After allegations of management interference led PJM to replace its internal market monitoring unit with an independent monitor in 2008, FERC had an opportunity to prohibit other RTOs from using the internal structure. Because it chose not to do so, the temptation for RTO officials to muzzle their MMUs remains.
Oversight Committee Chairman Says He Can’t Remember Many Details in Controversy
Third in a Series
By Rich Heidorn Jr.
FERC auditors, who have been examining allegations that SPP officials interfered with the independence of its internal Market Monitoring Unit, effectively ended their audit at the end of April without interviewing a key witness.
That person is Joshua W. Martin III, the chairman of the SPP Board of Directors’ Oversight Committee, which is charged with supervising the unit and protecting its independence.
Former SPP monitors Catherine Tyler Mooney and John Hyatt, who were fired in December, had asked to meet with Martin last September to discuss their frustration with the internal MMU structure and recommend a role for an external monitor. The monitors told Martin that pressure to please RTO management and conform to the positions of membership made it impossible to exercise the independence required by FERC.
Martin, however, refused to meet with them, telling them to talk instead to General Counsel Paul Suskie and their direct supervisor, MMU Director Alan McQueen, who was the target of some of their complaints.
Hyatt and Mooney say they were terminated for their efforts to exert independence. SPP officials have declined to give a reason for the firings, citing RTO policy not to publicly discuss personnel matters.
FERC announced in February 2015 it was conducting an audit of SPP that included an examination of the MMU’s independence under Order 719 (PA15-6).
Yet the auditors effectively ended their 13-month inquiry without interviewing Martin, the single most important person to the protection of the MMU.
SPP said that FERC auditors conducted an exit interview April 29 with RTO officials, including Suskie and McQueen, at which they outlined their conclusions.
“FERC auditors did not indicate any findings that SPP’s MMU is not independent nor did the auditors indicate that SPP’s MMU should be an external market monitor,” SPP said in a statement. “We do expect FERC to issue recommendations for enhancements to SPP’s MMU similar to those approved [in a revised policy statement on the MMU] by SPP’s Board of Directors in January.”
FERC declined to comment.
Martin said in an interview May 2 that although he met FERC auditors at an Oversight Committee meeting in D.C. last March, “this was not an in-depth session where we were looking at specifics. They were just giving us an indication of the scope of the audit, how it was going to proceed,” he said.
Had it interviewed Martin, FERC would have found a board member seemingly detached from — or forgetful about — many of the details of the controversy surrounding the MMU.
Oversight Committee Role
Attachment AG of SPP’s Tariff specifies that “the Market Monitor shall be an organization within SPP reporting to the Board of Directors, excluding any SPP management representatives serving on the Board of Directors.” (Emphasis added.)
The MMU reports in particular to the board’s Oversight Committee, which is composed of three outside directors led by Martin.
Despite the Tariff’s prohibition against “SPP management” having an oversight role, RTO executives were regularly present when McQueen reported to the committee, according to committee minutes reviewed by RTO Insider.
In 2013 and 2014, for example, McQueen’s direct supervisor, Stacy Duckett, vice president and chief compliance officer, usually recorded the minutes as the committee’s secretary.
Duckett died in March 2015 following a long illness. Suskie, who succeeded Duckett as McQueen’s supervisor, also attended meetings as secretary, as did Michael Desselle, vice president and chief compliance and administrative officer.
An SPP organizational chart shows McQueen reported to Duckett and, later, Suskie for “administrative purposes.” Until recently, that included requests to hire new staffers, budget and organizational reviews, and McQueen’s salary and bonus reviews.
Hyatt and Mooney say that when they pushed to oppose a position held by the RTO or members, McQueen often resisted, complaining, “You don’t understand the pressure I’m under.” McQueen declined to say whether he had made the remark. (See Part 1: SPP Squelching MMU Independence, Former Monitors Say.)
How could McQueen tell the Oversight Committee of such pressure when SPP management was present during the meetings? “We’ve been very, very open,” Martin said. “Alan’s communicated with me without management being there — through emails, through voice mail.”
Larry Altenbaumer and Phyllis E. Bernard, the other two members of the committee, declined requests for comment, referring questions to Martin.
Judge, Regulator, CEO
By any measure, Martin is an accomplished figure. A one-time civil rights activist in Camden County, N.J., he studied physics as an undergraduate before becoming a patent attorney for Hercules, a chemical manufacturer. He later served on the Delaware Public Service Commission (1978-1982), including three years as chairman, and became the first African American member of the Delaware Superior Court (1982-1989).
He retired from the bench to become general counsel of Bell Atlantic Delaware, rising to CEO of the company, which was renamed Verizon Delaware (1996-2005).
He has now come full circle. In 2005, he become a partner at Potter Anderson & Corroon, a venerable Wilmington, Del., law firm founded in 1826, whose office is in Hercules Plaza, an office tower that once housed 1,800 Hercules employees. He retired as a partner at the end of 2013 and remains with the firm as counsel.
It was in his seventh-floor office, with a commanding view that reaches New Jersey, that Martin sat down for an hour-long interview with RTO Insider.
Martin, who has been an SPP board member since 2003, forcefully defended his decision not to meet with Hyatt or Mooney and said he agreed with the decision to fire them.
He also insisted he had seen no evidence that the MMU was being pressured by executives to conform with RTO and stakeholder desires on market rules, as the two monitors contend.
But Martin said he was unable to answer numerous questions about the controversy, repeatedly answering with variations of “I don’t know” or “I don’t recall.”
He acknowledged that Potomac Economics — in addition to performing the functions formerly done by Mooney and Hyatt — is also doing an audit of the MMU, but said, “I don’t know the scope.” He also said he did not know when McQueen, whose retirement was announced in January, would be leaving. And he hasn’t seen a job description for McQueen’s replacement.
Below are excerpts from RTO Insider’s interview with Martin.
Martin was asked about the reasoning behind the Oversight Committee’s revised policy statement on the MMU’s independence.
The new statement makes the committee responsible for all salary and bonus decisions for McQueen and other MMU employees and ensured that the MMU director could meet the committee in executive sessions without RTO officials present.
Who was responsible for Alan McQueen’s salary and bonus evaluations [before the revised statement]?
“It would have gone to the board — and then through the administrative process of SPP — and to the board. That’s my assumption.”
You say you assume it went through the board. You’re a member of the board; why wouldn’t you be aware of it?
“I just don’t remember specifically. It wouldn’t have been significant enough for me to have that in my brain. But considering the fact that it had to go somewhere, and it didn’t come through the Oversight Committee specifically like it did this year, my assumption is it would have been in that package of compensation increases for the entire organization.”
And where did that package come from? That would have come from RTO management, right?
“Oh sure, human resources, RTO management, Human Resources Committee — all of that.”
So then is it fair to say that up until this most recent year and this change where the Oversight Committee was involved, that Alan McQueen’s compensation was being determined or recommended, at least, by RTO staff, RTO management?
“As best as I can recall, that would be accurate.”
Was there a realization that that was not compliant with Order 719? Is that why you changed it?
“Not to my knowledge. I don’t know that the issue was ever raised. It wasn’t raised with me.”
Martin went on to suggest that SPP might not have been in violation of Order 719 because the order allows the MMU to report to RTO management for “administrative purposes, such as pension management, payroll and the like.”
Payroll seems to me to be a more ministerial function — like how many deductions do you want taken out [of your paycheck] as opposed to supervision, which is: Are you doing a good job? Should you get a bonus? Should you get a raise this year?
“To be fair about this, assuming that there was some need for clarification on that, that was probably the genesis of the change that was made” regarding compensation.
You say it was probably the genesis, but you were there. You are the chairman of the committee. Wouldn’t you know what the genesis was?
“Well, here’s what I’m trying to distinguish. It wasn’t that we had FERC standing over us saying, ‘You must do this.’ But we looked at the situation concerning the independence of the MMU and we accepted certain changes that would make it clear that they were independent and that was one of them.”
When did those discussions start as to changing the statement?
“Good question. I can’t answer that. I just don’t know specifically when they started.”
What’s your first recollection? Who suggested it?
“I don’t remember that either. I can tell you that those discussions were ongoing in 2015. But I can’t tell you what the initial impetus for that was. It may well have been Alan McQueen who said, ‘I think we need to take a look at how the MMU operates versus the board and the Oversight Committee.’ But I can’t be specific on that. I just don’t remember.”
Martin was asked about the letter Hyatt and Mooney sent him in September.
What do you recall about that?
“What stood out for me more than anything else in that letter was the fact that there was this issue of a contract that they wished. And obviously directors do not negotiate contracts with employees. For that reason, I referred them to staff, specifically to the SPP general counsel, Paul Suskie.” [Editor’s Note: The letter recommends some MMU functions be transferred to an external monitor, which Hyatt and Mooney offered to join. It does not mention the word “contract.”]
The mention of the contract was why you chose not to meet with them? Even to talk about more generic issues?
“That stood out to me more than anything else because I’m very careful about my role as a director. Even though Southwest Power Pool is structured differently from a lot of organizations I’ve been associated with, the last thing you want is directors poking their noses in places where they shouldn’t be poking their nose in — namely operational issues.
“We’re supposed to set policy for the organization. And I felt that what I was being asked to get involved in there was beyond the scope of my role as chairman of the Oversight Committee. So I referred them to Paul Suskie, who … was general counsel and would be able to address whatever issue they wanted to advance.”
They have told me that Alan McQueen, their boss, was … preventing them from acting as independently as they thought the MMU should act. And they say that you telling them to go back and meet with McQueen and Suskie … was not in the spirit of you providing oversight for the independence of the MMU.
“Let me be very clear with you. If the issue were that simple — i.e., if they were coming to me purely to address the question of independence — we would have had a different situation. My analysis of what I was being asked to get involved in went beyond that and therefore I took the position that as a director and as chairman of the Oversight Committee, I should not get involved in that discussion and that’s why I referred them to the general counsel.”
Couldn’t you have bifurcated the discussion? Say I’m not going to talk about contracts or what the solution is but I will talk to you about the problem?
“I never got that far because a quick assessment of what I did would suggest that those issues were so interwoven that a bifurcation wouldn’t be possible.”
Martin was asked about the decision to fire Hyatt and Mooney, which McQueen discussed with the Oversight Committee at its Dec. 7 meeting.
Did the Oversight Committee explicitly approve the firing, or did it just say [to McQueen], ‘We won’t stop you from doing so?’
“My recollection is we acknowledged that what was happening from a human resources perspective was going forward. I don’t believe we approved that. …That’s my best recollection. As I think back on it, I don’t know why we would have to have approved it, because it was a human resource matter, a personnel matter…
“I can’t discuss with you publicly the personnel issues … but we did get a briefing on what Alan intended to do.”
Do you have any misgivings about the decision to terminate them?
“I thought that this was an appropriate decision for management to take. Recognize that as a board member I’m not involved in making that decision. This is not a policy decision. This is a personnel decision and this had worked its way through the various personnel levels. I felt that what was being requested was not unreasonable and I saw no basis for the Oversight Committee to refute what was getting ready to happen. It wasn’t our position to second guess the human resources structure.”
This was McQueen’s decision to fire them, not human resources, right?
“I’m assuming that it worked its way through human resources to make sure that all the T’s were crossed and I’s were dotted. That happens in any organization.”
What is the process at SPP to terminate somebody?
“You’re asking for more detail than I can give you. The best I can do is to tell you this is a human resources function.”
Martin was also asked about the timing of the revised policy statement — which the committee approved Dec. 23, nine days after Hyatt and Mooney were fired — and the announcement of McQueen’s retirement. Martin announced the statement and the retirement at the January board meeting. McQueen, who has been with SPP since 2003, told RTO Insider he was leaving to spend more time with his grandchildren in northern Michigan.
A cynic would say SPP … got rid of the two malcontents but that looked kind of bad — they’re going to say they were fired for trying to assert their independence. ‘We [SPP] disagree with that and to show that that’s not true we’re going to put out this statement.’ But just in case FERC isn’t satisfied with that, Alan McQueen is going to be gone by the end of the year anyway so it’s going to be a moot point when the audit comes out.
[Martin smiles.] “Well, I can understand how somebody could look at all of the facts and extract that conclusion. But without getting into the details of why Alan McQueen elected to retire — and this was his election, let me be very, very clear with you. As a director I certainly am not aware of any desire to push Alan McQueen out. The Oversight Committee of the board has been very, very supportive of Alan and his role with the MMU. That’s a separate issue — his decision to retire.”
Why announce McQueen’s retirement in January when no date certain was given for his departure?
“It was announced at that time because a process had to be initiated for his replacement. That’s obviously going to be a public process.”
OK, but we’re now into May and I’m not aware that you’ve begun that process.
“The process of pursuing a replacement for Alan is not one that I’m directly involved in. That, too, is a staff function. But I wouldn’t assume because you haven’t seen a name emerge that the process isn’t underway.”
You’re saying that RTO management will choose McQueen’s replacement, not the board?
“Well, they’re going to do the mechanics of dealing with advertising the position and all of that. That’s where the process is going to be initiated. Ultimately, and obviously, the board is going to make the decision.”
When will the transition occur?
“Sometime this year. … What I can be clear about is the fact that it is his intention to be there until a replacement is in place. That much I can share with you. I just can’t be more specific.
“This is a very important role. You’ve obviously got to put the right person in that position, and I’m confident knowing that there isn’t going to be a vacuum there.”
What will you be looking for in a replacement for Alan McQueen?
“Really, a continuation of what we have right now. A very competent, talented MMU that’s able to satisfy its almost daily requirements from the FERC for information [and] also satisfy what Southwest Power Pool needs. An MMU that’s comfortable working through the Oversight Committee, which knows that we are available if there are some concerns and what have you.
“I’m looking for the kind of competence and expertise that would parallel the other RTOs and ISOs from around the country.”
Are there certain minimum academic or professional qualifications that you’re looking for?
“I can’t answer that question — simply because I haven’t seen the job description. If you were to ask me specifically do we want someone with a Ph.D. in economics, I don’t know that answer. Obviously Alan [who has a master’s in economics] doesn’t have one. A number of RTO/ISOs across the country do. I just don’t have an answer for that question.”
[Editor’s Note: Editor-in-Chief Rich Heidorn Jr. is a former member of FERC’s Office of Enforcement and participated in a 2008 audit of SPP.]
Former Monitors Dispute SPP Claims over ‘Contract’
Joshua W. Martin III, chairman of the SPP Board of Directors’ Oversight Committee, said he refused to meet with Market Monitors Catherine Tyler Mooney and John Hyatt last year because their letter requesting a meeting included a proposal that the RTO sign a contract with them to set up an external monitor.
SPP General Counsel Paul Suskie said in a statement that Hyatt and Mooney proposed that they would form their own company and that SPP would fund their startup costs and award them a no-bid contract — essentially the arrangement that PJM agreed to with Joe Bowring when he left the RTO’s payroll and founded Monitoring Analytics in 2008. (See Independent Market Monitors Wouldn’t Have It Any Other Way.)
Mooney said it was Suskie and MMU Director Alan McQueen who initiated the discussion of contracts. Although the letter recommends some MMU functions be transferred to an external monitor, which Hyatt and Mooney offered to join, the word contract is not mentioned.
“John and I felt that this was premature. The OC needed to make a policy decision about whether to pursue an external unit first,” she said. “We discussed whether an open request for proposals for an external MMU contract could be conducted in a way that would protect our careers given the retaliation we were experiencing. John and I never ruled out any options. We did not ask for a contract.”
If SPP had chosen an open solicitation, it’s unlikely it would have received many responses. When Texas issued a solicitation last year for monitoring of ERCOT, only incumbent Potomac Economics submitted a bid.
“We had very good jobs [at SPP],” Mooney said. “All we had to do to keep them was to keep our mouths shut. But we felt that was a compromise of our principles. … We felt that would compromise the SPP MMU’s integrity.”
— Rich Heidorn Jr.
Previously in this Series
Part 1
- SPP Squelching MMU Independence, Former Monitors Say
- Order 719: FERC Balanced MMU Independence Against RTO Autonomy
Part 2
