<PAGE>

                                                                    EXHIBIT 10.1

                             POWELL INDUSTRIES, INC.
                     INCENTIVE COMPENSATION PLAN GUIDELINES
                                      2002



PURPOSE

An incentive compensations plan ("Plan") is intended to promote business growth
and profitability and to attract, retain, motivate and reward key members of the
management team by linking incentive awards to the achievement of strategically
directed financial and non-financial goals on an annual basis. These guidelines
are intended also to provide overall guidance while providing flexibility to
tailor certain elements of an incentive compensation plan to meet specific
business needs.


ELIGIBILITY AND PARTICIPATION

Key corporate and subsidiary executives and managers will be designated annually
to be Participants in the Plan. Participation is determined principally by the
degree to which an employee can have a definitive influence on performance and
profitability. Participation in one year does not guarantee participation in the
following year.

Participants must be active employees on first day of the plan year to be
eligible for a full annual award. Those hired or promoted into eligible
positions after the first day of a plan year will be eligible for an annual
award on a pro-rata basis assuming all other plan conditions are fulfilled.

Subsidiary presidents may also recommend an incentive "pool" for employees of
the subsidiary who are not Plan participants.

The CEO will recommend corporate and subsidiary participants and their maximum
incentive compensation amount for approval by the Compensation Committee of the
Company's Board of Directors, and the CEO may authorize use of the an incentive
"pool" for employees of Powell Industries, Inc. who are not Plan participants.

Participants in a plan are not eligible for participation in any other annual
incentive plan.


MAXIMUM AWARDS

Each Participant is assigned a maximum incentive compensation award annually
based on the Participant's potential contribution to the performance of the
Company or subsidiary. This maximum award is a percentage of participant's base
salary on the first day of the plan year. The Plan year is the fiscal year of
the Company.

Each Participant may earn between zero and one hundred percent of this maximum
Incentive compensation award depending on how the Company or subsidiary that
employs the participant performs during the Plan year against pre-established
performance targets.


ELEMENTS AND WEIGHTING OF THE PLAN

o    Financial
     Each year as part of the budgeting process for each operation, specific
     goals are established for the following elements: Return of Net Assets
     (RONA) (earnings before interest and taxes divided by 13 months average of
     net total assets less current liabilities) and EBIT (earnings before


                                                                     Page 1 of 3

<PAGE>


     interest and taxes). The CFO will recommend the threshold and maximum
     performance measures for RONA and EBIT for corporate and subsidiary's
     incentive targets.


o    Special Factors
     Components are significant measures typically focused on major process
     improvements related to business objectives. While referred to as special
     factors, they may actually be measurable in financial terms (e.g. accounts
     receivables, etc.). All special factors measures shall be as specific as
     possible and have clear goals established for the threshold and maximum
     performance levels. A maximum of two special factors are recommended.

The weighting percentage reflects the relative weight given to each performance
measure. The following measures will be used to measure the performance of each
subsidiary and the Company overall:

     PERFORMANCE MEASURES FOR SUBSIDIARY PARTICIPANTS
      o    60% Weighting: RONA
      o    25% Weighting: EBIT
      o    15% Weighting: Special Factors

     PERFORMANCE MEASURES FOR CORPORATE PARTICIPANTS
      o    50% Weighting: Return on Equity
      o    50% Weighting: Earnings Per Share

Each subsidiary will have unique targets. The CEO may authorize the use by a
subsidiary of separate performance measures and targets for that subsidiary or
for certain of its Participants provided their use is, in the best business
judgment of the CEO, compatible and consistent with the purpose and provisions
of this Plan.

The CEO will approve measures and targets for each subsidiary. The Compensation
Committee will review performance measures and targets for the Company.


PAYMENT OF AWARDS

Annual incentive awards will be determined after the audited financial
statements of the Company for the Plan year are complete, and paid in cash as
soon as practical thereafter. (Computation of each entity's performance must be
net of (after) provision for the total of Incentive Compensation amounts earned
for that entity.) The awards will be made in a lump sum subject to the usual
payroll taxes and employee benefit plan deductions.

Incentive goals are based upon a full plan year effort and are measured on a
full plan year basis. Incentive compensation is not deemed to be earned by a
participant until all conditions of a plan have been fulfilled including
participant's completion of the full plan year for which annual measures and
goals are established. However, at the Company's discretion, a prorated award
may be grated for those who were actively employed during a plan year but ceased
active employment with the Company under any of the following circumstances:
death, retirement, disability (in the first year of disability only),
involuntary layoff and transfer.

Prior to payment of such amounts, the Compensation Committee will review and
certify the incentive awards for all participants. Amounts due participants
under the Plan are an unfunded, general obligation of the Company.


GENERAL

The establishment of measures and goals under the plan does not guarantee
employment or payment of an award, but rather directs and prioritizes the
participant's activities for a plan year. Neither a plan nor the establishment
of an individual's performance measures or goals is intended to create or
constitute a contract of employment or otherwise. An employee's employment may
be


                                                                     Page 2 of 3

<PAGE>


terminated with or without cause or notice at any time at the option of either
the Company or the employee.


ADMINISTRATION

The Compensation Committee of the Company's Board of Directors is the plan
administrator. The administrator shall have the full power and discretionary
authority to administer and interpret the plan. The administrator will also
establish rules for the administration of the plan, including, but not limited
to, the power and discretionary authority to determine issues concerning
eligibility, prorating or adjusting of awards and interpretation of the terms of
the plan.

The decisions of the administrator shall be final and binding.

The Company's Board of Directors shall have the right to suspend, terminate or
amend the plan, in whole or in part, at any time, without notice.



                                                                     Page 3 of 3