Energy Legal Blog

FERC, NERC Flesh Out ERO Operations, Penalties, Disclosures & Budgets

Five months after FERC authorized mandatory Reliability Standards to go into effect last June, it  is now sorting out to whom the Standards apply.  It is also slogging through issues of organization and management of NERC as the Electric Reliability Organization (ERO).   

Application of Reliability Standards 

Among the issues being debated are when a participant on the electric power grid sufficiently impacts grid operations to require registration with a Regional Entity and to what extent pure power marketers should be subject to Reliability Standards.

On October 18, 2007, FERC remanded to NERC its determinations that the Florida Reliability Coordinating Council properly included Mosaic Fertilizer, LLC and City of Tampa, Florida on its compliance registry.  Mosaic and Tampa appealed their registration to NERC and then to FERC.  FERC determined that NERC did not adequately show that the either was properly registered and, in any event, failed to respond adequately to arguments against registration. 

Penalties, Budget & Business Plan

The back-and-forth between FERC and NERC to define the ERO continues.  FERC issued an order October 18 directing NERC to clarify that the maximum penalty that it or a Regional Entity could impose for violation of a Reliability Standard is $1 million per violation, per day, consistent with the Federal Power Act, and to clarify how it would address specific situations that do not fit the one-violation, one-day fact pattern.  FERC generally accepted NERC's compliance filing on these issues, and directed small follow-up clarifications to the proposed sanctions language.  Alternative situations will be handled as follows:  repeated violations during a single day may result in a $1 million penalty  for each violation; NERC will amend Reliability Standards requirements measured as an average over time to specify the minimum period in which a violation could occur and how to determine when a violation arises; and for requirements of Reliability Standards that involve discrete events that are measured only periodically or are reported by exception, a violation arises when that event occurs and continues until it is cured.

In response to FERC's request that NERC describe how it will process requests for information, NERC clarified that the requestor must explain the need for the information and how it will be used.  NERC clarified that requests would be met so long as they were not frivolous, too-broad or unreasonable, and that the requestor's description of the anticipated use of the information would not limit the use of the information once disclosed.  FERC accepted these clarifications.  NERC also proposed to include a new section 1600 in its rules of procedure, to establish a process for NERC or Regional Entities to issue requests for data or information needed to fulfill their obligations.  

Also on October 18, 2007, FERC accepted NERC's proposed budget and business plan for 2008, including the budgets and business plans for each of the eight regional entities and the Western Interconnection Regional Advisory Body.  FERC noted that it plans to compare proposed budgets to actual expenditures, and will require NERC to provide a true-up for itself and each Regional Entity by April 1 of each year.  FERC also directed several compliance filings with regard to the Regional Entities' proposed budgets and business plans, focusing especially on inconsistencies between the Regional Entities' income statements and their business plans, and on its concern about the adequacy of separation and independence of the SPP Regional Entity from the SPP RTO.