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<br />01388 <br /> <br />Introduction <br /> <br />In November 1993, we initiated a strategic planning process for Western. At the time, we <br />recognized that competition in the electric utility industry would only increase pressure to keep <br />our rates as low as possible, while we also would face the pressure of declining appropriations. <br />Western's Strategic Plan, adopted in September 1994 after employee and customer input, <br />responded to these pressures by adopting a number of goals, decision rules and operating rules. <br />Among these are: <br /> <br />o a Cost Goal: Western will limit increases in annual operating expenses to less than 2 <br />percent per year through Fiscal Year 1996 and thereafter, annual operating expenses shall <br />not exceed the annual rate of inflation; <br /> <br />o a Marketability Goal: Western will, as the marketing agent for Federal power, <br />participate in the decision-making process wherever possible with other resource agencies <br />whose operating decisions significantly affect Federal power rates and repayment <br />obligations. We will do so to sustain the marketability of the Federal hydroelectric <br />resource; and ' <br /> <br />o . a Construction Operating Rule: Western has assessed proposals for construction of <br />new facilities using integrated resource planning principles which were defined through a <br />public process that Western completed in June 1995. In addition, proposals must pass at <br />least one of three criteria before we will consider construction: increased revenues from <br />the new facilities must exceed the annual cost over the cost evaluation period; or <br />customers must benefit sufficiently to support the new facilities in spite of a possible rate <br />increase; or the new facilities will be funded by others. <br /> <br />To help meet these goals, we initiated a Transformation effort in February 1995, We recognized <br />that employees and customers needed to be kept informed of our efforts, so we chartered both <br />internal and external communications groups to help with thl!t work. After intense study and <br />consideration of employee and customer corrunents, senior managers presented a proposal in May <br />to employees, employee unions, and customers. The senior management team also chartered a <br />Focus Group of Western employees in May to spend three months analyzing the proposal, <br />looking for blind spots and developing an organizational structure that best supported Western's <br />business strategy. <br /> <br />The Focus Group effort was massive, involving interviews with employees and customers, and <br />, consideration of a vast array of corrunents and suggestions. To complement the work ofthe <br />Focus Group, the senior management team chartered a Transition Process Team in late June. The <br />goal of that team was to develop processes and procedures for staffing the "new" Western, to <br />develop a means of potential soft landings, and to develop alternatives for employees who might <br />be without positions in the "new" Western, We were pleased to have representatives from our <br />employee unions on the teams. <br /> <br />The result of the Focus Group effort was a thorough review of all of Western's processes and <br />functions, The Focus Group and the Transition Process Team made their recorrunendations to the <br /> <br />, <br />