Incentives are only payable under the Executive Annual Incentive Plan in the event the threshold EBITDA funding trigger is achieved. If actual EBITDA equals the threshold EBITDA, then the EBITDA funding percentage is 50%. If actual EBITDA is an amount between the threshold and target, the EBITDA funding percentage equals 50% plus the product of (i) 50%, multiplied by (ii) a fraction, the numerator of which equals the difference between actual EBITDA and threshold EBITDA and the
denominator of which equals the difference between threshold EBITDA and target EBITDA. If actual EBITDA equals the target EBITDA, then the EBITDA funding percentage is 100%. If actual EBITDA exceeds the target EBITDA, then funding equals the operational funding percentage, up to 150%, as described below in Step 2: Operational Achievement.
For 2014, the EBITDA funding triggers (threshold and target), actual results and funding percentage under the Executive Annual Incentive Plan were as follows:
Name Threshold ($ millions) Target ($ millions) Actual Results ($ millions) EBITDA Funding Percentage EBITDA $1,651 $1,834 $1,844 100% ____________
(1) Achievement of the threshold EBITDA level results in a 50% funding percentage. (2) Achievement of the target EBITDA level results in a 100% funding percentage.
(3) Provided that the threshold has been met, the EBITDA funding percentage equals the percentage of target EBITDA achieved. Step 2: Operational Achievement
If the threshold EBITDA funding trigger is achieved, then once the EBITDA funding percentage is determined, the operational metrics set by the O&C Committee are then applied to determine an operational funding percentage. The operational funding percentage can increase or decrease the funding percentage of the Aggregate Incentive Pool. If actual EBITDA exceeds the target EBITDA, then funding equals the operational funding percentage, up to 150%. If actual EBITDA is less than or is equal to the target EBITDA, then funding of the Aggregate Incentive Pool is the lesser of the EBITDA funding percentage or the operational funding percentage. For 2014, since actual EBITDA exceeded the target EBITDA, the Aggregate Incentive Pool was based on the operational funding percentage of 117.9%.
The O&C determines the operational metrics to be applied to the operational funding percentage, and the weighting of each of those metrics within the final operational funding percentage. As with the EBITDA funding percentage, each operational metric must meet a threshold level in order to provide any funding for that metric. Meeting the threshold amount results in 50% of the available funding for that specific metric. The O&C Committee also sets target and superior levels for each operational metric, and achievement of those levels results in funding for a specific metric of 100% and 150%, respectively. Once threshold has been achieved, actual results in between each level result in a funding percentage equal to the percentage of the target achieved (up to 150%, for achievement of the superior performance level).
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For 2014, the operational funding triggers, actual results and funding percentages under the Executive Annual Incentive Plan were as follows:
Goal Weighting Threshold Target Superior ResultsActual
Operational Funding Percentage Safety (measured in number of injuries per 200,000 hours)
DART 30% 0.92 0.80 0.62 0.63 44.2%
Reliability (measured in minutes)
Non-storm SAIDI 30% 108.00 100.00 87.00 97.90 32.4%
Operational Efficiency - O&M Cost Per Customer (measured in $ per customer)
O&M 30% $171.77 $160.53 $149.29 $159.56 31.3%
Infrastructure Readiness Capital expenditures
per three year average kW peak 10% 97.00% - 97.99% 103.00% - 105.00% 98.00% - 98.99% 101.50% - 102.99% 99.00% - 101.49% 101.72% 10.0% __________
(1) Achievement of the threshold operational metric level results in funding of 50% of the available funding percentage for that specific operational metric. Failure to achieve the threshold results in no funding for that specific operational metric.
(2) Achievement of the target operational metric level results in funding of 100% of the available funding percentage for that specific operational metric.
(3) Achievement above the superior operational metric level results in funding of up to 150% of the available funding percentage for that specific operational metric.
In 2014, satisfaction of safety metrics comprised 30% of the operational funding percentage. The safety metric measures the number of employee injuries using a DART system, which measures the amount of time our employees are away from their regular employment posts due to injury. DART is measured in the number of injuries per 200,000 hours. The safety metric is important to our operations because it promotes the health and welfare of our employees. In addition, lowering the number of accidents reduces our operating costs, which in turn contributes to lower rates for our customers.
In 2014, satisfaction of reliability metrics comprised 30% of the operational funding percentage. Reliability is measured by SAIDI, which measures the average number of minutes electric service is interrupted per customer in a year. This metric promotes our commitment to minimizing service interruptions to our customers as the lower the SAIDI level for the year, the greater the funding percentage under the Executive Annual Incentive Plan. Since weather can greatly impact reliability and is outside of our control, the reliability metric measures SAIDI on a non-storm basis.
In 2014, satisfaction of operational efficiency metrics related to O&M comprised 30% of the operational funding percentage. Operational efficiency is measured based on O&M per customer, excluding third party network transmission fees and amortization of regulatory assets. The purpose of the O&M metric is to promote lower expenditures relative to customers served, which in turn contributes to lower rates for our customers.
In 2014, satisfaction of infrastructure readiness metrics comprised the final 10% of the operational funding percentage. Infrastructure readiness is measured based on Oncor’s capital expenditures (including net removal costs, but excluding allowance for funds used during construction) for the preceding three years’ average kW peak loads. The purpose of the infrastructure readiness metric is to promote capital expenditures in line with the previously set capital plan. While this metric discourages exceeding the budget, it also discourages spending that is too far below the capital plan, as we believe expenditures to improve our facilities and other capital expenditures are important to maintaining the quality of and enhancing our services to our customers.
As discussed above, an aggregate operational funding percentage amount for all participants was determined based on the level of attainment of the above operational targets.
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