SQL Agent jobs that run a PowerShell script need to run with a proxy account, so I can adhere to Windows permissions constraints. However, the SQL Agent job returned the following error message
Unable to start execution of step 1 (reason: Error authenticating proxy DOMAIN\account_name, system error: The user name or password is incorrect.). The step failed.
So obviously I double checked the account user name and password. I did this using a CMD window and executed the command below to try to start a new cmd window. This was successful, so I knew there was nothing wrong with the account/password.
runas /user:DOMAIN\account_name cmd
The account used to start the SQL Agent account was causing the problem. So the message I was getting above was a bit of a red-herring. I changed the SQL Agent service account and restarted. Jobs using teh proxy account were now working! I would also add that the SQL Serve and teh SQL Agent are now using the same domain account. Not sure if this is important.