Within days of FERC clarifying final elements of its Electric Reliability Organization (ERO) rule, the North American Electric Reliability Organization (NERC) filed with the agency its long-awaited ERO application. On February 3, FERC issued its final rule establishing the criteria it will use to select an ERO, as mandated in the Energy Policy Act of 2005. FERC Rule Allows Regional Entities to Propose and Enforce Reliability Standards] But the rule didn't go into effect pending a FERC decision on how to handle conflicts between the ERO's reliability standards and FERC-approved tariffs. The revised rule provides that if FERC finds a conflict to exist, it may offer an RTO or affected utility an opportunity to submit a revised tariff, or FERC itself may modify the tariff itself under its Federal Power Act authority.
On April 4, NERC submitted to FERC its application for recognition as the US ERO, along with over 100 proposed reliability standards that it would enforce under its new designation. [NERC ERO Application] Simultaneously, NERC submitted applications to Canada's National Energy Board and various Canadian provinces to be recognized as the reliability coordinator in Canada. Little doubt exists that NERC will be certified as the US ERO since it has served in essentially that capacity since the 1960s. But robust debate is expected as to whom the ERO's reliability standards will apply, as some EPAct provisions exempt entities that engage solely in power distribution. In addition, the extent of the ERO's authority, if any, to delegate to regional councils standard-setting powers is likely to be contentious, with regional entities vying for region-specific standards and FERC wanting to maintain uniform national standards.
NERC hopes that FERC will grant it ERO status by summer's end, paving the way for reliability standards to go into effect in January 2007. That is when the rubber will hit the road and the industry should learn whether the years of legislative and administrative effort to get an ERO will actually improve reliability across the power grid.