NERC Compliance Program Overview

NERC Compliance Program Overview

FRCC 2007 Compliance Workshop

April 4 and 11, 2007

U.S. Energy Policy Act of 2005

Reliability Legislation● One industry self-regulatory ERO● FERC oversight

Delegates authority to set and enforce mandatory standards to ERO

ERO delegates authority to regional entities

● Standards apply to all owners, operators, and users of bulk power system

● Independent governance and Compliance Program

Electric Reliability Organization Overview

United StatesFederal Energy

Regulatory Commission

MexicoComision Reguladora

de Energia

Canada NEB, 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

ERO Implementation● Aug. 2005: Energy Policy Act● Feb. 2006: FERC Implementing Rule● April 2006: NERC ERO Application Filing

NERC Standards Filing● July 2006: ERO Certification Order● Oct. 2006: NERC Compliance Filing

FERC Standards NOPRBudget Approval Order

● Nov. 2006 Uniform Compliance Program FilingRegional Delegation Agreements Filed

● Jan. 2007 Standards NOPR Comments FilingsNERC Non-Governance Order

● Mar. 2007 Order on StandardsResponse to January 18 FERC Order

● Apr. 2007 Expected Order on Compliance Programand Delegation Agreements

● Summer 2007 – Mandatory Compliance

Standards Establish the Basis

Elected StandardsCommittee

StandardsRequestors

StandardsProcessManager

SAR & StandardDrafting Teams

BallotPools

Established by the IndustryANSI-accredited process

FERC Standards Final Rule

● Recent rule adopted 83 standards for enforcement in the U.S. by June 2007

● Of those, direct improvements to 58 through the standards process

● Hold 24 as pending further information Regional ‘fill-in-the-blank’ standards Expect compliance as good utility practice

● Focus ERO and RE resources on most serious violations through December 31, 2007

Regional Entities

Regional Delegation Agreements

● Delegated functions Compliance Standards Organization registration Reliability assessment Reliability readiness and improvement

● Regional consistency is key Transparency Predictability Uniform outcomes

ERO Program Areas

● Standards● Compliance● Reliability Performance● Reliability Readiness

and Improvement● Training and Education● Situation Awareness &

Infrastructure Security

● Members Forums

Funding

● Funding for ERO and regional delegated functions allocated to load-serving entities Bulk power system users Based on Net Energy for

Load (NEL)● ERO will fund regions for

delegated functions● Penalties offset costs

Funded regardless of penalty collections

Organization Registration and Compliance

Organization Registration

Who Must Comply?● Any entity responsible for any part

of bulk power system reliability Historically defined as control areas

and reliability coordinators

● Functional entities Aligns reliability

requirements with functional unbundling

Owners, Operators, and Users

● Energy Policy Act: All users, owners, and

operators of the bulk-power system shall comply with reliability standards

● FERC Rule All entities subject to the

Commission’s reliability jurisdiction… (users, owners, and operators of the bulk-power system) shall comply with applicable Reliability Standards …

● Who are they?

Organization Registration

● Creates a Compliance Registry Identifies owners, operators, and

users of the bulk power system Separate from funding or

membership

● Establishes scope of Compliance Monitoring Program Notice of compliance responsibility Opportunity to appeal

ERO Organization Registration

● Registration process Entities may register directly Regions or NERC may add to the

registration list Others may nominate those with

material impact for registration Entity may challenge placement in

the compliance registry

● Challenge process Entities must demonstrate they are

not a bulk power system owner, operator, or user

Initial Regional Results

RegionNumber of

Entities Total Functions

ERCOT 198 229

FRCC 100 330

MRO 74 360

NPCC 310 732

RFC 225 562

SERC 141 503

SPP 106 386

WECC 214 825

  1368 3927

Initial Results by Entity Type

17

130 163

100 120 30

RCs

BAs TOPs

PAs TSPs RSGs

176 204 318

RPs TPs TOs

414

DPs

635 476 638

GOs GOPs PSEs

506

LSEs

Compliance Registration Timeline

● March 2 – Regions submit revised registration

● March 13 – NERC and regions complete review

● Late March – NERC provides notices

● April – NERC reviews and rules on objections

● May – NERC hears appeals● Standards Approval – Provide

registration information to regulators

Compliance Program Essential Features

● Strong ERO oversight of regional implementation

● Compliance program independence Including independence of staff making

compliance determinations● Monitor designated standards for all entities● Timely reporting of information and all

violations● Impose fair penalties and sanctions● Uniform compliance programs● Single process to contest finding and appeal

decision

NERC Sanction Guidelines - Influences

● FERC Policy Statement on Enforcement Issued October 20, 2005

(Docket No. PL06-1-000)● Post Legislation Steering Committee

Penalties and Sanctions Task Group● Standards Committee

Relative risk of standards - “Risk Factors”● Other self-regulatory organizations

NASD CBOE NYSE

NERC Sanction Guidelines

• Meets FERC policy statement on enforcement• Comparable to the seriousness of the violation on

BPS reliability• Promotes compliance with standards• Filed with and approved by FERC ● Used by all regions to determine penalty or

sanction● Reward

unsolicited self-reporting, quality compliance programs, voluntary corrective actions, etc.

● Punish repeat violation, evasion, inaction, unwarranted

intentional violations (e.g., economic choice), etc.● Provide flexibility to consider all relevant facts

regarding the violation by the violator

How Will Sanctioning Be Carried Out?

● Regional Entities (RE) Staff RE Staff determine and propose appropriate sanctioning

for violation Entity can contest in a regional hearing Penalties may be appealed to NERC

(and beyond to FERC and the courts…)

● Ongoing NERC review of REs’ sanctioning activities Uniformity of application & outcomes

● NERC as ERO files “Notice of Penalty” FERC accepts or adjusts penalty Effective 31 days after filing

● Remedial actions may be applied immediately to preserve reliability

2006 NERC Compliance Monitoring & Enforcement Program-

Preliminary Results

2006 Preliminary Program Results

● Compliance continues to improve2003 2004 2005 200695.3%95.9%96.3% 96.7%

2006 Compliance Enforcement Program Performance for NERC StandardsPercent Compliance by Region

99%

91%

98% 98%99%

100%

98%

95%

86%

88%

90%

92%

94%

96%

98%

100%

102%

ERCOT FRCC MRO NPCC RFC SERC SPP WECC

Region

Per

cen

t C

om

pli

ance

Most Violated NERC Standards in 2006 (confirmed and unconfirmed)

Over 2/3 of all violations involve 6 standards

● Operating Personnel Credentials (PER-003) 66 violations; mostly small entities

● Transmission Protection System Maintenance and Testing (PRC-005) 30 violations- 27 not documentation

● Consistency with Regional UFLS Programs (PRC-007) 27 violations- 20 correct amount, trip points different

● Plans for Loss of Control Center Functionality (EOP-008) 24 violations

● Operating Personnel Training (PER-002) 16 violations

● UFLS Equipment Maintenance (PRC-008) 15 violations- 11 not documentation

Compliance Trends

Operator Certification Violations (PER-003-0)

0

50

100

150

200

250

2001 2002 2003 2004 2005 2006

Nu

mb

er o

f V

iola

tio

ns

Compliance Trends

Violations of Transmission Protection System Maintenanceand Testing Standard (PRC-005)

0

5

10

15

20

25

30

35

2003 2004 2005 2006

Nu

mb

er o

f V

iola

tio

ns

Request of Regions

● Assess reliability impact to bulk power system for the aggregate of violations in close electrical and geographic areas

● Assess reliability impact to bulk power system for entities with multiple violations during the year.

Questions