FERC Rule Allows Regional Entities to Propose and Enforce Reliability Standards

FERC has satisfied another major mandate of the Energy Policy Act of 2005 by issuing final rules that pave the way for certification of an Electric Reliability Organization ("ERO") as well as the establishment of mandatory electric reliability standards.  Notably the rule condones more regional flexibility than FERC originally envisioned [See Rules Concerning Certification of the Electric Reliability Organization; and Procedures for the Establishment, Approval, and Enforcement of Electric Reliability Standards]; Regional Entities are allowed both to propose reliability standards and to enforce (under ERO and FERC supervision) those standards that are adopted.  The rule, styled Order No. 672, establishes:

 

  • Credentials required of an ERO;
  • Procedures for the ERO to propose new or modified reliability standards for FERC review (FERC will evaluate the standards on whether they are just, reasonable, not unduly discriminatory or preferential, and in the public interest);
  • Funding of the ERO;
  • Directions for enforcing adopted reliability standards;
  • ERO authority to delegate to a Regional Entity the authority to propose and enforce reliability standards;
  • An ERO and Regional Entity audit programs to ensure compliance with the reliability standards;
  • Periodic ERO reports assessing the reliability and adequacy of the bulk power system; and
  • Procedures for establishing regional advisory bodies.

     

As expected, the North American Electric Reliability Council will soon apply to FERC to be designated as the ERO.  The application must be delivered to FERC by April 3, 2006.  FERC noted in the Final Rule that it plans to provide adequate time for industry participants to transition from the current regime of voluntary reliability standards to the new ERO world of mandatory and enforceable reliability standards.  [Rules Concerning Certification of the Electric Reliability Organization; and Procedures for the Establishment, Approval, and Enforcement of Electric Reliability Standards, 114 FERC ¶ 61,104 (2006)]