Assessing and Facilitating a Governance Structure Redesign for PJM Interconnection

BACKGROUND AND CHALLENGES

PJM Interconnection is the largest regional transmission organization (RTO) in the U.S. and coordinates the movement of wholesale electricity in 13 states and the District of Columbia. With over 700 member companies, 56,000 miles of transmission lines, and 51 million customers, PJM utilizes a complex governance structure for coordinating member companies. PJM asked CBI and Raab Associates, a CBI partner, to conduct an assessment of PJM's stakeholder process and overall governance structure.

PJM's stakeholder process is an extensive, multi-layered system for making decisions and providing recommendations on ensuring reliability and maintaining competitive markets. The diversity of PJM's member companies and the complexities of the process lead to conflicts about decision-making, meeting mechanics, allocation of members’ voting power, and the information flow and relationships between the PJM staff, management and the Board.

THE CBI/RAAB ASSOCIATES APPROACH

Step 1: CBI and Raab Associates survey PJM’s member companies to assess their views about the stakeholder process, conduct focus groups, observe meetings, and then analyze the findings.

Working closely with PJM’s Governance Assessment Team (GAST), CBI and Raab Associates created a carefully tailored, participatory approach to gather and inventory PJM member concerns. To acquire a broad understanding of stakeholders’ views, CBI interviewed 75 member companies, staff, management, and the PJM Board; conducted focus groups; and observed meetings. Using this information, CBI developed an online survey for all PJM member companies.

Survey results provided the team with extensive insight into members’ overall goals, objectives, and satisfaction level, as well as detailed information on more specific issues within the stakeholder process.

Step 2: CBI and Raab Associates facilitate a year-long process to redesign the members decision-making process.

Working with some 60 regular attendees from the five member sectors, CBI and Raab Associates facilitated a year-long intensive process to revise the members overall process. Based on the issues identified in the assessment, the members worked deliberately through a clearly-designed work plan. The deliberations focused on eight specific areas, including: building transparency among the Board and members; increasing clarity and expectations for participants’ roles and responsibilities; and providing support for lower level standing committees. CBI and Raab Associates used WebEx to include remote attendees, an electronic whiteboard, and prepared detailed meeting summaries as well as documents capturing the processes and procedures developed.

Step 3: CBI and Raab Associates facilitate a six month process to tackle the most difficult issues regarding decision making at the highest committees and the relationship between members and the Board.

Again, working with some 60 regular attendees from the five member sectors, CBI and Raab Associates facilitated a final negotiation regarding the most difficult issues in the governance process. This included balance of power among members and sectors, voting rules at the highest levels of the organization, and how best to handle the toughest issues when agreement cannot be found. CBI and Raab Associates conducted an extensive survey of voting rules, how they are used in similar and other large organizations worldwide, and engaged the services of a leading expert in complex decision making at Harvard Business School as part of the team. CBI and Raab Associates then mediated among the members to reach an agreement on further changes to the governance process.

RESULTS

PJM members agree to and implement a whole-scale change to their governance process.

Through this effort, the PJM membership (some 700 companies) accepted the recommendations of the three-stage process. The members, with CBI and Raab Associates assistance, developed a new Members Manual, based on consensus building as the key underlying approach to decision making.  This Consensus-Based Issues Resolution (CBIR) process is now being implemented at all levels of the process. PJM is providing extensive training and coaching for its facilitators.  An implementation team of core negotiation participants monitors the progress and addresses problems in the process execution as they arise. To date, members note that the new process is leading to a better record of decision making, clearer understanding of issues among diverse members, greater agreement among members on complex issues, and a clearer process and procedures for moving from an issue or problem to a solution.