23. Employee Safety Incentive Mechanism

CUE proposes that SCE continue the existing employee safety incentive mechanism. According to CUE there is no dispute that (1) over the past 10 years, OSHA recordable injuries (the safety metric) have been reduced by about two-thirds; (2) this statistic represents a genuine improvement in employee safety; or (3) the Commission's incentive mechanism has been helpful in reducing SCE's injury rate.

CUE proposes that the mechanism be structured like the former mechanism, but with a new performance target. The target would be an OSHA reportable level of approximately 2.7, based on a downward trend in earlier years.

SCE opposes the continuation of the employee safety incentive mechanism at this time. SCE indicates that it voluntarily reported, to the Commission, results of an internal investigation that found the company's injury and illness data was unreliable. It was determined that SCE did not accurately track the number of first aid treatments (e.g., such as small cuts requiring band-aids and sprains requiring cold- or hot-packs, or over-the-counter medication), cases involving hearing loss, and some OSHA recordable work injuries. SCE states that first aid work injuries and minor OSHA recordable work injuries are very difficult to track consistently, making it difficult to establish targets and assess performance in these areas. SCE indicates that it is strongly committed to protecting the safety of all SCE personnel and that safety performance incentives have been an important part of its safety programs. However, in view of the findings of its internal investigation that, SCE feels the employee safety mechanisms should be temporarily suspended to give the company time to evaluate alternative safety performance measures and to establish reliable safety performance baselines in order to set appropriate performance targets.

CUE argues that minor imprecision in the baseline data is not a good enough reason to terminate the incentive. It continues to assert its position that, given the success of the employee safety incentive measure over the past 10 years, and the importance of protecting the safety of employees in a dangerous occupation, the Commission should continue the incentive measure as proposed by CUE.

23.1 Discussion

For any incentive mechanism, when ratepayer/shareholder funds are at stake, we must ensure that the disposition of any rewards or penalties is based on a fair and unbiased process. Consistency of reporting is extremely important in order to fairly establish targets and assess performance. SCE's problems in this regard do not reflect a minor imprecision, as characterized by CUE. There is a question of whether OSHA reportable injuries are even an appropriate measure for developing safety incentives. Because of this, it is not be reasonable, at this time, to continue the employee safety incentive mechanism. It should be discontinued for the test year 2006 GRC cycle. In its next GRC, SCE should report on its evaluation of the reliability of its injury and illness data and address its concern about whether OSHA recordable injuries should be used as the basis for an employee safety incentive mechanism. SCE should also provide information or measurable data that demonstrate that, absent the incentive mechanism, the company has made, and will continue to make, employee safety a high priority during the full term of this GRC cycle.