Human Resources (HR) Volume 1 – HR Department INTRODUCTION TO HUMAN RESOURCES 3 A. Introduction 4 The Human Resources Department (HR) provides client organizations with integrated

Application No.: Exhibit No.: SCE-06, Vol. 1 Witnesses: J. Alderete

L. Clapp D. Featherstone F. Quevedo M. Steudle

(U 338-E)

2009 General Rate Case

Human Resources (HR) Volume 1 – HR Department

Before the

Public Utilities Commission of the State of California

Rosemead, California

November 2007

SUMMARY

This Exhibit is composed of two volumes: Volume 1 – HR Department Volume 2 – Total Compensation

Volume 1 – HR Department contains two chapters:

Chapter I – Introduction Chapter II – A&G Expenses for the HR Department, Equal Opportunity Department, and Executive Officers – Our request represents an $8.2 million increase from 2006 recorded expenses. The increase is due primarily to:

• Talent Management Increase of $4.4 million – the company is growing and additional personnel are needed to recruit, attract, retain, the talent needed to staff large-scale projects and expanding operations. The high percentage of employees eligible for retirement, the scarcity of labor resources and additional regulatory compliance requirements are also driving the need for additional staffing.

• Executive Officers Increase of $3.4 million – the company has filled executive positions that were vacant in 2006 due to retirements. In addition, we expect the executive ranks to grow slightly by the test year as our company grows.

Volume 2 – Total Compensation contains six chapters:

Chapter I – Overview of Total Compensation Philosophy

Chapter II – Summary of Hewitt Total Compensation Study

Chapter III – Short Term Incentive Programs – Our request represents a $15.1 million increase in Results Sharing program expenses over recorded 2006. The increase is due to the anticipated growth in the employee population.

Chapter IV – Long Term Incentives – Long Term Incentives form a substantial portion of the compensation offered by most companies to attract and retain top executives. Consistent with the new accounting standards that now require SCE to expense such costs, SCE is requesting $23.3 million in this GRC for recovery of these compensation costs.

Chapter V – Recognition Programs

Chapter VI – Pensions and Benefits Programs– Our request represents a $61.5 million increase from 2006 recorded expenses. The increase is primarily a result of:

• Post-Retirement Benefits Other than Pensions (PBOP) Decrease of $6.3 million – Due primarily to favorable trust fund investment returns.

• Medical Increase of $31.7 million – Due primarily to escalating health care costs.

SCE-06: HR Volume 1 - HR Department

Table Of Contents Section Page Witness

-i-

I. INTRODUCTION TO HUMAN RESOURCES...............................................1 D. Featherstone

A. Introduction............................................................................................1

B. Human Resources as a Strategic Business Partner ................................7

C. Workforce Planning ...............................................................................8

1. Introduction................................................................................8

2. Workforce Demographics..........................................................9

3. Workforce Retirements............................................................11

4. Workforce Terminations (Voluntary & Involuntary) ..............12

5. Workforce Retirement Projections ..........................................13

II. DEPARTMENT/FUNCTION DESCRIPTIONS ............................................14

A. Summary of Human Resources and Executive Officers Activities and Test Year Request.........................................................14

1. Human Resources Department ................................................15

a) Total Compensation .....................................................16

(1) Summary of Test Year Request .......................16

(2) Activities of Total Compensation ....................16

(3) Analysis of Recorded Data, Estimating Methodology, and Test Year 2009 Forecast for Total Compensation (FERC Accounts 920/921, 923, and 926) ....................................23 L. Clapp

b) HR Service Center .......................................................27 D. Featherstone


(2) Activities of the HR Service Center.................27


Table Of Contents (Continued) Section Page Witness

-ii-

(3) Analysis of Recorded Data, Estimating Methodology, and Test Year 2009 Forecast for HR Service Center...............................................................33 L. Clapp

c) Talent Management .....................................................34 D. Featherstone


(2) Activities of Talent Management.....................34

(3) Analysis of Recorded Data, Estimating Methodology, and Test Year 2009 Forecast for Talent Management (FERC Accounts 920/921 and 923) .............................................49 M. Steudle

d) HR Client Services.......................................................64 D. Featherstone


(2) Activities of HR Client Services......................64

(3) Analysis of Recorded Data, Estimating Methodology, and Test Year 2009 Forecast for HR Client Services (FERC Accounts 920/921 and 923) ...........................................................71 L. Clapp

e) Labor Relations............................................................74 D. Featherstone


(2) Activities of Labor Relations ...........................74

(3) Analysis of Recorded Data, Estimating Methodology, and Test Year 2009 Forecast for Labor Relations (FERC Accounts 920/921 and 923) ...........................................................77 L. Clapp

f) HR Administration.......................................................79 D. Featherstone




-iii-

(2) Activities of HR Administration......................79

(3) Analysis of Recorded Data, Estimating Methodology, and Test Year 2009 Forecast for HR Administration (FERC Accounts 920/921 and 923) .............................................81 L. Clapp

g) SCE Executive Officers ...............................................84 D. Featherstone


(2) Description of Executive Officer Compensation ..................................................84

(3) Analysis of Recorded Data, Estimating Methodology, and Test Year 2009 Forecast for Executive Officers of SCE (FERC Accounts 920/921 and 923) .............................................86

2. Equal Opportunity....................................................................90 F. Quevedo

a) Summary Of Test Year Request ..................................90

b) Diversity Strategy ........................................................90

(1) Work Environment...........................................90

(2) Community Partnership ...................................91

(3) Recruitment and Retention ..............................91

(4) Leadership Development .................................91

(5) Communication and Education........................92

c) Workforce Diversity Update........................................92

(1) Background and Data.......................................92

(2) Plans and Programs..........................................94



-iv-

d) Functional Activities Of Equal Opportunity (EO)..............................................................................96

(1) EO Administration and Compliance................97

(2) Training............................................................98

(3) Investigating Employee Concerns ...................98

(4) Supplier Diversity ............................................99 J. Alderete

(5) Equal Opportunity and Diversity (EOD) Special Projects ..................................101 F. Quevedo

e) Analysis Of Recorded Data, Estimating Methodology, And Test Year 2009 Forecast For Equal Opportunity (FERC Accounts 920/921) .....................................................................102 J. Alderete

Appendix A Witness Qualifications


List Of Figures Figure Page

-v-

Figure I-1 HR Department And Executive Officers/ Administrative And General

Expenses Recorded and Adjusted 2002-2006/Forecast 2007-2009 FERC Accounts

920/921 (Constant 2006 $000) (Discussed in this Exhibit, Chapter II)........................................... 2

Figure I-2 Outside Services Recorded And Adjusted 2002-2006/Forecast 2007-2009

FERC Account 923 (Constant 2006 $000) (Discussed in this Exhibit, Chapter II) .......................... 3

Figure I-3 Pension And Benefits Program Costs And Administrative and General

Expenses Net Of Capitalization Recorded and Adjusted 2002-2006/Forecast 2007-

2009 FERC Account 926 (Constant 2006 $000) (Discussed in Multiple Exhibits, See

Table I-1 Below) ..................................................................................................................... 4

Figure I-4 Results Sharing Recorded And Adjusted 2002-2006/Forecast 2007-2009

FERC Accounts 500, 588, 905, And 920/921 (Constant 2006 $000) (Discussed In

Exhibit SCE-06 Vol.2) ............................................................................................................. 6

Figure I-5 SCE Retirement Eligible Employees.............................................................................. 10

Figure I-6 SCE Retirement Comparison Actual Retirements vs. Retirement Eligible

Employees ............................................................................................................................ 11

Figure I-7 Voluntary And Involuntary Terminations....................................................................... 12

Figure II-8 Human Resources And Executive Officers – Combined Recorded and

Adjusted 2002-2006/Forecast 2007-2009 FERC Accounts 920/921/923/926 (Constant

2006 $000) ........................................................................................................................... 14

Figure II-9.................................................................................................................................. 15

Figure II-10 Total Compensation Recorded and Adjusted 2002-2006/Forecast 2007-2009

All FERC Accounts (920/921/923/926) (Constant 2006 $000) ................................................... 16


FERC Accounts 920/921 (Constant 2006 $000)........................................................................ 23


List Of Figures (Continued) Figure Page

-vi-


FERC Account 923 (Constant 2006 $000) ............................................................................... 24



Figure II-14 HR Service Center Recorded and Adjusted 2002-2006/Forecast 2007-2009

All FERC Accounts (926) (Constant 2006 $000) ...................................................................... 27

Figure II-15 HR Service Centers Recorded and Adjusted 2002-2006/Forecast 2007-2009


Figure II-16 Talent Management Recorded and Adjusted 2002-2006/Forecast 2007-2009

All FERC Accounts (920/921/923) (Constant 2006 $000).......................................................... 34

Figure II-17 Leadership Development Targeted Areas .................................................................... 46





Figure II-20 HR Client Services Recorded and Adjusted 2002-2006/Forecast 2007-2009






Figure II-23 Labor Relations Recorded and Adjusted 2002-2006/Forecast 2007-2009 All

FERC Accounts (920/921/923) (Constant 2006 $000) ............................................................... 74

Figure II-24 Labor Relations Recorded and Adjusted 2002-2006/Forecast 2007-2009



List Of Figures (Continued) Figure Page

-vii-

Figure II-25 Labor Relations Recorded and Adjusted 2002-2006/Forecast 2007-2009


Figure II-26 HR Administration Recorded and Adjusted 2002-2006/Forecast 2007-2009

All FERC Accounts 920/921/923 (Constant 2006 $000) ............................................................ 79





Figure II-29 Executive Officers Recorded and Adjusted 2002-2006/Forecast 2007-2009


Figure II-30 Executive Officers Recorded and Adjusted 2002-2006/Forecast 2007-2009


Figure II-31 Executives Recorded and Adjusted 2002-2006/Forecast 2007-2009 FERC

Account 923 (Constant 2006 $000) ......................................................................................... 88

Figure II-32 Equal Opportunity Recorded and Adjusted 2002-2006/Forecast 2007-2009

All FERC Accounts (920/921) (Constant 2006 $000) ................................................................ 90

Figure II-33 Equal Opportunity Recorded and Adjusted 2002-2006/Forecast 2007-2009

FERC Accounts 920/921 (Constant 2006 $000)...................................................................... 102


List Of Tables Table Page

-viii-

Table I-1 Pension And Benefit Expense By Exhibits FERC Account 926 .................................................5

Table I-2 Summary of Retirement Forecast, 2007-2011 ...........................................................................13

Table II-3 Comparison Between Planning And Administration................................................................28

Table II-4 Talent Management Labor & Non-Labor Forecast Increases Above 2006

Recorded Amounts FERC Accounts 920/921 (2006$)........................................................................51

Table II-5 Talent Management Labor Forecast Increase Above 2006 Levels FERC

Account 920 (2006$) ...........................................................................................................................56

Table II-6 Talent Management Non-Labor Forecast Increase Above 2006 Levels FERC

Account 921 (2006$) ...........................................................................................................................60

Table II-7 Comparison Between Total Compensation And Client Services Activities.............................66

Table II-8 Summary Of SCE Full & Part-time Workforce For 2009 GRC For Years 1990

And 2006..............................................................................................................................................93

Table II-9 Top 1000 Diversity Statistics....................................................................................................94

Table II-10 WMDVBE Expenditures for 2002 – 2006 ($000)................................................................100

1

I. 1

INTRODUCTION TO HUMAN RESOURCES 2

A. Introduction 3

The Human Resources Department (HR) provides client organizations with integrated solutions 4

for attracting, developing, motivating, and retaining a highly skilled workforce. HR develops people 5

policies and programs for managing the workforce, including employee relations and development 6

programs. HR also designs, develops, and administers compensation and benefits programs for all 7

active and retired employees. 8

This exhibit presents the facts supporting the estimated $69 million of administrative and general 9

expenses we expect to incur in Test Year 2009 to carry out essential HR functions. Compensation and 10

benefits program costs are discussed in Exhibit SCE-6, Volume 2/HR – Total Compensation. 11

The figures below show a summary of our entire HR request for: 12

• Departmental and executive officer administrative and general expenses – FERC 13

Accounts 920/921, Figure I-1. 14

• Outside services – FERC Account 923, Figure I-2. 15

• Pension and Benefits – program costs, administrative and general expenses, net of 16

capitalization costs – FERC Account 926, Figure I-3. For illustration purposes only, 17

Table I-1 reflects all costs for Pension and Benefits including those expenses that are 18

discussed in other exhibits. 19

• Results Sharing program costs – FERC Accounts 500, 588, 905, and 920/921, Figure I-20

4. 21

2

Figure I-1 HR Department And Executive Officers/ Administrative And General Expenses

Recorded and Adjusted 2002-2006/Forecast 2007-2009 FERC Accounts 920/921

(Constant 2006 $000) (Discussed in this Exhibit, Chapter II)

Labor 26,392 30,076 32,125 35,162 34,665 36,245 36,807 40,798Non-Labor 8,406 9,178 10,396 10,958 12,463 12,669 12,751 14,211Other 0 0 0 0 0 0 0 0Total 34,798 39,254 42,521 46,120 47,128 48,914 49,558 55,009

Forecast

0

10,000

20,000

30,000

40,000

50,000

60,000

2002 2003 2004 2005 2006 2007 2008 2009

Labor (std escl) Non-Labor (std escl) Other (not escl)

3

Figure I-2 Outside Services

Recorded And Adjusted 2002-2006/Forecast 2007-2009 FERC Account 923

(Constant 2006 $000) (Discussed in this Exhibit, Chapter II)

4

Figure I-3 Pension And Benefits Program Costs And Administrative and General Expenses

Net Of Capitalization Recorded and Adjusted 2002-2006/Forecast 2007-2009

FERC Account 926 (Constant 2006 $000)

(Discussed in Multiple Exhibits, See Table I-1 Below)

5

Table I-1 Pension And Benefit Expense By Exhibits

FERC Account 926

2002 2003 2004 2005 2006 2007 2008 2009

COSTS IN THIS EXHIBITHR DEPARTMENTAL EXPENSES SCE-6, Vol. 1 9,611 10,292 10,857 9,650 9,518 9,986 9,986 9,986 PENSION SCE-6, Vol. 2 0 34,445 34,914 30,216 44,429 39,227 44,819 52,947 401K SCE-6, Vol. 2 30,262 34,444 35,005 50,850 56,311 58,054 62,031 68,520 MEDICAL SCE-6, Vol. 2 54,661 60,252 80,964 80,543 85,564 94,545 97,670 117,274 DENTAL SCE-6, Vol. 2 12,041 13,340 14,302 15,929 13,743 14,189 15,067 16,906 VISION SCE-6, Vol. 2 1,788 1,888 1,926 2,470 2,649 2,695 2,830 3,138 PBOP SCE-6, Vol. 2 120,890 117,726 79,181 72,951 64,840 51,642 54,185 58,589 DISABILITY SCE-6, Vol. 2 14,456 16,021 16,158 21,071 18,590 19,361 20,862 23,658 GROUP LIFE INSURANCE SCE-6, Vol. 2 419 841 1,091 1,240 1,372 1,384 1,505 1,643 MISC. BENEFITS SCE-6, Vol. 2 6,241 5,779 4,834 5,633 6,130 6,381 6,833 7,705 EXECUTIVE BENEFITS SCE-6, Vol. 2 8,975 11,157 9,490 13,753 19,217 20,016 21,343 23,954

Total 259,343 306,184 288,721 304,306 322,364 317,480 337,131 384,320

COSTS IN OTHER EXHIBITSCONTROLLER'S - CORP ACCTG SCE-7, Vol. 1 514 517 587 592 499 499 499 499 PARTICIPANT (CREDITS) CHARGES SCE-7, Vol. 1 (3,429) (423) (1,548) (78) 2,138 8,497 13,662 12,433 CAPITALIZED P&B EXPENSE SCE-7, Vol. 1 (72,184) (97,536) (93,010) (106,199) (117,924) (115,164) (123,735) (149,930)

Total (75,099) (97,442) (93,970) (105,686) (115,287) (106,168) (109,574) (136,998)

Total Company 926 Costs 184,244 208,742 194,751 198,620 207,077 211,312 227,557 247,322

6

Figure I-4 Results Sharing

Recorded And Adjusted 2002-2006/Forecast 2007-2009 FERC Accounts 500, 588, 905, And 920/921

(Constant 2006 $000) (Discussed In Exhibit SCE-06 Vol.2)

Generation 17,634 15,781 9,627 14,521 13,583 13,041 13,327 14,041T&D 25,458 26,485 20,420 28,238 31,389 32,146 33,186 38,962Cust Accts 14,619 13,903 9,184 13,689 13,066 14,051 14,377 14,983A&G 33,950 34,068 28,285 34,006 33,256 34,744 36,668 38,427Total 91,661 90,237 67,516 90,454 91,294 93,982 97,558 106,413

Forecast

0

20,000

40,000

60,000

80,000

100,000

120,000

2002 2003 2004 2005 2006 2007 2008 2009

Generation T&D Cust Accts A&G

7

B. Human Resources as a Strategic Business Partner 1

The Human Resources (HR) department at SCE is a strategic partner with business units in the 2

formulation of the Company’s people strategies as well as in the implementation of those strategies 3

through HR activities such as recruiting, selecting, training and compensating personnel. The 4

department’s mission is to provide integrated solutions that attract, develop, motivate and retain a 5

talented, high-performing and diverse workforce, thereby positively impacting SCE customers, 6

employees and shareholders. 7

The HR function improves the company’s overall performance by enhancing the effectiveness of 8

day-to-day operations and work practices, the capabilities of our people and the quality of their output. 9

It is also responsible for ensuring that the working environment at SCE reflects our vision and values, 10

and enhances our corporate culture. HR supports the business in delivering its goals by helping place 11

the right people in the right job; by helping develop and support the most effective organizational 12

strategies and structures; and by attracting, retaining and developing employees and rewarding the right 13

behaviors and outcomes. 14

HR is organized to ensure delivery of the company’s people strategies. The leadership team 15

includes heads of functional areas such as compensation, health and welfare benefits, organizational 16

effectiveness, resourcing, and talent development; it also includes strategic business partners responsible 17

for employee and organizational strategies for respective business units, and for managing resources to 18

deliver maximum benefits. Together, the functional experts and strategic business partners work 19

collaboratively to develop best practices and strategies for service delivery, and coordinate enterprise-20

wide processes. 21

SCE faces many concurrent challenges. A massive need for infrastructure replacement, growth 22

in our customer base, transmission system expansion, an aging workforce,1 major technology initiatives-23

all of which require a strategic alignment of our people with our business direction. The HR function is 24

essential to helping the company achieve successful outcomes in these critical areas and others. 25 1 The average age of SCE’s workforce is several years older than the national average; 35 percent of SCE’s workforce will

be eligible for retirement by 2010. See also I.B.2.3 below.

8

C. Workforce Planning 1

1. Introduction 2

Workforce Planning at SCE continues to evolve. Interest and efforts associated with 3

workforce planning are being driven by a number of events, specifically, the effects of retirements, 4

voluntary/involuntary terminations, the need to develop and retain a qualified workforce to meet 5

increased work requirements, key regulatory and legislative activities, and the difficulty associated with 6

attracting and retaining people who are put off by the high cost of living in Southern California. 7

A significant issue facing many business units within SCE is the development and 8

retention of a qualified workforce to meet the increased work requirements brought about by high levels 9

of customer and load growth, and the need to responsibly maintain and improve an aging infrastructure 10

(e.g., information technology and transmission and distribution systems).2 In addition, management 11

personnel are in demand. It is very difficult to hire knowledgeable leadership externally because of the 12

technical, regulatory, safety and work rules-related issues they must be familiar with. 13

Specific regulatory and legislative events are also driving changes to the workforce. 14

These include the need to incorporate new FERC requirements associated with our hydro infrastructure, 15

along with transmission and distribution infrastructure growth to meet growing demands in California.3 16

There are also three external or environmental issues affecting workforce planning across SCE. 17

Housing costs in Southern California have risen dramatically over the last few years. There is a 18

perception that utilities are less appealing career-wise than other non-utility corporations. And lastly, 19

competition for some industry-specific skills across the nation makes it even more difficult to bring 20

talent into Southern California. 21

These increasing work and customer growth challenges, existing workforce 22

demographics, limited availability of fully trained and qualified skilled workers, and the significant time 23

2 Please see Exhibit SCE-2 regarding growing generation workforce needs, Exhibit SCE-3 for Transmission &

Distribution workforce needs, and Exhibit SCE-5 regarding Information Technology needs. 3 Please see Exhibit SCE-3 regarding Transmission & Distribution infrastructure demand growth needs, Exhibit SCE-2

regarding Generation and Hydro needs and Exhibit SCE-5 regarding Information Technology needs.

9

required to hire and fully train employees in specific, highly technical, and specialized areas dictate that 1

we continue our workforce acquisition, training, and development strategy into the foreseeable future. It 2

also means that in some cases SCE will request additional funding to support training and knowledge 3

transfer efforts prior to the departure of incumbent employees (i.e., retirement-eligible employees). 4

2. Workforce Demographics 5

The aging of the American workforce has emerged as a critical issue facing American 6

productivity in the 21st century. As the so-called “Baby Boomer Generation” reaches retirement 7

eligibility, the impact will be felt across both the public and private sectors. These 78 million 8

individuals born between 1946 and 1964 have accumulated a wealth of experience and knowledge, and 9

represent 44% of America’s workforce. For electric utilities, whose service quality and reliability 10

depends on maintaining an adequate, knowledgeable workforce, managing the upcoming retirement 11

transition is a particular challenge.4 12

SCE has 2,424 employees who, based on reaching age 55 with 10 years of service, are 13

eligible for retirement now. By 2009, at current levels, that number grows to 3,516 employees. On 14

average, we are seeing the number of employees eligible for retirement increase by 500 employees per 15

year.5 Workforce planning efforts across the company are taking this into consideration and numerous 16

approaches are being implemented to respond to this challenge. The result is that there is a need to start 17

hiring now in many specialized jobs, as it takes years of training and experience for employees to 18

become fully proficient. Since it is impossible to know precisely when an employee will retire, we are 19

starting to see planning activities that include bringing people on in advance of when positions are 20

actually vacated by an employee. This approach allows for orderly training and knowledge transfer to 21

take place while the existing employee is still performing his/her duties. 22

4 Workforce Trends In The Electric Utility Industry – A Report To The United States Congress Pursuant To Section 1101

Of The Energy Policy Act Of 2005, U.S. Department of Energy August 2006, p. xi. 5 See Figure I-5– SCE Retirement Eligible Employees

10

Figure I-5 SCE Retirement Eligible Employees

11

3. Workforce Retirements 1

SCE saw a large number of people retire in 2006. This is the first time in the last five 2

years that the number of people who actually retired exceeded the number of people who became 3

eligible to retire for any one year.6 The number of employees who retired in 2006 (582) was sharply 4

higher than what we experienced in 2005 (260), which was quite a bit more than what we saw in 2004 5

(149). 6

Figure I-6 SCE Retirement Comparison Actual Retirements vs. Retirement Eligible

Employees

6 See Figure I-6 for a comparison of actual retirements and retirement-eligible employees for the years 2002 through 2006.

12

4. Workforce Terminations (Voluntary & Involuntary) 1

SCE has seen steady increases in the number of people terminating employment with the 2

company (voluntary and involuntary). In 2002, we had 435 employees terminate. That number has 3

grown substantially by 2006 where we saw 835 employees terminate. This, combined with the large 4

increase in the number of employees actually retiring, is driving a significant level of hiring, training, 5

and retention activity. 6

Figure I-7 Voluntary And Involuntary Terminations

13

5. Workforce Retirement Projections 1

Retirement projections for SCE are included in Table I-2 below. These projected 2

departures are of retirement-eligible employees (at least age 55 with at least 5 years of service at time of 3

departure).7 The forecast was developed using actual historical SCE data to develop a simple forecast 4

for the future so that we would have a consistent way to forecast across the company. It is intended to 5

provide a basis for planning rather than an exact set of numbers. 6

Table I-2 Summary of Retirement Forecast, 2007-2011

2007 2008 2009 2010 2011Exempt 2,882 184 199 196 195 238 1,012 35%Non-exempt non-represented 853 41 47 54 44 60 246 29%IBEW 1,333 89 96 104 90 113 492 37%UWUA 355 32 27 31 29 24 143 40%Total 5,423 346 369 385 358 435 1,893 35%

*Those employees at the beginning of 2007 who would be at least age 50 by December 2007.

*Projected Departures (all causes) of retirement-eligible employees(at least 55 with at least 5 years of service at time of departure)

Total Projected Departures

Projected Percentage DepartingPopulation Group

Starting Population*

Projected Number Departing in . . .

7 Employees at least age 55 with at least 10 years of service are eligible for retiree health care benefits.

14

II. 1

DEPARTMENT/FUNCTION DESCRIPTIONS 2

A. Summary of Human Resources and Executive Officers Activities and Test Year Request 3

Included in this Volume is testimony regarding the corporate HR Department activities, 4

organizationally separate but related activities, such as Equal Opportunity (EO) and Executive Officers, 5

and support functions. Figure II-8 below, reflects the overall combined expenses for these activities and 6

the forecast going forward. 7

Figure II-8 Human Resources And Executive Officers – Combined Recorded and Adjusted 2002-2006/Forecast 2007-2009

FERC Accounts 920/921/923/926 (Constant 2006 $000)

In Figure II-8 above, we forecast a total of $69 million for the combined HR department and 8

executive officers activities for Test Year 2009. Estimated expenses for HR and the executive function in 9

forecast years 2007 through 2009 are appropriate for the growing needs of the Company. 10

15

1. Human Resources Department 1

The HR Department consists of seven operating functions: Total Compensation, HR 2

Service Center, Talent Management, HR Client Services, Labor Relations, HR Administration, and Equal 3

Opportunity. Depicted in Figure II-9 below, are these functions. 4

Figure II-9

Senior Vice PresidentHuman Resources

TotalCompensation HR Service Center Talent

Management HR Client Services Labor Relations HR Administration Equal Opportunity

Each of these functions provides specialized expertise to our organization and contributes 5

directly to SCE’s achievement of its primary service goals. The roles, responsibilities, expense analyses, 6

and forecasts of HR’s operating divisions are discussed in the following sections of this Chapter. 7

16

a) Total Compensation 1

(1) Summary of Test Year Request 2

For the Test Year 2009, Total Compensation forecasts a total of 3

$5.478 million of expenses. Figure II-10 below, shows recorded costs for the years 2002 through 2006, 4

plus our forecasts for the years 2007 through 2009. 5

Figure II-10 Total Compensation

Recorded and Adjusted 2002-2006/Forecast 2007-2009 All FERC Accounts (920/921/923/926)

(Constant 2006 $000)

(2) Activities of Total Compensation 6

Total Compensation plays a key role in helping the company attract and 7

retain the high performing workforce required to effectively execute the company’s business strategy. The 8

group, in partnership with business unit management, evaluates the company’s current and anticipated 9

workforce needs and develops and deploys effective compensation strategies, policies and services to 10

ensure the Company remains an employer of choice. 11

Specific components of the company’s Total Compensation program include 12

the Compensation Integration Program (CIP), which is the market-based salary structure for the company’s 13

17

non-represented employees; incentive pay programs with links to company team, and individual 1

performance, and competitive and flexible benefits. The group reviews internal and external data to 2

determine competitive base and incentive pay levels and benchmarks other companies to assess emerging 3

trends in the area of total compensation. 4

CIP includes more than 200 job classifications grouped into more than 65 job 5

families. Each of the classifications has an identified Market Reference Point (MRP). The MRP represents 6

the median market base pay for all jobs priced for the respective classification. Total Compensation 7

updates the salary structure with new jobs as needed and updates the MRP for each classification annually 8

to ensure they remain market competitive. As part of this ongoing process, The Total Compensation Group 9

participates in over 25 annual salary surveys on compensation to obtain current compensation data for the 10

labor markets from which SCE recruits. Based on the results of such analyses, we identify specific 11

compensation challenges, analyze potential solutions and make recommendations to senior management. 12

Total Compensation also manages the design and administration of the 13

company’s incentive pay programs, Results Sharing (RS), the Management Incentive Program (MIP), and 14

the Executive Incentive Plan (EIP). These are short-term incentive pay programs that provide a market-15

competitive incentive pay opportunity linked to overall company performance. In addition, we manage the 16

administration of the long term incentive pay program for senior managers and professionals. These 17

incentive pay programs, combined with base salary and benefits, provide competitive compensation that 18

help the company attract and retain talented leaders and a qualified workforce.8 19

Total Compensation also implements the compensation related aspects of the 20

Collective Bargaining Agreements, including working with Labor Relations as subject matter experts and 21

participating on the contract negotiating committees with regard to general and step wage increases. The 22

group also conducts compensation surveys and job studies and prepares various supporting documents as 23

needed in response to data requests by the union negotiating committees. The group also researches other 24

8 See Exhibit SCE-6, Volume 2.

18

compensation trends, such as recognition programs and spot bonus programs to ensure we remain 1

competitive in the area of total compensation. 2

Total Compensation also ensures that the Company remains in compliance 3

with federal, state, and local laws and regulations concerning compensation, most notably the Fair Labor 4

Standards Act (FLSA), the Equal Pay Act and the Age Discrimination and Employment Act. 5

(a) Pension And Benefit Planning 6

Total Compensation also develops, implements, and monitors the 7

pension and benefit programs across the Company for all participants (employees, retirees, and their 8

families). These programs, which are discussed in Exhibit SCE-6, Volume 2/HR – Total Compensation, 9

include medical plans, dental, vision, the Edison 401(k) Savings Plan, the pension plan, disability, life 10

insurance, and other benefits, such as Employee Assistance Program (EAP) and vacation policy. 11

Benefit planning includes analyzing Company benefit data with 12

respect to Company and participant costs, program value to participants, utilization of benefits, 13

administrative efficiency, plan performance, and the changing needs of participants. For example, our 14

medical programs include multiple plans and providers. We analyze the plans relative to industry 15

standards of cost, accreditation status, availability, and quality. We review any problems that may require 16

Company intervention, (e.g., failure or reluctance of providers to refer participants to specialists) and 17

periodically collect information relating to participant satisfaction. The survey results are shared with our 18

employees during annual enrollment through the use of our company’s plan chooser tool. We provide each 19

medical plan their participant satisfaction survey results, along with comparisons of key measures to the 20

other medical plans, so they can evaluate their own performance. We also identify potential program 21

customer service issues, such as the possible withdrawal of a medical group from a plan or elimination of a 22

primary care provider, and take action in advance to ensure participants continue to have access to high 23

quality health care services. 24

In addition to benefit program performance review, Total 25

Compensation continually evaluates the need for benefit design changes to balance the objectives of 26

providing a comprehensive benefit program for employees and retirees against the need to mitigate 27

19

increasing cost pressures and requests for new benefit options. Total Compensation analyzes competitors’ 1

benefit programs, studies national, local, and industry trends in benefits, and participates in national and 2

regional business coalitions to share ideas and develop common strategies for addressing benefit issues. As 3

critical issues are identified, a strategy to address them is developed and presented to senior management. 4

Once the benefit change strategy has gained senior management approval for non-bargaining unit 5

employees, we develop and manage the implementation plan and communication strategy. Developing and 6

implementing a communication strategy is a primary responsibility for Total Compensation. Total 7

Compensation is often involved in the direct communication of benefit changes to employees and retirees 8

as well as ensuring that these changes are accurately reflected in the plan contracts, plan documents and 9

summary plan descriptions. 10

Total Compensation also supports Labor Relations as a key member 11

of SCE’s Benefits Negotiating Committee, in negotiating benefit changes for bargaining unit employees. 12

Total Compensation provides technical benefit support, which includes developing detailed benefit cost 13

estimates, preparing and presenting Company proposals, analyzing and responding to union proposals, and 14

briefing senior management on progress and issues. 15

(b) Occupational Health Services And Non-Occupational Disability 16

Programs 17

Total Compensation also manages occupational health services and 18

non-occupational disability programs. The Occupational Health Services function ensures Company 19

compliance with the medical surveillance requirements of federal and state Occupational Health and Safety 20

Administration (OSHA) and Department of Transportation (DOT) regulations. Occupational Health 21

Services administers SCE’s contract with a third party vendor who separately contracts with physicians to 22

arrange and perform over 2,000 examinations each year of SCE employees exposed to potentially 23

hazardous conditions. This includes complying with federal and California OSHA requirements related to 24

physician credentialing, physical examination9 and notification, tracking and record maintenance. 25 9 Surveillance medical examinations include Asbestos Exams, Respiratory Exams, SCE’s Hearing Conservation Program,

Lead/Zinc Blood Testing, and DMV Physicals.

20

Occupational Health Services also prepares and provides testimony for legal proceedings related to OSHA 1

related labor grievances and other occupational health issues. 2

DOT compliance requires that SCE conduct more than 1,000 3

employee drug tests each year as well. Occupational Health Services reviews and evaluates those test 4

results and, when test results indicate drug use, OHS coordinates with the affected employee and work 5

location on, any appropriate disciplinary action, rehabilitation and follow-up testing. 6

Among the non-occupational disability programs managed by Total 7

Compensation are SCE’s Comprehensive Disability, and Long-Term Disability plans.10 These plans 8

provide short and long-term disability income protection to SCE employees who are unable to work due to 9

injury or illness. Other non-occupational disability programs managed by Total Compensation are the 10

Wage Continuation and the Return To Work programs. Under these latter programs, the Disability 11

Management group within Total Compensation investigates employee’ medical conditions to determine if 12

an employee can return to his/her current position after illness or injury, provides training as necessary to 13

facilitate the employees’ return to work, and evaluates cases in the context of the ADA (and related laws), 14

collective bargaining agreement provisions, and Workers’ Compensation regulations. If employees are 15

unable to return to work in their pre-disability classification, we assess their skills and set up a training 16

program to help them locate another position. 17

The work related to our disability plans is required and regulated by 18

our collective bargaining agreements, letters of agreement with unions representing our workforce and 19

provisions of the disability benefit plan for employees not covered by a collective bargaining agreement. 20

These agreements and the relevant plan documents specify how the Comprehensive Disability Plan (CDP), 21

LTD, wage continuation, and the Return to Work Program will be administered and how claims will be 22

handled for both represented and non-represented employees. 23

10 SCE’s LTD plan is discussed further in Exhibit SCE-6 Volume 2 /HR – Total Compensation.

21

(c) Compliance With Federal And State Laws 1

Much of the work detailed so far is directly related to compliance 2

activities required by various federal and state laws and regulations. The Fair Labor Standards Act (FLSA) 3

(which includes the Equal Pay Act), the Americans with Disabilities Act (ADA), Title VII of the Civil 4

Rights Act, the Equal Employment Opportunity Commission, Security and Exchange Commission (SEC) 5

regulations, various state wage hour laws, Employment Retirement Income Security Act (ERISA), and the 6

Internal Revenue Service (IRS) code are among the laws and agencies that require significant compliance 7

monitoring and reporting. Finally, in addition to the federal and state OSHA regulations already 8

mentioned, programs requiring substantial compliance activity include complex leave laws under the 9

Federal Family and Medical Leave Act, the California Family Rights Act, the Pregnancy Disability Leave 10

Law, California regulations regarding voluntary disability plans, the Americans with Disability Act (ADA), 11

the Rehabilitation Act of 1973, and the Employee Retirement Income Security Act (ERISA). 12

We estimate that approximately 25 to 30 percent of the Total 13

Compensation staff’s workload mentioned so far is driven by compliance with these requirements.11 Tasks 14

include writing and enforcing policies that adhere to federal and state regulations, monitoring participation 15

in various plans, statistically evaluating pay decisions for disparate impact conditions, filing requisite 16

reports, providing Company guidance on related compensation issues, spot-checking and auditing for 17

compliance, evaluating job postings and job/pay actions, and communicating laws and regulations to 18

employees. 19

(d) Executive Compensation 20

Total Compensation designs and administers all executive and 21

director level compensation and benefit programs. In accordance with federal and state laws, these 22

programs are typically non-qualified plans that augment the broad-based qualified plans. The non-23

qualified plans include the Executive Retirement Plan, the Executive Deferred Compensation Plan, 24

survivor benefits, and supplemental disability benefits. This process requires assessing competitive 25

11 This estimate is based on an informal assessment by the Director of Total Compensation, not a formal study.

22

practices in total compensation among companies in our labor market and identifying executive and 1

director compensation and benefit plan modifications. This assessment looks at base pay levels, short-term 2

incentive opportunities, long-term incentives (e.g., stock options), and executive benefit programs. We 3

also interview Company executives and senior management on the need for change. After identifying 4

proposed changes, we evaluate cost and benefits to the Company, test proposals against compliance 5

criteria, and prepare recommendations to executives and the Board of Directors. As changes are adopted, 6

we develop implementation plans, which include process and system changes, and communication 7

materials. We also report executive compensation and benefits in compliance with Securities and 8

Exchange Commission and other regulatory bodies’ rules on disclosure. 9

23

(3) Analysis of Recorded Data, Estimating Methodology, and Test Year 2009 1

Forecast for Total Compensation (FERC Accounts 920/921, 923, and 926) 2

(a) FERC Accounts 920/921 3

We record salaries and related expenses of Total Compensation to 4

FERC Account 920 (Administrative and General (A&G) Salaries) and FERC Account 921 (Office 5

Supplies and Expenses). Figure II-11 shows 2002 through 2006 recorded and our forecast years 2007 6

through 2009 expenses for this account. 7




Labor costs fluctuated slightly between 2002 and 2006, primarily due 8

to vacancies and the timing lag in filling those positions with qualified personnel. Non-labor costs varied 9

over the course of the five year period due to membership costs for the Compensation Roundtable, 10

supplemental personnel costs, and other employee expenses such as supplies and conference costs. The 11

last five years of recorded costs are most representative of future costs due to the fluctuations in labor and 12

24

non-labor expenses. Therefore, we have chosen a five-year average method to forecast expenses for labor 1

and non-labor for Test Year 2009. 2

(b) FERC Account 923 3

We record outside service expenses of Total Compensation in FERC 4

Account 923 (Outside Services Employed). Figure II-12 shows our 2002 through 2006 recorded and our 5

forecast years 2007 through 2009 expenses for this account. 6


Recorded and Adjusted 2002-2006/Forecast 2007-2009 FERC Account 923


Total Compensation depends on the use of external consultants to 7

perform a variety of services on an ongoing basis. During the recorded period, the use of outside services 8

were integral in assisting with incentive plan assessments and design, compensation analysis, 9

benchmarking, and General Rate Case assistance, specifically the Total Compensation Study. Costs 10

increased in 2003 due primarily to compensation administration consulting support. Costs increased 11

significantly in 2004 due primarily to external consultant support with the Total Compensation Study, 12

25

FLSA and incentive assessment and design costs. Costs decreased in 2005 due primarily to FLSA 1

consulting and decreased again in 2006 due primarily to a decrease in incentive design costs. 2

As our market-based compensation system continues to evolve, we 3

will incur additional costs for surveys and benchmarking. In addition, compliance work which began in 4

2004 with respect to significant changes in FLSA regulations will continue into the future. As a result, the 5

costs reflected in years 2004 through 2006 are most representative of anticipated future costs. Therefore, 6

we have chosen a three year average to forecast Test Year 2009 costs. 7

(c) FERC Account 926 8

We record the labor and non-labor cost of designing and planning 9

SCE’s pension and benefit plans to FERC Account 926 (Employee Pensions and Benefits). Figure II-13 10

shows 2002 through 2006 recorded and our forecast years 2007 through 2009 expenses for this account. 11

26




Between 2002 and 2006, Labor costs steadily increased primarily due 1

to vacancies and the timing lag in filling those positions with qualified personnel. Non-labor costs for the 2

same period fluctuated due to consulting and various employee expenses. Costs decreased in 2005 due 3

primarily to a decrease in benefit consulting support. Costs decreased again in 2006 due to a decrease in 4

benefit consulting support and other employee expenses. Benefits consulting support is cyclical in nature. 5

For example, the full agreement of union negotiations are conducted every five years and negotiations for 6

the Health and Welfare plans reopening on the third year of the agreement. As a result, consulting support 7

for union negotiations in not required every year. In addition, various other projects such as updates to the 8

summary plan descriptions and production of the Employee Total Compensation Statements are on two 9

year cycles. Due to the fluctuations in labor and non-labor expenses, the last five years of recorded costs 10

are most representative of future costs. Therefore, we have chosen a five-year average to forecast expenses 11

for labor and non-labor for Test Year 2009. 12

27

b) HR Service Center 1


For the Test Year 2009, SCE forecasts HR Service Center costs to be a total 3

of $6.991 million. Recorded costs for the years 2002 through 2006, plus forecasted costs for the years 4

2007 through 2009 are shown in Figure II-14 below. 5

Figure II-14 HR Service Center

Recorded and Adjusted 2002-2006/Forecast 2007-2009 All FERC Accounts (926)


(2) Activities of the HR Service Center 6

The HR Service Center is responsible for delivering Company benefits to 7

participants in an efficient and user-friendly manner that ensures the integrity, accessibility, and flexibility 8

of the benefit plans and HR data, while complying with federal and state regulations. The HR Service 9

Center provides a single point of informed contact for employees, retirees, dependents, survivors and 10

managers in need of services related to benefit plans, employee data, and employee programs such as 11

tuition reimbursement and rideshare programs. The HR Service Center has the most direct contact with 12

employees and retirees of any other operating function within HR. Specific activities of the HR Service 13

Center are discussed in the following sections. 14

28

(a) Benefits Administration 1

The HR Service Center administers, or oversees the administration of, 2

all Company benefit plans other than the disability plan, and certain programs available to employees, 3

retirees, survivors, and dependents. These plans and programs, which are discussed in detail in Exhibit 4

SCE-6, Volume 2 include our 401(k) Savings Plan, retirement plan, medical plan, dental plan, vision plan, 5

health care reimbursement account, dependent care reimbursement account, life and accident insurance 6

plans, vacation plans, education assistance, rideshare programs, service awards, relocation, and employee 7

activities. Although the HR Service Center is separate from the Total Compensation Benefits Planning 8

group, decisions made in Total Compensation directly influence the HR Service Center’s benefits 9

administration activities. This relationship is illustrated in Table II-3 below. 10

Table II-3 Comparison Between Planning And Administration

BENEFITS PLANNING FUNCTION (TOTAL COMPENSATION)

BENEFITS ADMINISTRATION FUNCTION (HR SERVICE CENTER)

Establishes goals for Company benefit programs.

Determines what types of benefits the Company will offer.

Negotiates with vendors on plan design and cost issues.

Selects the plans that will be offered, i.e., which medical plans or dental plans.

Analyzes benefit data: − How plans are utilized − Costs to Company / participants − Program value to participants − Plan performance − Programs at other companies

Monitors medical provider performance. Monitors legislation / requirements

related to benefits. Member of Benefits Negotiating

Committee.

Implements Company benefit plans selected by Total Compensation.

Answers participant questions related to benefit plan issues.

Administers the company’s pension plan. Develops reports on benefit use. Negotiates with vendors responsible for administering

SCE’s plans and HR programs. Oversees and educates those responsible for updating

employee data to ensure accuracy and to minimize the impact inaccurate data can have on the benefit plans.

Ensures benefits are administered in compliance with all applicable laws and regulations.

Manages vendors responsible for administration of plans including: − Benefit changes due to retirement, death, and

voluntary/involuntary termination. − Initial new hire benefit enrollment. Mid-year

coverage changes for employees with eligible events.

− The annual open enrollment process.

29

The HR Service Center responds to participant questions and 1

oversees the vendor responsible for the processes that enable participants to use their benefit plans. For 2

example, when a new employee is hired, the vendor administrator prepares the new employee’s customized 3

benefits information package. This benefits package describes the benefits and programs for which the 4

employee is eligible, calculates the costs of the various benefits based on the new employee’s age and 5

salary, and outlines the enrollment process. Similarly, during the annual open enrollment process, the 6

vendor provides the participants with an information package that outlines their benefit choices and the 7

associated costs, and includes instructions on how to enroll via phone or web. When the employee makes 8

benefit elections using the vendor’s website or by contacting the vendor’s call center, the employee is 9

enrolled in the selected plans and his/her elections are confirmed. Enrollment requires the vendor to enter 10

the elections into the system to reflect participation, contact the plans to initiate coverage, and coordinate 11

with Edison to establish payroll deductions through our PeopleSoft system. The HR Service Center also 12

establishes performance standards during vendor negotiations, monitors vendor performance against 13

established standards and initiates action, as needed, to correct performance deficiencies. 14

(b) Benefit Changes Due To Change In Family Status 15

The HR Service Center oversees the vendor that administers benefit 16

changes due to changes in family status, such as marriage, divorce, birth or adoption of a child, new 17

address, and changes in a family member’s employment status. The request is reviewed to ensure its 18

consistency with the federal regulations that govern the kinds of benefits status changes that can be made 19

for various types of family events based on rules and guidelines which the HR Service Center establishes 20

from plan provisions. Once requested changes are approved, the plans are notified of coverage changes 21

and payroll deductions are updated accordingly. 22

(c) Court-Ordered Benefit Changes 23

The HR Service Center also processes court-ordered benefits changes 24

under qualified domestic relations orders. In a typical case, a private attorney, district attorney, or 25

government agency will notify the HR Service Center of an adverse interest. Upon receiving notice of 26

such orders, we place an administrative hold on distributions from the employee’s 401(k) and retirement 27

30

accounts to prevent improper distributions, and advise the employee of our legal obligations to comply 1

with these orders. We work with SCE’s Law Department in processing changes to establish separate 2

accounts with an alternate payee and initiate benefits for the child(ren) as required. The process requires 3

updating the systems, preparing appropriate communication materials, and providing information to the 4

employee, courts, attorneys, and family. 5

(d) Benefit Changes Due To Termination 6

The HR Service Center administers benefit changes due to 7

termination of employment (retirement, involuntary or voluntary termination). When advised of an 8

employee’s pending retirement, we prepare an individual retirement package that includes the necessary 9

forms, a retirement benefit estimate, and an outline of the retirement process. We ensure the employee is 10

provided with all the information necessary to make an informed decision. Once the employee returns the 11

completed forms, we initiate the retirement process by reviewing the forms, updating the information in the 12

system, requesting the final value of the retirement benefits, provide information for the employee’s final 13

check, and process the change to retiree status. The process for terminated employees who have a right to 14

future retirement benefits is handled in a similar manner when they reach retirement age. 15

(e) Benefit Changes Due To Death 16

When an employee or retiree dies, the HR Service Center processes 17

the insurance, retirement, and survivor benefits. Once advised of a death, we compile an information 18

package for the family that outlines the benefits and payments the survivor(s) will receive. This requires 19

coordination with other parts of the Company, such as SCE’s Treasurer’s Department to determine 20

ownership of Edison International (EIX) stock, and Controllers regarding final pay disbursement. We help 21

the survivors coordinate the multiple benefits programs to which they are often entitled, assist in working 22

with insurance carriers, and, depending upon special circumstances, we may make a “family call,” which 23

includes meeting with the family to provide more detailed information on their benefits. 24

(f) Administration Of Educational And Service Award Programs 25

The HR Service Center also administers several other Company 26

programs, such as the educational programs. We review the employee’s reimbursement request to ensure 27

31

that the program and approvals are in line with Company requirements (e.g., the institution is accredited). 1

We input the request into our PeopleSoft system, which initiates the payment to the employee. SCE has a 2

service award program to recognize milestone service anniversaries and provide a gift upon retirement. On 3

a monthly basis, the HR Service Center provides the external program vendor with a list of eligible 4

employees. 5

(g) Rideshare Program 6

Another program administered by the HR Service Center is the 7

Rideshare Program. The HR Service Center provides employees with options for commuting to and from 8

work. Enterprise Rideshare, a division of Enterprise Rent-A-Car, is responsible for providing cars and 9

vans for employees to utilize as van and carpools. The employee is responsible for coordinating routes, 10

drivers, and riders for the individual vanpool groups. To ensure driver and rider safety, Enterprise 11

coordinates and monitors the drivers’ medical certification process, and replaces vehicles due to mileage or 12

age of the vehicle.12 Our Guaranteed Ride Home Program ensures that commuters using 13

Company-endorsed alternate transportation methods will be provided with a ride home in case of a 14

personal emergency or unexpected work requirement. 15

(h) Benefit Appeals 16

The HR Service Center coordinates and investigates benefit appeals 17

submitted by participants for review by the SCE Benefits Committee. We respond to an appeal request by 18

initiating an acknowledgment letter to the sender and investigating the issue using records of conversations 19

and pertinent communication materials. Once the investigation is complete, we work with SCE’s Law 20

Department, as necessary, to develop a case summary for Committee review. We present a 21

recommendation to the Committee, supported by prepared materials, and coordinate the response from the 22

Committee to the participant. 23

12 SCE employees participating in the Rideshare Program receive a voucher in the amount of $60 per month. All other costs,

including fuel, are paid by the participants of the vanpool.

32

(i) Employee Information Center (EIC) 1

The HR Service Center also manages the EIC, which functions as the 2

primary point of contact for employees, retirees and dependents with questions relating to benefits plans 3

and HR sponsored programs. Since the outsourcing of the 401(k) and health and welfare benefits, the EIC 4

shares responsibility for answering employee questions with the outsourced call centers. The EIC responds 5

to all inquiries regarding pension benefits, death benefits, rideshare programs, tuition programs, relocation, 6

and service awards but redirects calls about the other benefit plans to the appropriate vendor. The EIC is 7

open during business hours and offers a 24-hour a day voicemail function to leave messages. 8

In 2006, the EIC assisted over 44,000 employees, retirees and 9

dependents. We resolved 85 percent of the issues on the first call and received a satisfaction rating of 4.7 10

out of 5.0 from our customers. 11

(j) Compliance With Federal And State Laws 12

The Company’s benefit plans and programs are directly governed by 13

various federal and state laws and regulations, including the Employment Retirement Income Security Act 14

(ERISA), Securities and Exchange Commission (SEC) regulations, COBRA, HIPAA and the Internal 15

Revenue Service (IRS). In conjunction with the Total Compensation Benefits Planning group, the HR 16

Service Center monitors new legislation for its impact on benefit administrative processes and implements 17

and project manages required changes. 18

33


Forecast for HR Service Center 2

We record the expenses for the HR Service Center administration of the 3

pension and benefit programs to FERC Account 926 (Employee Pensions and Benefits). Figure II-15 4

below, shows 2002 through 2006 recorded expenses and our forecast for years 2007 through 2009 expenses 5

for this account. 6

Figure II-15 HR Service Centers



Labor costs fluctuated slightly during the recorded period. In 2004, labor 7

costs increased due to the filling of vacancies from the previous year. Non-labor costs include the costs for 8

the vendors who administer SCE’s benefit plans and for those vendors who provide specific industry 9

expertise and assistance in the renewal or negotiation of vendor contracts. Non-labor also includes the cost 10

for supplemental personnel support as well as development expenses for HR Service Center staff. The 11

non-labor decrease in 2005 is due to the new benefits administration vendor which transitioned in 2004. 12

We selected the five-year average of recorded costs for our Test Year 13

forecast for both labor and non-labor because it tends to better smooth out the labor fluctuations from year-14

34

to-year due to vacancies, and the non-labor fluctuations due to the cyclical nature of the vendor contract 1

life cycle (typically around five years). 2

c) Talent Management 3


For the Test Year 2009, Talent Management forecasts a total of $19.183 5

million of expenses. Figure II-16 below, shows recorded costs for the years 2002 through 2006, plus our 6

forecast for the years 2007 through 2009. 7

Figure II-16 Talent Management

Recorded and Adjusted 2002-2006/Forecast 2007-2009 All FERC Accounts (920/921/923)


(2) Activities of Talent Management 8

Talent Management is responsible for providing strategic and tactical 9

leadership for SCE’s talent acquisition, assessment, and employee and organizational development. 10

SCE is facing several challenges to the acquisition, retention, development, 11

and management of the workforce. Foremost, SCE has a maturing workforce with a looming retirement 12

35

bubble at all levels of the organization. As of the end of 2006, the entire SCE retirement-eligible 1

population (55 with 10 years of service) was 2,424, roughly 20 percent of the Company’s Total Workforce. 2

By 2010, the number of employees eligible for retirement will greatly increase to 35 percent of the total 3

workforce. Compounding this retirement/replacement issue is increased competition for skilled and 4

professional workers, in part because there is a shortage of suitably skilled workers available in the job 5

market. For instance, the Institute of Electrical and Electronics Engineers, Inc. (2004) reported that there 6

were just slightly more than 500 undergraduate engineering degrees awarded annually during the last two 7

decades, whereas there were nearly 2,000 awarded annually during the 1980s. At the end of 2006, 17 8

percent of SCE’s power system engineers were aged 55 or older. Additionally, TDBU’s Engineering and 9

Technical Specialist needs are increasing by approximately 16 percent over the next three years.13 10

As noted in earlier testimony, SCE is facing many concurrent challenges in 11

addition to our retirement eligible population and the effects of employee attrition. These challenges 12

include a massive need for infrastructure replacement, growth in our customer base, a major technology 13

initiative, and key regulatory and legislative activities.14 All of these things not only require a strategic 14

alignment of our people with our business direction, they also require that we continue to attract and retain 15

a qualified, diverse workforce comprised of individuals interested in a long career with SCE. In order to 16

meet those pressing company demands, SCE must acquire, retain, train, and develop employees and leaders 17

who possess the critical knowledge, abilities, and leadership skills to guide the company into the future. 18

Talent Management is the critical HR function focused on attracting, retaining, and developing new and 19

existing talent required for the Company to meet these growing demands. However, Talent Management 20

faces the additional challenge of recruiting external talent which is often overwhelmed with the high cost of 21

living in Southern California. 22

13 Refer to Exhibit SCE-3, Volume 2, Part 1 for additional details. 14 As discussed in detail by Witness Kludjian in SCE-3, Volume 2, Part 1, SCE must continue to adapt to meet the changing

business demands we will face over the next several years to replace our aging infrastructure and expand our services to meet the demands of our growing customer base.

36

In addition to its primary function of attracting, developing, and maintaining 1

SCE’s talent base, the Talent Management organization also ensures that SCE maintains compliance with 2

several statutes and regulations while doing so. These statutes and regulations include the following: 3

1. Age Discrimination in Employment Act; 4

2. Americans with Disabilities Act (ADA); 5

3. California Fair Employment and Housing Act; 6

4. Title VII of the Civil Rights Act of 1964; 7

5. Executive Order 11246; 8

6. Uniform Guidelines on Employee Selection; 9

7. Employment Qualification Requirements of the American Nuclear 10

Standards Institute; 11

8. Immigration and Naturalization Statutes and Regulations. 12

9. Office of Federal Contract Compliance Programs – Executive order 13

11246 on applicant tracking. 14

These requirements affect the development and validation of employee 15

selection systems, new hire and application record retention,15 applicant and employee identification, 16

tracking, and reporting, vacancy identification and announcements, and impact the company’s compliance 17

with our affirmative action plans and associated required reporting and audit responses. 18

As SCE continues to grow and meet the increasing demands for skilled 19

workers and leaders, the Talent Management organization will continue to play a key role in the external 20

recruitment, internal placement, retention of resources, succession planning, employee training and 21

leadership development activities. Together, these functions will ensure that SCE has the leadership and 22

skills to successfully meet future business challenges. The following sections describe the activities of 23

Talent Management in more detail, and identify the costs we must incur in 2009 to meet the challenges of 24

building the SCE workforce of the future to ensure effective execution of the company’s business strategy. 25 15 This includes applications, job advertisements, interview records, resumes, test records, position information, and applicant

demographics.

37

(a) Staffing and Recruitment 1

In meeting the critical shortages of skilled employees, staffing and 2

recruitment personnel handle the recruitment and hiring of external applicants. By participating in job 3

fairs, community events, and information and outreach opportunities, staffing and recruitment promotes 4

SCE as the employer of choice in attracting qualified and diverse candidates. In 2006, we participated in 5

over 193 job fairs and other outreach activities, resulting in 307 external hires. We also utilize external 6

websites to post positions and search for potential candidates, place advertisements in publications, 7

journals, and websites, and contract with search firms. We then respond to job seekers’ inquiries by 8

telephone and in-person, assisting them in submitting their résumés for vacancies to our website, and 9

generating letters confirming receipt of résumés. Resumes are entered into our tracking system and 10

reviewed by our staff to determine if the individual meets the basic qualifications for the position. In 2006, 11

we processed 96,800 resumes from external candidates.16 In addition, Talent Management processed 12

resumes from 17,435 SCE employees competing for positions within the company. Talent Management 13

screens external applicant resumes and includes those results with the results of employee candidates on a 14

screening matrix provided to hiring managers. The screening matrix is an assessment tool that provides 15

hiring managers with a ranking of all applicants who applied for the position. It is also used as an audit 16

tool to demonstrate the process and decision making activities associated with each posting. 17

Next, we schedule testing for qualified applicants and interviews for 18

potential hires and, when necessary, make travel arrangements for candidates. In 2006, we conducted 19

5,198 interviews and tested 13,446 internal and external candidates. We generated decline letters to 20

applicants not selected for interviews advising why they were not as competitive as others who applied for 21

the position. Once the hiring manager has made his/her selections, we confirm suitability for hire, 22

including criminal conviction / probation review, and ensuring compliance with applicable standards for 23

hiring employees. In 2006, we conducted in excess of 2,000 of these screenings. We negotiate offers by 24

considering the market for a particular position, the applicant’s current salary, and internal equity for the 25

16 33,100 of the 96,800 were from candidates applying for multiple positions or updating their resumes on file.

38

position and the department. We then generate offer letters and schedule applicants for new hire 1

processing. Decline letters are generated for notification to unsuccessful candidates. The new hire 2

processing includes requests for background investigations and drug screening with external vendors, 3

completion of new hire forms, and verification of right to work. We review all forms for completeness and 4

ensure compliance with employment laws and regulations such as those required by the Department of 5

Homeland Security, Office of Federal Contracts Compliance Programs, Sarbanes-Oxley, and company 6

policies. During the recruitment cycle, candidate files are updated with current status in the applicant 7

tracking system in accordance with federal requirements. All of these activities are necessary for SCE to 8

attract the employees we need to continue providing reliable electric service well into the future and to 9

ensure compliance with rules and regulations that governs the hiring process. 10

Talent Management is responsible for managing SCE’s internal job 11

placement programs and policies. Since 2002, the Company’s internal job placements have continued to 12

grow steadily in order to meet workforce needs. Specifically, between 2002 and 2006, we experienced an 13

87 percent increase in the number of employee applications and a 68 percent increase in the number of 14

internal placements. For represented positions, we experienced a 77 percent increase in the number of 15

internal placements. Talent Management also provides consultation, training, and client support for 16

workforce management programs including business case development for reorganizations/restructuring, 17

job rotation programs, job progressions, affiliate transfers, direct placements, and the application/use of 18

policies to facilitate the movement of employees within SCE and across EIX companies on a full-time, 19

temporary, and project basis. This function is also responsible for coordinating and administering the 20

company’s severance program. 21

Our staff consults with clients to implement workforce plans and 22

internal placement strategies for meeting operational staffing needs. For example, in 2006 we placed 1,236 23

employees into internal vacancies. This is accomplished through a variety of methods and tools including 24

the Job Opportunity Information System (JOIS) – our internal electronic job posting board, temporary 25

work assignments (directed and competitive), re-assignments, and upgrades. The Talent Management team 26

is responsible for processing and screening internal applications/resumes, creating job offers, and 27

39

developing and tracking temporary work agreements. Talent Management also manages job bids and 1

transfers for vacancies in represented positions, including consultation with clients to implement 2

appropriate labor strategies for filling union positions for UWUA, IBEW, SOFA, and Teamsters. 3

Employee bids and transfer requests are processed and screened, qualifying candidates are tested, and job 4

offers are processed by Talent Management. In 2006, we processed 784 bids and transfers across all 5

unions at SCE. 6

As mentioned in the Equal Opportunity section of this exhibit, SCE 7

has a diversity strategy in place that includes focused recruiting strategies in support of the Company’s 8

commitment and ongoing efforts to build a highly talented, diverse employee base. To focus on workforce 9

representation, SCE works with organizations and associations focused on issues concerning minorities and 10

women, including attending job fairs targeting minorities and women and engaging on college campuses 11

known for their student diversity. Talent Management partners with Equal Opportunity in this effort and 12

much of our job fair and college campus presence is in direct relation to the strong commitment of the 13

company in this critical area. 14

Talent Management also supports other personnel-related programs 15

designed to identify, recruit, and retain highly skilled employees. These include the Employee Referral 16

Program, the College Relations Program, and the Relocation Program. The Employee Referral Program 17

targets critical positions that the company has difficulty filling and also serves as a tool for employees to 18

refer individuals to the company while maintaining the level of separation required by the governing 19

regulations. 20

The College Relations Program is designed to recruit talent by 21

leveraging a variety of programs, partnerships, organizations, networks, and activities with college 22

students. In 2006, we held 87 events at colleges to recruit talent. This program enables students to apply 23

the skills learned through their college education to real-life experiences, and creates interest among 24

college students to seek employment with SCE upon graduation. In 2006, this resulted in 161 college 25

students hired into SCE. 26

40

The SCE Relocation Program assists with some expenses incurred by 1

employees who need to relocate in order to accept SCE employment or to assume a different position 2

within the company. For example, in 2006 we relocated 123 employees. Many factors are considered for 3

eligibility in this program, which is applied at management’s discretion. The program does not apply to 4

relocations caused by group moves, plant or office closures, mergers, acquisitions, or divestitures, unless 5

specifically designated. Expenses covered may include household goods transportation, home-finding 6

assistance, spouse job-search help, mortgage subsidies, relocation allowances, and other expenses related to 7

the move. This program will continue to be essential for SCE to maintain a competitive presence in the job 8

market and provide necessary assistance to employees entering the Southern California housing market. 9

(b) Assessment Testing and Performance Management 10

Talent Management directs the development and administration of 11

assessment tools used to select and promote talent from within and outside the organization, administers 12

the Company testing program, and designs and ensures effective implementation of the performance 13

management process. The following is a description of the Assessment, Testing and Performance 14

Management functional areas. 15

(i) Performance Assessment and Testing 16

Talent Management provides expert advice and consultation 17

to all levels of management on the development of selection strategies and tools used to acquire superior 18

talent, assess leadership capabilities, and survey client/employee opinions. Responsibilities also include 19

consulting with managers to design jobs and associated selection tools e.g., job postings, candidate screens, 20

interviews, performance tests, and other selection tools. Talent Management is also responsible for 21

implementation of the Corporate Testing Policy and providing end-to-end testing service in support of the 22

acquisition, promotion, and internal movement of employees by administering and scoring tests and 23

maintaining accurate records. The group provides testing support for all of SCE’s business units. The 24

team is also responsible for the Company’s automated testing program. Between 2002 and 2006, we 25

experienced a 31 percent increase in the total volume of employment testing, an average annual increase of 26

six percent. In 2006, 13,446 tests were conducted on both internal and external candidates including 27

41

Clerical Abilities, Software testing (Word, Excel, PowerPoint), Knowledge and Performance tests for craft 1

positions (Electricians, Machinists, Mechanics, Test Technicians), Planners, and Nuclear Security Officers 2

(knowledge and performance). 3

(ii) Performance Management 4

SCE has developed a performance appraisal tool to help 5

ensure business goals are met. Each SCE business unit is responsible for the fair and consistent application 6

of this process, and to consistently evaluate the performance of their employees. Talent Management 7

designs and administers this performance management process. This includes communication of timelines 8

for (1) setting goals and objectives including personal development goals, (2) performing mid-year 9

reviews, (3) developing individual action plans, (4) providing performance feedback, and (5) providing a 10

year-end assessment of performance. As our workforce grows into 2009 and beyond, the need for this 11

important performance management function will increase correspondingly. 12

Talent Management is also responsible for the development 13

and delivery of performance management training to all non-represented SCE employees. Talent 14

Management supports its performance management process by conducting follow-up assessments and 15

interviews with business unit client groups to determine effectiveness and utilizes the feedback from that 16

follow-up to continually improve and enhance program effectiveness and efficiency. We establish 17

guidelines and training for managers to follow when assessing employee performance and planning for 18

development. We also identify and monitor performance management trends within the company as well 19

as the external business environment and industry. 20

(c) Learning and Development, Succession Planning and Organization 21

Change Management 22

Another of Talent Management’s major areas of responsibility is non-23

technical training, leadership development, succession and career planning, and organization change 24

management. The activities of this part of Talent Management are detailed below. 25

42

(d) Non-Technical Training 1

Continually upgrading the skills of our workforce is crucial in order 2

for SCE to meet its business goals. It has become even more essential as our workforce plan reflects the 3

need to hire an increasingly large number of new employees. SCE provides both technical and non-4

technical training to build and maintain a strong workforce. Talent Management manages the non-5

technical curriculum contained in the Company’s training catalog. In 2006, this catalog contained over 6

60 courses, which included formal classroom instruction and computer-based training. Courses include 7

new employee orientation, basic and advanced supervisory and management skills training, project 8

management, career development courses, and professional business skills development. We make 9

changes to the catalog curriculum on an ongoing basis to meet Company needs and to support our business 10

strategy. Based on our discussions with senior leaders and business unit managers, and a review of 11

participation rates and trends, we will continue to offer, update or eliminate current programs, or introduce 12

new courses as appropriate. We meet new training needs by designing an in-house program or selecting 13

and customizing an “off-the-shelf” training product. Once the curriculum is established, we manage the 14

catalog program vendor(s), coordinate the scheduling and enrollment for classes, select a trainer from our 15

staff or contract with an outside facilitator, coordinate the purchase and distribution of class materials, and 16

evaluate class quality through participant evaluations and periodic reviews of content and presentation. 17

Reports are provided monthly to the business units, Company management, and to employees upon 18

request. 19

In addition to professional and management development courses, all 20

new SCE employees are required to attend an orientation session. Participants are given an overview of the 21

Company culture, including a focus on history, core values and safety. Talent Management also delivers 22

compliance training, for example, training on FERC Standards of Conduct, Sexual Harassment Prevention 23

training, and Ethics and Integrity. In fulfillment of the Company’s diversity strategy (see Equal 24

Opportunity section of this volume), Talent Management also manages the design, delivery and tracking of 25

mandatory Equal Opportunity/Diversity training for all new employees as well as on-going refresher 26

43

training. In 2006, Talent Management provided training to 25,266 participants in 1,223 sessions in support 1

of corporate initiatives, compliance training, leadership programs, and general course offerings. 2

SCE’s non-technical training curriculum is partially provided by 3

outside vendors. Talent Management manages the external non-technical training vendors who provide 4

training and consulting services. We ensure that they provide high quality service by evaluating their 5

experience, training, and performance against our standards. We reconcile invoices, review enrollment 6

rosters, assess participant evaluations, and work with the vendors to resolve unique problems or issues. 7

Talent Management offers computer based training (CBT) as an 8

alternative to traditional classroom-based training. CBT improves efficiency of the training process by 9

providing employees with flexibility regarding the location, timing, and subject matter of the training they 10

elect. Our current CBT curriculum includes FERC Standards of Conduct, Preventing Sexual Harassment, 11

Diversity @ SCE, Resume Writing, Interviewing, Budgeting at SCE, Situational Leadership, Managing 12

Change, Optimizing Team Performance, and Resolving Interpersonal Conflict courses. In 2006, 7,760 13

SCE employees took these computer based training courses. 14

(e) Organization Development and Change Management 15

Talent Management supports major organizational change and 16

technology initiatives to ensure employees are trained and ready to adopt new processes and supporting 17

technology. We also provide organization development consulting on business unit reorganizations and 18

restructuring efforts, such as that at San Onofre. We provide support to company management for 19

implementing process improvement processes, identifying change impacts and ensuring that changes to 20

employees’ roles and jobs are evaluated and communicated. We provide support for the Company’s 21

initiative to build a stronger safety culture, including delivering and analyzing assessments of the current 22

culture and helping to build plans for improving safety performance. We ensure that effective 23

communication; employee engagement and training strategies are designed and implemented. 24

(f) Career Learning Center 25

Talent Management has responsibility for SCE’s Career Learning 26

Center, which offers services to employees who are being vocationally rehabilitated, are in need of career 27

44

guidance, or are displaced and looking for other career opportunities. The offerings are designed to coach 1

and train employees on career development issues including job search skills, career planning, and resume 2

writing and interviewing skills. For example, in 2006 we assisted 731 employees through the Career 3

Learning Center. In addition to these offerings, we maintain an on-line career learning center website and a 4

career resource library. Resources such as career guidance assessments and interview training, as well as 5

tools for mentoring and supervisory skills, are available on the SCE intranet for easy access by all 6

employees. Online reference materials are available, such as access to professional summaries of top 7

business books that can help all employees broaden their business acumen and skills in such disciplines as 8

leadership, management, business strategy, communication, and marketing. Talent Management also 9

oversees the vendors who provide career development training. 10

(g) Succession Planning 11

Talent Management works in partnership with business units to 12

develop detailed lines of succession for SCE executives and senior managers. Succession planning is vital 13

to ensuring the Company has sufficient bench strength to fill critical roles, and in preparing for the 14

imminent retirement of executives in key positions. On a longer-term basis, succession planning helps to 15

ensure the Company prepares the next generation of SCE managers and executives. Succession planning is 16

also a key component of an integrated approach to leadership development. It helps the Company 17

anticipate talent needs that may emerge as a result of retirements and changes in the business landscape, 18

and to identify key learning experiences and development to ensure successors have the knowledge and 19

capabilities to assume new positions. For example, 70 percent of key positions at SCE were filled from our 20

high potential pool, which is one aspect of succession planning. Succession planning and executive 21

development increase our ability to fill vacancies with internal candidates. By the end of 2007, 73 percent 22

of executives are forecast to be age 50 or older (based on current population). Due to this age 23

demographic, the rate of executive retirements will increase in the coming years. Therefore, effective 24

succession planning and executive development will continue to be a high priority. 25

45

(h) Leadership Development Programs 1

Talent Management creates and manages the leadership development 2

programs (“Leadership Programs”) at SCE. Designed to develop the next generation of Company leaders 3

and managers, these programs are critical for ensuring that succession candidates are well prepared to 4

assume new leadership roles. Talent Management oversees the process to select participants for the 5

Leadership Programs with assistance from HR Client Services and senior executives. We establish the 6

selection guidelines for program participants, develop consistent selection and evaluation tools such as 7

candidate screenings, ensure diversity of the candidate pool, and communicate the program to employees. 8

The leadership development programs managed by Talent 9

Management include the Future Leaders Program, the Leadership Grant Program, the Leadership 10

Academy, and Executive Leadership Programs, which are described below. To ensure consistent 11

leadership bench strength, organizations must focus their leadership development programs on critical 12

leadership capabilities, and enable the efficient delivery of high quality and high impact development 13

activities. Executives and high potential leaders who participate in the Executive Leadership Program 14

receive regular feedback and individualized development planning to identify learning needs and provide 15

development options. These needs are addressed in a variety of ways, including executive coaching, 16

rotational assignments, and experiential learning. In addition, group-based learning programs develop the 17

new skills leaders require to advance to higher levels in the organization. Topics may include executive 18

finance, managing talent, and leveraging organizational relationships. 19

The leadership programs are based on assessments of the skills and 20

knowledge required for each level of leadership and are targeted to build upon the capabilities and 21

experiences gained from the prior programs. Figure II-17 below, illustrates the leadership development 22

programs that are described in the following sections. 23

46

Figure II-17 Leadership Development Targeted Areas

Executives

Leadership Grant

All

Employees

Individual

Contributors

Managers

Thre

e Ye

ars

18 M

onth

s

One Y

ear

Thre

e Ye

ars

Executive Leadership

Leadership Academy

Future Leaders

Executives

Leadership Grant

All

Employees

Individual

Contributors

Managers

Thre

e Ye

ars

18 M

onth

s

One Y

ear

Thre

e Ye

ars

Executive Leadership

Leadership Academy

Future Leaders

Cross-training assignments are a key development strategy to broaden 1

the experience of leaders. The Executive Cross-Training Program is focused on meeting the individual 2

development needs of executive and high potential leaders. In addition to coaching and other 3

developmental interventions, cross-training assignments lasting up to eighteen months help individuals 4

develop in areas key to their growth, preparing them to successfully transition into new roles. In 2004 and 5

2005, a total of six people initiated cross-training assignments. Of these six, one person transitioned 6

successfully from a high-level individual contributor to a senior manager role, one person was assigned to 7

co-lead a Company critical project, and four people were promoted within nine months of completing their 8

assignments. In 2006, we had three participants who completed assignments in the Executive Leadership 9

(cross-training) program. 10

The Leadership Academy is a series of intensive leadership 11

workshops aimed at preparing managers to step into mid-management level positions. Utilizing 360-12

degree feedback, classroom training, stretch assignments, and developmental experiences, the program is 13

47

designed to help managers learn necessary leadership skills and develop practical tools for creating more 1

effective teams. Due to the eminent retirement bubble, building internal leadership at SCE is more critical 2

than ever. This program helps leaders and the company, recognize the importance of human capital and 3

building a culture of leadership. The program focuses on providing a consistent approach to developing 4

the core skills, knowledge, and experience necessary for positions of increasing responsibilities. 5

Future Leaders is an 18-month leadership development program 6

targeted to high potential individual contributors to prepare them to step into entry-level management 7

positions. This program is a redesign of the Cross Training Leadership Program. Enhancements were 8

made to the program to provide a broader overview of the company and enable more targeted leadership 9

development experiences. The objectives of the program include providing opportunities to develop 10

leadership skills through challenging assignments, broad exposure to the business, and placement of high 11

potential employees into management positions. In October 2006, five employees were selected to 12

participate in the newly designed Future Leaders program. 13

The Leadership Grant Program provides 12 rotating grants of up to 14

$50,000 toward a Master’s level degree program at a local university. New grants are offered as existing 15

grant-holders complete or terminate their programs. Advanced degrees are another important way of 16

ensuring that the future leaders of the company are equipped with the appropriate skills to deal with new 17

challenges. This includes such critical skills as strategic planning, finance, and organization change 18

management. In 2006, 12 employees participated in the Leadership Grant program. 19

A 2001 survey by the American Management Association, reports 20

that over 25 percent of participating companies spend approximately one-third of their annual training 21

budget on leadership development, a figure that has increased significantly over previous years.17 22

Companies invest in leadership development because in today’s business environment, it is essential to 23

business performance and governance. Also, developing internal managers and executives presents several 24

17 Corporate Leadership Council, Fact Brief: Funding Models for Leadership Development, Washington: Corporate Executive

Board, September 2004, p. 4.

48

advantages over external recruitment. As discussed in the sections below, there are significant benefits to 1

customers for funding leadership development programs. 2

By developing our talent in-house we avoid spending significant 3

amounts of money to fill senior management and executive level vacancies. The average recruiting costs 4

for an executive level position are approximately $260,000 each (this includes average recruitment fees, 5

signing bonus, and relocation costs). A Development Dimensions International 2003 study estimates that 6

the average first-year cost of a new senior executive is close to $750,000 when compensation, recruitment, 7

selection, relocation, and training and development are factored in.18 Due to the age of our current leaders, 8

the development of internal candidates is not only a necessity, it also represents a significant cost 9

avoidance. 10

According to The Aspen Institute’s Domestic Group, the number of 11

qualified replacement candidates is declining due to the projected drop in growth within the overall labor 12

force from 50 percent over the last 20 years to 16 percent though 2020.19 This decline will necessitate an 13

increased focus on internal development as the availability of external talent decreases while the 14

competition for that talent increases. SCE will be required to focus on developing the skills of current 15

employees to ensure successful implementation of our business strategy and objectives. 16

Changes across the electric utility landscape demand that leaders have 17

new skills and a broader range of experiences. The demographics of the aging US workforce require 18

aggressive measures to ensure business continuity. The aging workforce problem is particularly acute at 19

SCE, where 73 percent of executives and 61 percent of senior managers are 50 years old or older as of 20

2007. Given these facts, it is likely that the Company will experience a large increase in executive 21

retirements over the next five years. Combined with the trend of increased competition for talent in the 22

marketplace, the need to develop leaders internally will continue to be critical to ensuring that the company 23

18 Corporate Leadership Council, Highlights of Effective Leadership Programs, Washington: Corporate Executive Board,

November 2003, p. 8. 19 Corporate Leadership Council, Business Case for Leadership Development, Washington: Corporate Executive Board, p. 4.

49

has a sufficient and diverse talent pool capable of assuming executive and senior leadership positions in the 1

future. The Leadership Programs help fulfill this need. 2

Organizations that promote internally generally have a higher rate of 3

workforce engagement, commitment, and intent to stay with the company. A 2003 study by the Learning 4

and Development Roundtable entitled Engaging Managers as Agents of Employee Development, found that 5

helping leaders develop their direct reports more effectively improves employees’ interest to stay with the 6

company by almost 40 percent, improves employee commitment to the organization by almost 30 percent, 7

and increases employees’ efforts by almost 14 percent.20 Research also demonstrates a clear relationship 8

between leadership development, bench strength, and organizational performance.21 9


Forecast for Talent Management (FERC Accounts 920/921 and 923) 11


We record salaries and related expenses of the Talent Management 13

Division to FERC Account 920 (A&G Salaries) and FERC Account 921 (Office Supplies and Expenses). 14

Figure II-18 shows 2002 through 2006 recorded and forecast years 2007 through 2009 expenses for these 15

accounts. 16

20 Corporate Leadership Council, Business Case for Leadership Development, Washington: Corporate Executive Board, p 7. 21 Corporate Leadership Council, Hallmarks of Leadership Success, Washington: Corporate Executive Board, 2003, p. 5b.

50




From 2002 to 2003, labor costs increased by $342,000, primarily due 1

to an increase of five positions required to test more applicants, support on-board processing, and 2

eventually train new personnel. In 2004, labor costs increased by $2,401,000, primarily resulting from 3

increased participation in the Leadership Programs. Also in 2004, costs increased due to a higher volume 4

in internal employee movement and the consolidation and centralization of the employee mobility 5

programs. During 2006, labor costs increased by $709,000 from 2005. The acceleration of effort to build 6

the workforce due to major technology initiatives, the pole replacement program, and building new service 7

centers in areas that are experiencing high growth caused a significant increase in labor costs. These 8

increases were partially offset by decreased labor costs for the Leadership programs due to the redesign, 9

implementation, and start-up of the programs. 10

Non-labor costs increased in 2003 by $753,000 primarily due to the 11

purchase and implementation of systems for recruitment, an increase in testing materials, including testing 12

licensing agreements with the Edison Electric Institute, and the use of supplemental employees to provide 13

51

additional administrative support for the recruitment, testing and performance assessment activities. 1

Executive Leadership Program non-labor costs also increased primarily due to increased costs for 2

development, the result of a 67 percent increase in the number of individuals in our high potential pool. 3

In 2004, non-labor costs increased by $1,165,000, largely due to 4

redesign costs and implementation of the diversity and leadership programs. We also instituted the Talent 5

Pipeline, a new performance management system for the company. Non-labor costs increased by $865,000 6

in 2006 primarily due to an increase in the use of agency/supplemental support resulting from the 7

acceleration of recruiting new personnel. 8

A combination of factors including the anticipated growth in the 9

company and the activities and initiatives discussed previously in this testimony, the percentage of 10

employees eligible for retirement and normal attrition, the scarcity of labor resources, and the high cost of 11

living in Southern California, all drive an increased need for resources to attract, hire, develop, and retain 12

talent needed to build organizational capacity and achieve business objectives. 13

We are using a budget-based method to forecast Test Year labor and 14

non-labor expenses for Accounts 920/921. Our Test Year forecast of $17.668 million reflects an increase 15

of $4.806 million over 2006 recorded costs. This increase is itemized in Table II-4 below. 16

Table II-4 Talent Management

Labor & Non-Labor Forecast Increases Above 2006 Recorded Amounts

FERC Accounts 920/921 (2006$)

Activity

Recruitm ent 1,135,200$ Internal Mobility, Testing, Performance Assessment 691,600$ Executive & Leadership Development 2,979,600$

Total Increase 4,806,400$

The Company anticipates a 15 percent growth in the number of 17

employees hired over the next three years. As the company grows, Talent Management must increase 18

staffing in support functions like recruiting, testing, assessment, training, and development in order to meet 19

52

client organization needs and service expectations. Since 2003, the Corporate Executive Board’s 1

Recruiting Roundtable, a group of member organizations across a wide variety of industries, has reported 2

an increase in the number of positions to be filled without the necessary growth in staff and budget. This 3

group has focused on cycle time (time to hire) and quality of hire (measured by employee retention, 4

engagement, satisfaction). 5

Data from the Recruiting Roundtable assesses the current state in 6

relationship to the ratio of hires per recruiter at an average workload of 25 positions per recruiter. The 7

suggested “optimal” solution is an average workload of 15 positions per recruiter. The benefits from this 8

ratio include improvements in cycle time, reduced vacancy cost from filling positions more quickly, 9

improved quality, and greater recruiter satisfaction and engagement. SCE’s Recruiters currently handle in 10

excess of an average workload of 44 positions per recruiter. In 2006, SCE filled 3,769 vacancies with 11

external candidates. The request for increased staffing will provide much needed support for filling 12

existing and anticipated vacancies given the expected growth of the company and its retirement population. 13

We are moving closer to our client organizations and local talent 14

pools through the re-establishment of Regional Staffing Offices (mirroring the Regional Office currently 15

operating in San Clemente at the San Onofre Nuclear Generating Station). We are opening a Regional 16

Office in Rialto in July and anticipate additional Regional Offices in Westminster and Ventura. Our 17

experience indicates these offices provide necessary access to applicants as we test, interview, hire and 18

train new employees. 19

In addition, the company has identified a strong need for leadership, 20

employee, and career development. Talent Management is the central resource for non-technical training 21

and development. Participation in courses designed to fulfill critical skill needs, as well as training 22

resulting from increases in hiring has escalated. As part of our on-boarding process and to comply with 23

SOX remediation requirements, all new employees attend New Employee Orientation (NEO). The number 24

of NEO sessions has increased from 22 in 2005 to 59 in 2006, and the upward trend will increase in 25

proportion to hiring trends. The following sections outline some of the key challenges facing Talent 26

53

Management as we strive to meet the escalating demand for qualified talent in a market where such talent 1

is becoming increasingly scarce. 2

(i) Employees Eligible for Retirement 3

As discussed previously in this testimony volume, SCE has a 4

high percentage of retirement-eligible employees. This population, coupled with the average attrition rate, 5

represents a significant portion of Talent Management’s workforce re-staffing activities. This re-staffing 6

includes everything from entry level to senior professional positions. In areas of the company where the 7

loss of institutional knowledge presents strong operational issues, there is an effort to hire new employees 8

to allow them to train alongside the existing employees whose departure is anticipated. Many positions 9

have long training life-cycles (e.g. senior engineers, system/plant operators, planners, and technicians) and 10

as enhanced knowledge transfer occurs there is a greater likelihood of successfully transitioning this key 11

work associated with operational excellence and system reliability. This makes it more likely that the 12

company will be able to retain new employees who are appropriately trained for their jobs. 13

(ii) Scarcity of Labor Resources 14

It is becoming increasingly difficult to recruit applicants with 15

the necessary background and skills to meet the growing needs of the business. The limited supply of 16

qualified labor can be directly attributed to the reduced focus on vocational classes in high schools, which 17

has led to a lack of interest in pursuing a career through trade school skills. There is also a reduction in 18

skilled labor exiting the military due to enhanced military retention bonuses and the War on Terror. This 19

combination of factors has precipitated the beginning of a systemic labor shortage expected to transform 20

the workplace over the next 25 to 30 years, according to the Employment Policy Foundation (EPF). The 21

gap between baby boomers and entrants of college-educated workers will widen over the next two to three 22

decades due to the boomers’ mass retirements. If the U.S. economy continues to grow at three percent – 23

the consistent average since 1948, the workforce must increase by 58 million employees over the next three 24

decades to maintain a level rate of productivity. If the current population trends continue, the number of 25

workers will only increase by 23 million; a shortfall of 35 million workers, most with specific skills. 26

54

SCE competes with employers across the country to attract 1

and retain employees through its recruitment efforts. Vying for top talent is increasingly competitive given 2

the following factors: the current tight labor market (4.5 percent unemployment rate), high relocation costs 3

and cost of living in Southern California (housing market is unattractive), and the costs to retain existing 4

employees who are increasingly being courted by other employers, many outside of California. Utilities 5

across the nation are seeking to attract qualified candidates. The current focus on a “Nuclear Renaissance” 6

also threatens to deplete the narrow existing labor force in this niche market. New plants are being built in 7

less expensive areas of the country (primarily the Southeast) utilizing new technology. This has created a 8

number of government jobs to support the effort (the Nuclear Regulatory Commission is expected to hire 9

300 experienced engineers over the next several years). Our experienced Nuclear staff includes many well 10

qualified senior individuals who are prime recruitment targets for these positions. Given the tight market 11

for these specialized skills, Talent Management is extremely challenged in attempting to replace these 12

employees. 13

SCE’s aging infrastructure requires increased staffing levels 14

as we seek to maintain quality electric service for our customers. The impact of both retirement and 15

attrition and the increasing workload in TDBU impact Talent Management directly. For example, 16

manpower forecasts for key positions reflect a 10 percent increase over the next three years (see Exhibit 17

SCE-03, Volume 2, Part 1 T&D, Figure V-10). The cost of living in Southern California makes it 18

extremely difficult to attract and retain qualified employees to conduct this work. When we are successful 19

in recruiting these employees (e.g. linemen), they are often recruited away from us once they are again 20

eligible to move without paying back relocation expenses. This is a prevalent occurrence within the 21

electrical utility industry, where employers are competing for a limited pool of skilled labor resources that 22

are in high demand. 23

Given the challenges of recruiting qualified talent to the local 24

area, we utilize specialized recruitment efforts focused on the niche skills we must attract and retain to 25

conduct our business. These niche areas include Power Procurement traders, skilled craft (machinists, 26

linemen, mechanics, test technicians, computer technicians, instrument and control technicians, nuclear 27

55

operators), senior engineers (electrical, mechanical, civil, nuclear, specialized focus), and IT personnel with 1

up-to-date knowledge and skills. Additionally, the skills required (math, science, software skills) for entry 2

level positions (administrative assistants, clerical support, call center support, apprenticeship programs) are 3

lacking in approximately 50 percent of the applicants we test for these positions. 4

(iii) Regulatory Compliance 5

As a federal contractor, SCE is responsible for ensuring 6

compliance with the regulations of the Office of Federal Contracts Compliance Programs. In 2006, 7

updated regulations increased our responsibility with respect to applicant tracking. This tracking 8

requirement has created a significant increase in how we review and screen resumes determining applicant 9

status. Additional work is required as we seek to obtain, track and retain applications from qualified 10

applicants. In addition, training classes have been developed in support of regulatory compliance. For 11

example, Sexual Harassment Prevention, FERC Standards of Conduct, and Ethics & Integrity are required 12

training. Also, as a part of our on-boarding process and to comply with SOX remediation requirements, all 13

new employees attend New Employee Orientation. 14

(b) Labor Increases 15

To address the challenges discussed above regarding the impact to the 16

Talent Management organization from the growth of the company, the high percentage of employees 17

eligible for retirement, scarcity of labor resources and regulatory compliance requirements, we will need to 18

increase staff. These staffing increases are summarized in Table II-5 below. 19

56

Table II-5 Talent Management

Labor Forecast Increase Above 2006 Levels FERC Account 920

(2006$)

Increase in Personnel: #Annual Salary

Total Labor Increase

Recruitment:External Recruiter (HRC 2) 4 81,000$ 324,000$ Administrative Aide 4 2 50,400$ 100,800$ Supervisor 4 2 100,200$ 200,400$ Total Increase in Labor 625,200$

Internal Mobility, Testing, and Performance Assessment:Internal Placement (HRC 2) 2 81,000$ 162,000$ Assessment Consultants (HRC 3) 2 97,800$ 195,600$ Project/Product Analyst 2 2 63,000$ 126,000$ Total Increase for Internal Mobility, Testing & Perf Assessment 483,600$

Learning & Development:Human Resources Consultant 3 4 100,800$ 403,200$ Training Resource Specialist 3 3 92,400$ 277,200$ Business Analyst 3 2 84,600$ 169,200$ Manager 1 1 102,000$ 102,000$ Total Increase for Learning & Development 951,600$

Executive Development Program:Executive Cross-Training Program 7.5 144,000$ 1,080,000$ Total Increase for Executive Development 1,080,000$

Leadership Programs:Future Leaders Program 2.5 115,200$ 288,000$ Total Increase for Leadership Programs 288,000$

Total Increase in Labor 3,428,400$

2009 GRC ForecastTalent Management Increase in Labor

(i) Staffing, Testing, Performance Assessment Labor Increase 1

In support of our internal and external recruiting, testing, and 2

assessment functions, our request includes four additional Recruiters to support the hiring forecast, two 3

additional Administrative Assistants to support the process (tracking applicant and vacancy status to ensure 4

compliance with laws and regulations, processing new employees into the company, arranging interviews 5

57

and candidate travel), and two Supervisors to effectively supervise the employees and the processes. Two 1

Assessment Consultants will be required to address test maintenance activities to ensure SCE’s selection 2

tools are up-to-date regarding operational and safety laws, regulations, and company guidelines and 3

practices. Two testing specialists (Project/Product Analysts) will be required to support testing and to 4

qualify job applicants for field positions. As internal positions are filled, other internal positions are 5

vacated. This can create a domino effect, which can be repeated several times until an external vacancy is 6

finally generated. To address the internal churn, two Internal Placement Consultants will be required to 7

support filling these positions. 8

(ii) Learning & Development Labor Increase 9

The increase in training requirements has necessitated 10

securing additional trainers to facilitate. Additional resources will be needed to design, develop, deliver, 11

and evaluate the effectiveness of these training courses. Three Training Resource Specialists will be 12

required to support design and development, three Human Resource Consultants will be required for 13

training delivery, two Business Analysts for training evaluation, and one Human Resource Consultant for 14

program management. The requested staff will require one manager to provide oversight and functional 15

direction. The labor increase totals approximately $951,600. 16

Where subject matter expertise is essential, external resources 17

will continue to be used to develop and deliver courses. With the implementation of new learning 18

technologies (SAP) and to take advantage of the 24/7 access to training, the development of web-based 19

learning (WBL) increases efficiencies in the delivery course content. The requested Training Resource 20

Specialists will develop courses using all available delivery methods, including instructor-led and web-21

based learning. This internal development of courses will allow for reusable content to be leveraged across 22

the company and enable blended learning opportunities (WBL, classroom instruction, mentoring, and on-23

the-job training). Each designer will be responsible for developing and updating on average four courses 24

and programs. 25

Due to the continued increase in the number of classes 26

delivered, the Human Resource Consultants requested will be required to deliver training throughout the 27

58

Company. The opening of regional offices and the increase in intact training sessions will require 1

conducting additional training sessions to employees in field locations. The industry average number of 2

learning hours provided per learning professional staff member is approximately 600. Each of our 3

requested HRCs will deliver on average 753 hours of training, based on a 15 percent increase over 2006 4

(565 four hour sessions). 5

To ensure that learning is tied to metrics and business goals 6

and is integrated with the business strategy, SCE needs to enhance the capacity to measure the 7

effectiveness of training. The requested Business Analysts will develop metrics that will aid in ensuring 8

that the courses developed provide measurable value to the company. The focus must not be only on 9

program-level evaluation but the overall impact training has in meeting Company objectives. 10

(iii) Executive Development Labor Increase 11

Included in the forecast are five additional developmental 12

assignments per year in our Executive Cross-Training Program for a total increase of $1,080,000.22 Cross-13

training assignments are critical to prepare internal candidates to take on expanded roles. Funding five 18-14

month cross-training assignments will help the company keep pace with the need to advance internal 15

candidates into the executive positions that become vacant due to retirements, internal movements, 16

transfers, and other types of turnover. Because the 18-month assignments are launched on an annual basis, 17

the assignments will overlap (beyond the first year there will typically be a six-month period where ten 18

assignments run concurrently). Historically, the number of people in cross training assignments that were 19

funded through Executive Development was five in 2004, six in 2005, and three in 2006.23 Based on 20

retirement forecasts and trends in actual data, the annual number of executive vacancies is expected to 21

increase, thereby creating a need to prepare internal candidates in greater numbers.24 22

22 Although we capture recorded costs for a 12-month period, the cross training assignments are for an 18-month term. As a

result, beyond the first year, the program covers 90 months of salary per year across participants. 23 In 2004, three people started assignments, and two people completed assignments that started in 2003. In 2005, three people

started new assignments three people completed assignments. In 2006, one person continued an assignment, two people completed assignments and there were no new starts.

24 For example, the number of retirements and terminations in executive positions was nine in 2005 and twelve in 2006.

59

(iv) Leadership Programs Labor Increase 1

With the increased focus on the company’s leadership 2

capabilities, a Human Resource Consultant position is required to oversee the design and implementation 3

of leadership programs, and ensure program success. To support our leadership programs, labor costs are 4

projected to increase $288,000. In 2006, our leadership programs underwent redesign to ensure alignment 5

with the company’s values and strategic direction. In October 2006, a new leadership program, Future 6

Leaders, was launched. This program funds five 18-month cross-training assignments. The first five 7

cross-trainees charged three months to this program in 2006. Because the 18-month assignments are 8

launched annually, the assignments will overlap (beyond the first year there will typically be a six-month 9

period where 10 assignments run concurrently). 10

60

(c) Non-Labor Increases 1

Non-labor costs are also projected to increase. These increases are 2

summarized in Table II-6 below. 3

Table II-6 Talent Management Non-Labor Forecast Increase Above 2006 Levels

FERC Account 921 (2006$)

Non-Labor:Total Non-

Labor IncreaseRecruitment:Staffing Support (training, travel, IT) 100,000$ New Employee Expense 410,000$ Total Increase for Recruitment 510,000$

Internal Mobility, Testing, and Performance Assessment:Support (training, travel, IT) 50,000$ Testing Supplies 65,000$ Testing Licenses 8,000$ QuestionMark - Testing Automation 68,000$ Leadership Assessments 17,000$ Total Increase for Internal Mobility, Testing & Perf Assessment 208,000$

Executive Development Program:Executive Cross-Training Program 100,000$ Total Increase for Executive Development 100,000$

Leadership Programs:Future Leaders Program:Field Visits 30,000$ Development 140,000$ Expenses 80,000$ Total Increase for Future Leaders Program 250,000$

Leadership Academy:Selection/Orientation 15,000$ Development 275,000$ Expenses 20,000$ Total Increase for Leadership Academy 310,000$

Total Increase in Non-Labor 1,378,000$

2009 GRC ForecastTalent Management Increase in Non-Labor

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(i) Staffing, Learning and Development, Testing and 1

Performance Assessment Non-Labor Increase 2

Additional non-labor funding is required to support the 3

increase in hiring. Specifically, advertising vacancies, substance screens (drug and alcohol), background 4

investigations (required to be completed prior to employee start date), candidate travel and 5

accommodations, and site visits. The projected increase in costs is approximately $410,000. The 6

forecasted increase in Talent Management staff will require additional funding for training, IT 7

support/products (computers, telephones), and expense reimbursement (travel to company locations college 8

campuses and job fairs and recruitment events in support of hiring activity). These costs are projected to 9

be approximately $150,000. Due to a projected six percent increase in testing volume, there will be a 10

corresponding increase of $65,000 per year in additional testing supplies and material costs. In addition to 11

testing materials, testing licenses required to implement the use of the tests are projected to be $8,000, and 12

computer software programs’ service and maintenance charges are projected to be $68,000 per year. In 13

support of the development and delivery of a new leadership assessment process, testing materials, 14

simulations, and exercises will be acquired and modified to meet the future needs of SCE’s 15

executive/management selection and development programs, averaging $17,000 a year. 16

(ii) Executive Development Non-labor Increase 17

Each participant in the Executive Cross Training Program is 18

allocated executive assessment and development tools with an estimated cost of $20,000 per person over 19

18-months for a forecasted total increase of $100,000. Based on individual development needs, these costs 20

may cover assessments, executive education programs, industry-specific training, specialized training, and 21

associated travel costs. 22

(iii) Leadership Programs Non-Labor Increase 23

Each member in our leadership programs participates in 24

development activities that enhance their learning. To gain a broader knowledge and experience of the 25

company, participants visit field locations where they meet with the senior executive of that function to 26

62

learn first-hand its business and leadership objectives. Additional development activities such as education 1

programs and training and associated travel are part of the program costs. 2

(d) FERC Account 923 3

We record outside services expense of Talent Management to FERC 4

Account 923 (Outside Services Employed). Figure II-19 shows our 2002 through 2006 recorded and 5





Talent Management relies on the use of outside services to assist in 7

the design, implementation, and delivery of our various catalog training courses and specially designed 8

training programs as well as Computer Based Training Modules. Talent Management also utilizes outside 9

services for recruitment, organizational development activities, job testing and interview assessments. 10

From 2002 to 2004, costs for outside services decreased $412,000 11

primarily due to our decision to in-source training administration and program management. As we 12

63

increased the amount of training supported in-house, our outside services costs decreased. The creation of 1

new training programs or the revision of existing programs is based upon changing business needs and are 2

generally cyclical, and we had just revised our leadership programs, so the outside services for these costs 3

were reduced. In addition, outside services expenses related to recruitment decreased. 4

In 2006, outside services expenses increased approximately $638,000 5

as Talent Management prepared for various major projects. Outside services were utilized to determine the 6

resources, skills, and training estimates for various technology projects. In addition, outside services 7

increased for Talent Management as some business needs dictated the redesign of the Management 8

Foundations class and the addition of the Leadership Foundations class. 9

Outside services expenses fluctuated considerably over the five year 10

historical period. Since the use of these services is cyclical, we expect similar spending patterns in the 11

future. Therefore, we have selected a five-year average for our Test Year 2009 forecast. Our forecast for 12

the Test Year is $1.515 million as shown in Figure II-19. 13

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d) HR Client Services 1


For the Test Year 2009, HR Client Services forecasts a total of $5.948 3



Figure II-20 HR Client Services



(2) Activities of HR Client Services 6

HR Client Services staff manages Human Resources activities for the 7

Company’s business units. HR Client Services implements the Company’s HR directives at the business 8

unit level. While other HR divisions are responsible for the development of HR policies at the Company 9

level, we work directly with the business units to ensure that HR programs are integrated in a manner that 10

supports the achievement of their business goals. By facilitating the achievement of business unit goals, 11

HR Client Services contributes directly to the achievement of Company goals. We work with the business 12

units to implement programs and activities in compliance with governing regulations, and we provide 13

advice about HR issues to employees, supervisors, managers, and officers. A significant amount of the HR 14

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Client Services responsibilities are related to the monitoring and enforcement of laws, regulations, and 1

policies. This includes the FMLA and other laws regarding leaves of absence, wage and hour laws and 2

regulations, EO laws and regulations, Affirmative Action requirements, and employment regulations 3

affecting supplemental workers. The specific activities of HR Client Services include the following: 4

(a) Equal Opportunity And Affirmative Action Plans 5

HR Client Services works directly with the business units and the 6

Equal Opportunity Department to ensure compliance with EO regulations and affirmative action plans. We 7

identify EO issues that may be present in employee-related decisions made at the business unit level (e.g., 8

compensation, performance management, employee discipline, and training opportunities), and work with 9

the business unit personnel to ensure compliance. We also communicate the provisions of the Company’s 10

affirmative actions plans to managers and supervisors, and provide training on Company responsibilities 11

under the plans. We assist Talent Management in ensuring approaches to recruiting, hiring, training, and 12

development that comply with the plans. 13

(b) Compensation-Related Services 14

HR Client Services works with Total Compensation and provides a 15

wide range of compensation-related services to the business units in support of compensation review, the 16

MIP, and the CIP.25 17

25 Information detailing the Management Incentive Program (MIP) and Compensation Integration Program (CIP) is provided

in the workpapers.

66

As illustrated in Table II-7 below, Total Compensation’s 1

compensation policy decisions at the Company level directly influence HR Client Services’ compensation 2

support activities at the business unit level. 3

Table II-7 Comparison Between Total Compensation And Client Services Activities

TOTAL COMPENSATION: COMPANY-LEVEL

HR CLIENT SERVICES: BUSINESS UNIT (BU) LEVEL

Develops the Company’s compensation policy and programs.

Determines what forms of compensation will be offered (e.g., salary, incentives, etc.).

Analyzes compensation data for fairness and parity.

Designs and administers executive/director compensation programs.

Monitors legislation/requirements related to benefits.

Analyzes national compensation trends.

Participates in national compensation surveys.

Manages compensation programs (e.g., compensation review, annual merit increases, Results Sharing and MIP).

Member of Company Benefits Negotiating Committee.

Supports implementation of Company compensation policy and programs (designed by Total Compensation) at the BU level.

Assists BU in complying with compensation policies and programs and evaluating impacts of specific compensation decisions.

Determines need for BU-specific incentive programs.

Works with BU to ensure fair and equitable application of compensation guidelines.

Assists BU in developing performance/development goals linked to BU-goals.

Answers BU questions related to compensation issues.

Carries out actual salary planning for employees by working with management during the compensation review process.

HR Client Services supports the business units by communicating and 4

explaining changes to the compensation programs and advising the business units of Compensation Review 5

guidelines, timelines, and policies. We develop business unit procedures for implementing Compensation 6

Review by helping determine which increases must be reviewed, and what amount of the merit pool, if any, 7

will be withheld to pay for mid-year increases. We ensure compliance with compensation policies by 8

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reviewing compensation increases on a business unit and division basis, and meeting with managers to 1

discuss merit increases that fall outside the suggested guidelines. HR Client Services supports the MIP by 2

responding to inquiries from supervisors and managers, and reviewing the appropriateness of MIP bonuses 3

and stock options awarded to participants. We also support the CIP by responding to questions from 4

supervisors and employees, and offering advice and counsel regarding promotional increases and salary 5

offers for new hires. We review and approve requests to change employee and job CIP classifications for 6

positions outside the MIP. 7

(c) Business Unit Staffing Support 8

HR Client Services works with Talent Management and the business 9

units to ensure the proper and effective use of the JOIS system. This requires meeting with business unit 10

supervisors to discuss staffing needs and the appropriate methods for filling those positions, checking the 11

Affirmative Action Plan to determine if females or minorities are underutilized in the job classification at 12

issue, and if so, working with the hiring supervisor and Talent Management to determine appropriate 13

actions to address the situation. We assist in developing the JOIS posting by providing advice about 14

appropriate JOIS language, and reviewing the job posting for content and consistency prior to its 15

appearance on JOIS. We review notifications to JOIS applicants who are not selected for interviews and 16

work with Talent Management and the hiring supervisors if problems are noted or questions arise. Upon 17

request, we assist the hiring supervisor by helping prepare interview questions and participating on the 18

interview panel. We also provide guidance to Talent Management and the hiring supervisors if problems 19

are noted. We respond to questions from employees and supervisors relating to the interpretation of JOIS 20

policies, such as the definition of a vacancy or the appropriate classification of a temporary work 21

assignment. Finally, HR Client Services reviews and approves temporary work assignments, requests to 22

waive in-service residency requirements, and waivers to bypass the JOIS posting process. 23

(d) Succession Planning In The Business Units 24

HR Client Services works with the business units and Talent 25

Management to ensure that the goals of the succession planning process are effectively integrated. We 26

initiate the succession planning process in the business units by distributing the information related to the 27

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succession planning process, including employee profile, incumbent, key position, and organization talent 1

review forms. After reviewing the business unit’s list of succession planning candidates to identify any 2

staffing issues, we advise the business unit if problems are found, and forward the approved package to 3

Talent Management for processing. HR Client Services also works with the business units on a continuing 4

basis to assist in identifying their present and future talent needs. This process requires assisting in the 5

identification and assessment of high potential employees, identifying developmental opportunities for the 6

high-potential pool, and training managers to coach, develop, and mentor high potential employees. 7

(e) Workforce Planning in the Business Units 8

HR Client Services works with the business units to ensure they have 9

the required workforce in terms of both numbers of people and skill level to meet business objectives. We 10

initiate the workforce planning process by validating with the business units, their five-year goals and 11

objectives. We assist the business units in determining the workforce requirements to meet these business 12

objectives. We then run and analyze historical attrition and internal movement data to predict potential loss 13

and determine areas where there may be a critical shortfall. Once these areas of potential future shortfall 14

have been determined, HR Client Services works with the business unit as well as Talent Management and 15

Total Compensation to develop strategies for ensuring these resources are available when needed. This 16

process is done on an annual basis and updated throughout the year, as needed. 17

(f) Workforce Management In The Business Units 18

HR Client Services works with the business units and Talent 19

Management when a surplus condition is invoked or under consideration, and assists the business units in 20

the development of a business case to support the declaration of a surplus condition, the first step of 21

workforce management. A surplus condition may result from a loss of or reduction of funding, plant 22

closure, outsourcing of functions, shifts in business demands, adoption of new technology or processes, and 23

the need for different skill requirements. We help develop employee selection methods to determine which 24

employees will be declared surplus and advise business units on program policies and past practices. HR 25

Client Services works with surplus employees by matching them with job vacancies for which they may be 26

69

qualified. Through the Workforce Management Program, HR Client Services helps the business units 1

retain employees with the right skills and talent necessary to fill job vacancies. 2

(g) Other Business Unit Support Activities 3

HR Client Services directly supports the business units in other HR 4

policies and programs, such as performance management, the disciplinary process, HR-related systems, 5

and policy and procedure communication. We provide assistance related to performance management by 6

communicating guidelines and process changes, helping managers develop performance plans and 7

evaluations, and providing guidance on establishing employee development goals. When disciplinary 8

action is considered, we work closely with the business units to determine whether the discipline process 9

should be imposed, what the appropriate level of discipline will be, and whether the action is consistent 10

with the actions taken in similar past situations. We also ensure that the disciplinary action is in 11

compliance with the appropriate laws and regulations. 12

(h) Implementing New Human Resources Systems 13

HR Client Services supports the implementation of new HR systems 14

by communicating with the business units on the design and intent of the new programs, training 15

supervisors and managers, and designing a change management program to help system users transition to 16

the new requirements. HR Client Services assists in the creation and revision of HR policies at the 17

Company level and participate in the implementation of those policies by providing policy training in the 18

business units, and interpreting the application of new policies. 19

(i) Focus On Resolution Program 20

HR Client Services administers the Focus on Resolution program, our 21

dispute resolution process for employees not covered by a collective bargaining agreement. Employees can 22

utilize Focus on Resolution to address most issues involving employment, such as the application of 23

policies and procedures, and alleged violations of law, including claims of unlawful discrimination, which 24

are investigated by EO. When a complaint is filed, we meet with employees to discuss the issues raised 25

and answer questions related to the Focus on Resolution form, process, timelines, and procedures. We 26

meet with the involved supervisor and respond to questions. We facilitate meetings between the employee 27

70

and supervisor in an attempt to resolve the issue at the business unit level. In addition, we investigate the 1

allegations made by the employee, and we perform follow-up fact finding as requested by management. 2

If the complaint is not resolved at the business unit level, the Focus 3

on Resolution process moves to the Company level. HR Client Services works with both the supervisor 4

and the employee to prepare them for the Company-level hearing, and does additional fact finding, as 5

necessary. If the issue is not resolved by the hearing, it is escalated to the review panel level. If the issue is 6

not resolved at this level, voluntary arbitration is available. We advise the supervisor and the employee 7

regarding their roles and responsibilities at each step. As appropriate, we implement the decisions made by 8

the review panel. Implementing these decisions may require revising an employee’s performance 9

appraisal, re-posting a vacancy, or modifying disciplinary action. 10

(j) Other Personnel-Oriented Services 11

In addition to assisting the business units in implementing HR 12

policies and procedures, HR Client Services also works closely with the business units to design and 13

implement personnel-oriented programs that meet their specific needs. We support the accomplishment of 14

business goals by identifying the competencies necessary to achieve the goals, introducing those 15

competencies in performance plans and evaluations, and reinforcing the competencies through training 16

initiatives. We also facilitate team-building, strategic planning, and off-site meetings to improve business 17

unit productivity. We develop certain business unit specific training programs, such as the service 18

excellence program for Shared Services, affiliate guideline training for customer contact employees in the 19

Customer Service Business Unit, and certification training for Customer Service account managers. 20

(k) Work Environment Survey 21

HR Client Services administers the bi-annual Work Environment 22

Survey process by reviewing and revising survey content, communicating the survey schedule, intent, and 23

process to employees, distributing the survey via the Intranet, and tabulating the results. We interpret the 24

survey responses, communicate the results to all levels of the business units, and provide officers and 25

managers with an analysis of the survey findings. We then develop organizational effectiveness initiatives 26

for the business units to help them address the outcomes of the survey. For example, if the survey indicates 27

71

that employees are having difficulty understanding the performance review process, we might recommend 1

that communication tools be developed to address that need. If the survey indicates that employees do not 2

view the business unit communication environment as “open,” then training or team-building interventions 3

could be developed to address that perceived deficiency. 4


Forecast for HR Client Services (FERC Accounts 920/921 and 923) 6


We record salaries and related expenses of HR Client Services to 8

FERC Account 920 (A&G Salaries) and FERC Account 921 (Office Supplies and Expenses). Figure II-21 9

shows our 2002 through 2006 recorded and forecast years 2007 through 2009 expenses for these accounts. 10




Labor costs fluctuated slightly over the recorded period due to 11

vacancies and delays in filling positions. Non-labor costs also fluctuated between the years 2002 and 2006. 12

72

The decrease in 2004 is primarily due to a reduction in development expenses from the previous year. 1

Non-labor costs in 2006 increased due to development and printing expenses related to the Work 2

Environment Survey. Since we anticipate fluctuations in costs as experienced in the recorded period 2002 3

through 2006, we have selected a five-year average to forecast both labor and non-labor expenses for Test 4

Year 2009. 5


We record outside service expenses of HR Client Services FERC 7






HR Client Services uses outside services for various on-going 10

activities such as support for the distribution and analysis of an employee work environment survey and 11

various training programs for our HR employees. 12

73

Non-labor costs fluctuated between 2002 and 2006. Costs in 2002 are 1

related to the analysis and distribution of an employee Work Environment Survey which occurs every two 2

years plus various consulting expenses associated with training, mentoring programs and HR related issues. 3

Consulting costs in 2003 are related to organizing drive activities and the facilitation of an internal 4

investigation training certificate program for HR Consultants, EO and Labor Representatives. In 2004 5

costs increased significantly due to the Work Environment Survey and activities related to an organizing 6

drive. The decrease in 2005 is attributed to the Work Environment Survey which was completed in the 7

prior year. This activity causes fluctuations in year-to-year expenses. In 2006 costs increased due to the 8

analysis and distribution of the Work Environment Survey plus a change in the design and delivery of the 9

survey. The last five years of recorded costs are most representative of future costs due to the fluctuation 10

in consulting expenses for activities such as the Work Environment Survey, organizing drives and various 11

consulting expenses. Therefore, we have selected a five-year averaging method to forecast expenses for 12

Test Year 2009. 13

74

e) Labor Relations 1


For the Test Year 2009, Labor Relations forecasts a total of $1.394 million of 3

expenses. Figure II-23 below, shows recorded costs for the years 2002 through 2006, plus our forecast for 4

the years 2007 through 2009. 5

Figure II-23 Labor Relations



(2) Activities of Labor Relations 6

Labor Relations negotiates and implements the collective bargaining 7

agreements for the Company’s bargaining-unit workforce, and ensures SCE’s compliance with federal and 8

state labor regulations. These federal regulations and statutes include the National Labor Relations Act, the 9

Fair Labor Standards Act, the Taft-Hartley Act (Labor Management Relations Act), Title VII of the Civil 10

Rights Act, the Age Discrimination Act of 1967, and the Americans with Disabilities Act of 1990. Primary 11

state statutes include the Fair Employment and Housing Act, and the state’s wage and hour, statute and 12

regulations. 13

75

(a) Negotiations Management 1

Labor Relations manages several types of negotiations with the 2

unions. Collective Bargaining Agreement negotiations relate to wage and working condition issues for 3

bargaining-unit employees, and have historically been scheduled every three years, although extensions are 4

sometimes approved beyond the three-year period. Benefit negotiations are separate from the Collective 5

Bargaining Agreement negotiations and are typically five-year agreements. Interim negotiations are 6

initiated as necessary, by either the unions or the Company, and cover specific issues that arise outside the 7

regular Collective Bargaining Agreement process. An example of an issue that would be settled through 8

interim bargaining is changes in the duties or wages of a bargaining-unit job classification. 9

Managing the Collective Bargaining Agreement and Benefits 10

negotiations processes requires us to establish bargaining strategies, form a negotiating team, structure the 11

proposals, lead at the bargaining table, and implement the negotiated changes. Labor Relations develops 12

the bargaining strategy by meeting with executives, business unit managers, HR, and other divisions of the 13

Company, such as Regulatory Policy & Affairs, to determine the Company goals and objectives for the 14

specific negotiating process. The goals and objectives could require us to identify new issues, include new 15

agreements, or modify or delete existing agreements. 16

Labor Relations forms and leads the Company negotiating team for 17

the bargaining process. Members of the negotiating team are drawn from several of SCE’s business units 18

including Law, Benefits Administration, and Total Compensation, as well as other areas that can provide 19

the necessary expertise on the specific subject matters. The Company negotiating team initially meets with 20

the union representatives to structure how the negotiations will be handled, and then negotiations formally 21

begin. Labor Relations oversees the negotiation process and works to reach mutual agreement on the 22

issues presented by both sides. During the process, Labor Relations provides periodic updates on the status 23

and progress of negotiations to the Company. Once negotiations are complete, Labor Relations supports 24

the implementation of the new, changed, or deleted Collective Bargaining Agreement and Benefits issues. 25

We prepare and distribute management letters and other materials that outline the changes, provide a 26

76

question-and-answer-format document for responding to employee inquiries, and offer suggestions for the 1

effective implementation of the changes. 2

(b) Contract Administration/Liaison Activities 3

Labor Relations serves as the liaison between the Company and four 4

unions that represent approximately 5,500 Company employees. These unions include International 5

Brotherhood of Electrical Workers (IBEW), Local 47; Utility Workers Union of America (UWUA), Local 6

246; San Onofre Firefighters’ Association (SOFA); and Teamsters, Local 495. Labor Relations’ is the 7

primary and almost exclusive point of contact for questions, and handling the day-to-day issues raised by 8

either the union, Company management, or an affected represented employee. These issues may include 9

questions or disputes about union dues, grievances, disabilities, and pay. Labor Relations works with the 10

unions to review and resolve these issues before they develop into large scale problems. 11

Labor Relations directly supports the business units’ interpretation, 12

application and administration of the Collective Bargaining Agreements. Grievance processing and 13

progressive discipline are the two most common areas of support required by the business units. 14

The grievance process for bargaining-unit employees is dictated by 15

the Collective Bargaining Agreement and includes four steps: oral grievance, fact-finding, review, and 16

arbitration. Labor Relations supports the business units by offering advice and counsel, assisting in the 17

fact-finding investigations, sitting in on meetings, and helping the business unit prepare for each step of the 18

process. We work with the involved first-line supervisors, the business unit labor representative, and other 19

involved parties from the business unit. 20

Labor Relations assists the business units by advising about the 21

appropriate discipline for specific infractions, and serving as a resource for advice regarding both the 22

process and individual cases. We also provide training for first line supervisors on the Collective 23

Bargaining Agreement, such as the grievance and disciplinary processes. 24

77


Forecast for Labor Relations (FERC Accounts 920/921 and 923) 2


We record salaries and related expenses of the Labor Relations staff 4

to FERC Account 920 (A&G Salaries) and FERC Account 921 (Office Supplies and Expenses). Figure II-5

24 shows our 2002 through 2006 recorded and forecast years 2007 through 2009 expenses for this account. 6




Labor costs fluctuated slightly between 2002 and 2006, primarily due 7

to vacancies and the timing lag in filling those positions with qualified personnel. Non-labor costs also 8

fluctuated from 2002 through 2006; these fluctuations are attributed to printing costs for collective 9

bargaining agreements. The last five years of recorded costs are most representative of future costs due to 10

the fluctuations in labor and non-labor expenses. Therefore, we have chosen a five-year average method to 11

forecast expenses for labor and non-labor for Test Year 2009. 12

78


We record outside services expense of Labor Relations to FERC 2






The use of outside services in Labor Relations fluctuated over the 5

historical period. The costs primarily consist of expenses associated with the grievance resolution process 6

including expenses for arbitrations and court reporter fees. The costs also consist of contract negotiations-7

related expenses, including costs for transcribers. We anticipate similar expenses in our Test Year as our 8

2002 through 2006 recorded costs and have, therefore, selected a five-year averaging method to forecast 9

2009 expenditures of $17,000. 10

79

f) HR Administration 1


For the Test Year 2009, HR Administration forecasts a total of $1.645 3



Figure II-26 HR Administration

Recorded and Adjusted 2002-2006/Forecast 2007-2009 All FERC Accounts 920/921/923


(2) Activities of HR Administration 6

HR Administration consists of strategic planning, general rate case, finance 7

and VP administration support functions. HR Administration is responsible for overall HR strategic 8

planning, managing the preparation of HR’s exhibits for general rate case filings, and managing the HR 9

Department budget / accounting processes, payroll activities and transactions. 10

The specific activities of HR Administration include the following: 11

80

(a) Human Resources Financial Services 1

HR Administration includes our Financial Services area which 2

manages budgets, monitors performance, and provides administrative support services to the HR 3

Department such as payroll, purchase order maintenance, invoicing, facilities and presentation support. 4

The annual HR budget includes operations and maintenance (O&M), 5

general functions, and capital. HR Financial Services initiates the annual budget process in accordance 6

with Company guidelines. Preliminary budget requests are developed and analyzed for appropriateness, 7

completeness, and compliance with company guidelines. HR Financial Services then presents the budget 8

projections to the HR Senior Vice President for review and, once approved, the department budget is 9

forwarded to the corporate level for review. 10

Once the budgets are established, HR Financial Services is 11

responsible for analyzing and reporting budget performance against budget targets. We prepare monthly 12

reports that display and explain budget status and variances by each HR division. We are responsible for 13

preparing the financial data for SCE’s Quarterly Business Review sessions with Company officers. HR 14

Financial Services is responsible for establishing criteria for new budget accounts, approving requests for 15

new accounts, and coordinating the establishment of accounts in compliance with corporate, federal, and 16

state accounting requirements. HR Financial Services also has vendor management responsibilities and 17

administers the purchase order process for HR by establishing purchase orders, monitoring and tracking 18

their status, and making payment to vendors in accordance with Company guidelines. 19

HR Financial Services also handles HR’s payroll function by posting 20

timesheet adjustments (including flexible work schedule variations); communicating payroll policy or 21

process changes to HR employees, and processing special payments such as spot bonuses. We review and 22

approve on-line expense reports to ensure compliance with established requirements. We coordinate the 23

“banking” requirements for the Health Care Reimbursement Account and the Dependent Care 24

Reimbursement Account. This requires funding the trusts, withdrawing and depositing money to meet 25

payroll deduction and payout requirements, all in compliance with the federal and state regulations. 26

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(b) General Rate Case 1

HR Administration manages the preparation of GRC exhibits, 2

including department expenses for HR, EO and executive officers, employee pension and benefits and 3

incentive compensation programs. We are also responsible for SCE’s management of the GRC Total 4

Compensation Study. The Total Compensation Study is performed by an external consulting firm, under 5

the joint management of the Commission’s Division of Ratepayer Advocates (DRA) and SCE. 6

(c) Strategic Planning 7

HR Administration manages the strategic planning activities for the 8

HR department which includes the development of goals set out to support our strategic direction. We 9

establish strategic target areas of focus for HR based on the workforce priorities identified by our business 10

units. Based on these workforce priorities, objectives, and short and long-term goals for the department are 11

identified to meet the needs of our business units. HR Administration monitors and facilitates progress on 12

the objectives and identified goals. Updates on HR’s progress towards meeting its goals are regularly 13

provided to all HR department employees. HR Administration manages a periodic process to update and 14

refine the strategic plan to continually align with the needs of our business units. 15

(d) SVP Administration Support 16

HR Administration also includes costs associated with providing 17

support to the Senior Vice President of Human Resources. Costs include administrative assistant labor and 18

general employee expenses. 19


Forecast for HR Administration (FERC Accounts 920/921 and 923) 21


We record salaries and related expenses of HR Administration to 23

FERC Account 920 (A&G Salaries) and FERC Account 921 (Office Supplies and Expenses). Figure II-27 24


82




Labor costs fluctuated over the recorded period. The increase in 2003 1

resulted from the addition of a project manager responsible for special projects and the full-year impact of a 2

strategic planning manager added in 2002. Labor costs increased in 2005 due to the filling of vacancies 3

and two additional FTEs in the Strategic Planning group. Non-labor fluctuations during the recorded 4

period are primarily due to systems, telecommunication and facility expenditures for the entire HR 5

department. Since HR Administration was fully staffed by year 2005, we believe years 2005 and 2006 are 6

most representative of future labor costs. Therefore, we have selected a two-year averaging method to 7

forecast Test Year 2009 labor expenses. We anticipate non-labor expenditures to fluctuate as experienced 8

in the recorded period 2002 through 2006, therefore, we have selected a five-year averaging method to 9

forecast non-labor costs for Test Year 2009. 10

83


We record outside service expenses for HR Administration in FERC 2






HR Administration relies on the use of outside services for executive 5

searches, succession planning, strategic planning assistance and miscellaneous analysis. In 2002, our 6

strategic planning activities were not fully underway. In 2003, non-labor costs increased primarily due to 7

consultant facilitation for strategic planning activities which were ongoing through 2006. We anticipate 8

future costs to reflect those incurred during the period 2003 through 2006. Therefore, we have selected a 9

four-year average to forecast non-labor expenses for Test Year 2009. 10

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g) SCE Executive Officers 1


For the Test Year 2009, SCE forecasts $24.588 million of expenses for 3

executive officer cash compensation and expenses. Figure II-29 below, shows recorded costs for the years 4

2002 through 2006, plus our forecast for the years 2007 through 2009. 5

Figure II-29 Executive Officers



(2) Description of Executive Officer Compensation 6

The costs associated with the Company’s executive officers include the 7

officers’ salaries, annual incentives, and their expenses. Benefits for executive officers are discussed in 8

Exhibit SCE-6, Volume 2/HR – Total Compensation. In this section, we will discuss only cash 9

compensation for executive officers, that is, base salary and annual incentives, and associated expenses.26 10

26 Compensation and expenses of the shared corporate officers are allocated to the EIX holding company according to CPUC

D.88-01-063, Appendix C.I.C.2; Richard Metzler & Associates CPUC Affiliate Audit, Data Request No. 36, dated February 5, 1992; and Policies and Rules on Affiliated Company Transaction (PROACT) Manual, dated March 23, 2001.

85

The incentives for non-officer executives are addressed under the Results Sharing program discussion in 1

Exhibit SCE-6, Volume 2/HR – Total Compensation. Base salary for non-officer executives is discussed 2

in the individual sections where the expenses of their respective departments are discussed. 3

The cash compensation for SCE’s executive officers is part of the competitive 4

total compensation package, which includes base salary, incentives and benefits designed to attract and 5

retain well-qualified executives. We compete for executive talent from both utilities and other industries, so 6

our salary and incentive programs must be competitive in order to attract the talent we require. 7

Annually, we benchmark executive pay against that of competing companies 8

using data from surveys and disclosure filings including proxy statements and 10-K filings. We then 9

conduct a recommendation and review process addressing salary increases and incentive targets for the 10

following year. The recommendations for executive officers’ compensation are presented in February to 11

the Compensation and Executive Personnel Committee (“Compensation Committee”) of the Board of 12

Directors for review and approval, and salary increases are made effective March 1. 13

In December of each year, the Board of Directors approves a set of 14

performance goals for the Company, and the Compensation Committee adopts these goals as measures that 15

will be used to determine executive bonuses to be paid under the Executive Incentive Compensation Plan. 16

These goals identify critical areas of utility performance and set measurable, challenging standards to 17

define successful attainment. These goals include targets that improve value for both customers 18

(e.g., customer satisfaction, improved safety performance, and financial performance) and shareholders 19

(e.g., improved earnings per share). These goals are emphasized at all levels of the Company through the 20

year and focus performance on areas critical to the utility’s business success. 21

In January of the following year, individual and organizational performance 22

is measured and rated against the target goals established for the prior year. Recommendations for bonuses 23

based on performance are developed for each eligible officer. The Chairman of the Board provides a report 24

to the Compensation Committee as to overall Company performance and presents recommendations based 25

on individual officer performance. Concurrently, an incentive pool is determined that establishes funding 26

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available for the bonuses. The Compensation Committee reviews the recommended individual incentive 1

awards for the officers, and ensures bonus awards are appropriate. 2


Forecast for Executive Officers of SCE (FERC Accounts 920/921 and 923) 4


We record salaries and related expenses for executive officers of SCE 6

in FERC Account 920 (A&G Salaries) and Account 921 (Office Supplies and Expenses). Figure II-30 7


Figure II-30 Executive Officers



Average costs per officer for salaries and bonuses, expenses, and the 9

cost of outside services, vary from year-to-year. Average cash compensation per officer fluctuates widely 10

from year-to-year because of differences in the average bonus earned. For example, bonus payouts were 11

relatively high in 2003 and 2005 and lower in other years. Non-labor expenses per officer, which include 12

automobile-related expenses, meals, travel, office supplies, cell phones, pagers, computer access costs and 13

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other business expenses, also varied over the recorded period. We expect to add one additional officer in 1

2008 and another in 2009, to lead the large capital projects being undertaken over the next several years. 2

The forecasting method that provides the most reliable forecast for 3

the Test Year is a budget-based forecast that uses the average cost per officer from the period 2002-2006 4

(thus smoothing out the year-to-year variation in per-officer costs) and the expected number of officers for 5

each of the forecast years—the 34 officers we currently have for 2007, 35 for 2008 and 36 for 2009. The 6

Test Year forecast was derived by multiplying the average cost over the five years by the expected number 7

of officers in the Test Year. 8


We record outside service expenses for executive officers of SCE in 10

FERC Account 923 (Outside Services Employed). Figure II-31 shows our 2002 through 2006 recorded 11

and forecast years 2007 through 2009 expenses for this account. 12

88

Figure II-31 Executives



Outside services play a vital role to ensure that we offer market-1

competitive compensation packages to attract and retain a team of effective leaders to run our business and 2

that we comply with accounting and reporting regulations. These services include actuarial valuation of 3

executive benefit plans, calculations of executive retirement plan benefits, comparative analysis of values 4

of executive compensation and benefits, design of executive benefit and incentive programs, and other 5

services required for administration of compensation and benefit plans and compliance with regulatory 6

requirements. Outside services expenses tend to vary with year-to-year changes in travel requirements, the 7

number of officers requiring actuarial calculations, special compensation studies not done annually, and 8

costs attributable to the holding company CEO’s services. 9

From 2002 to 2006, costs for outside services related to executive 10

compensation and benefits increased from $894,000 to $1,270,000. The increases were somewhat uneven, 11

with 2003 being a higher-cost year due to actuarial fees for an unusual number of executive retirement 12

calculations, an Executive Benefit Index Valuation study as part of a review of executive benefits, and 13

89

executive search fees. The upward trend from 2004 to 2006 reflects in part additional executive searches 1

and actuarial calculations which have become more numerous as the number of officers has increased. 2

We arrived at our Test Year forecast of $1.4 million for outside 3

services by calculating the average cost per officer over the period 2002-2006 (thus smoothing out the 4

year-to-year variation in these expenses) and applying that average cost to the expected number of officers 5

for each of the forecast years—the 34 officers we currently have for 2007, 35 for 2008 and 36 for 2009. 6

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2. Equal Opportunity 1

a) Summary Of Test Year Request 2

For the Test Year 2009, Equal Opportunity (EO) forecasts a total of $3.878 million 3

of expenses. Figure II-32 below, shows recorded costs for the years 2002 through 2006, plus our forecast 4

for the years 2007 through 2009. 5

Figure II-32 Equal Opportunity

Recorded and Adjusted 2002-2006/Forecast 2007-2009 All FERC Accounts (920/921)


b) Diversity Strategy 6

Initially developed in 2001, SCE’s diversity strategy serves as a framework for 7

annual diversity planning as well as for planning over longer periods of time. SCE’s diversity strategy 8

continues to evolve and covers diversity issues in five main areas: 9

(1) Work Environment 10

The Company is committed to train employees to embrace diversity and thus 11

reduce the number of equal opportunity issues in the workplace. The training is designed to ensure that all 12

employees understand the Company’s commitment to providing a work environment where all employees 13

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can operate at their full potential and value individual differences. In addition, as part of the diversity 1

strategy, EO works with business units in targeting specific work environment issues for annual attention. 2

(2) Community Partnership 3

The Company encourages and supports employees with common interests, 4

cultural backgrounds, and goals to gather and share experiences and resources. Some of these groups have 5

grown into more formal and organized “affinity groups,” or business resource and employee networks. EO 6

also manages a Supplier Diversity Program which is committed to providing procurement opportunities for 7

women, minority, and disabled veteran business enterprises. EO partners with other parts of the Company 8

to prepare employees to address diversity related issues when dealing with members of the community we 9

serve. 10

(3) Recruitment and Retention 11

The Company believes talent, regardless of race, gender, or background, 12

seeks out companies that offer ample opportunity for career advancement. 13

EO shares information regarding workforce makeup with Talent 14

Management in order to ensure the Company is reaching diverse applicant pools. Company recruiters 15

routinely take part in diversity-focused job fairs and advertise job opportunities with minority and niche 16

publications, newspapers and websites that target various demographic groups. 17

Once the Company has attracted and hired applicants, they focus on ways to 18

retain employees. This includes consistently providing employees with the opportunities and programs 19

they need to develop successful, long-term careers with the Company. 20

(4) Leadership Development 21

The development of employees and creation of comprehensive leadership 22

development programs are considered imperatives to retain top talent. The Company provides various 23

leadership programs to build and develop a talent pipeline that mirrors the demographic representation of 24

its entire workforce and the qualified labor market. 25

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(5) Communication and Education 1

The Company believes communication and education are among the 2

foundations of successful diversity initiatives and a critical component of the continuous learning process. 3

Communication and education provide an ongoing foundation for keeping the organization focused on 4

objectives. The following are some of the SCE practices supporting this focus area: mandatory diversity 5

training within six months of hire, supplemental diversity training for managers and supervisors within six 6

months of being promoted, targeted publication of information and policy to managers and supervisors to 7

assist them in understanding and articulating the business case for making diversity and inclusion a 8

business priority, and finally, distribution of a diversity information kit to all new hires that highlights the 9

ways the Company manages and promotes diversity and its equal opportunity policies. In accordance with 10

SCE’s obligation under the FEHA, EO also coordinates and/or provides Sexual Harassment Prevention 11

training to all managers and supervisors on a two-year rotation. 12

c) Workforce Diversity Update 13

(1) Background and Data 14

As stated above, the core of SCE diversity strategy is its belief that the 15

diversity of its workforce helps drive success. SCE has a long-standing commitment to workforce diversity 16

and equal employment opportunity. SCE continually evaluates its employment practices and programs to 17

have its workforce reflect the pool of qualified women and minorities in the labor market. In addition, SCE 18

has a wide variety of programs in place to ensure that once employed by SCE, all employees, including 19

women and minorities, have the opportunity to develop their talents and skills. 20

Since the 1970s, SCE has had a department overseeing equal employment 21

opportunity and diversity issues. In the mid-1980s, the department became a stand-alone organization. For 22

the last seven years, the Vice President of EO has reported directly to the President of SCE, thus ensuring 23

that diversity-related issues are communicated directly to Senior Management of SCE. 24

Since 1990, SCE’s workforce has become increasingly diverse. Table II-8 25

below reflects the progress SCE has made in terms of increasing the representation of minorities in its 26

workforce. Currently, minorities make up 49 percent of SCE’s workforce and minorities plus non-minority 27

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females make up 61 percent of the workforce.27 This is up from 33 percent and 47 percent, respectively, in 1

1990.28 In three categories, technicians, administrative, and bargaining unit, gains in the representation of 2

total minorities have been achieved despite the overall reduction in the size of the groups. 3

Table II-8 Summary Of SCE Full & Part-time Workforce For 2009 GRC

For Years 1990 And 200629 TYPE TOTAL MALE FEMALE MIN

TOTAL AFR AM

ASIAN NAT AM

LATINO WHITE

1990 EXECUTIVE PAYROLL

40 38 95.0%

2 5.0%

3 7.5%

0 0.0%

1 2.5%

0 0.0%

2 5.0%

37 92.5%

2006 EXECUTIVE PAYROLL

128 95 74.2%

33 25.8%

30 23.4%

10 7.8%

7 5.5%

2 1.6%

11 8.6%

98 76.6%

1990 MANAGERS 557 469 84.2%

88 15.8%

73 13.1%

21 3.8%

16 2.9%

4 0.7%

32 5.7%

484 86.9%

2006 MANAGERS 872 646 74.1%

226 25.9%

281 32.2%

52 6.0%

79 9.1%

4 0.5%

146 16.7%

591 67.8%

1990 TECHNICIANS 2,343 2,093 89.3%

250 10.7%

757 32.3%

159 6.8%

187 8.0%

32 1.4%

379 16.2%

1,586 67.7%

2006 TECHNICIANS 1,293 1,115 86.2%

178 13.8%

565 43.7%

97 7.5%

154 11.9%

11 0.9%

303 23.4%

728 56.3%

1990 ADMINISTRATIVE 2,584 628 24.3%

1,956 75.7%

1,186 45.9%

288 11.1%

178 6.9%

26 1.0%

694 26.9%

1,398 54.1%

2006 ADMINISTRATIVE 2,758 1,314 47.6%

1,444 52.4%

1,742 63.2%

389 14.1%

162 5.9%

31 1.1%

1,160 42.1%

1,016 36.8 %

1990 JOBS REQUIRING CERTIFICATION30

254 221 87.0%

33 13.0%

43 16.9%

10 3.9%

16 6.3%

0 0.0%

17 6.7%

211 83.1%

2006 JOBS REQUIRING CERTIFICATION

316 251 79.4%

65 20.6%

120 38.0%

18 5.7%

69 21.8%

1 0.3%

32 10.1%

196 62.0%

1990 BARGAINING UNIT

7,541 6,696 88.8%

845 11.2%

2,661 35.3%

625 8.3%

282 3.7%

108 1.4%

1,646 21.8%

4,880 64.7%

2006 BARGAINING UNIT

5,273 4,692 89.0%

581 11.0%

2,548 48.3%

411 7.8%

280 5.3%

68 1.3%

1,789 33.9%

2,725 51.7%

SCE has received recognition for its commitment to diversity. For example, 4

Fortune Magazine has ranked SCE as one of the top 50 places for minorities to work every year since 1998. 5

27 Based on December 31, 2006, full and part-time workforce data. 28 Based on December 31, 1989, full and part-time workforce data. 29 In 1990, SCE started a 10-year diversity related pledge. Therefore, SCE chose to use 1990 as one of its data points in this

proceeding. In addition, recognizing that the representation of each of the individual minority groups is important, SCE provided a breakdown of total minorities into individual groups.

30 The 1990 numbers do not include engineers because the Company’s records do not indicate which of the many engineering titles used in 1990 required certification. The 2006 number includes engineers requiring certification.

94

Table II-9 below, addresses the requirement from the 2006 GRC decision to 1

include diversity statistics for the top 1,000 management employees at SCE. 2

Table II-9 Top 1000 Diversity Statistics

Top 100 Top 500 Top 1000 2002 2004 2006 2002 2004 2006 2002 2004 2006 African American 13 10 9 26 25 22 42 40 42 Latino 4 4 5 49 52 58 96 102 119 Asian American 4 4 5 39 40 46 99 112 120

Currently, minorities make up 28 percent of the Top 1,000 positions. The 3

Company is working towards solid progress in this area. As mentioned in Section 2, SCE has a diversity 4

strategy in place that includes focused recruiting strategies as well as internal programs, such as the 5

Company’s Leadership Programs, that help provide the company with a more diverse pool of internal 6

candidates. 7

(2) Plans and Programs 8

SCE is committed to ongoing efforts to build a highly talented, diverse 9

employee base. SCE believes managing and nurturing a qualified, diverse workforce is fundamental to 10

achieving business objectives. SCE’s diversity mission is to make SCE a better company by continuing to 11

focus on workforce representation, leveraging individual differences, enhancing the company’s reputation, 12

and evaluating success in employee development, recruitment and retention, community partnership, work 13

environment, and diversity communication and education. 14

In 2001, to build on its diversity efforts of the 1990s, SCE adopted its above 15

described and evolving diversity strategy. As part of SCE’s diversity strategy, diversity focus areas are 16

discussed during the business review process when the CEO and the President of SCE meet with Vice 17

Presidents of each business unit. 18

SCE has a strong commitment to diversity recruiting and has taken steps to 19

ensure it reaches minority and female candidates. SCE’s 2006 hiring rates demonstrate SCE’s commitment 20

to diversity. In 2006, 60 percent of SCE’s hires were minorities and the rate for minorities combined with 21

non-minority women was 70 percent. To ensure there is diversity in the candidate base, SCE works with 22

95

organizations and associations that are focused on issues concerning minorities and women, attends job 1

fairs targeted at minority and female candidates, engages students on college campuses known for the 2

diversity of their student body, and tracks the makeup of the workforce to identify areas where additional 3

diversity recruiting would enhance the quality and diversity of the candidate base. 4

To facilitate diversity recruitment, SCE refined its hiring process and 5

developed a form, tied to SCE’s affirmative action plans, that identifies when a position open to external 6

recruiting is underutilized (meaning the diversity of the employee base in that position is less than the 7

representation in the qualified labor market). This form is provided to the recruiters so they can develop 8

targeted recruitment strategies. SCE’s recruitment practices were also discussed in previously in this 9

testimony volume. In addition, SCE continues to build its college relations program and has a partnership 10

with INROADS, Inc., a non-profit organization dedicated to the professional and leadership development 11

of minority college students. 12

SCE believes that to build a qualified, diverse workforce, attention must be 13

paid not only to diversity recruitment, but also to the work environment and leadership development needs. 14

SCE has several leadership programs focused on developing employees, with a focus on ensuring diverse 15

groups of employees are prepared for leadership opportunities. Many of these programs were discussed in 16

previously submitted testimony and include the Front-line Leadership program, which is designed to 17

prepare bargaining-unit and non-exempt employees to pursue jobs with increased responsibility within the 18

Company, the Leadership Grant program, which awards up to $50,000 to employees to complete their 19

graduate degrees, the Executive Cross-Training Program, which is focused on meeting the individual 20

development needs of high potential leaders, the Emerging Leaders Program, which prepares managers to 21

step into mid-management level positions, and the Future Leaders Program, which is targeted to high 22

potential individual contributors to prepare them for entry-level management positions.31 In addition, SCE 23

has rolled out four core management competencies, which will guide SCE in evaluating its managers 24

31 For a more detailed description of these programs, refer to the Talent Management section discussed previously in this

Chapter.

96

through the formal performance evaluation process. One of these four competencies emphasizes building 1

and managing a diverse workforce. 2

SCE maintains a strong commitment to equal employment opportunity so as 3

to sustain a work environment where all employees can operate at their full potential. As such, SCE 4

provides mandatory diversity training for all employees, including officers, to ensure all employees 5

understand SCE’s commitment to valuing differences in culture, gender, race/color, marital status, work 6

experience, medical condition, pregnancy, veteran status, age, religion, physical or mental disability, sexual 7

orientation, and national origin. SCE frequently communicates with its employee base and continues to 8

refine its diversity practices on an ongoing basis with the aim of continually building a well-qualified, and 9

diverse workforce. SCE communicates this commitment to diversity through a variety of means such as 10

SCE’s internal newspaper as well as through detailed diversity brochures distributed to employees.32 11

SCE has partnerships with nine employee affinity groups and works with 12

those groups to communicate with employees and sponsor various employee activities. The groups are 13

open to all employees but have specific focus areas: the Edison Chinese Connection (organized by SCE 14

employees with Chinese heritage), the Cultural Exchange (organized by employees from the Middle East), 15

Lighthouse (organized by gay, lesbian, and trans-gender employees), Roundtable (organized by female 16

employees), Networkers (organized by African American employees), LEAD (organized by Latino 17

employees), FilBarkada, (organized by employees with roots in the Philippines), the Vietnamese 18

Connection (organized by Vietnamese employees) and the American Indian Alliance (organized by SCE 19

employees with American Indian roots). 20

d) Functional Activities Of Equal Opportunity (EO) 21

SCE’s Vice President of EO is the leader of the company’s equal opportunity and 22

diversity efforts within the service territory and statewide and nationwide. He is the Company’s 23

spokesperson on reaching and serving the customer and consumer groups considered underserved. 24

32 Copies of SCE’s equal employment opportunity policies, SCE’s 2006 diversity brochure delivered to all employees, SCE’s

2005 understanding the strategy brochure which was also delivered to all employees, and SCE’s diversity business reasons guide which was delivered to all managers in 2002, are all included in workpapers.

97

(1) EO Administration and Compliance 1

Many federal and state laws and regulations require that SCE promote 2

diversity in the workplace, ensure equal opportunity for all applicants, employees, and eliminate unlawful 3

discrimination in the workplace. Examples include the Americans with Disabilities Act, the Age 4

Discrimination in Employment Act, Title VII of the Civil Rights Act, the California Fair Employment and 5

Housing Act (FEHA), the Equal Pay Act, Executive Order 11246, and the Family Medical Leave Act, in 6

addition to those in various local and state jurisdictions. 7

The EO Department ensures that the Company complies with existing and 8

new laws and regulations by monitoring legislative and regulatory activity, reviewing new legislation or 9

requirements to understand the requirements and responsibilities on SCE, and evaluating how we can most 10

effectively meet the need for compliance and change. EO then develops the necessary programs, practices, 11

and guidelines to support and implement the changes in conjunction with HR Client Services and Labor 12

Relations, across the Company. This takes the form of written guidelines, informational brochures, 13

policies and procedures, EO Information Line, and/or training programs for all of our employees. Other 14

examples of EO activities include development, maintenance, and implementation of SCE’s affirmative 15

action plans and related programs required of federal contractors by Executive Order 11246 and related 16

federal regulations. 17

The Equal Opportunity/Diversity department works with a diversity strategy 18

team and each of SCE’s business units to ensure SCE’s commitment to diversity is reflected in its dealings 19

in the focus areas set forth in the strategy. This includes facilitating or overseeing the Company’s diversity 20

driven programs described above in II.A.2.c).2). All of these functions are performed in support of the 21

focus areas identified in SCE’s diversity strategy, recruitment and retention, community partnership, 22

employee development, communication and education, and the work environment. 23

98

(2) Training 1

EO regularly trains employees on the requirements of general equal 2

opportunity policies, equal opportunity laws, and employee responsibilities regarding conduct in the 3

workplace. EO also maintains and informational website for employees, distributes brochures on EO 4

policies, and provides employees a brochure covering the Company’s prohibition on inappropriate sexual 5

conduct in the workplace. In addition, EO partners with Human Resources to deliver mandatory EO and 6

Diversity training to employees, including offices, on a three year cycle. Finally as noted above, SCE 7

provides Sexual Harassment Prevention training as mandated by FEHA. 8

(3) Investigating Employee Concerns 9

Independent of legal requirements, we believe that bias and non-job-related 10

factors in hiring, promotion, and compensation must be eliminated in order to have an efficient and results-11

driven workforce that operates to the benefit of our customers. Accordingly, EO operates as a neutral fact-12

finder to investigate employee concerns regarding bias and discrimination before they reach the level of a 13

formal complaint filed through a states or federal agency. This encourages employees to raise their 14

concerns within SCE, thus limiting disruption in the workforce. 15

EO investigates internal complaints of discrimination, harassment, 16

retaliation, and denial of Family Leave. Any employee complaint raising an EO-related issue (e.g., race, 17

age, gender, disability, retaliation, denial of family leave, sexual orientation, etc.) triggers an investigation. 18

The information gathered during investigations is put into a report and analyzed to see if the Company’s 19

EO-related policies have been violated. Most of these complaints are received directly, but some may be 20

handled through the Focus on Resolution program discussed in Section II.A.1.e of this Exhibit. If an EO-21

related issue is raised in the Focus on Resolution process, EO conducts the fact-finding investigation that 22

supports the process. If EO determines a violation of policy has occurred, management is given advice on 23

how to address the situation, whether through discipline or other remedies. 24

EO also investigates external or “formal” complaints involving alleged 25

discrimination, retaliation and/or harassment. Formal complaints are those complaints raised outside of the 26

99

Company through lawsuits or filings with local, state, or federal agencies.33 EO normally conducts 1

investigations of formal complaints, pursuant to the attorney-client privilege. If a response is due to the 2

agency, EO takes the facts gathered and provides a written letter response as may be appropriate. Overall, 3

EO handled 184 investigations in 2006. 4

(4) Supplier Diversity 5

EO also manages the Company’s supplier diversity program. CPUC General Order 6

(“GO”) 156 requires utilities to implement an outreach program to inform and recruit women, minority, 7

and disabled veteran business enterprises (Utility Supplier Diversity Program) to apply for procurement 8

contracts. The Supplier Diversity Program has three major objectives: 9

1. To increase opportunities for small businesses and WMDVBE businesses to 10

participate in the Company’s products and service contract activities. 11

2. To increase both the dollar amount and percentage of products and services 12

procured from WMDVBEs and the level of WMDVBE representation on a 13

qualifiable list of commodities and services utilized by the Company. 14

3. To assist both WMDVBE associations and individual WMDVBEs to better 15

understand the Company’s general business, procurement practices and 16

procedures through consultations, business development workshops, 17

seminars, trade shows, and special events 18

A strategic component of the supplier diversity program is our membership 19

in various minority trade associations and ethnic chambers of commerce (state and national). The 20

Company is committed to providing procurement opportunities for women, minority, and disabled veteran 21

business enterprises (“WMDVBEs”),34 and facilitates meaningful discussions about company needs, 22

33 E.g., the California Department of Fair Employment and Housing (DFEH), Equal Employment Opportunity Commission

(EEOC), and Nevada Employment Rights Commission (NERC). 34 “WMBEs” stands for women and minority business enterprises. Because disabled veterans business enterprises (“DVBEs”)

were not initially included under GO 156, some of the Commission’s policies and procedures in GO 156 are different for WMBEs and DVBEs. Also in this testimony, “WBEs” stands for women business enterprises, and “MBEs” stands for minority business enterprises.

100

connecting these various potential suppliers with our procurement and client organizations. The Company 1

also actively participates in WMDVBE trade fairs, seminars, conferences, and produces a large number of 2

business workshops geared to increasing and improving the pool of qualified vendors seeking to do 3

business with the Company. 4

(a) Supplier Diversity Update 5

A review of the Company’s annual total procurement expenditures 6

for the past five years reflects an increase from $1.28 billion dollars in 2002 to over $2.41 billion dollars in 7

2006, representing an 88 percent increase in total procurement spent. WMDVBE procurement spending 8

for the same time period also rose from $263,902,417.00 in 2002 to $544,528,020.00 in 2006, representing 9

a significant 106 percent increase. Table II-10 shows the WMDVBE expenditures for 2002 – 2006. 10

Table II-10 WMDVBE Expenditures for 2002 – 2006

($000)

200235 2003 2004 2005 2006

$263,902 $294,549 $403,432 $446,445 $544,528

In addition, the Company’s Supplier Diversity Program is considered to be among 11

the nation’s leading efforts of its kind. For the ninth consecutive year, the Company made Fortune 12

magazine’s list of the 50 Best Companies for Minorities. The Company’s 2006 ranking was based, in part, 13

on the Company’s supplier diversity efforts, in addition to the Company’s training programs and work/life 14

benefits for employees. In 2006, the Company also received the Corporate Award for 2006 by the Black 15

Business Association, the Corporate Diversity Advocate of the Year Award by the Asian Business 16

Association of Orange County, the 2006 “John Lopez Keep the Promise” Award by the California Disabled 17

Veteran Business Enterprise Alliance, the 2006 Corporate Leadership Award by the San Diego Elite 18

Disabled Veteran Business Enterprise, the 2006 Patriot Award by the California Disabled Veteran Business 19

Enterprise Alliance, and in addition, was recognized by Minority Business News USA and Women’s 20

Enterprise USA Magazine for our supplier diversity achievements. 21

35 2002 reflects dollars reported with exclusions.

101

In summary, the Company is committed to increasing WMDVBE participation in the 1

Company’s procurement process in a manner that is beneficial and cost-effective to our customers and 2

continues to make every effort to meet and/or exceed the contracting goals outlined in GO 156. 3

(5) Equal Opportunity and Diversity (EOD) Special Projects 4

SCE’s Vice President of EO provides overall direction to the EOD Special 5

Projects directors whose operations as a unit are administered by EO’s Manager of Supplier Diversity. 6

SCE’s EOD Special Projects unit works with large segments of the SCE customer base and with 7

corresponding population and language groups within the entire SCE service territory that are considered 8

underserved. These groups include African Americans, Asian Americans, Native Americans, Latinos, 9

seniors, as well as related community-based organizations, faith-based programs, advocacy groups, and 10

other business and professional organizations.36 EOD Special Projects also works with consumer and 11

environmental groups and organizations in the SCE service territory and statewide. 12

Ongoing outreach to underserved communities is the main mission of the 13

EOD Special Projects directors. SCE seeks to provide essential information on its programs and services 14

to all residential consumers and all small business customers, giving appropriate attention to those from 15

language and minority and immigrant backgrounds and reaching inner city areas and rural regions. EOD 16

Special Projects directors carry out their work in frequent collaboration with a host of SCE departments 17

and programs. The directors provide feedback on obstacles to quality of electricity service, effective 18

customer communications, and opportunities to improve service. 19

Another important part of the EOD Special Projects mission is to help 20

business and professional and community leaders, faith-based programs, and community-based 21

organizations gain an understanding of key electricity issues that will impact SCE programs and services 22

and SCE residential and small business customers. EOD directors serve as an important channel of 23 36 EOD Special Projects directors work with such organizations as the Consumers Coalition of California, Congress of

California Seniors, Mexican American Opportunity Foundation, AltaMed Health Services, Tulare Kings Hispanic Chamber of Commerce, Council for Energy Resource Tribes, National Center for Indian Enterprise Development, Asian Business Association, Asian-Pacific Policy and Planning Council, California Black Chamber of Commerce, Black Business and Professionals Association, American Association of Blacks in Energy, West Angeles Community Development Corporation, 100 Black Men of Orange County, Black Voice Foundation, African American Network, and many others.

102

communication with SCE service-territory leaders and groups and statewide organizations on major and 1

often complex issues. 2

EOD’s Special Projects also facilitates SCE’s Consumer Advisory Panel (CAP) that 3

meets quarterly with senior officers and directors to discuss issues of major importance to SCE customers 4

and consumers. Appointed by SCE’s President and overseen by SCE’s Vice President of EO in 5

collaboration with other SCE senior executive officers, CAP is made up of external members who are all 6

opinion-leaders from diverse communities and customer segments served by the company. 7

e) Analysis Of Recorded Data, Estimating Methodology, And Test Year 2009 Forecast 8

For Equal Opportunity (FERC Accounts 920/921) 9

We record salaries and related expenses of the EO staff to FERC Account 920 (A&G 10

Salaries) and FERC Account 921 (Office Supplies and Expenses). Figure II-33 depicts 2002 through 2006 11

recorded and forecast years 2007 through 2009 expenses. 12

Figure II-33 Equal Opportunity



103

In 2003, labor costs slightly increased as a result of filling two vacancies. In 2005, 1

labor costs increased as a result of hiring two additional Corporate Representatives to form the EOD 2

Special Projects unit discussed in next section. 3

In 2004, non-labor costs increased as Supplier Diversity programs returned to pre-4

energy crisis levels. Our sponsorships, in-kind donations, and outreach effort expenses increased by 5

approximately $300,000. Travel expenses also increased as a result of these activities. 6

In 2006, non-labor expenses increased by $464,000 as the Supplier Diversity 7

program continued to grow. The department’s sponsorships, memberships and outreach efforts expanded 8

to a national level in an effort to attract more non-traditional WMDVBE suppliers. EO expenses also 9

increased with this growth, as did CPUC Contract Administration expenses. The EOD Special Projects 10

unit was finally staffed and in operation this year. Non-labor costs associated with this group include 11

stipends and travel expenses for CAP. 12

Since the EOD Special Projects unit was completely staffed and in operation as of 13

December 2006, we have selected the last recorded year method to forecast both our labor and non-labor 14

costs for Test Year 2009 expenses. Recorded expenses for years 2002-2005 do not reflect the labor and 15

non-labor expenses for present Corporate Representative staffing levels (three) within this group or any of 16

the expenses associated with CAP. In addition, Supplier Diversity anticipates continued expansion of its 17

programs, thereby increasing our sponsorships, outreach, and in-kind donations in the years to come. 18

Appendix A

Witness Qualifications

A-1

SOUTHERN CALIFORNIA EDISON COMPANY 1

QUALIFICATIONS AND PREPARED TESTIMONY 2

OF JOE ALDERETE 3

Q. Please state your name and business address for the record. 4

A. My name is Joe Alderete, and my business address is 2244 Walnut Grove Avenue, 5

Rosemead, California 91770. 6

Q. Briefly describe your present responsibilities at the Southern California Edison Company. 7

A. I am the Manager of Supplier Diversity. As the Manager, I oversee the Company’s 8

Women, Minority, and Disable Veteran, Business Enterprise Program (WMDVBE). I 9

ensure the Company’s compliance with all CPUC regulations and public law relating to 10

WMDVBE procurements. 11

Q. Briefly describe your educational and professional background. 12

A. I have 31 years with Southern California Edison Company. I have held middle and 13

senior management positions in Human Resources, Procurement and Material 14

Management, and Equal Opportunity. I hold an AA degree in Business Administration. 15

Q. What is the purpose of your testimony in this proceeding? 16

A. The purpose of my testimony in this proceeding is to sponsor portion of Exhibit SCE-6, 17

Volume 1, entitled Human Resources Department as identified in the Tables of Contents 18

thereto. 19

Q. Was this material prepared by you or under your supervision? 20

A. Yes, it was. 21

Q. Insofar as this material is factual in nature, do you believe it to be correct? 22

A. Yes, I do. 23

Q. Insofar as this material is in the nature of opinion or judgment, does it represent your best 24

judgment? 25

A. Yes, it does. 26

Q. Does this conclude your qualifications and prepared testimony? 27

A-2

A. Yes, it does. 1

A-3



OF GUADALUPE C. CLAPP 3


A. My name is Guadalupe C. Clapp and my business address is 8631 Rush Street, 5



A. I manage the HR Strategy, Planning and Finance division of Human Resources. 8


A. I have been employed full time by SCE since 1980 and have held various management 10

positions in Human Resources since 1990. I have an MBA from the University of 11

Southern California and a Bachelor’s degree in Mathematics from California State 12

University, Los Angeles. 13




thereto. 17


A. Yes, it was. 19


A. Yes, I do. 21


judgment? 23

A. Yes, it does. 24


A. Yes, it does. 26

A-4



OF DIANE FEATHERSTONE 3


A. My name is Diane Featherstone, and my business address is 2244 Walnut Grove Avenue, 5



A. I am Senior Vice President, Human Resources. I have responsibility for all labor 8

relations and human resources functions including staffing, total compensation, employee 9

development, client services, and benefits administration for Edison International and 10

Southern California Edison. 11


A. I have a BA Degree in economics and history from Towson University in Baltimore, 13

Maryland and a MA Degree in economics from the University of Virginia. I am a 14

Certified Public Accountant and a Certified Fraud Examiner. 15

I was elected Vice President and General Auditor for Edison International and Southern 16

California Edison on September 9, 2002. Before joining Edison, I was Vice President, 17

Management Consulting and Auditing at Constellation Energy Group in Baltimore, MD. 18

Before that I was President and CEO of Constellation Energy Source and Managing 19

Director of Strategic Planning for Constellation Power Source. Over a nine-year period 20

at Baltimore Gas and Electric Company, I held several management positions in Human 21

Resources, where I had responsibility for compensation, executive compensation, 22

employee benefits design and administration, employee policies, human resource 23

information systems, organizational development, and training for a workforce of 8,000. 24

I served as plan administrator for all retirement and health and welfare plans. I also held 25

several managerial positions in finance and accounting while at Baltimore Gas and 26

Electric Company. 27

A-5




thereto. 4


A. Yes, it was. 6


A. Yes, I do. 8


judgment? 10

A. Yes, it does. 11


A. Yes, it does. 13

A-6



OF FRANK J. QUEVEDO 3


A. My name is Frank J. Quevedo, and my business address is 8631 Rush Street, Rosemead, 5

California 91770. 6


A. I am the Vice President of Equal Opportunity. 8


A. I began my employment with Southern California Edison in the early 1970s. I then 10

worked at Hunt-Wesson Foods and returned to Southern California Edison in the 1980s. I 11

received a Bachelor’s Degree in Political Science from University of California, 12

Riverside. I am currently a board member of Mexican American Legal Defense and 13

Education Fund. I also chair the Puente Project and sit on a number of other boards and 14

advisory committees including the Asian Pacific American Legal Center, the Edmund G. 15

“Pat” Brown Institute of Public Affairs, the East Los Angeles YMCA, the Liberty Hill 16

Foundation, the Orange County Hispanic Education Endowment Fund, Sabriya’s Castle 17

of Fun Foundation, Cathedral High School Board of Trustees, the Women’s Foundation 18

of California, and the Watts Health Foundation. 19




thereto. 23


A. Yes, it was. 25


A. Yes, I do. 27

A-7


judgment? 2

A. Yes, it does. 3


A. Yes, it does. 5

A-8



OF MARY STEUDLE 3


A. My name is Mary Steudle, and my business address is 2244 Walnut Grove Avenue, 5



A. I am the Manager of Staffing with responsibility for external recruitment and employee 8

mobility ensuring compliance with company policies, fair hiring policies and laws, and 9

local, state, and federal laws, rules, and regulations related to hiring and applicant 10

tracking, reporting and compliance. 11


A. I have been employed by Southern California Edison for 24 years in a variety of 13

positions. I have been supervising and managing various support functions for 16 of 14

those years. Most recently I have been promoted to the Manager of Staffing after 15

managing the San Clemente Regional Staffing office for a little over 2 years. I have a 16

B.A. in Political Science from California State University Long Beach. 17




thereto. 21


A. Yes, it was. 23


A. Yes, I do. 25


judgment? 27

A-9

A. Yes, it does. 1


A. Yes, it does. 3

Documents

Human Resources (HR) Volume 1 – HR Department INTRODUCTION TO HUMAN RESOURCES 3 A. Introduction 4 The Human Resources Department (HR) provides client organizations with integrated