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HUMAN RESOURCES COMMITTEE MEETINGFebruary 19, 2013Teleconference MINUTES Agenda Item 1 – Call to OrderPhyllis Bernard called the meeting to order at 8:37 am, CST, on February 19, 2013. The followingmembers were in attendance:Ms. Phyllis Bernard, ChairDirectorMr. Julian BrixDirectorMs. Lori DunnCalpine CorporationMr. Mike PalmerEmpire District Electric CompanyMr. Noman WilliamsSunflower Electric Power CorporationSouthwest Power Pool staff in attendance:Mr. Nick BrownMs. Malinda SeeAgenda Item 2 – Approval of MinutesThe minutes of the January 22, 2013 meeting were reviewed. The minutes were amended to state thecorrect meeting month of the summer meeting as “July” on page five. Noman Williams moved that theminutes be approved as amended. The motion was seconded by Mike Palmer and approved viaunanimous voice vote.Agenda Item 3 – Historical Review of Previous Compensation VendorsMalinda See presented an overview of previous vendor selections for the compensation survey. SPP hasselected Hewitt, Towers Perrin, Hay Group and Towers Watson over the past 12 years. Historically, SPPhas implemented a new salary structure for the organization as a result of the compensation survey. Inaddition, some individual positions received salary adjustments if their compensation was out of themarket range as determined by the survey. The committee discussed the implications of marketadjustments, and tools SPP has in place to accommodate recommended market adjustments (up ordown) for positions. The committee agreed they are looking for a vendor that will bring creativity,flexibility and an understanding of the SPP culture in their approach to the compensation survey.Agenda Item 4 – Evaluation of Vendor ProposalsMalinda See presented the SPP staff evaluation of vendor bid submittals. SPP Purchasing ManagerJason Gross created an overview of all vendor bid submittals via weighted evaluation criteria as part ofthe vendor selection process. This evaluation was discussed by the committee. Mercer was the toprated vendor from the process. Mercer provided a thorough submittal that indicated their knowledge ofSPP and the industry. Committee member Lori Dunn commented that she had previous experienceworking with Mercer that was very positive. Mercer was able to provide appropriate comparable peergroups and was flexible in their approach. The committee agreed they are looking to forge a relationshipwith the selected vendor as a partner. After group discussion of all bids, Julian Brix moved that thecommittee award the contract to Mercer. The motion was seconded by Lori Dunn and approved viaunanimous voice vote.The committee discussed next steps in the compensation survey process. Selecting appropriate peergroups for the survey was identified as a critical next step. As part of this vital step, SPP staff willexamine the applicant pool locations from which SPP has successfully recruited employees. Staff willlook at employee previous employer data to identify trends. In addition, staff will identify companies SPPAgenda Item 2Page 2 of 4

Southwest Power Pool Human Resources Committee MinutesFebruary 19, 2013is competing with for graduates joining directly from a college or university. The committee agreed toprovide staff with suggested peer group information by Friday, March 1, 2013.The committee agreed that another step vital in the success of the compensation survey process wouldbe an in-person meeting with the selected vendor. SPP staff will schedule a committee meeting onThursday, March 7, 2013 at the DFW Hyatt to meet with Mercer personnel conducting the survey. At thismeeting, appropriate peer groups will be identified. The committee will also discuss the importance offlexibility, creativity and an understanding of the SPP culture in conducting the survey. The committeetasked Malinda See to visit with Mercer prior to the meeting to emphasize the agreed upon approach.Agenda Item 5 – Other ItemsPhyllis would like to extend a special thank you to SPP HR staff member Pat Forgy who walked to workduring the snow storm on December 26, 2012 to ensure payroll was completed on time.Mike Palmer brought to the attention of the committee a provision in the healthcare reform act that will taxemployers in 2018 if the employer offers “too rich” a medical insurance plan. Mike requested additionalinformation and discussion on this issue at a future committee meeting.Agenda Item 6 – Future MeetingsThe committee reviewed future meetings for 2013. Future meeting dates include:March 7, 2013 (Thursday)Dallas, TX – DFW HyattTime: 1:00 pm – 5:00 pm (CST)Agenda Items: In-person meeting with Mercer to outline survey expectationsApril 23, 2013 (Tuesday)Chicago O’HareAgenda Items: Review 2012 Performance Compensation Process/payout Review HRC Scope Review 2013 Compensation Survey ActivitiesJuly 23 & 24, 2013 (Tuesday & Wednesday)HRC Planning RetreatLittle Rock, Arkansas Review SPP HR programs Review SPP Benefit plans Review of 2013 Compensation Survey Recommend 2014 SPP Compensation Pool funding Approve 2014 Meeting schedule and agendas Investment Management Meeting – 401(k)o Review Investment Policy Statement 401(k)o Review/evaluate investment manager performanceOctober 8, 2013 (Tuesday)Chicago O’Hare Review SPP Fraud Prevention Report Annual review of committee activitiesAgenda Item 2Page 3 of 4

Southwest Power Pool Human Resources Committee MinutesFebruary 19, 2013Agenda Item 7 - AdjournPhyllis Bernard adjourned the meeting at 9:45 am on Tuesday, February 19, 2013.Respectfully Submitted,Malinda SeeSecretaryAgenda Item 2Page 4 of 4

Southwest Power PoolHUMAN RESOURCES COMMITTEE MEETINGMarch 7, 2013Dallas Ft. Worth Airport HyattDallas, Texas Summary of Action Items 1. None. Summary of Follow-Up Items 2. SPP staff will meet with Mercer to develop next steps in the survey process and parameters for acustom survey of SPP members.Page 1 of 3

HUMAN RESOURCES COMMITTEE MEETINGMarch 7, 2013Dallas Ft. Worth Airport HyattDallas, Texas MINUTES Agenda Item 1 – Call to OrderPhyllis Bernard called the meeting to order at 1:05 pm, CST, on March 7, 2013. The following memberswere in attendance:Ms. Phyllis Bernard, ChairDirectorMr. Julian BrixDirectorMs. Lori DunnCalpine CorporationMr. Mike PalmerEmpire District Electric CompanyMr. Noman WilliamsSunflower Electric Power CorporationSouthwest Power Pool staff in attendance:Ms. Malinda SeeThe following guests were in attendance:Ms. Deb BilakMs. Julie PeakPartner, MercerSenior Associate, MercerAgenda Item 2 – Approval of MinutesApproval of the February 19, 2013 teleconference meeting minutes was deferred until the April 23, 2013meeting.Agenda Item 3 – Introductions – Mercer and SPPMalinda See introduced Deb Bilak and Julie Peak with Mercer. Deb and Julie provided their backgroundwith compensation consulting and with Mercer. Committee members introduced themselves and led adiscussion on the history of SPP and the compensation philosophy. SPP strives to hire careeremployees that will fit with the organizations culture. Compensation must support providing cost-effectiveservices to members and customers. Communication and strong relationships between employees, theHRC and SPP members is critical to the success of a compensation program. SPP utilizes the followingelements of compensation to attract and retain the right employees: a dual retirement plan, competitivesalaries and incentive plans, training, and affordable benefits.The committee and Mercer agreed that during the survey process Mercer will keep members in mind aspeer groups are developed and perform validity checks for core positions across industries. Thecommittee noted that benchmarking and identifying the proper peer groups for staff and executivepositions in the survey is crucial. Proper peer group identification will provide validity and consensusamong the HRC and SPP membership.The committee and Mercer agreed to conduct a custom survey of key positions among the SPPmembership. Mercer will work with SPP staff to identify positions to be included in this custom survey.SPP staff will provide Mercer with member contact information. Mercer will review the entire SPP benefitpackage in comparison to SPP members, the general industry and identified peers. The committeeexpressed a goal to establish a compensation foundation that can be built on and enhanced in the future.The committee indicated they are flexible in the delivery date for the final survey report in order to conductproper due diligence. A goal was established to review the final Mercer report at the HRC July 23 and 24,2013 meeting. SPP staff will meet with Mercer to develop next steps in the survey process andparameters for a custom survey of SPP members. Mercer will visit the SPP corporate campus to meetPage 2 of 3

Southwest Power Pool Human Resources Committee MinutesMarch 7, 2013with SPP HR and management staff to determine key job roles and member contacts for the customsurvey and observe the SPP corporate culture. The committee will receive an update on survey progressat the April 23, 2013 meeting.Agenda Item 5 – Other ItemsNoneAgenda Item 6 – Future MeetingsThe committee reviewed future meetings for 2013. Future meeting dates include:April 23, 2013 (Tuesday)Chicago O’Hare HiltonTime: 10:00 am – 3:00 pmAgenda Items: Review 2012 Performance Compensation Process/payout Review HRC Scope Review 2013 Compensation Survey ActivitiesJuly 23 & 24, 2013 (Tuesday & Wednesday)HRC Planning RetreatLittle Rock, Arkansas Review SPP HR programs Review SPP Benefit plans Review of 2013 Compensation Survey Recommend 2014 SPP Compensation Pool funding Approve 2014 Meeting schedule and agendas Investment Management Meeting – 401(k)o Review Investment Policy Statement 401(k)o Review/evaluate investment manager performanceOctober 8, 2013 (Tuesday)Chicago O’Hare Review SPP Fraud Prevention Report Annual review of committee activitiesAgenda Item 7 - AdjournPhyllis Bernard adjourned the meeting at 4:25 pm on Thursday, March 7, 2013.Respectfully Submitted,Malinda SeeSecretaryPage 3 of 3

MemorandumTo:From:Date:Re:SPP Human Resources CommitteeMalinda SeeApril 23, 20132012 Performance Compensation Process ReviewEach year, SPP management allocates performance compensation funds to individual staff membersbased on those employee’s performance during the preceding fiscal year. SPP has assigned performancecompensation targets for each job classification (i.e. positions in grades 1 – 6 have a target payout of 10%of compensation). Each SPP manager meets with either Nick Brown or Carl Monroe and discusses theperformance of each employee reporting to them. Ultimately, each manager recommends a rating for theemployee’s performance on a scale of -5 to 10. The rating is then utilized to determine the percentage oftarget funding to allocate to the employee.Lighting the past powering the future.Agenda Item 3Page 1 of 1

Southwest Power PoolHUMAN RESOURCES COMMITTEEOrganization Group Scope StatementPURPOSEThe Human Resources Committee provides oversight of all aspects of the SPP employmentrelationship. Specifically, the Human Resources Committee will ensure personnel policies andstructures are developed, advocated and maintained which support the employees of SPP infulfilling their responsibilities.SCOPE OF ACTIVITIESThe Human Resources Committee has broad responsibilities for approving organizationalstructure including continuous realignment to support timely execution of the SPP Strategic Plan;recruitment and employment policies; compensation and incentive policies; benefits includinginsurance, health and retirement plans; and systems for evaluating organizational performanceand structure. The Human Resources Committee responsibilities include performing the tasksenumerated herein and reporting results on the performance of these tasks to the Board ofDirectors.The Human Resources Committee may hire consultants and other experts, asnecessary, to advise and guide the Committee in fulfilling its duties and achieving the desiredworkplace environment.The Committee will report its activities to the Board of Directors at the next meeting of the SPPBoard of Directors following a meeting of the Committee. Specific tasks of the Committeeinclude:a. Review and monitor organizational structure, succession, and personnel plans, ensuringcontinuous alignment with the SPP Strategic Plan.Revised April 23, 2013Page 1 of 3

b. Approve overall compensation policies and funding and review administration of thosepolicies.c. Review and approve employee and executive benefit and health care plans. Ensuringplans are competitive in the marketplace, responsive to the law, and provide satisfactionto beneficiaries within a cost constrained budget that effectively meets stakeholder needs.Appoint trustees to administer employee benefit plan trusts and define the rights, powersand responsibilities of trustees. Provide oversight of the design and investment strategyof the defined contribution employee benefit plan.d. Annually review the slate and structure of SPP’s retirement plans ensuring compliancewith applicable laws, ensure benefits are consistent with SPP’s strategic values.e. Oversee SPP programs designed to maintain ethical standards and facilitate open doorprocedures to report violations. Ensure documentation of standards and procedures,proper functioning of programs and provision of ongoing training to all SPP employees.f. Review and approve SPP’s employee and executive performance evaluation processes.g. Ensure the critical job functions and goals of the SPP President are documented andcommunicated to the SPP President and, annually, ensure the SPP President receives adocumented review of performance against the stated critical job functions and goals.Recommend compensation and benefit adjustments for the SPP President.h. Perform an annual assessment of the effectiveness of the Human Resources Committeeand report to the Board of Directors the results and make any recommendations forchange.Perform such other duties as the Board of Directors may delegate or direct.Revised April 23, 2013Page 2 of 3

REPRESENTATIONThe Human Resources Committee shall be comprised of six members. Two representatives shallbe members of the Board of Directors and one of these will be the chairperson, the other the vicechairperson.Two representatives from the Transmission Owning Member sector and tworepresentatives from the Transmission Using Member sector will be members each as nominatedby the Corporate Governance Committee.The Board of Directors shall appoint therepresentatives of the Human Resources Committee at the regular meeting of the Board ofDirectors immediately following the Annual Meeting of Members. The Corporate GovernanceCommittee is responsible for filling and recommending individuals to fill vacancies on theCommittee while monitoring and developing criteria governing the overall composition of theCommittee. Persons designated as representatives on the Human Resources Committee willcontinue to serve until their successors have been appointed.DURATION/QUORUM/PROXY/MEETINGSThe Human Resources Committee is a permanent committee. The Committee shall meet aminimum of two times per fiscal year and at other times as called by the Chair. A quorum willconstitute at least half of the members of the Committee but no less than three members. Proxiesare allowed if reported to the Chair prior to the meeting. All meetings of the Human ResourcesCommittee shall be open to all SPP members, members of the SPP Board of Directors, membersof the Regional State Committee, invited guests, and other interested parties unless closed by theChair of the Committee. All meetings will be noticed in accordance with the meeting noticeguidelines stated in the SPP Bylaws.REPORTINGThe Human Resources Committee reports directly to the Board of Directors.Revised April 23, 2013Page 3 of 3

Southwest Power Pool, Inc.HUMAN RESOURCES COMMITTEEFuture Meetings and AgendasJuly 23 & 24, 2013 (Tuesday & Wednesday)HRC Planning Retreat – Strategic HR Planning SessionLocation: Little Rock, ArkansasAgenda Items: Review SPP HR programs Review SPP Benefit Plans Review of 2013 Compensation Survey Recommend 2014 SPP Compensation Pool funding Approve 2014 Meeting schedule and agendas Investment Management Meeting – 401(k) Review Investment Policy Statement for 401(k) Review/evaluate investment manager performanceOctober 8, 2013 (Tuesday)Location: Chicago O’HareAgenda Items: Review SPP Fraud Prevention ReportAnnual Review of committee activitiesAgenda Item 8Page 1

selected Hewitt, Towers Perrin, Hay Group and Towers Watson over the past 12 years. Historically, SPP has implemented a new salary structure for the organization as a result of the compensation survey. In addition, some individual positions received salary adjustments if their compensation was out of the market range as determined by the survey.