FERC Initiates Process for Formation of Overdue Mandatory Reliability Standards

The Energy Policy Act of 2005 directs FERC to finalize by February 5, 2006, a design for a new electricity reliability organization ("ERO") over which it will have jurisdiction, and develop mandatory reliability standards and a process for enforcement of these standards.  On September 1 FERC proposed criteria in a rulemaking for establishing the ERO.  Public comments on the criteria are due Friday, October 7. 

Currently, the North American Electric Reliability Council ("NERC") administers voluntary operational standards for the bulk-power system in North America.   It is widely expected that FERC will choose NERC to become the ERO.

In its rulemaking, FERC proposes a process through which the ERO can develop and propose reliability standards, subject to FERC's review and approval.  FERC also proposes funding the ERO through "end-users" fees, and procedures for ERO's and FERC' joint enforcement of the new mandatory reliability rules.  As proposed in the rulemaking, all owners, operators and users of the bulk power system "• including public and governmental entities ordinarily exempt from FERC regulation "• will be obligated to comply with the approved reliability standards, regardless of whether the entity is a member of the ERO.  As proposed, penalties could include not only monetary forfeitures, but also limitations on activities, functions, or operations.  FERC asks for comment on the appeals process, as well as how the collected monetary penalties should be applied.

The rulemaking also proposes a process enabling the ERO to delegate enforcement authority to a regional subordinate and procedures for the establishment of independent Regional Advisory Bodies that can provide advice to FERC on regional reliability matters.    [Rules Concerning Certification of the Electric Reliability Organization; and Procedures for the Establishment, Approval, and enforcement of electric Reliability Standards, 112 FERC ¶ 61,239, (2005)] [NEW MATTER]