MEMORANDUM. TO: FMPA Board of Directors FROM: Chairman Bill Conrad/ Nicholas P. Guarriello DATE: December 9, 2015

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1 MEMORANDUM TO: FMPA Board of Directors FROM: Chairman Bill Conrad/ Nicholas P. Guarriello DATE: December 9, 2015 RE: PLACE: Board of Directors Workshop Succession Planning for the General Manager and CEO Wednesday, December 16, 2015 at 10:00 a.m. Florida Municipal Power Agency, 8553 Commodity Circle, Orlando, FL Board Room, Orlando, Florida DIAL-IN INFORMATION: or ACCESS CODE 91583# (If you have trouble connecting via phone or internet, please call ) FMPA Board of Directors Chairman Bill Conrad, Presiding AGENDA 1) Call to Order and Roll Call 2) Workshop Item: a) Succession Planning for the General Manager and CEO (Chairman Bill Conrad / Nicholas Guarriello / Carl Mycoff) 3) Member Comments 4) Adjournment One or more participants in the above referenced public meeting may participate by telephone. At the above location there will be a speaker telephone so that any interested person can attend this public meeting and be fully informed of the discussions taking place either in person or by telephone communication. If anyone chooses to appeal any decision that may be made at this public meeting, such person will need a record of the proceedings and should accordingly ensure that a verbatim record of the proceedings is made, which includes the oral statements and evidence upon which such appeal is based. This public meeting may be continued to a date and time certain, which will be announced at the meeting. Any person requiring a special accommodation to participate in this public meeting because of a disability, should contact FMPA at (407) or 1-(888) , at least two (2) business days in advance to make appropriate arrangements. Page 1 of 12

2 AGENDA PACKAGE MEMORANDUM TO: FMPA Board of Directors FROM: Bill Conrad and Nick Guarriello DATE: December 8, 2015 ITEM: 2a Succession Planning for the General Manager and CEO Introduction On Oct. 21, 2015, Nick Guarriello, FMPA s General Manager and CEO, notified the Board of Directors of his intention to retire in Nick requested an effective date of May 6, On Oct. 22, 2015, the Board of Directors discussed how to begin the search process. At that meeting, the Board of Directors requested preliminary information from a few executive search firms about their typical recruiting timeline, process and cost for the Board of Directors to discuss in November. On Nov. 19, 2015, the Board of Directors reviewed information from a few executive search firms and decided to hold a workshop on Dec. 16, 2016, to discuss what qualities are needed in the next General Manager and the critical success factors for the next General Manager. The members agreed to hire a facilitator with experience in executive recruiting to facilitate the workshop. Facilitator At the Board of Directors workshop on Dec. 16, 2015, FMPA members will be joined by Carl Mycoff, who will facilitate the discussion. Mr. Mycoff is the Managing Director of Mycoff, Fry & Prouse LLC. His firm, which was previously known as Mycoff & Associates, was established in 1974 and specializes in recruiting executives, management, and industry experts for the electric, natural gas, and water industries. His clients include joint action agencies, municipal utilities, investor-owned utilities and others. Some recent client engagements include Electricities of North Carolina and MEAG Power. Mr. Mycoff s plan for leading the discussion includes asking questions, such as those shown on Attachment A. Attachment B contains information from the Board s most recent strategic plan, and Attachment C contains information from the Executive Committee s most recent strategic plan. This information might be helpful as a reference. Recommended Action For information and discussion only. No action requested. BC/NPG/mm Attachments Page 2 of 12

3 Attachment A Discussion Questions Page 3 of 12

4 1. Leadership Needs Assessment a. A frequent complaint heard from municipal utilities is that their joint action agency does not understand the issues of retail utilities. What issues are important to your utility that the next General Manager of FMPA must know? b. What are FMPA s current strengths and weaknesses? c. What specific challenges do you expect the next FMPA General Manger to face within the next 5-10 years? (i.e., Clean Power Plan, legislative, distributed generation, renewables portfolio standard, low load growth, etc.) d. Should FMPA maintain its current direction or adopt a new direction? i. What is the existing direction? ii. What changes in direction should be considered, if any? e. What professional experience or expertise should the next General Manager have? f. What personality traits should the next General Manager have? g. What leadership and management style should the next General Manager have to be successful? h. What external relationships are important for the General Manager to maintain or develop? i. How should the General Manager focus his/her time? 2. Compensation 3. Recruiting Process Page 4 of 12

5 Attachment B Board of Directors Strategic Plan S.W.O.T. Analysis Page 5 of 12

6 Board of Directors Strategic Plan Vision Our preferred picture of the future Being the preferred power and service provider for municipal electric utilities and the company of choice for employees. Mission What we do, for whom, and the benefit To provide competitively priced, reliable power and value-added services for municipal electric utilities through joint action. Values General guidelines for how our organization operates Trust built through honesty, integrity, openness and respect Innovation and excellence Teamwork among employees and members Cultural diversity Employee recognition, reward and empowerment Environmentally responsible operations Commitment to public power Transparent and effective communication Goals Broad, long-term aims that define accomplishment of the Mission A. Power Supply Provide competitively priced power supply alternatives, including both short-term and long-term options B. Leadership Have highly effective, qualified leadership and staff C. Member Services Optimize member services that are responsive to member needs D. Communication Foster a positive communication culture Strategic Plan 2014 Page 6 of 12

7 FMPA Board of Directors Strategic Plan 2014 Page 2 A. Power Supply B. Leadership C. Member Services D. Communication Measurable Targets Specific targets that measure accomplishment of a Goal Aa Propose at least one new, power supply or transmission project Ba Provide the Board with an annual report on employee turnover Ca Maintain the Member Services participation rate of at least 90% of members (i.e. 28 out of 31) involved in at least one service Da Have at least 35% of members participate in annual visits with their state legislators and at least 45% participate in annual visits with federal legislators Bb Conduct an annual evaluation of the General Manager and General Counsel Cb Conduct an annual survey of member satisfaction with services, including a numeric rating Db Maintain member satisfaction at a level above the Member Relations Survey s 12- year average of 3.3 for overall satisfaction of members toward their relationship with FMPA staff Bc Conduct a Board of Directors self-evaluation at least annually Cc Visit every member city at least once per year Dc Issue 22 positive news releases per year Strategies Broad activities required to achieve a Measurable Target A1 Investigate transmission projects that benefit members, including interstate transmission B1 Develop a Boardapproved self-assessment process C1 Identify member needs and member satisfaction with services D1 Work with FMEA on public image projects A2 Conduct a needs analysis of non-arp members B2 Continue highly effective training and development programs at all levels of the organization C2 Evaluate and coordinate services between FMPA and FMEA D2 Annual visits by member cities with their state and federal legislators coordinated by FMPA C3 Help members identify best practices in electric utility operations D3 Conduct a Board member relations survey C4 Assist members with managing regulatory risk and foster a climate of regulatory compliance Page 7 of 12

8 FMPA STRATEGIC PLANNING WORKSHOP 2013 S.W.O.T. Analysis Summary 1 FMPA General (Agency) POSITIVE Strengths NEGATIVE Weaknesses INTERNAL 1. Good place to work 2. Tax-exempt financing 3. Broad legal power 4. Independent rate-setting authority 5. Florida Supreme Court validated contracts 6. Trust in top management 7. Good staff 8. Good management structure 1. Limited or no staff back-up in key positions where succession candidates are ready to step into the role Opportunities Threats EXTERNAL 1. Investigate additional natural gas pipeline proposed into Florida 2. Economies of scale in operations, engineering and planning 3. FPL s acceptance of the license extension for St. Lucie Unit 2 4. The debt payoff is drawing nearer for FMPA s ownership interests in the Stanton units. 1. Environmental regulations (new and proposed) related to coal plants 2. Member general government financial picture may further negatively impact Agency budget 3. Privatization of municipal electric utilities 4. Aging unit-specific projects may mean costs go higher than the newest, most efficient units or higher than the best system-average cost, thus creating perception problems for the projects 1 S.W.O.T. elements reflect those that received more than 60% agreement from FMPA members. S.W.O.T. Strategy Development S O W T S-O Strategies: Pursue opportunities that are a good fit to the organizational strengths. O-W Strategies: Use opportunities to address weaknesses. S-T Strategies: Use strengths to reduce the vulnerability to external threats. W-T Strategies: Establish a plan that prevents weaknesses from becoming susceptible to external threats. Page 8 of 12

9 Attachment C Executive Committee Strategic Plan S.W.O.T. Analysis Page 9 of 12

10 ARP Executive Committee Strategic Plan Vision Our preferred picture of the future To be the lowest cost, sustainable wholesale power provider in Florida Mission What we do, for whom, and the benefit To provide competitively priced, reliable power and value-added services for municipal electric utilities through joint action. Values General guidelines for how our organization operates Trust built through honesty, integrity, openness and respect Innovation and excellence Teamwork among employees and members Cultural diversity Employee recognition, reward and empowerment Environmentally responsible operations Commitment to public power Transparent and effective communication The individual needs and desires of participants shall be given the strongest consideration consistent with the best interests of all participants in the All-Requirements Project Goals Broad, long-term aims that define accomplishment of the Mission A. Power Supply As a wholesale power provider, become and remain competitive in the Florida market. B. Leadership Have highly effective, qualified leadership and staff that enhance member confidence. C. Regulatory Compliance Foster a culture of regulatory compliance, and reduce regulatory risk to the All- Requirements Project. Strategic Plan 2014 Page 10 of 12

11 ARP Executive Committee Strategic Plan 2014 Page 2 A. Power Supply B. Leadership C. Regulatory Compliance Aa Ab Ac Ad ARP wholesale costs are targeted to be equal to or lower than the weighted average of the wholesale revenue requirements of FPL and Duke based on the ARP members load characteristics within three years (for FY 2017) In long-term resource planning, plan to add resources that maintain or improve our system operating heat rate In long-term resource planning, plan to maintain at least an 18% reserve margin during the summer months Maintain unit equivalent availability factors equal to or better than 92% during the summer months Measurable Targets Specific targets that measure accomplishment of a Goal Ba Bb Bc No more members issue CROD or the 30-year notice Monitor member satisfaction with ARP Conduct an Executive Committee self-evaluation at least annually Ca Cb Have staff provide a compliance update to the Executive Committee on a quarterly basis Find, fix and report any violations, resulting in zero violations during monitoring activities of regulators, such as audits A1 A2 A3 A4 A5 Continually focus on cost reduction Identify, understand and manage risk responsibly Maintain sound financial policies and practices Diversify power supply resources Continually evaluate the overall industry trends Strategies Broad activities required to achieve a Measurable Target B1 B2 B3 B4 B5 Provide resources for the CEO to employ an outstanding, trained staff Support a highly effective training and development program for all levels of the organization Provide resources for the CEO to implement effective succession planning Conduct an ARP member relations survey Develop an Executive Committee-approved selfassessment process C1 C2 Provide resources for staff to identify and anticipate changes in regulations, and shape the outcome of regulations by advocating on behalf of members Provide resources for an effective regulatory compliance program Strategic Plan 2014 Page 11 of 12

12 FMPA STRATEGIC PLANNING WORKSHOP 2013 S.W.O.T. Analysis Summary 1 All-Requirements Project POSITIVE Strengths NEGATIVE Weaknesses INTERNAL 1. Relatively young fleet 2. Efficient units in CI3, CI4 and TCEC 3. Cost of money, tax-exempt financing 4. Economies of scale enhanced by FMPP 5. Strong contracts between members 6. Natural gas position in a period of time when gas is inexpensive 7. Good credit rating and access to capital markets 8. Independent rate-setting authority 1. Transmission dependent in Florida and transmission limitation our of Cane Island 2. Limitations to economies of scale (i.e. 300 MW units rather than 1,200 MW unit, etc.) 3. Overcapacity currently in generation [items 2 and 3 were separated at the suggestion of a member in the survey] 4. Higher proportion of fixed costs to total costs, as compared to prior years 5. Heavily dependent on one fuel (natural gas) Opportunities Threats EXTERNAL 1. Sales of capacity (e.g. Duke shortfall following retirement of Crystal River Units 1, 2 and 3) 2. Demand-side management technology to improve load factor 3. Possible expansion of Florida Municipal Power Pool or other joint ventures 1. Gas market dynamics (e.g., price volatility, pipeline capacity, sustainability of fracking) 2. Economics/financial (e.g., fall back into another recession, credit crisis, etc.) 3. Regulatory and legislative initiatives (e.g., NERC, cyber security, environmental issues, tax-exempt financing, etc.) 4. Regulatory environments in transmission, generation, finance may create additional costs, which hit ARP more than others 1 S.W.O.T. elements reflect those that received more than 60% agreement from FMPA members. S.W.O.T. Strategy Development S O W T S-O Strategies: Pursue opportunities that are a good fit to the organizational strengths. O-W Strategies: Use opportunities to address weaknesses. S-T Strategies: Use strengths to reduce the vulnerability to external threats. W-T Strategies: Establish a plan that prevents weaknesses from becoming susceptible to external threats. Page 12 of 12