FERC and NERC Speed Processing of Electric Reliability Violations

Natural Gas & Electricity, Vol. 28 Issue 11 pp.13

June 2012

By Andrew Art and Van Smith

The North American Electric Reliability Corporation (NERC) is the organization responsible for ensuring the reliability of the bulk-power system (BPS) in the United States, Mexico, and Canada. NERC recently received approval from the Federal Energy Regulatory Commission (FERC) to streamline the process for tracking and reporting violations of electric reliability standards. On March 15, FERC issued an order conditionally approving the proposed “Find, Fix, Track, and Report” (FFTR) process to expedite the enforcement process for violations of NERC Reliability Standards that pose lesser risk to the BPS. In its approval of NERC’s new process, however, FERC included several conditions that narrow the range of potential violations eligible for the expedited process. FERC Chairman Jon Wellinghoff hailed the new process as “a major change in how [FERC] will enforce compliance with the Reliability Standards going forward.”

Previous Process Caused Inordinate Delays, Focus on MinutiaIn 2006, FERC certified NERC as the electric reliability organization that is charged with establishing and enforcing mandatory reliability standards for the BPS. FERC retains oversight of NERC enforcement processes and has concurrent reliability jurisdiction over the BPS.

In 2006, FERC certified NERC as the electric reliability organization that is charged with establishing and enforcing mandatory reliability standards for the BPS. FERC retains oversight of NERC enforcement processes and has concurrent reliability jurisdiction over the BPS.

To enforce those reliability standards, NERC had previously been required by FERC to file a Notice of Penalty (NOP) for every penalty determination that resulted from any violation of reliability standards by a registered entity. Under the previous NOP process, lesser-risk compliance issues were treated substantially the same as more serious violations. This led to a drain on NERC’s resources to process minor violations of registered entities that did not pose material risks to BPS reliability. The manner in which violations were processed without accounting for the severity of the underlying compliance issues also generated perverse consequences for many registered entities whose employees became “focused on the minutia of compliance and penalty avoidance rather than on best practices and excellence.”

As NERC’s compliance violation processing stagnated, its backlog of open cases grew to more than 3,300 active compliance matters awaiting action. It was widely acknowledged by FERC, NERC, and the electric industry that NERC’s enforcement process was inefficient and did not allocate reliability resources efficiently. As of September 2011, NERC found that it would take two to three years to fully process its backlog, assuming no reports of new compliance violations, which of course continue at a rate of about 200 new compliance matters per month.

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This is an excerpt of an article published in Natural Gas & Electricity © 2012, Wiley Periodicals, Inc.  Click here to read the entire article.