % 3.2% 0.6% 3.0% -10% -20% These goals are intended to promote wise use of financial resources committed to MISO. The goals measure our ability to complete scheduled work at scheduled costs. The focus is on accurate and predictable business planning and operations. Operating Budget for metric purposes = Base Operating Costs less Incentive Compensation Capital Budget for metric purposes = Base Capital Projects 7 of 14

8 Metric Wt. Historic Performance/Results Threshold Performance Excellent Performance Customer Service 6. Survey Feedback Rating 90% 10% 80% of survey respondents 83% providing an average rating of 5 81% 80% 80% or better on a 7 point scale. 80% 70% 60% % of survey respondents providing an average rating of 5 or better on a 7 point scale. 8 of 14

9 Strategic Elements These metrics represent milestone steps towards long-term strategic initiatives. Concurrent achievement requires significant coordination of resources and performance efficiency. Each of these goals is evaluated on a pass/fail basis. The total possible combined performance for these goals is 40% of the plan total. Metric Wt. Historic Performance/Results Threshold Performance Excellent Performance Strategic Elements Strategic Elements 40% 100% 100% 4 of 5 (80%) strategic goals are 100% completed. 80% 71% 60% 60% 40% 20% 0% of 5 (100%) strategic goals are completed. 9 of 14

10 Strategic Element 7.1 Seams Enhancement MISO s long-term goal is to create and maintain an environment and tools where effective collaboration supports reliable and efficient market transactions and transmission planning across the seams. In support of this strategic goal, the following milestone accomplishments will be pursued in 2016: 1. Price Convergence Improve price convergence along the MISO-PJM by filing at FERC any necessary tariff changes to implement changes to Interface Pricing. Evaluate options to improve price convergence with SPP. 2. Reliable Cost Effective Infrastructure Investment Advance planning along the non-rto seam through focused efforts on coordination with the South East Regional Transmission Planning Group (SERTP). Improve the efficiency and effectiveness of the current three hurdle (JOA criteria, MISO criteria, PJM criteria) Interregional Planning process with PJM. Required Performance 1. File necessary tariff changes to implement interface pricing changes at FERC; if no tariff changes are required for final method, complete MISO stakeholder process around changes to be implemented; evaluate options to improve price convergence with SPP. 2. Complete data and information exchange by year end. 3. Develop and introduce into the Interregional Planning Stakeholder Advisory Committee a proposal to eliminate one or more of the current three hurdles for interregional transmission projects with PJM. 10 of 14

11 Strategic Element 7.2 Clean Power Plan and Other Environmental Regulatory Impacts EPA s final Clean Power Plan will fundamentally transform the electric utility industry by impacting generation, resource adequacy and grid reliability, as well as the economic dispatch model that we use to deliver least-cost energy across the footprint. As an independent system operator, MISO is not subject to EPA regulations, nor do we take policy positions on them. However, MISO has an interest and a responsibility to analyze how CPP, MATS and other EPA rules affect generation, load, resource adequacy and our ability to deliver least-cost energy across the MISO footprint. The goals of our analyses are 1) to inform our states and asset owners as they formulate their compliance strategies; and 2) to enable the reliable, efficient implementation of policy and compliance decisions made by our states and asset owners. In support of these goals, MISO will undertake the following efforts in 2016: 1. Conduct modeling and analysis of the final Clean Power Plan with a focus on understanding the compliance options and their implications and preparing for transmission overlay development to provide information to our states and asset owners to inform their decisions on compliance strategies. 2. Develop scope, budget and workplans for assessing operational impacts, market design and tariff implications of Clean Power Plan compliance options. Required Performance 1. Modeling and analysis focused on understanding the compliance options and their implications and preparing for transmission overlay development is complete, and modeling to develop overlay options has commenced. 2. Workplans, including work scope and budget, to assess operational impacts, market design and tariff implications established and ready for execution. 11 of 14

12 Strategic Element 7.3 Portfolio Evolution MISO s long-term goal is to maintain operating reliability and efficiency at the regional resource level while performing at or near the target planning reserve level. As the MISO resource mix changes based on public policy requirements and other market forces, MISO is committed to necessary analyses and product improvements to support reliability and market efficiency. In support of that goal MISO will undertake the following efforts in 2016: 1. Implement requirements for Seasonal and locational assessments for the MISO resource pool for 2017/18 Planning Resource Auction. 2. Implement requirements to reduce delays in Interconnection queue. Required Performance 1. Complete stakeholder process and file appropriate changes at FERC. 2. Implement requirements to reduce delays and reduce commercial uncertainty in Interconnection queue. 12 of 14

13 Strategic Element 7.4 Market Enhancements MISO s long-term goal is a market design recognized as a hallmark of reliability and efficiency. The design will enhance the value proposition delivered to stakeholders and consumers. Market prices will accurately reflect the underlying supply and demand balance under all market and operating conditions. In support of this strategic goal, the following milestone accomplishments will be pursued in 2016: 1. Ramp Enhancements Enhance commitment and dispatch functions within the Day Ahead and Real-Time markets to include two new products named Up Ramp Capability (URC) and Down Ramp Capability (DRC). These two products will reserve some flexible capacity to prepare the system for known variability of net load and the uncertainty associated with forecasts. 2. Setting Price During Emergency Events Under conditions of scarcity, market prices can be artificially depressed. Prices in these hours play a crucial role in sending efficient long-term economic signals to maintain an adequate supply of resources and to develop additional demand-response capability. This project will address the artificial depression of prices that can occur when implementing capacity emergency procedures. 3. Electric and Gas Scheduling Requirements Implement a 3 hour day-ahead market clearing window to improved alignment of the Electric and Gas day scheduling timelines. This project will provide reliability and market benefits by allowing resources with longer start-up times to be considered in MISO s Dayahead and Next Day FRAC processes and will also comply with FERC Order 809. Required Performance 1. Complete testing of the Ramp Enhancements products and begin using in operational production. 2. Take delivery of emergency pricing software from the vendor, complete testing, and migrate the enhancements to operational production. 3. Implement in operational production a target 3 hour Day-ahead market clearing window 13 of 14

14 Strategic Element 7.5 Technology Enablement MISO s long term IT vision is to enable and deliver business value through innovation, operational excellence and an enabling workforce. Delivering business value with our services & application portfolio is critical to our overall reliability and cost effectiveness. In 2016, we will continue our investment in our IT transformation with the next set of program deliverables executing our IT Strategy. These include: 1. Innovation and Security: a. Settlements: MISO s Settlements applications are critical to our financial partners and to MISO s value creation. MISO, will provide for the next generation of settlements data processing and calculation engine capabilities. b. Access Management: Changes focused on provisioning and authentication. c. Cyber Security: Expand visibility and monitoring of 24/7 Security operations through enhanced user activity monitoring (Solutionary Phase 2). Deploy Threat Analytics Capabilities to improve MISO s knowledge of advanced threat actors. Deploy Next Level Incident Management Capabilities. Establish security metrics that are reviewed and actioned by the Senior IT Leadership on a quarterly basis. d. Compliance: Ensure the reliability of grid operations by protecting MISO Bulk Electrical System (BES) cyber assets in accordance with CIPv5. 2. Operational Excellence: a. Quality: Increase automated regression testing of critical business applications to improve efficiencies but also quality. b. Software Development Framework: Focus on a test driven development approach, unit testing and adoption of our agile methodologies to improve efficiencies. Improve operational efficiencies by taking manual business processes surrounding existing systems and replacing them with new processes that take advantage of new system functionality, automation, and improved user interfaces. Required Performance 1. Innovation and Security: a. Settlements: Run at least 70% of the Settlement system in shadow mode by the end of b. Access Management: At least 95% of applications move to the new Access permission process. c. Cyber Security: By the end of 2016 we will: Deliver on Solutionary Phase 2 Scope as defined in Q1. Deploy and use new platform that leverages enhanced intelligence sources and reporting. Implement and practice responding to breaches in Cyber Security with Business Leadership in partnership with industry experts. Achieve quarterly cadence and take actions to improve security controls. d. Compliance: Remediation and movement of the 22 BES cyber assets into the Electronic Security Perimeter (ESP) by April 1, Elimination of shared infrastructure use between BES cyber assets and Non-BES by April 1, Operational Excellence: a. Quality: Develop a Risk Based Assessment to identify key business functionality in DART and EMS. Create regression tests for at least 20% of the key business functionality in DART and EMS based on the risk assessment. Automate at least 20% of the DART and EMS regression tests developed in b. Software Development Framework: Develop an automated testing framework for Settlements. Implement continuous integration automation to build and test Settlements applications and complete tests to support at least 60% code coverage. 14 of 14