Smith Direct Testimony v 1 - iurc.portal.in.gov

Petitioner’s Exhibit No. 11

Northern Indiana Public Service Company LLC

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VERIFIED DIRECT TESTIMONY OF CHRISTOPHER D. SMITH

Q1. Please state your name, business address and title. 1

A1. My name is Christopher D. Smith. My business address is 801 E. 86th 2

Avenue, Merrillville, Indiana 46410. I am employed by NiSource Corporate 3

Services Company (“NCSC”) as Vice President of Human Resources. 4

Q2. On whose behalf are you submitting this direct testimony? 5

A2. I am submitting this testimony on behalf of Northern Indiana Public Service 6

Company LLC (“NIPSCO”). 7

Q3. Please describe your educational and employment background. 8

A3. I received a Bachelor of Arts Degree from Indiana University in 2002. In 9

2003, I received a Human Resources Certificate from Cornell University. In 10

2014, I obtained a Master in Business Administration from the University 11

of Notre Dame. I joined NiSource Inc. (“NiSource”) in 2009 as Human 12

Resource Director. Prior to joining NiSource, I was the Human Resources 13

Director for The Pepsi Bottling Group (“Pepsi”) where I had Human 14

Resources and Labor Relations responsibility for 13 distribution and 15

production facilities across Virginia and Tennessee and preceding that role 16

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I was the Human Resources Manager for Pepsi’s Las Vegas facility. Before 1

joining Pepsi, I worked for Bristol‐Myers Squibb Pharmaceuticals (Infant 2

Formula division, previously known as Mead Johnson Nutritionals) in roles 3

of increasing responsibility to include Human Resources Intern, Human 4

Resources Specialist, and Associate Human Resources Manager. Prior to 5

working for Bristol‐Myers Squibb, I was a Human Resources Intern with 6

Kimball International. 7

Q4. What are your responsibilities as Vice President of Human Resources? 8

A4. As Vice President of Human Resources, I am responsible for executing all 9

aspects of human resources for the seven NiSource Operating Companies 10

including NIPSCO, which includes recruiting and retention, employee 11

relations, performance management, organizational effectiveness, and 12

leadership development. Although NCSC has subject matter experts for 13

compensation, labor, benefits, and recruiting, I oversee the field Human 14

Resources Generalists that link those subjects/subject matter experts to our 15

employees. 16

Q5. Have you previously testified before this or any other regulatory 17

commission? 18



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A5. Yes. I previously submitted testimony before this Commission in support 1

of NIPSCO’s most recent gas rate case in Cause No. 44988 and in NIPSCO’s 2

last electric rate case in Cause No. 44688. 3

Q6. Are you sponsoring any attachments to your testimony in this Cause? 4

A6. Yes. I am sponsoring Attachment 11‐A through Attachment 11‐D, all of 5

which were prepared by me or under my direction and supervision. 6

Q7. What is the purpose of your testimony? 7

A7. The purpose of my testimony is to describe and support the reasonableness 8

and competitiveness of NIPSCO wages and salaries, incentive 9

compensation, and benefits provided to employees. I also support the pro 10

forma adjustment to test‐year expenses relating to incentive compensation. 11

Employee Compensation 12

Q8. Please describe NiSource’s compensation philosophy. 13

A8. NiSource’s “total rewards” compensation philosophy aims to compensate 14

employees competitively in comparison to the utility industry, as well as 15

general industry employers, to attract, retain and motivate employees who 16

are qualified to perform the needed functions of the particular position. 17

This compensation philosophy enables NIPSCO to meet its obligation to 18



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provide safe, reliable, and cost‐effective service to its customers. This 1

compensation philosophy is consistent across the NiSource companies. 2

Q9. What are the components of NIPSCO’s total compensation and benefits? 3

A9. NIPSCO’s total rewards program includes (a) market‐driven base 4

compensation (rewarding employees in a manner that is competitive with 5

the external job market), (b) market‐driven performance 6

adjustments/merits, (c) long‐ and short‐term incentives, (d) profit sharing, 7

and (e) health and welfare benefits. The mix of these elements differs for 8

various levels in the organization. For purposes of my testimony, I will 9

focus on merit increases, long‐term incentives, short‐term incentives, and 10

profit sharing, which are all components of the total rewards program. 11

Q10. Does NiSource employ a compensation and benefits consultant to assist 12

in determining the manner in which it should compensate employees 13

across the NiSource Operating Companies, including NIPSCO? 14

A10. Yes. For compensation and certain health and welfare benefits, NiSource 15

regularly relies on the advice and guidance provided by Mercer LLC, a 16

global consulting leader in talent, health, retirement, and investments. 17

Mercer assists NiSource in setting competitive salary ranges and evaluating 18



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and recommending changes to employee health and welfare benefit plans. 1

Mercer supports NiSource’s policy of compensating employees within a 2

range determined for base pay and total compensation and benefits when 3

compared to other employers. Mercer also supports the NiSource base pay 4

management program that is designed to maintain reasonable market 5

based pay on an ongoing basis across the NiSource Operating Companies. 6

In addition, Aon Hewitt Associates (“Aon”), a global human resources 7

consulting firm, assists NiSource in pension plan and post‐retirement 8

medical actuarial analysis, and Alight Solutions assists with administration 9

of pension and health and welfare benefits. 10

Q11. Are compensation and benefit levels at NIPSCO reasonable and 11

competitive in your opinion? 12

A11. Yes. As I explain below, I believe NIPSCO provides reasonable and 13

competitive compensation and benefits to its employees. 14

Base Compensation 15

Q12. Is NIPSCO required to provide any increases in compensation as a result 16

of labor contracts? 17



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A12. Yes. NIPSCO has two collective bargaining agreements that provide for 1

annual increases through the terms of the agreements, which are from June 2

1, 2014 through May 31, 2019. 3

Q13. When do increases under the collective bargaining agreements take effect 4

for each of NIPSCO’s bargaining units? 5

A13. The scheduled wage increases are shown in Attachment 11‐A attached 6

hereto. Both agreements provide for a 3.25% base wage increase on January 7

1, 2017, a 3.5% base wage increase on January 1, 2018, and a 3.5% base wage 8

increase on January 1, 2019. These scheduled wage increases are key inputs 9

in NIPSCO’s merit adjustment, which is designated as Adjustments OM 1‐10

18 and OM 1‐19 on Petitioner’s Exhibit No. 4, Attachment 4‐C‐S2, OM 1. 11

Q14. How is base pay determined for NIPSCO employees who are not covered 12

by a collective bargaining agreement? 13

A14. To ensure that each job was valued correctly, NiSource, on behalf of 14

NIPSCO, in conjunction with Mercer, evaluated the compensation paid by 15

other employers within the energy/utility industry and outside the industry 16

for the same or similar type of work. NiSource established a pay range for 17

each job based on 75% to 125% of the median values derived during this 18



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process. NiSource’s objective is to pay employees within this range. An 1

employee’s placement within the applicable range is determined by factors 2

such as general business conditions and the employee’s skill set, experience, 3

and performance. This policy results in compensation levels that are 4

reasonable but also competitive enough to attract, retain and motivate 5

qualified employees. 6

Q15. Does NIPSCO generally provide annual base pay increases, based on 7

merit, to its employees who are not covered by a collective bargaining 8

agreement? 9

A15. Yes. Annual base pay increases are a critical component to attracting, 10

retaining and motivating a high quality workforce. NIPSCO’s employees 11

who are not covered by a collective bargaining agreement, therefore, also 12

receive annual base pay increases effective June 1 of each year. NIPSCO 13

has regularly awarded annual pay increases to its employees as shown in 14

Attachment 11‐A attached hereto. Effective June 1, 2017 and June 1, 2018, 15

NIPSCO provided a 3.00% performance pay pool for distribution to exempt 16

and non‐exempt, non‐union employees. As reflected in Attachment 11‐A, 17

NIPSCO anticipates a 3.00% performance adjustment for distribution to 18



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exempt and non‐exempt, non‐union employees effective June 1, 2019 as 1

well. 2

For 2017 and 2018, leaders were expected to differentiate the amount of 3

increase provided to individual employees based upon the individual 4

employee’s performance and contribution, as well as the employee’s 5

relative placement in the salary range for the position. Thus, while 6

individual increases were more or less than 3.00%, the average increase for 7

all employees was 3.00%. These increases are important to recognize 8

employees’ contributions and necessary to allow NIPSCO to remain 9

competitive. These anticipated wage increases are key inputs in NIPSCO’s 10

merit adjustment, which is designated as Adjustment OM‐1 on Petitioner’s 11

Exhibit No. 4, Attachment 4‐C‐S2, OM 1. 12

Annual Incentive Plan 13

Q16. Does NIPSCO provide employees an opportunity to receive annual 14

incentive pay? 15

A16. Yes. For 2017 and 2018, Corporate Incentive Plan goals were set for both 16

overall NiSource and NIPSCO. If these Corporate Incentive Plan goals are 17

met, an incentive pool is created for distribution to NIPSCO employees. For 18

employees covered by a collective bargaining agreement and for other non‐19



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exempt employees, their incentive pay is determined arithmetically by 1

multiplying their incentive payout percentage times their eligible earnings. 2

For all other employees, one‐third of their incentive pay is determined 3

arithmetically by multiplying their incentive payout percentage times one‐4

third of their eligible earnings. The other two‐thirds of their incentive pay 5

is determined by assessing how well that employee has met individual 6

performance objectives that are focused on customer‐oriented goals such as 7

safety, customer service, quality of service, and containment of costs. 8

Employees are accountable for these goals and take action to reinforce them 9

to achieve incentive rewards. 10

The discretionary portion of the incentive program is based on performance 11

management linked to goals, including customer service, reliability, safety, 12

employee, process/capability, and financial goals for NIPSCO. 13

Performance management is executed through the annual evaluation 14

process embodied in the Performance Management Worksheet (“PMW”). 15

The PMW contains annual performance objectives and articulates the 16

means of measuring the employee’s progress in relation to the established 17

objectives. Each employee is actively involved in the development of his or 18



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her PMW, with input from his or her supervisor. The employee’s progress 1

is reviewed and discussed with the employee periodically throughout the 2

year. The PMW process is also used as an aid in determining the amount 3

of a merit increase for an employee. 4

Use of the PMW process to establish goals against which to measure 5

employees’ performance is important in reinforcing the proper focus on key 6

initiatives and goals designed to improve safety, customer service, quality 7

of service, and containment of costs. 8

Q17. Is the potential to earn incentive pay needed for NIPSCO to be effective 9

in recruiting, retaining and motivating its employees? 10

A17. Yes. Incentive compensation is an element of competitive total 11

compensation in the labor market both within the utility industry and 12

within the broader employer base. Therefore, in order for NIPSCO to 13

remain competitive in the labor market, it is important to provide incentive 14

compensation as part of total compensation. If NIPSCO maintains a 15

competitive base compensation, but does not provide incentive 16

compensation, total compensation will lag behind the competition, and 17

employees will have larger, more attractive total compensation 18



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opportunities at other employers providing competitive compensation 1

inclusive of incentives. 2

The importance of incentive compensation is evidenced by a recent survey 3

conducted by Aon Hewitt. The following is an excerpt from the Highlights 4

and Trends section of The Aon Hewitt 2017 Variable Compensation 5

Measurement (“VCM”) Report‐U.S. Edition (at 4‐6): 6

Even with the changing economic environment, variable 7

pay budgets have continued to remain significantly higher 8

than amounts budgeted for salary increases. While salary 9

increases have hovered at or around 3% for the past six 10

years, variable pay budgets have consistently been in 11

double digits. 12

Highlights and Trends 13

Variable pay plans continue to be a critical component of 14

most VCM participants’ total compensation offerings. The 15

Aon Hewitt VCM report continues to support the trend that 16

organizations are increasingly turning to variable pay as a 17

means to attract, retain, and reward performance while 18

traditional merit increase budgets remain at record low 19

levels. In 2017, a median 98% of total U.S. employees who 20

were eligible for at least one type of variable pay award 21

actually received an award. 22

Prevalence of Variable Compensation 23

The frequency of companies with at least one broad‐based 24

variable pay plan continued to increase since 1994 when we 25

first started recording this information. According to Aon 26

Hewitt’s Salary Increase Survey in 1995, 59% of U.S. 27

organizations indicated they had at least one broad‐based 28

variable pay plan in place. By 2017, 88% of U.S. 29



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organizations had implemented a broad‐based variable pay 1

plan. 2

Not only have more U.S. organizations in the database 3

introduced broad‐based variable compensation in recent 4

years, organizations also have changed the look of their 5

variable pay plans. 6

The incentive plan is designed to drive and reinforce PMW goals for exempt 7

employees. These goals are divided into 5 key categories, including: safety, 8

customer, financial, execution, and engagement. These goals and the 9

Performance Management processes are critical in reinforcing key NIPSCO 10

initiatives, including safety, customer service, and reliability improvement. 11

Q18. How are NIPSCO incentive levels and incentive ranges determined? 12

A18. Each employee is placed in a job scope level, which is based generally on 13

their responsibility level within the organization. Each job scope level has 14

an associated incentive opportunity range, beginning at a threshold or 15

“trigger” level, which provides an incentive of 50% of a “target.” The 16

incentive opportunity range increases through the “target” level up to the 17

“stretch” level, which provides an incentive of 150% of the “target.” For 18

example, first line supervisors are in a job scope level that provides a target 19

incentive of 10% of base pay. The trigger and stretch levels are 50% below 20



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and above the target percentage, respectively. Therefore, the incentive 1

range for a first line supervisor is: 2

5% 10% 15% 3

Trigger Target Stretch 4

Q19. What incentive level is included in the Forward Test Year? 5

A19. The Forward Test Year is based on a target level payout. The 2017 actual 6

payout was above target. Adjustments OM 7‐17 and OM 12‐17 on 7

Petitioner’s Exhibit No. 4, Attachment 4‐C‐S2, OM 7 and OM 12, 8

respectively, normalizes 2017 corporate incentive compensation expenses 9

to reflect a payout consistent with the target levels included in the Forward 10

Test Year to align the 2017 actuals with the target level payouts included in 11

2018 and 2019 Budget Years. 12

Q20. When is incentive compensation awarded? 13

A20. If the measures for the incentive compensation plan are met, incentive 14

compensation is provided annually in the end of February paycheck for 15

monthly paid employees and in the first paycheck in March for bi‐weekly 16

paid employees. 17



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Detail of Comparative Compensation Analysis 1

Q21. Have you performed a comparative analysis to determine the 2

reasonableness of NIPSCOʹs total cash compensation? 3

A21. Yes. As previously mentioned, NCSC, in conjunction with Mercer, has 4

prepared analyses that compare total cash compensation provided by 5

NCSC and NIPSCO relative to other utilities and to general industry 6

companies. Mercer provides NCSC with robust external compensation data 7

that is utilized for comparison purposes. The analyses look at base 8

compensation and “total cash compensation.” “Total cash compensation” 9

is the total of base pay and incentive pay. These analyses demonstrate that 10

the base pay and total cash compensation provided by NCSC and NIPSCO 11

are reasonable when compared with other utilities and general industry 12

employers. The comparative analyses are attached hereto as Attachment 13

11‐B and Attachment 11‐C. Attachment 11‐B compares base and total cash 14

compensation for NCSC positions with at least 15 or more incumbents in 15

both utility and general industry from a variety of functions and levels 16

relative to the industry nationally. Attachment 11‐C compares NIPSCO 17

non‐union positions with at least 15 incumbents relative to the industry 18

nationally. 19



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As Attachment 11‐B shows, the NCSC base salary and total cash 1

compensation are reasonable and competitive. Specifically, NCSC is 7.1% 2

below the market comparison data in base pay and 4.0 % below the market 3

comparison data in total cash compensation for these positions compared 4

nationally. 5

Q22. Please describe Attachment 11‐C. 6

A22. Attachment 11‐C analyzes the salaries for non‐union NIPSCO positions as 7

compared to base salaries and total cash compensation to the average utility 8

salaries nationally. 9

Q23. What conclusions do you draw from Attachment 11‐C? 10

A23. NIPSCO base salary and total cash compensation are reasonable and 11

competitive. Overall, nationally, NIPSCO base salaries were below market 12

by 5.5%, and NIPSCO total cash compensation was below market by 2.2%. 13

Annual Base Pay Increases 14

Q24. How do annual base pay increases at NIPSCO compare to those provided 15

by other employers? 16

A24. Attachment 11‐D provides a comparison between NCSC and NIPSCOʹs 17

base pay increases (as a percent of base pay) for employees who are not 18



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covered by a collective bargaining agreement and those for other utilities 1

and general industry employers. The data in Attachment 11‐D is 2

categorized nationally, by the energy segment, and regionally, the 3

Chicagoland area. This analysis draws from Mercer data covering a large 4

number of companies within the general industry, the Energy industry, and 5

industries located in the Chicagoland area. Attachment 11‐D demonstrates 6

that the Company’s annual increases in 2018 and projected for 2019 of (non‐7

exempt) and (exempt), which are 3%, were the same as the average 8

increases of other companies nationally, within the Energy segment, and 9

regionally. 10

Employee Benefits 11

Q25. What are the benefits offered by NIPSCO to attract, retain and motivate 12

qualified employees? 13

A25. NIPSCO’s benefit plans basically correspond to the plans offered 14

throughout NiSource, including health and welfare plans (medical and 15

prescription drug coverage, dental coverage, vision care, term life 16

insurance, spouse and child term life, and disability insurance), a defined 17

benefit pension plan (for certain employees), a 401(k) savings plan, and 18

paid time off (vacation, holiday and sick pay). Benefits are an important 19



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component of any compensation structure and are necessary to ensure 1

NIPSCO is able to attract and retain qualified employees. 2

Q26. Please describe each of the major employee benefit plans. 3

A26. The major benefit plans are as follows: 4

Pension Plan: 5

Pension benefits are provided to NIPSCO employees and certain NCSC 6

employees pursuant to the provisions of the NiSource Inc. and Northern 7

Indiana Public Service Company Pension Plan Provisions Pertaining to 8

Salaried and Non‐Exempt Employees and NiSource Inc. and Northern 9

Indiana Public Service Company Pension Plan Provisions Pertaining to 10

Bargaining Unit Employees (ʺPension Planʺ). The Pension Plan consists of 11

three different pension offerings. The particular pension offering in which 12

an individual participates is determined by several factors, such as whether 13

the employee is in a bargaining unit or is non‐union, the date of the 14

employeeʹs hire, or individual choice. 15

The three different pension offerings are: (1) the Account Balance II 16

formula; (2) the Account Balance I formula; and (3) the bargaining unit Final 17

Average Pay formula. The manner in which the pension benefit is 18



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calculated varies according to the pension offering. Under the Account 1

Balance II Formula, pay credits are allocated to an employee’s balance in an 2

amount equal to a percentage of the employee’s eligible pay. The 3

employee’s annual pay credit percentage is determined by the total age and 4

service points the employee accumulates each year, as measured on 5

December 31. The pay credit percentage ranges from 4% to 6% of eligible 6

pay. In addition, an employee receives an additional pay credit of 1% on 7

their eligible pay that exceeds one‐half of the Social Security Wage Base in 8

effect that year. In addition to the pay credit, employees receive an interest 9

credit to their account each year on December 31. Under the Account 10

Balance I Formula, pay credits are allocated to an employee’s balance in an 11

amount equal to a percentage of the employee’s eligible pay. The 12

employee’s annual pay credit percentage is determined by the total age and 13

service points the employee accumulates each year, as measured on 14

December 31. The pay credit percentage ranges from 5% to 10% of eligible 15

pay. In addition, an employee receives an additional pay credit of 2% on 16

their eligible pay that exceeds one‐half of the Social Security Wage Base in 17

effect that year. In addition to the pay credit, employees receive an interest 18

credit to their account each year on December 31. Under the bargaining 19



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unit Final Average Pay formula, an employee receives a pension benefit 1

that is based upon: 0.575% of final average pay times years of credited 2

services up to 30; plus, years of credited service times an amount based on 3

the employeeʹs benefit class for the last 60 months. 4

A pension benefit is no longer offered effective on or after January 1, 2010 5

for exempt new hires and on or after January 1, 2013 for non‐exempt, non‐6

union new hires. 7

The annual expense of the Pension Plan is based upon calculations 8

performed by Aon Hewitt consulting actuaries. The annual expense is 9

determined by factors including the discount rate, return on assets, and 10

various actuarial assumptions. Aon Hewitt also makes an annual 11

evaluation of the Pension Plan as to liabilities, assets and the required 12

funding level. 13

Under the NiSource Inc. Retirement Savings Plan employees can contribute 14

between 1% to 50% of eligible compensation on a pre‐tax basis and up to 15

25% on an after‐tax basis, subject to IRS limitations. NIPSCO matches a 16

portion of the pre‐tax or after‐tax contributions each pay period. The 17

amount of NIPSCO’s match varies based upon the pension plan offering in 18



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which the employee participates or on the non‐union employees’ hire date. 1

Medical Coverage: 2

NIPSCO provides medical coverage to its employees through the following 3

self‐insured plans: Preferred Provider Organization (“PPO”) and two High 4

Deductible PPOs. NIPSCO continues to review plan coverage and search 5

for more efficient ways to offer and administer plan coverage. NIPSCO self‐6

insures its PPO and High Deductible PPO offerings, which reduces 7

underwriting margins. Plans that offer coverage through provider 8

networks are used to take advantage of provider discounts. NIPSCO also 9

provides access to medical coverage for retirees who meet certain hire date, 10

age, and service requirements. The amount of subsidy NIPSCO provides 11

to retirees varies depending upon factors, such as: whether the employee is 12

a member of a bargaining unit, the number of years of service, the level of 13

coverage, choice of plan, and when an employee retired. Post‐retirement 14

medical is no longer offered effective on or after January 1, 2010 for exempt 15

new hires and on or after January 1, 2013 for non‐exempt, non‐union new 16

hires. 17

Dental Coverage: 18



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NIPSCO offers three dental coverage options: (1) Preventative Dental 1

(salaried/non‐exempt only), (2) Basic Dental, and (3) Dental Plus. All dental 2

plans use a network of providers. The process of procuring dental coverage 3

for NIPSCO employees corresponds with the process for procuring health 4

care described previously. 5

Vision Coverage: 6

NIPSCO provides Vision coverage to its employees. The plan utilizes a 7

network of doctors and covers certain costs associated with exams and 8

correction. 9

Group Life: 10

NIPSCO provides three forms of life insurance: Basic Group Life, 11

Accidental Death and Disbursement (“AD&D”), and Retiree Life Insurance. 12

Group Life and AD&D are based upon covered base compensation for 13

salaried and non‐exempt employees and years of service for bargaining 14

unit employees. Retiree Life is a fixed amount. Retiree Life is no longer 15

offered effective on or after January 1, 2010 for exempt new hires and on or 16

after January 1, 2013 for non‐exempt, non‐union new hires. As with all of 17

NIPSCOʹs insured plans, the premiums are based upon actual claims 18



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experience because this is a fully experience‐rated plan. 1

Long Term Disability (“LTD”): 2

The cost of LTD is based on an employee’s base compensation. The LTD 3

plan is also fully experience‐rated, and, therefore, the premium reflects 4

NIPSCO’s claims experience, plus administrative expenses. For bargaining 5

unit employees, the applicable disability plan and coverage level depends 6

on date of hire or choice of plan. 7

Employee Assistance Program (“EAP”): 8

EAP provides short‐term counseling for employees and their dependents 9

to assist with personal, family and work‐related concerns. 10

Health Care and Dental Plan Costs 11

Q27. How does NIPSCO obtain health care coverage for its employees? 12

A27. NCSC provides a number of health care coverage options for NIPSCO 13

employees and retirees. Applicable benefit plan coverage is competitively 14

bid through a request for proposal process. Proposals are solicited from 15

insurance carriers and/or third party administrators. These proposals are 16

reviewed, and finalists are selected based upon the financial stability of the 17

carrier or third‐party administrator, the breadth of its provider network, 18



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network provider discounts, administrative capabilities, and price. 1

Finalists are interviewed, and further negotiations take place regarding 2

pricing for the services offered. Carriers and third‐party administrators are 3

selected based upon their ability to provide quality service in the most cost‐4

efficient manner. 5

Q28. What steps has NIPSCO taken to manage its health care costs? 6

A28. NCSC, on behalf of NIPSCO, undertakes many initiatives to manage the 7

cost of providing health care to NIPSCO employees. NCSC continues to 8

review plan coverage and search for more efficient ways to offer and 9

administer plan coverage. The primary health care plans are self‐insured, 10

which reduces underwriting margins. Plans that offer coverage through 11

provider networks are used as often as possible to take advantage of 12

provider discounts. Opt‐out credits are paid to those employees who have 13

alternate health care coverage and elect not to participate in the plans. 14

These credits are offered at a fraction of the cost that would otherwise be 15

required to provide coverage for the employees who opt‐out. As with other 16

parts of its business, NIPSCO utilizes purchasing power to ensure 17

competitive rates from its carriers because of its affiliation with NiSource. 18

In addition, corporate‐wide programs offer a larger pool of covered 19



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participants, which provides for a larger spread of risk. The larger risk pool 1

helps manage health care costs. 2

Q29. Are NIPSCO employees subject to increases commensurate with those 3

imposed on NIPSCO? 4

A29. Yes. Because employees share on a percentage‐of‐cost basis in the cost of 5

the health plans that NIPSCO makes available to them, employees have 6

experienced increases in their contributions toward health coverage. The 7

percentage of cost employees share is 25% for non‐exempt non‐union 8

employees. Exempt employees pay 30% of the cost. For employees in the 9

bargaining units, their percentage cost share is 25% and is subject to 10

collective bargaining. 11

Q30. How does NIPSCO procure dental coverage for its employees? 12

A30. The process of procuring dental coverage for NIPSCO employees 13

corresponds with the process for procuring health care described 14

previously. 15

Retiree Benefits 16

Q31. Please describe the post‐retirement benefits other than pensions that 17

NIPSCO provides to its retirees. 18



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A31. NIPSCO provides access to medical coverage for retirees who meet certain 1

hire date, age, and service requirements. The amount of subsidy NIPSCO 2

provides to retirees varies depending upon factors such as: whether the 3

employee is a member of a bargaining unit, the number of years of service, 4

the level of coverage, and when an employee retired. NIPSCO also 5

provides life insurance to its retirees based on date of hire. The amount of 6

life insurance coverage is fixed at $10,000 for exempt employees and $25,000 7

for non‐exempt non‐union employees. 8

Competitive Benefits 9

Q32. Does NIPSCO assess how its employee benefit plans compare to other 10

companies? 11

A32. Yes. On behalf of NIPSCO, NCSC periodically performs studies to compare 12

benefits at a program level and as a package against the benefit programs 13

of a market basket of similar offerings at other employers. The standard 14

NIPSCO benefit offerings are compared to the benefits offered at other 15

energy companies, including investor‐owned utilities, and separately 16

against offerings at companies in general industry. The total value and the 17

employer‐paid portion of the benefits are rated on a standardized value 18

scale that reflects the deviation of the NIPSCO standard benefit offerings 19



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against the average of the selected cohort. In addition to the studies, 1

employees within the NCSC Human Resources department, along with 2

Aon Hewitt, Mercer and its other benefits vendors, conduct ongoing 3

evaluations regarding benefits trends that are observed in the marketplace, 4

as well as alternative means of reducing the cost of providing the necessary 5

benefits. 6

Q33. What were the results of the latest Aon Hewitt study performed 7

regarding NIPSCO’s benefits offerings? 8

A33. The results of the study performed by Aon Hewitt in August of 2016 show 9

that the overall employer‐paid value of NIPSCO’s benefits plans is 3.1% 10

lower than the average of a comparator group of eleven national utility 11

companies. Based on these results, I conclude that NIPSCO’s benefits are 12

competitive and reasonable as compared with the offerings from other 13

comparable utility companies in the labor market. 14

Q34. Does this conclude your prefiled direct testimony? 15

A34. Yes. 16

The following information by employee category identified in subdivision (9) for each payroll increase during the test year:

Date % increaseBargaining unit-clerical 1/1/2017 3.25%Bargaining unit-physical 1/1/2017 3.25%Exempt 6/1/2017 3.00%Nonexempt 6/1/2017 3.00%Bargaining unit-clerical 1/1/2018 3.50%Bargaining unit-physical 1/1/2018 3.50%Exempt 6/1/2018 3.00%Nonexempt 6/1/2018 3.00%Bargaining unit-clerical 1/1/2019 3.50%Bargaining unit-physical 1/1/2019 3.50%Exempt 6/1/2019 3.00%Nonexempt 6/1/2019 3.00%

Petitioner's Exhibit No. 11 Attachment 11-A

Survey Job Title(2)

NCSC Annual Base Salary (Average)

(3)

NCSC Annual Total Cash Compensation (Average)

(3), (4)

Survey Annual Base Salary (Median)

(5)

Survey Annual Total Cash Compensation (Median)

(5)

Accounting Mgr $111,713 $137,087 $112,994 $124,969

Administrative Assistant $51,000 $53,829 $57,009 $57,946

Business Systems Analyst 4 $106,652 $122,383 $116,598 $126,580

Buyer 4 $94,584 $107,895 $102,749 $110,392

Call Center Rep 3 $32,478 $33,533 $37,002 $38,410

Credit and Collection Clerk $44,085 $46,661 $44,763 $48,218

Call Center Rep Senior $41,012 $43,188 $47,421 $50,896

Engineering Mgr $126,229 $154,228 $135,613 $150,127

Entry Field Eng $83,938 $93,187 $72,517 $77,616

Executive Administrative Assistant $63,347 $67,088 $63,224 $64,597

Fin Analyst 1 $57,201 $60,520 $58,560 $61,065

Fin Analyst 4 $91,815 $104,713 $105,053 $116,320

HR Associate $43,606 $45,531 $57,433 $59,603

Intermediate Field Eng $86,245 $95,273 $83,541 $90,060

Lead Field Eng $105,030 $118,403 $118,976 $130,452

Logistics Coordinator/Assigner $47,321 $49,558 $56,107 $59,463

Lead/Sr HRC $97,501 $112,804 $106,752 $117,107

Programmer/Analyst 2 $70,997 $78,267 $81,072 $85,102

Project Manager Intermediate $82,846 $89,921 $80,606 $84,318

Sales Rep 1 $49,402 $51,270 $55,998 $64,916

Sales Rep 3 $66,907 $73,444 $79,055 $85,345

Sr Attorney $166,971 $205,777 $170,522 $199,610

Sr Field Eng $92,740 $103,307 $100,898 $111,876

Sr Financial Analyst $74,630 $82,698 $80,792 $85,957

Technical Trainer 2 $84,784 $93,709 $77,794 $82,903

Team Leader CCC $57,793 $63,970 $75,906 $82,724

Overall Average $76,765 $86,046 $82,638 $89,664Above/(Below) Market (7.1%) (4.0%)

Footnotes

NiSource Corporate Service Company (NCSC) Salary Analysis1

Comparison of NCSC Base Salaries & Total Cash Compensation to Survey Data (National Data)

(1) NiSource Corporate Service Company Data as of June 30, 2018.

(2) These jobs were utilized because the Company had at least 15 incumbents matched to the survey job title on June 30, 2018.

(5) Survey data shown are from the 2017 Mercer Benchmark Database (MBD), US Mercer Total Compensation Survey for the Energy Sector (MTCS), Willis Towers Watson American Gas Association (AGA), Willis Towers Watson General Industry Compensation Surveys Results (CSR), and Willis Towers Watson CDB General Industry Compensation Survey, Aon Hewitt TCM Broad Based Mgmt Total Comp. Survey datais aged to June 30, 2018

(4) Total Cash Compensation = Base salary plus actual annual Incentive.

(3) The average annual base salary and total cash compensation were calculated by aggregating the annual base pay and total cash compensation of all NCSC employees matched to the survey title and dividing it by the number of NCSC employees matched to the title.

Petitioner's Exhibit No. 11 Attachment 11-B

Survey Job Title(2)

NIPSCO Annual Base Salary (Average)

(3)

NIPSCO Annual Total Cash Compensation (Average)

(3), (4)

Survey Annual Base Salary (Median)

(5)

Survey Annual Total Cash Compensation (Median)

(5)

Area Operations Mgr $116,371 $144,100 $120,064 $136,327

Customer Field Service Mgr $104,026 $125,937 $104,528 $115,593

Distribution Crew Supv $89,907 $102,631 $97,954 $108,542

Engineer 2 $91,778 $103,595 $88,951 $96,666

Engineer 4/Project Leader $100,819 $113,479 $110,783 $121,201

Engineer 5/Section Head $115,236 $132,972 $124,116 $137,399

Engineering Mgr $127,090 $151,688 $135,613 $150,127

Entry Field Eng $72,060 $77,609 $72,517 $77,616

Intermediate Field Eng $81,871 $92,077 $83,541 $90,060

Lead Field Eng $110,719 $123,070 $118,976 $130,452

Logistics Coordinator/Assigner $59,010 $61,916 $56,107 $59,463

Power Plant Shift Supervisor $94,815 $112,026 $107,139 $123,543

Sr Field Eng $94,814 $106,567 $100,898 $111,876

Overall Average $94,821 $107,500 $99,864 $109,840Above/(Below) Market (5.5%) (2.2%)

Footnotes

Northern Indiana Public Service Company (NIPSCO) Salary Analysis1

Comparison of NIPSCO Base Salaries & Total Cash Compensation to Survey Data (National Data)

(1) NIPSCO Electric Data as of June 30, 2018.

(3) The average annual base salary and total cash compensation were calculated by aggregating the annual base pay and total cash compensation of all NIPSCO employees matched to the survey title and dividing it by the number of NIPSCO employees matched to the title

(4) Total Cash Compensation equals base salary plus actual annual incentive

(5) Survey data shown are from the 2017 Mercer Benchmark Database (MBD), US Mercer Total Compensation Survey for the Energy Sector (MTCS), Willis Towers Watson American Gas Association (AGA), Willis Towers Watson General Industry Compensation Surveys Results (CSR), and Willis Towers Watson CDB General Industry Compensation Survey, Aon Hewitt TCM Broad Based Mgmt Total Comp. Survey data is aged to June 30, 2018

(2) These jobs were utilized because the Company had at least 15 incumbents matched to the survey job title on June 30, 2018.

Petitioner's Exhibit No. 11 Attachment 11-C

Actual 2018 Projected 2019% Merit Increase

(Median)% Merit Increase

(Median)WorldatWork 2018-2019 Salary Budget Survey

National All 3.0% 3.0% Officers/Executives 3.0% 3.0% Exempt Salaried 3.0% 3.0% Non-Exempt Salaried 3.0% 3.0% Non-Exempt Hourly Nonunion 3.0% 3.0% Utilities All 3.0% 3.0% Officers/Executives 3.0% 3.0% Exempt Salaried 3.0% 3.0% Non-Exempt Salaried 3.0% 3.0% Non-Exempt Hourly Nonunion 3.0% 3.0%Central Region All 3.0% 3.0% Officers/Executives 3.0% 3.0% Exempt Salaried 3.0% 3.0% Non-Exempt Salaried 3.0% 3.0% Non-Exempt Hourly Nonunion 3.0% 3.0%

NiSource Exempt & Executive 3.0% 3.0% Non-Exempt & Nonunion Hourly 3.0% 3.0%

NiSource Corporate Service Company (NCSC) and Northern Indiana Public Services Company (NIPSCO) Non-Union Merit Increase Market Data

Petitioner's Exhibit No. 11 Attachment 11-D

Documents

Smith Direct Testimony v 1 - iurc.portal.in.gov