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5.2. ERMUSR 11-17-2015 Elk River Municipal Utilities UTILITIES COMMISSION MEETING TO: FROM: Elk River Municipal Utilities Commission Wage and Benefits Committee: John Dietz—Chair John Dietz, Troy Adams,Mark Fuchs, Al Nadeau—Vice Chair Theresa Slominski Daryl Thompson—Trustee MEETING DATE: AGENDA ITEM NUMBER: November 17, 2015 5.2 SUBJECT: Wage and Benefits Committee Update: Cost of Living Adjustment and Other BACKGROUND: In October 2011, the Utilities Commission formed a Wage and Benefits Committee. The Utilities Commission created the committee to be comprised of one appointed Commissioner, currently John Dietz—Utilities Chair, and three Utilities managers, Troy Adams—General Manager, Theresa Slominski—Finance and Office Manager, and Mark Fuchs—Electric Superintendent. The intent for the creation was to have the committee review and analyze wage and benefits information, receive comments and questions from employees relating to wage and benefits, function as a forum for discussion, and ultimately present select wage and benefit information to the Utilities Commission for action. DISCUSSION: On November 2,the Committee reviewed: commissioner compensation, ERMU's electrical contractor license and ongoing need for a master electrician, cost of living adjustments (COLA) numbers from our market, and organizational structure and personnel projections. Commissioner Compensation The current Commission compensation is $150/month. Of the Minnesota municipal utilities, approximately half are governed by council. Generally speaking,these are the smaller cities/utilities. A survey of the Minnesota municipal utilities governed by a commission indicated that the majority of them do not receive monthly compensation. Of those that do compensate their commissioners, the most common monthly compensation amount was $150. The highest level of monthly compensation was $500/month for chair and$400/month for commissioner. For a statutory city,the monthly compensation is set by the council. Separate from the monthly commissioner compensation,the commissioners may be reimbursed for expenses due to travel or representation of the utilities for work that falls outside of the regular commission meetings and committee meetings. ERMU reimburses for qualifying expenses with supporting documentation. ERMU also compensates commissioners for IP-OVIERE0 0 Y U44 Page 1 of 4 NATURE Reliable Public Power Provider P 0WE 0.E D To S ERV E 133 representing the Utilities at meetings/conferences that are in addition to the regular commission meetings. This additional stipend is at a rate of$50/day and must be supported by additional documentation. Based on survey information, the W&BC recommends maintaining the current level of compensation for the regular utilities commission meeting at a rate of$150/month. With the personal costs for a commissioner to take off from work to represent ERMU at additional meetings/conferences,the W&BC recommends increasing the additional stipend to $75/day. Electrical Contractor License An electrician's license is required for electrical work performed on the load side of the electric meter. Because of this, a few years ago ERMU registered as a licensed electrical contractor in the state of Minnesota. This was possible because one of ERMU's employees had owned an electrical contracting company and was the company's master electrician. This employee allowed ERMU to become registered as an electrical contractor through the use of his master electrician's license. This employee then would oversee any electrical work that was being performed under this license. This is ERMU's new normal. Now and into the foreseeable future, ERMU will need to employ a master electrician and maintain an electrical contractor's license. Currently the employee whose master electrician license is being used to maintain the electrical contractor's license is not being compensated to maintain his license. Nor is the master electricians license a minimum requirement of a position. Both of these issues need to be resolved. If this employee were to let the master electrician's license expire, or if this employee leaves ERMU, ERMU would need to hire another master electrician. This employee is currently an Electrical Technician. The W&BC discussed options to address these issues and recommends the following solution: Replace one of the current Electrical Technician positions with an Electrician/Electrical Technician position. The new Electrician/Electrical Technician position will include as a minimum requirement a master electrician's license. The points for this new position would be adjusted for the additional requirement. This would increase the position grade from Field Group Pay Grade 7 to Field Group Pay Grade 8. 2016 Cost of Living Adjustment,Market Adjustment, and Total Compensation On September 8 the Committee reviewed preliminary 2016 COLA survey numbers from our lineworker market. Those preliminary survey numbers indicated a need for ERMU to have a COLA for the lineworkers in the range between 3% and 4%just to maintain a metro market average. This range appeared to be higher for lineworkers that would be likely for all labor market sectors. Therefore the Committee benchmarked additional positions/groups: Water Operator, Customer Service Representative,Meter Technician, Electrician, and Utility Management. On November 2 the Committee reviewed the benchmarking information. The data lead the Committee to support a recommendation for a 2.75%COLA for all pay groups. This COLA, however,brings the lineworker group short of the metro average. The Committee recommends • 1' 0 / E8E11 O1 Page 2 of 4 NATURE Reliable Public Power Provider O W E R E D T O S ERV E 134 an additional 1%market adjustment for the lineworker group which will bring the journeyman lineworker wage to the metro average. Due to the upcoming work associated with the electric service territory acquisitions over the next five years and due to projected retirements, retention of lineworkers is critical; critical for the labor to perform the obligation of work associated with the acquisition and critical for the succession of leadership. ERMU lost two lineworkers again this year and are now dangerously thin on experience. Another factor of the total compensation is the compensation from ERMU's Performance Metrics Incentive Policy. This policy was developed after ERMU lost six lineworkers to Xcel in a two year window. The W&BC and Commission looked at the Xcel lineworker wage and felt that as a municipal we were not able to match the base hourly rate. This policy was developed as a solution to close that hourly rate gap with strings attached; the company had to meet performance metrics established by the Commission for this additional compensation to be paid out. For example, if the Utilities were under performing financially, the Commission could hold back this incentive compensation. This policy was broadened in scope to span across the whole company to encourage above average performance from all segments of the company. Even with the recommended COLA,market adjustment, and the anticipated Performance Metrics Incentive, the journeyman lineworker wage will be still lower than Xcel in 2016. This also doesn't take into consideration the significant amount of overtime the Xcel lineworkers normally get. However this has still been a valued tool to narrow the gap. That said,this is part of the total compensation and the Committee recommends the Commission discuss this along with COLA and market adjustments. The Commission needs to consider total compensation when positioning the Utilities for employee retention, rates, and value. An additional challenge that has arisen from market adjustments for the lineworker group is that members of this group will make more than managers who supervise them. This situation will make it nearly impossible to develop future leadership from within and proactively succession plan for retirements and growth. The W&BC recommends a few options for addressing this issue: additional performance metrics incentive for the manager group or standalone incentive plan. The Committee looks for discussion and direction from the Commission. The ERPD developed a wage incentive program in 1993. This may provide valuable information and lessons for consideration in addressing ERMU's issues. Organizational Structure and Personnel Projections The Committee reviewed the organizational chart to discuss succession planning for growth and potential retirements. All positions are important for ERMU to successfully provide valued services to our community. However, due to special circumstances there are always areas of immediate and/or long term concern that become critical for planning. As already stated, it is identified that the lineworker position has elevated concern as a critical position for employee retention. Also critical is the development and retention of leadership and management. The Committee is developing an annual practice to review, identify, and develop options for solutions for areas of staffing concern. This information will be presented as needed to the Commission for consideration. PyOWERED DI Page 3 of 4 NATURE Reliable Public Power Provider P ERED D T o SERV E 135 In review of the organizational structure it was determined that the Credit and Collections Specialist should be reassigned from being a direct report to the Finance and Office Manager to being a direct report to the Customer Service Manager. Due to workflow and interoffice procedures this is more efficient. The Customer Service Manager is a direct report to the Finance and Office Manager. Responsibilities within the office fall under the Finance and Office Manager regardless of the assignment of the Credit and Collections Specialist. This change would not affect any position points or change any pay classifications. ACTION REQUESTED: 1. Approve an increase of the commissioner stipend from$50/day to $75/day. 2. Approve the replaced of one of the current Electrical Technician positions with a new Electrician/Electrical Technician position effective January 1, 2016. 3. Approve 2016 COLA at 2.75% for all pay groups. Approve 2016 market adjustment of 1% for the lineworkers group. 4. Approve the reassignment of the Credit and Collections Specialist from being a direct report to the Finance and Office Manager to being a direct report of the Customer Service Manager. rOWEIIEll 11 Page 4 of 4IjIJATURE Reliable Public Power Provider POWERED T o SERV E 136