NERC Compliance Operations - WSPP€¦ · NERC Compliance Operations Michael Moon. ... NERC E&M. Processing. 271. NERC Legal. ... (Reliability Standards Audit Worksheets)

NERC NERC Compliance OperationsCompliance Operations

Michael MoonDirector of Compliance OperationsMarch 8 2010

2

AgendaAgenda

Overview and EnvironmentProgram Design and FocusOrganization and FunctionsFocusStatistics and AnalysisCulture of ComplianceIssues

3

Voluntary standards were previously used to review compliance for member companies Many regions allowed flexibility in compliance and assisted the member company to achieve compliance

Volunteers staff from other member companies staffed most audits

In most cases findings of noncompliance resulted in a public posting but no monetary penalties

Compliance Monitoring in the PastCompliance Monitoring in the Past

4

Electric Reliability Organization OverviewElectric Reliability Organization Overview

United StatesFederal Energy

Regulatory Commission

MexicoComision Reguladora

de Energia

CanadaNEB Alberta British

Columbia Manitoba Ontario New Brunswick Nova Scotia

Quebec and Saskatchewan

Electric ReliabilityOrganization

RegionalEntities

Other ERO Members

Other ERO Members Bulk Power System

Owners Operators Users Bulk Power System

Owners Operators Users

ReliabilityStandards

ComplianceEnforcement

Reliability Assessment

Government Oversight

5

Modeled after other industry-based self-regulatory organizations

Regional implementationbull Regional Entities monitor

users owners amp operators

bull Delegation agreements

NERC oversight rolebull Active oversight

Substantive Review

bull Audits of regional implementation

Compliance Program DesignCompliance Program Design

GovrsquotRegulators

NERC

Regional EntitiesFRCC MRO NPCC RFCSERC SPP TRE amp WECC

Users Owners and Operators(Registered Entities)

6

About ComplianceAbout Compliance

Focus on improving bulk power system reliabilitybull Fair consistent approach

bull Prompt reporting

Protects confidentiality of involved parties

Single defined appeals process whereby resolution can be reached

Reports to governmental authorities

7

The ERO Enterprise NERC and the Regional Entities performs compliance monitoring activities

94 NERC standards mandatory in the US

54 actively monitored bull CMEP Implementation Plan updated Feb 12 2010bull httpwwwnerccomfiles20100212_Process20Bulletin_2010-

002_Update_201020Implementation20Planpdf

bull CIP standards in transitional phase

Compliance Monitoring TodayCompliance Monitoring Today

8

ResourcesResources

Compliance Registry

Reliability Standardsbull httpwwwnerccompagephpcid=2|20

Compliance Monitoring amp Enforcement Programbull NERC Rules of Procedure

bull Sanction Guidelines

Reliability Standard Audit Worksheets (RSAW)bull httpwwwnerccompagephpcid=3|22

FERC Policy Statements and Orders

9

ReliabilityCoordinator

TransmissionOperator

GenerationOperator

BalancingAuthority

TransmissionOwner

GenerationOwner

DistributionProvider

Load-ServingEntity

PlanningAuthority

(Coordinator)

Purchasing-SellingEntity

Interchange Authority

ReserveSharingGroup

TransmissionPlanner

TransmissionServiceProvider

ResourcePlanner

Functional ResponsibilitiesFunctional Responsibilities

10

Compliance ProcessCompliance Process

Region notifies NERC (amp entity) of possible alleged violation in 2-5 days ndash NERC notifies govrsquot authority

Periodic Reports

Regions continue review and evaluation

Dismissed Notice of alleged violation amp proposed penalty sent to responsible entity

Entity accepts violation ndash submits mitigation plan Entity Contests

Notice of confirmed violation sent to NERC amp responsible entity

Mitigation Plan Region Review

NERC Review

Govrsquot ReviewNERC BOTCC reviews amp approves

regionrsquos proposed penalty

Notice of penalty or settlement sent to FERC in US amp posted to NERC website (Processes differ in Canada)

5 DAY WAITING PERIOD

Settlement negotiations

Settlement Reached Regional Hearing

Appeals ProcessSettlement Approved by BOTCC

Self- Certification

Exception CVI Spot Check

Audits Self- Report

CO

NFI

DEN

TIA

L

Complaint

11

ComplianceCompliance EnvironmentEnvironment

CCC (SIS)

Investigations

Stakeholders+ EEI APPA

NRECA ELCON EPSA

Board of Trusteesand BOT Compliance Committee

Regulators

NERC Staff

Audits

Compliance

Regions x8

Enforcement

InvestigationsOperations

Board x8

12

NERC Compliance Organization NERC Compliance Organization -- ThenThen

Manager Registration amp CertificationCraig Lawrence

Manager Compliance Violation InvestigationsEarl Shockley

Director of Regional OperationsJoel deJesus

Senior Compliance Investigators

Vice President amp Director of ComplianceDavid Hilt

Regional Compliance Auditors

Manager Enforcement amp Mitigation Tim Kucey

Manager Compliance Analysis Reporting amp Tracking amp TFE Mike DeLaura

Director of Compliance Program Operations amp InterfacesMike Moon

Senior Regional Entity Compliance Program Auditors

Compliance Investigators

AuditsAnnual Plan

InvestigationsInquiries

RegistrationCertification

CEA

Analysis MitigationEnforcement

13

NERC Compliance Organization NERC Compliance Organization -- NowNow

VP amp Director of Operations and

EngineeringDavid Hilt

Enforcement amp Mitigation

Compliance Analysis

Reporting amp Tracking

Director of Compliance OperationsMike Moon

Director of Compliance EnforcementJoel deJesus

Registration amp Certification

Audit Assurance amp

Oversight

Audit Assistance

and Training

Outreach and Standards Interface

Event Analysis and Investigations

Situational Awareness

Planning

Training and Assistance

System Analysis and

Reliability Initiatives

Operations

14

Compliance OperationsCompliance Operations

Realignment as of February 1 2010

Primary Effort help make the regional entities successful

Critical Documentsbull Annual CMEP Implementation Plan and Actively Monitored Listbull Reliability Standards Audit Worksheetbull Audit Observation reportsbull Compliance Registry

Key initiativesbull Publish lessons learnedbest practices to support consistencybull Provided feed back loop to Standards departmentbull Develop Compliance Application of Standards bulletinsbull Assist the regions during auditsbull Leverage experts in the regions to improve trainingconsistency

15

Compliance OperationsCompliance Operations

Principal FunctionsRegistration amp Certificationbull Registration Policybull Certification of RC BA and TOPbull Compliance Enforcement Authority

Audit Assurance and Oversightbull Regional entity Audit Programbull Registered entity audit oversight and validation

Audit Assistance and TrainingEducationbull Develop lessons learned and best practicesbull Leverage expertise at Regions to improve trainingconsistency

Outreach and Standards Interface

Violations Submitted to NERC by YearViolations Submitted to NERC by Year

Violation Status by RegionViolation Status by Region Current as of 12312009Current as of 12312009

Top 10 FERC Enforceable StandardsTop 10 FERC Enforceable Standards All Time All Time ndashndash 61807 to 1231200961807 to 12312009

Top 10 FERC Enforceable StandardsTop 10 FERC Enforceable Standards Rolling 12 Months 1109 to 123109Rolling 12 Months 1109 to 123109

Dismissals by Discovery MethodDismissals by Discovery Method 6182007 through 123120096182007 through 12312009

Compliance Analysis ProgressCompliance Analysis Progress

Analysis Completed on six (6) of the top 10 standards violated

Two standard analysis posted to the NERC website PRC-005 and CIP-004

Compliance analyses in Process FAC-008 FAC-009 CIP-001 VAR-002 and PER-002

httpwwwnerccompagephpcid=3|329

Analysis StatusAnalysis Status

NERC Analysis

NERC Analysis to BOTCC

RCIG Analysis

RCIG Analysis to BOTCC

Posted to NERC Website

PRC-005 Complete Complete Complete Complete Complete

CIP-004 Complete Complete Complete Complete Complete

FAC-008 FAC-009 Complete Complete Complete February

BOTCC

CIP-001 Complete Complete FebruaryBOTCC

VAR-002 Complete Complete FebruaryBOTCC

PER-002 Complete Complete

FAC-003 Initiated

CIPCIP--001 Lessons Learned001 Lessons Learned

Entities should prepare one document that contains all requirements of CIP-001-1 and ensure that all employees have access to the document and are made aware of its contents

Entities should clearly indicate the appropriate communications strategy in their Sabotage Reporting plan and ensure its employees are trained to act accordingly

Entities need to ensure that the proper contacts are maintained and updated to report Sabotage Events with appropriate Law Enforcement authorities and regulatory agencies

VARVAR--002 Lessons Learned002 Lessons Learned

Entities need to establish robust communication procedures to ensure that the Transmission Operator is notified of any and all changes to elements critical in maintaining reactive power and voltage output

Entities need to use their Automatic Voltage Regulators (AVR) in Automatic mode at all times unless specifically directed by their Transmission Operator

Entities need to notify their Transmission Operator within the specified time frame when taking the Automatic Voltage Regulator (AVR) offline or moving it into manual mode

PERPER--002 Lessons Learned002 Lessons Learned

Registered Entities should ensure that the training objectives specified in Requirements 31 through 34 are met on an annual basis to satisfy compliance

Registered Entities should ensure personnel that perform key roles in operation of the real-time Bulk Electric System have been adequately trained in their task or role

26

FERC Policy Statement on EnforcementIssued October 20 2005

Internal compliance is an important proactive tool bull Does the company have an established formal program for

internal compliance

bull Is the program supervised by an officer or other high-

ranking official

bull Is compliance fully supported by senior management

bull How has the company responded to prior wrongdoing

Culture of ComplianceCulture of Compliance

27

Recent Recent ldquoldquoReport CardsReport Cardsrdquordquo

Recent significant documentsRecent significant documentsbull ERO Effectiveness and Stakeholder Perceptions Surveybull Regional Entity Joint Assessment Reportbull Three Year Assessment Attachment 2 Recommendationsbull Crowe Audit of the NERC Compliance Department

The big recommendationsThe big recommendationsbull clarificationbull consistencybull uniformitybull training education and assistance

Many of the recommendations REQUIRE Compliance and Standards collaboration

28

QuestionsQuestions

Backup

Improving Efficiencies Current Violations Processing Status

Regional EntityNCEAProcessing

1462

NERC EampMProcessing

271

NERC LegalProcessing

59Approved by BOTCC need

final cleanup and filing

Scheduled for BOTCC Consideration

In the Queue

Returned to Region for rework

Various states(have not seen)

0

59

20

Jan 91 (17)Feb 79 (39)Mar 81 (25)

December 31 2009

SA Negotiation 636 NOCV Prep 68

16 (2)

INAV possibly to NAVAPS 742

Total Violations1792

Number in parenthesis = number of actions (SAs amp NOCVs)1 in discussions wRegion 1 Dismissal 18 Omnibus II

Active Violations by RegionActive Violations by Region As of 12312009As of 12312009

Active + Closed Violations Active + Closed Violations by Discovery Method through 12312009by Discovery Method through 12312009

33

Energy Policy Actbull All users owners and operators of the bulk

power system shall comply with reliability standards

FERC Rulebull All entities subject to the Commissionrsquos reliability

jurisdictionhellip (users owners and operators of the bulk power system) shall comply with applicable Reliability Standards hellip

NERC Compliance Registrybull Statement of Compliance Registry Criteria

Provincial Canadian Regulations

Who Must ComplyWho Must Comply

34

NERC Compliance Oversight of NERC Compliance Oversight of REsREs

REs to implement the CMEP as they are authorizedand obligated to do in their regionConsistency and uniformity of CMEP implementation

bull RSAWs (Reliability Standards Audit Worksheets)

bull Standardized CMEP process documentsSelf-Reporting FormSelf-Certification FormMitigation Plan submittal forms

bull Formal direction and guidance eg Process Bulletins

bull NERC training Auditor CVI amp CIP training

bull Audits of RE conformance to and performance of the Uniform CMEP

35

NERC Compliance Oversight of NERC Compliance Oversight of REsREs

Timelinessbull Violation proceedings

bull Compliance Violation Investigations

Quality and Appropriatenessbull Substantive review and approval of REsrsquo CMEP process

outputseg Violations Mitigation Plans amp Settlements

Direct support and participationbull Lead or participate in CVIs amp CIQs

bull Lead or collaborate regarding Remedial Action Directives (RADs)

36

The WSPP exists to provide a catalyst for an efficient and robust wholesale electric power market that allows WSPP members to effectively manage their power deliverability and price risk and create opportunity

The WSPP Agreement is open to power sellers and customers though it provides only for wholesale and not retail sales Currently there are more than 300 members

The Agreement is used to allow transactions to occur without constant renegotiations of contract terms and to standardize terms thereby promoting liquidity in the market Currently the WSPP Agreement is the most commonly used standardized power sales contract in the electric industry

The WSPP membership has devoted much time and resources to continuous updating of the WSPP Agreement to ensure that its terms represent the state-of-the-art terms for power sales contracts

The current version was the result of a consensus reached by a diversified group of power sellers and consumers including most of the major players in the industry Because of the constant changes in the industry this is a continuous process with the WSPP attempting to ensure that its contract stays up to date

The WSPP operates through its committees Each member has one vote on each committee Each member must select one representative and one alternate and make those selections known to the organization

WSPP Overview

37

Operating Committee ndash the OC evaluates contract changes in the first instance It also establishes operating procedures and procedures for evaluating membership applications The OC recommendations then are forwarded to the Executive Committee OC officers include a Chairman Vice Chairman and Secretary Executive Committee ndash the EC decides whether to adopt OC recommendations Consensus is required given the 90 percent voting requirement to make changes Any changes to the WSPP documents are filed with FERC and do not take effect until FERC accepts the filing Each member of WSPP is represented on the EC and is considered a board member as defined by law EC officers include a Chairman Vice Chairman and Secretary Administrative Committee ndash the Admin Committee is made up of the Chairman Vice Chairman and Sectretary of the EC and the Chairman and Vice Chairman of the OC Their task is to execute the administrative affairs of the organization including budgeting auditing contract administration financial management and legal management Audit Committee ndash the audit committee is created by the by-laws and includes The duty of the audit committee is to annually review the financial condition and financial systems employed by the organization to ensure compliance Contract Sub-Committee ndash the Contract Sub-Committee was created by the OC and is tasked with entertaining evaluating and codifying proposed changes to the WSPP Agreement Operating Agent ndash the Operating Agent is under contract with the organization to be the central point of contact for WSPP operations Other ad-hoc committees may be created to address specific issues

Organizational Structure

38

The Western Systems Power Pool (WSPP) began as an agreement among a group of utilities in the western states The agreement which was filed with the Federal Energy Regulatory Commission by Pacific Gas and Electric Company on behalf of the group established a multi-state bulk power marketing experiment The agreement was meant to test whether broader pricing flexibility for coordination and transmission services would promote increased efficiency competition and coordination

The WSPP began operations in 1987 first as an experiment allowed by the Federal Energy Regulatory Commission (FERC) and then beginning in 1991 as a more permanent entity Its initial purpose was to allow sales of power for short-term transactions to take place with a maximum of flexibility and minimum of regulatory filings and to test market efficiency and competition

History of WSPP