Agenda Board of Trustees - Balch & Bingham · 2013-04-24 · Standard PRC-006-SERC-01 —Automatic...

Agenda Board of Trustees May 9, 2013 | 8:00 a.m.-Noon Eastern Sheraton Boston Hotel 39 Dalton Street Boston, MA 02199 617-236-2000 Introductions and Chair’s Remarks NERC Antitrust Compliance Guidelines and Public Announcement Consent Agenda — Approve

1. Minutes*

a. March 8, 2013 Actions Without A Meeting

b. February 7, 2013 Meeting Regular Agenda

2. Guest Speaker: Tom King, Executive Director and President, National Grid US

3. Remarks by Commissioners Norris and LaFleur, FERC

4. President’s Report

5. Electric Reliability Organization Enterprise Strategic Plan 2013-2016 ― Endorse

6. Standards*

a. Generator Verification ― PRC-024-1 – Adopt

b. Violation Risk Factor (VRF) Revision to Requirement 2 of FAC-003-2 – Adopt

c. Phase 1 of Glossary Updates: Statutory Definitions – Adopt

d. Adequate Level of Reliability (ALR) Definition* – Approve

7. Reliability Assessment Reports* ― Approve

a. 2013 State of Reliability

b. 2013 Special Reliability Assessment —Increasing Dependence on Natural Gas for Electric Power

8. Critical Infrastructure Department*― Update

a. Executive Order 13636 and Presidential Policy Directive on Critical Infrastructure

b. Proposed Changes to the Electricity Sub-Sector Coordinating Council (ESCC) and ES-ISAC

c. Key Activities Status Report

Board of Trustees Agenda May 9, 2013

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9. WECC Restructuring ― Update (Mark Maher)

10. Report on Assuring Reliability in Canada* ― Information Committee Reports* (Item 11)

a. Operating Committee

b. Planning Committee

c. Critical Infrastructure Protection Committee

d. Member Representatives Committee

e. Personnel Certification Governance Committee

f. Standards Committee

g. Reliability Issues Steering Committee

h. Compliance and Certification Committee

i. Electricity Sub-Sector Coordinating Council Forum and Group Reports* (Item 12)

a. North American Energy Standards Board

b. Regional Entity Management Group

c. North American Transmission Forum

d. North American Generator Forum Board Committee Reports

13. Corporate Governance and Human Resources

14. Compliance

15. Finance and Audit a. 2012 Audited Financial Statements: Review Audit Findings and Recommendations — Accept

b. First Quarter Statement of Activities —Accept c. Financial Aspects of the Form 990 — Review d. Audit of Compliance Monitoring Enforcement Program (CMEP) — Review

16. Standards Oversight and Technology

*Background materials included.

Antitrust Compliance Guidelines I. General It is NERC’s policy and practice to obey the antitrust laws and to avoid all conduct that unreasonably restrains competition. This policy requires the avoidance of any conduct that violates, or that might appear to violate, the antitrust laws. Among other things, the antitrust laws forbid any agreement between or among competitors regarding prices, availability of service, product design, terms of sale, division of markets, allocation of customers or any other activity that unreasonably restrains competition. It is the responsibility of every NERC participant and employee who may in any way affect NERC’s compliance with the antitrust laws to carry out this commitment. Antitrust laws are complex and subject to court interpretation that can vary over time and from one court to another. The purpose of these guidelines is to alert NERC participants and employees to potential antitrust problems and to set forth policies to be followed with respect to activities that may involve antitrust considerations. In some instances, the NERC policy contained in these guidelines is stricter than the applicable antitrust laws. Any NERC participant or employee who is uncertain about the legal ramifications of a particular course of conduct or who has doubts or concerns about whether NERC’s antitrust compliance policy is implicated in any situation should consult NERC’s General Counsel immediately. II. Prohibited Activities Participants in NERC activities (including those of its committees and subgroups) should refrain from the following when acting in their capacity as participants in NERC activities (e.g., at NERC meetings, conference calls and in informal discussions):

• Discussions involving pricing information, especially margin (profit) and internal cost information and participants’ expectations as to their future prices or internal costs.

• Discussions of a participant’s marketing strategies.

• Discussions regarding how customers and geographical areas are to be divided among competitors.

• Discussions concerning the exclusion of competitors from markets.

• Discussions concerning boycotting or group refusals to deal with competitors, vendors or suppliers.

NERC Antitrust Compliance Guidelines 2

• Any other matters that do not clearly fall within these guidelines should be reviewed with NERC’s General Counsel before being discussed.

III. Activities That Are Permitted From time to time decisions or actions of NERC (including those of its committees and subgroups) may have a negative impact on particular entities and thus in that sense adversely impact competition. Decisions and actions by NERC (including its committees and subgroups) should only be undertaken for the purpose of promoting and maintaining the reliability and adequacy of the bulk power system. If you do not have a legitimate purpose consistent with this objective for discussing a matter, please refrain from discussing the matter during NERC meetings and in other NERC-related communications. You should also ensure that NERC procedures, including those set forth in NERC’s Certificate of Incorporation, Bylaws, and Rules of Procedure are followed in conducting NERC business. In addition, all discussions in NERC meetings and other NERC-related communications should be within the scope of the mandate for or assignment to the particular NERC committee or subgroup, as well as within the scope of the published agenda for the meeting. No decisions should be made nor any actions taken in NERC activities for the purpose of giving an industry participant or group of participants a competitive advantage over other participants. In particular, decisions with respect to setting, revising, or assessing compliance with NERC reliability standards should not be influenced by anti-competitive motivations. Subject to the foregoing restrictions, participants in NERC activities may discuss:

• Reliability matters relating to the bulk power system, including operation and planning matters such as establishing or revising reliability standards, special operating procedures, operating transfer capabilities, and plans for new facilities.

• Matters relating to the impact of reliability standards for the bulk power system on electricity markets, and the impact of electricity market operations on the reliability of the bulk power system.

• Proposed filings or other communications with state or federal regulatory authorities or other governmental entities.

Matters relating to the internal governance, management and operation of NERC, such as nominations for vacant committee positions, budgeting and assessments, and employment matters; and procedural matters such as planning and scheduling meetings.

Draft Minutes Board of Trustees – Action Without a Meeting Revision to Electricity Sector–Information Sharing and Analysis Center (ES-ISAC) Policy Statement March 8, 2013 On March 8, 2013, the members of the Board of Trustees of the North American Electric Reliability Corporation consented in writing and approved the following resolutions:

WHEREAS, the NERC Board of Trustees has reviewed and identified enhancements to the Policy on the Role of the Electricity Sector–Information Sharing and Analysis Center (“ES-ISAC”) vis-à-vis NERC’s Compliance Monitoring and Enforcement Program. NOW, THEREFORE, BE IT RESOLVED, that the modifications to the ES-ISAC policy statement, attached hereto as Exhibit A, are hereby approved. FURTHER RESOLVED, that this consent may be signed in any number of counterparts and by facsimile, photo or other electronic signature copy, each of which shall be deemed to be an original, and all of which taken together shall be deemed to be a single consent.

Attached to these minutes is the memorandum from the General Counsel requesting the actions and the written votes of the trustees as Exhibits B and C, respectively. Submitted by,

Charles A. Berardesco Secretary

mcclellantText BoxAgenda Item 1aBoard of Trustees MeetingMay 9, 2013

Draft Minutes Board of Trustees – Action Without a Meeting Modifications to Regional Reliability Standard PRC-006-SERC-01 — Automatic Underfrequency Load Shedding Requirements March 8, 2013 On March 8, 2013, the members of the Board of Trustees of the North American Electric Reliability Corporation consented in writing and approved the following resolutions:

WHEREAS, the Federal Energy Regulatory Commission (“FERC”) has determined that Violation Risk Factors (“VRFs”) are part of the NERC Rules of Procedure, and, as such, modifications to VRFs must be approved by the Board prior to being filed with FERC. WHEREAS, on November 3, 2011, the NERC Board approved Regional Reliability Standard PRC-006-SERC-01 – Automatic Underfrequency Load Shedding Requirements. WHEREAS, on December 20, 2012, FERC issued Order No. 772 approving Regional Reliability Standard PRC-006-SERC-01 —Automatic Underfrequency Load Shedding Requirements and requiring a compliance filing by NERC to be made within 30 days of the effective date of the final rule (i.e., March 27, 2013) that (1) provides a schedule for implementing a revision to the rationale statement for Requirement R6; and (2) modifies the VRF for Requirement R6 by raising it from “Medium” to “High.” NERC management recommends that the Board approve the proposed modifications to be filed with FERC. NOW THEREFORE BE IT RESOLVED, that modification to the VRF for PRC-006-SERC-01, attached hereto as Exhibit A, is hereby approved and NERC management shall so advise FERC. FURTHER RESOLVED, that this consent may be signed in any number of counterparts and by facsimile, photo or other electronic signature copy, each of which shall be deemed to be an original, and all of which taken together shall be deemed to be a single consent.



Draft Minutes Board of Trustees – Action Without a Meeting Proposed Amendments to Delegation Agreement with Texas Reliability Entity, Inc. (Texas RE) – Amended Exhibit B (Texas RE Bylaws) March 8, 2013 On March 8, 2013, the members of the Board of Trustees of the North American Electric Reliability Corporation consented in writing and approved the following resolutions:

WHEREAS, during the November 16, 2012 Texas Reliability Entity Special Meeting of Members, amendments to the Delegation Agreement between NERC and Texas Reliability Entity (“Texas RE”), consisting of amendments to Exhibit B – the Texas RE Bylaws, were approved. WHEREAS, on December 5, 2012, Texas RE submitted the amendments to Exhibit B – the Texas RE Bylaws to NERC, with a request for approval. WHEREAS, the amendments to Exhibit B – the Texas RE Bylaws, address non-substantive changes, and continue to satisfy the five governance criteria in the Delegation Agreement. NOW, THEREFORE, BE IT RESOLVED, that modifications to the Delegation Agreement between NERC and Texas RE, consisting of amendments to Exhibit B – the Texas RE Bylaws, attached hereto as Exhibit A, are hereby approved and NERC management is directed to file the revisions with the Federal Energy Regulatory Commission.

FURTHER RESOLVED, that this consent may be signed in any number of counterparts and by facsimile, photo or other electronic signature copy, each of which shall be deemed to be an original, and all of which taken together shall be deemed to be a single consent.



Draft Minutes Board of Trustees February 7, 2013 | 8:00 a.m. local time Hotel del Coronado 1500 Orange Avenue Coronado, CA 92118 800-468-3533

Acting Chair Fred Gorbet called to order a duly noticed meeting of the North American Electric Reliability Corporation Board of Trustees on February 7, 2013 at 8 a.m., local time, and a quorum was declared present. The Agenda is attached as Exhibit A. Present at the meeting were: All Board members, being Fred Gorbet, Chair, Paul Barber, Janice Case, Gerry Cauley, Bob Clarke, Dave Goulding, Doug Jaeger, Ken Peterson, Jan Schori, Bruce Scherr, and Roy Thilly. A listing of industry attendees is attached as Exhibit B. Mr. Gorbet welcomed newly elected Trustees Messrs. Clarke and Jaeger to the Board, as well as special guests Mr. Valenzuela from CFE and Mr. Ray Gorman, Chair of the New Brunswick Energy and Utilities Board and Chair of CAMPUT, attending on behalf of the Canadian Regulators. Executive Session Mr. Gorbet reported that before the open meeting, as is its custom, the Board met in closed session with Management and then in executive session without Management, to review management activities. NERC Antitrust Compliance Guidelines Mr. Berardesco, senior vice president and general counsel, directed participants’ attention to the NERC Antitrust Compliance Guidelines included in the agenda. Consent Agenda Upon motion duly made and seconded, the Board approved the consent agenda, as follows: Minutes The Board approved the following draft minutes:

a. January 30, 2013 Conference Call

b. December 19, 2012 Conference Call

c. November 26, 2012 Conference Call

d. November 7, 2012 Meeting

mcclellantText BoxAgenda Item 1bBoard of Trustees MeetingMay 9, 2013

Board of Trustees Draft Minutes February 7, 2013 2

Committee Membership Appointments and Charter Changes Upon motion duly made and seconded, the Board approved the proposed new members for the Personnel Certification Governance, Critical Infrastructure Protection, Planning, Reliability Issues Steering, and Compliance and Certification Committees as set forth in the posted materials. Welcoming Remarks by Mr. Marcus Valenzuela, CFE Mr. Valenzuela, general manager of the Baja California Control Area of the Federal Electricity Commission (CFE), welcomed the audience to San Diego, and presented highlights of CFE operations, including responses in Mexico to the September 2011 Southwest Outage Event. He concluded his report stating cooperation between the two countries in mitigating the causes of the event highlights the international nature of the electric reliability organization. President’s Remarks Mr. Cauley commended industry on the 2012 accomplishments in bulk power system reliability, and encouraged industry to continue on this successful path. He highlighted the Board approved more than 30 standards, including the bulk electric system definition, the frequency response standard and the Critical Infrastructure Protection Version 5 standards. Mr. Cauley also highlighted the 30 percent reduction in outstanding regulatory directives. He stated in the coming year, the industry must focus on the following three strategic transformations in order to continue this forward momentum:

Standards. The ERO has improved the tools for developing reliability standards and must now focus on continued execution and delivery of high quality, results-based standards.

Risk Initiatives. The ERO has the capabilities to analyze system events using multiple sources, to determine root causes and to define mitigation actions and must continue the maturation of the risk work and structuring solutions around increased accountability.

Compliance. The ERO must work closely with stakeholders to define a risk-based model for compliance. Election and Appointment of Officers Upon motion duly made and seconded, the Board appointed the following officers for 2013:

• Fred Gorbet as Chair of the Board

• Janice Case as Vice Chair

• Gerry Cauley as President and Chief Executive Officer And on the recommendation of CEO Gerry Cauley and upon motion duly made and seconded, the Board appointed the following additional officers:

• Mark Rossi, Senior Vice President and Chief Operating Officer

• Charles Berardesco, Senior Vice President, Corporate Secretary, and General Counsel

• Michael Walker, Senior Vice President, Chief Financial and Administrative Officer, and Treasurer

• Janet Sena, Senior Vice President and Director of Policy and External Affairs

• Mark Lauby, Vice President and Director of Standards


• Thomas Burgess, Vice President and Director of Reliability Assessment and Performance Analysis

Board of Trustees Self-Assessment Results Mr. Gorbet provided an overview of the Board of Trustees Self-Assessment results and the Member Representatives Committee (MRC) assessment results. He stated the Trustees will work with the MRC to address the noted areas of concern. Electric Reliability Organization Enterprise Strategic Plan 2013-2016 Mr. Cauley noted he had reviewed the ERO Enterprise Strategic Plan at the MRC meeting the previous day and summarized the approach of identifying Enterprise-wide goals in standards, compliance, registration and certification, risks to reliability, and coordination and collaboration. The plan will be used as a framework for developing the 2014 Business Plan and Budget. Mr. Cauley requested the Board authorize Management to post the Plan for a 30-day comment period, after which Management will present the Plan for Board approval. Upon motion duly made and seconded, the Board authorized the posting of the Plan for comment. Standards Mr. Lauby, vice president of standards and training, provided an overview of the Reliability Standards Program and presented the following items for Board action. After discussion, and upon motion duly made and seconded, the following resolutions were approved:

BAL-003-1 – Frequency Response

RESOLVED, that the Board hereby adopts the BAL-003-1 – Frequency Response and Frequency Bias Setting Reliability Standard, as presented to the Board at this meeting.

FURTHER RESOLVED, that the Board hereby adopts the associated implementation plan, as presented to the Board at this meeting. FURTHER RESOLVED, that the Board hereby adopts the Violation Risk Factors and Violation Severity Levels for the proposed BAL-003-1 Reliability Standard, as presented to the Board at this meeting. FURTHER RESOLVED, that the Board hereby adopts the corresponding retirement of the BAL-003-0.1b—Frequency Response and Bias Reliability Standard and the existing definition for Frequency Bias Setting at midnight on the day immediately prior to the effective date of BAL-003-1 in the particular jurisdiction in which the new standard is becoming effective. FURTHER RESOLVED, that NERC management is hereby authorized and directed to make the appropriate filings with ERO governmental authorities. FURTHER RESOLVED, that NERC management is hereby authorized and directed to make the appropriate filings with ERO governmental authorities.


Paragraph 81, Phase I

RESOLVED, that the Board hereby adopts the retirement of the requirements and associated elements identified in the set of Reliability Standards, as presented to the Board at this meeting. FURTHER RESOLVED, that the Board hereby adopts the retirement of the VRFs and VSLs, as presented to the Board at this meeting. FURTHER RESOLVED, that the Board hereby adopts the conforming changes made to the VSLs of other associated requirements that reference requirements proposed for retirement, as presented to the Board at this meeting. FURTHER RESOLVED, that the Board hereby adopts the associated implementation plan, as presented to the Board at this meeting. FURTHER RESOLVED, that NERC management is hereby authorized and directed to make the appropriate filings with ERO governmental authorities.

TPL Table 1, Footnote b

RESOLVED, that the Board hereby adopts the TPL-002-2b—System Performance Following Loss of a Single Bulk Electric System Element (Category B) Reliability Standard, as presented to the Board at this meeting. FURTHER RESOLVED, that the Board hereby adopts the TPL-001-3—Transmission System Planning Performance Requirements Reliability Standard, as presented to the Board at this meeting. FURTHER RESOLVED, that the Board hereby adopts the associated implementation plans, as presented to the Board at this meeting. FURTHER RESOLVED, that the Board hereby adopts the corresponding retirement of the following Reliability Standards at midnight on the day immediately prior to the effective date of TPL-002-2b and TPL-001-3 in the particular jurisdiction in which the new standards are becoming effective:

• TPL-001-1 – System Performance Under Normal (No Contingency) Conditions (Category A)

• TPL-002-1b—System Performance Following Loss of a Single Bulk Electric System Element (Category B)

• TPL-003-1a—System Performance Following Loss of Two or More Bulk Electric System Elements (Category C)

• TPL-004-1—System Performance Following Extreme Events Resulting in the Loss of Two or More Bulk Electric System Elements (Category D)

FURTHER RESOLVED, that NERC management is hereby authorized and directed to make the appropriate filings with ERO governmental authorities.


Generator Verification (MOD-025-2—Verification and Data Reporting of Generator Real and Reactive Power Capability and Synchronous Condenser Reactive Power Capability; MOD-026-1—Verification of Models and Data for Generator Excitation Control System or Plant Volt/Var Control Functions; MOD-027-1—Verification of Models and Data for Turbine/Governor and Load Control or Active Power/Frequency Control Functions; PRC-019-1—Coordination of Generating Unit or Plant Capabilities, Voltage Regulating Controls, and Protection)

RESOLVED, that the Board hereby adopts the following Reliability Standards, as presented to the Board at this meeting:

• MOD-025-2—Verification and Data Reporting of Generator Real and Reactive Power Capability and Synchronous Condenser Reactive Power Capability

• MOD-026-1—Verification of Models and Data for Generator Excitation Control System or Plant Volt/Var Control Functions

• MOD-027-1—Verification of Models and Data for Turbine/Governor and Load Control or Active Power/Frequency Control Functions

• PRC-019-1—Coordination of Generating Unit or Plant Capabilities, Voltage Regulating Controls, and Protection

FURTHER RESOLVED, that the Board hereby adopts the associated implementation plans, as presented to the Board at this meeting. FURTHER RESOLVED, that the Board hereby adopts the Violation Risk Factors and Violation Severity Levels for the proposed MOD-025-2, MOD-026-1, MOD-027-1, and PRC-019-1 Reliability Standards, as presented to the Board at this meeting. FURTHER RESOLVED, that the Board hereby adopts the corresponding retirements of the MOD-024-1 and MOD-025-1 Reliability Standards at midnight on the day immediately prior to the effective date of the MOD-025-2, MOD-026-1, MOD-027-1, and PRC-019-1 Reliability Standards in the jurisdictions in which the new standards are becoming effective. FURTHER RESOLVED, that NERC management is hereby authorized and directed to make the appropriate filings with ERO governmental authorities.

Interpretation of TPL-003-0a and TPL-004-0 for System Protection and Control Subcommittee

RESOLVED, that the Board hereby adopts the proposed Interpretations to the TPL-003-0a and TPL-004-0 Reliability Standards, as presented to the Board at this meeting. FURTHER RESOLVED, that NERC management is hereby authorized and directed to make the appropriate filings with ERO governmental authorities.


Interpretation of CIP-002-3 for Oklahoma Gas and Electric

RESOLVED, that the Board hereby adopts the proposed Interpretation to the CIP-002-3 Reliability Standard, as presented to the Board at this meeting. FURTHER RESOLVED, that NERC management is hereby authorized and directed to make the appropriate filings with ERO governmental authorities.

IRO-006-WECC-2 Qualified Transfer Path Unscheduled Flow (USF) Relief

RESOLVED, that the Board hereby adopts the IRO-006-WECC-2—Qualified Transfer Path Unscheduled Flow (USF) Relief Reliability Standard, as presented to the Board at this meeting. FURTHER RESOLVED, that the Board hereby adopts the associated implementation plan, as presented to the Board at this meeting. FURTHER RESOLVED, that the Board hereby adopts the Violation Risk Factors and Violation Severity Levels for the proposed IRO-006-WECC-2 Reliability Standard, as presented to the Board at this meeting. FURTHER RESOLVED, that NERC management is hereby authorized and directed to make the appropriate filings with ERO governmental authorities.

MRO Regional Standards Development Procedure

RESOLVED, that the Board hereby approves Version 5 of the Midwest Reliability Organization Regional Reliability Standards Process Manual. FURTHER RESOLVED, that NERC management is hereby authorized and directed to make the appropriate filings with ERO governmental authorities.

Standards Process Reform Mr. Lauby provided an overview of the Standards Process Reform initiative and presented the following items for Board action. After discussion, and upon motion duly made and seconded, the following resolutions were approved: Standards Committee Strategic Plan and Standards Committee Strategic Work Plan 2013-2015

WHEREAS, in October 2012, the Standards Committee formed a small, ad hoc group to work with NERC staff to develop a strategic vision for the Standards Committee to align the Standards Committee’s work with the Electric Reliability Organization’s strategic direction. WHEREAS, the Strategic Plan aligns closely with the November 2012 Board resolution calling for improvements to the Reliability Standards development process.


WHEREAS, the Standards Committee approved the Strategic Plan and Strategic Work Plan 2013-2015 at its January 2013 meeting. WHEREAS, the Standards Committee Strategic Plan sets forth the vision and mission for the Standards Committee, describes the guiding principles of the Standards Committee, and sets the foundation for refocusing the activities of the Standards Committee. WHEREAS, a companion Standards Committee Strategic Work Plan for 2013-2015 was developed as the tactical implementation of the Standards Committee Strategic Plan. RESOLVED, that the Board hereby approves the Standards Committee Strategic Plan, as presented to the Board at this meeting. FURTHER RESOLVED, that the Board hereby approves the Standards Committee Strategic Work Plan 2013-2015, as presented to the Board at this meeting.

Standards Committee Charter

WHEREAS, in October 2012, the Standards Committee formed a small, ad hoc group to work with NERC staff to develop a strategic vision for the Standards Committee. WHEREAS, this ad hoc group revised the Standards Committee’s Charter in response to the Board’s November 2012 resolution calling for improvements to the Reliability Standards development process and to align the Standards Committee Charter with the Standards Committee’s Strategic Plan. WHEREAS, the changes to the Standards Committee Charter were approved by the Standards Committee in January 2013. WHEREAS, the Standards Committee’s enhanced charter includes changes that clarify accountability of the Standards Committee to the Board of Trustees for development of Reliability Standards that provide for the reliability of the bulk power system. RESOLVED, that the Board hereby approves the Standards Committee Charter, as presented to the Board at this meeting.

Standard Processes Manual Changes

RESOLVED, that the Board approves the changes to the Standards Processes Manual (Appendix 3A of the NERC Rules of Procedure), as presented to the Board at this meeting. FURTHER RESOLVED, that NERC management is hereby authorized and directed to make the appropriate filings with ERO governmental authorities.

Standards Committee Chair and Vice Chair


RESOLVED, that the Board approves the following nominations as Chair and Vice-Chair to the NERC Standards Committee:

• Brian J. Murphy of NextEra Energy, Inc. to serve as Chair of the Standards Committee for a one-year term.

• Scott Miller of MEAG Power to serve as Vice-Chair of the Standards Committee for a one-year term.

In addition to the above Resolutions, the Board asked the Standards Committee to provide an assessment in one year (at the February 2014 Board Meeting) on the effectiveness of the changes to the Reliability Standards development process and how revisions to the overall process are working. FERC Audit Update and Implementation Mr. Berardesco provided an update on the FERC Audit, noting the recent settlement agreement with FERC finalizes the recommendations, and that implementation of the audit recommendations was already underway. NERC will file its implementation plan with FERC by March 15 and continue to provide updates to the Board.

Reliability Issues Steering Committee (RISC) Recommendations Ms. Schwab, provided an overview of the RISC Recommendations and presented the resolutions for Board consideration. After discussion, and upon motion duly made and seconded, the following resolutions were approved:

RESOLVED, that the Board hereby accepts the report of the Reliability Issues Steering Committee (RISC), expresses its appreciation to the RISC for the excellent report and endorses continued work by the RISC on a gap analysis on the high priority and then the medium priority issues and requests continued reports to the Board. FURTHER RESOLVED, that the Board hereby directs NERC management to continue to work with the RISC to consider how the priority rankings in the development of the ERO’s business plan and to consider how such rankings should be reflected in the work plans of NERC committees. FURTHER RESOLVED, the Board hereby directs NERC management to work with the RISC and, as appropriate, NERC committee leadership to consider how NERC should utilize a data-driven reliability strategy development process that integrates with budget development and overall ERO planning (e.g., standing committee planning, department, and employee goal setting).

Standing Committee Reports Operating Committee Mr. Castle reported the Operating Committee posted the Cold Weather Guideline for industry comment and will review the comments received and the development team’s recommendations and will look to finalize the Guideline in March. With regard to the Southwest Outage, Mr. Castle stated the Operating Committee has tasked its reliability subcommittee to undertake a further review to determine if any new or modified standards are needed. They expect the subcommittee to have the analysis completed by June.


Planning Committee Mr. Mitchell reported the Planning Committee is working on the Technical Justification for the Bulk Electric System Definition, reviewing the protection-related recommendations from the Southwest Outage Report, and conducting essential research into current and proposed areas of reliability issues in support of the work being completed on the Standards Development Process. Critical Infrastructure Protection Committee Mr. Abell reported the Critical Infrastructure Protection Committee has been reorganized to enhance further progress in achievement of Committee goals. Mr. Abell stated the top goals for the Committee for 2013 are to complete current activities underway, support the new task forces and initiatives, continue the support of the ES-ISAC, and work to create stand-alone event analysis within the Committee. Member Representatives Committee Ms. Chinn noted the very beneficial discussion held during the MRC meeting the previous day, and looked forward to working with Mr. Gorbet as the new Chair of the Board of Trustees. Personnel Certification Governance Committee Mr. Halborg reviewed key areas of focus for the Personnel Certification Governance Committee for 2013, including the system operator certification exam process, new certification development process, and the budget process, to include the implementation of a reduction in fees commencing January 1. The Committee will provide the Board at a future date with a set of development program metrics and the recommendation for appointments for two open positions. Standards Committee Mr. Murphy referenced excellent discussions throughout the previous day’s meetings and offered his appreciation to the Board for the earlier approvals of the Standards Committee Strategic and Work plans. Compliance and Certification Committee Mr. Bilke reported that the Compliance and Certification Committee is working closely with Ms. Ferguson on the independent audit of Compliance, Enforcement, Registration, and Certification process and are reviewing the results of that audit and will provide a report to the Board in March. Mr. Bilke further reviewed and requested acceptance of the Compliance and Certification 2013 Work Plan. Upon motion duly made and seconded, the Board accepted the plan. Electricity Sub-Sector Coordinating Council Mr. Cauley reported the Council has been reviewing lessons learned from Hurricane Sandy on the roles of industry and government in such a catastrophic event and how that translates into an opportunity for executive engagement in the event of a cyber attack or physical terrorist event. The Council will continue to work closely with the industry on these issues. Mr. Cauley concluded the report by stating the Council continues to focus on the major activities from the four HILF task force reports.


Forum and Group Reports North American Energy Standards Board Mr. Desselle highlighted recent activities of the North American Energy Standards Board, most specifically the decommissioning of TSIN on November 13, 2012. Regional Entity Management Group Ms. Dochoda highlighted recent activities of the key multi-Regional groups, noting detailed summaries were contained in the full written report to Board. Ms. Dochoda also reconfirmed support on behalf of the Regional Entity Management Group for the RAI initiative. North American Transmission Forum Mr. Galloway referred to the Forum’s written report to the Board and further reported the Forum continues to hold valuable discussions with the NERC CEO and Senior Management on ways to advance each other’s missions. Board Committee Reports Corporate Governance and Human Resources Ms. Case, chair, provided a summary report of the Corporate Governance and Human Resources Committee (CGHRC) open and closed meetings occurring on February 5 and 6. She reviewed and requested Board approval of the Board committee assignments for 2013 and upon motion duly made and seconded, the Board approved the following Board committee assignments for 2013:

Finance and Audit Committee Roy Thilly, Chair Janice Case Bob Clarke Doug Jaeger

Corporate Governance & Human Resources Committee Jan Schori, Chair Ken Peterson Bob Clarke

Nominating Committee Dave Goulding, Chair Ken Peterson Bruce Scherr Jan Schori Bob Clarke Doug Jaeger 5 MRC Representatives Compliance Committee Bruce Scherr, Chair Janice Case


Dave Goulding Jan Schori Roy Thilly

Standards Oversight and Technology Committee Ken Peterson, Chair Paul Barber Dave Goulding Bruce Scherr Doug Jaeger

ESCC Gerry Cauley, Chair Paul Barber

RMICS Roy Thilly, Chair Janice Case Bob Clarke Doug Jaeger Terry Bilke, CCC Chair Stacy Dochoda, REMG Chair Ex officio to all: Fred Gorbet Ms. Case reported that the Committee was recommending a contribution to the Company’s Savings and Investment Plan and upon motion duly made and seconded, the Board adopted the following resolution:

RESOLVED, that, upon recommendation of the Corporate Governance and Human Resources Committee, the Board hereby approves a contribution into the Company's Savings and Investment Plan for the year ended December 31, 2012 for the account of each eligible employee participant in the Plan equal to 8 percent of such employee participant's 2012 base salary.

Compliance Committee Mr. Scherr, chair, provided a summary of the Committee’s open meeting from the previous day, highlighting the review of the Committee’s self-assessment results and areas for improvement, the update on the status of the Reliability Assurance Initiative, and the update on the quarterly performance and related metrics. In addition, Mr. Scherr reported NERC Management continues to work on the FFT Report due in March. Finance and Audit Committee Mr. Gorbet, chair, provided a summary of the Committee’s open meeting held via conference call on February 1, 2013. In addition, Mr. Gorbet provided an overview of the meeting of the Risk Management and Internal Controls Subcommittee on February 6.


Mr. Gorbet reviewed and requested acceptance of the unaudited year-end financial statements. Upon motion duly made and seconded, the Board approved the following resolution:

RESOLVED, that the Board accepts the unaudited 2012 year-end financial statements of NERC and the eight Regional Entities, as presented to the Board at this meeting.

Standards Oversight and Technology Committee Mr. Peterson, chair, provided a review of the actions of the Committee the day prior. Mr. Peterson stated the bulk of the meeting focused on the changes to the Standards process and provided on behalf of the Committee appreciation on the evolvement of the process and the work completed under exiting Chair Allen Mosher and Vice Chair Ben Li. He stated the Committee is looking forward to working with newly elected Chair Brian Murphy and Vice Chair Scott Miller and continuing the progression and movement forward in the standards development process. Mr. Peterson stated there is a significant amount of work still to accomplish and the burden will be on NERC staff and the Standards Committee to ensure progress and for the Standards Oversight and Technology Committee to provide the oversight and guidance needed through all avenues applicable to include attending Standards Committee meetings and calls. Concluding, Mr. Peterson referenced the presentation by Mr. Santerfeit at the meeting on the status of information technology areas. Closing Mr. Gorbet closed the meeting by noting the valuable discussions that had led up to the Board meeting, particularly the MRC meeting. He stated that the written policy input provided by industry is beneficial to the Board and requested that the industry members continue to submit their comments but also consider providing input through the additional forums of open meetings and conference calls. Mr. Gorbet stated he is looking forward as Chair of the Board to working closely with the Chair and Vice Chair of the MRC, including consideration of current meeting processes and protocols to enhance the value and efficiency of the quarterly meetings. Adjournment There being no further business, and upon motion duly made and seconded, the meeting was adjourned at 10:45 a.m. local time. Submitted by,


Agenda Item 5 Board of Trustees Meeting May 9, 2013

Electric Reliability Organization Enterprise Strategic Plan 2013-2016 Action Endorse Summary At the February 2013 Board of Trustees (Board) meeting NERC’s President and Chief Executive Officer Gerry Cauley presented an update to the Electric Reliability Organization (ERO) Enterprise Strategic Pan 2013-2016 (Strategic Plan) which was jointly developed by NERC management and the Regional Entities. The Strategic Plan serves as an overall guiding document to assist NERC and the Regional Entities in the preparation of their annual business plans and budgets. The specific annual goals, objectives and deliverables for NERC and each Regional Entity will be approved by the Board in connection with its annual review and approval of the NERC and Regional Entity business plans and budgets. After review and discussion, the Board requested that the Strategic Plan be posted for a 30-day comment period. The Strategic Plan was posted on February 13, 2013 and comments were received from a number of individuals and entities. These comments are posted on NERC’s website. Management has reviewed the comments received and is proposing several refinements to the text of the Strategic Plan, a marked version of which is attached and has also been posted on NERC’s website. At the Board meeting, Mr. Cauley will provide the Board and stakeholders with a brief overview of these updates. NERC management has also requested that each Regional Entity include their company specific 2014 goals and objectives, together with a description of major activities and any significant projects or initiatives as part of the draft 2014 business plans and budgets which they submit to NERC for review, together with a discussion of the relationship between these items and the Strategic Plan and their responsibilities under their delegation agreements with NERC. NERC management will provide a summary of this information in connection with their review and recommendations to the Board Finance and Audit Committee regarding approval of the Regional Entities’ business plans and budgets as part of the 2014 business plan and budget process.

http://www.nerc.com/docs/bot/finance/2014%20NERC%20Business%20Plan%20and%20Budget/SP2013_2015-Complete.pdf�

FinalDraft Electric Reliability Organization Enterprise Strategic Plan 2013-2016 This plan was expanded and updated from 2012 to provide more transparency in the setting of goals for the ERO Enterprise and to accommodate the 2013-2016 planning period. The ERO Enterprise is a collaborative, international network comprised of the North American Electric Reliability Corporation (NERC) and the eight Regional Entities that brings together collective leadership, experience, judgment, skills, and technologies for ensuring the reliability of the North American bulk power system. This plan summarizes the ERO Enterprise’s mission, vision, values and goals; and provides strategic direction and priorities for 2013 and beyond. The plan will be reviewed, revised, and supplemented every two years or more frequently as needed. Mission To ensure the reliability of the North American bulk power system. Vision To be the trusted leadership that ensures and continuously improves the reliability of the North American bulk power system by implementing relevant standards; promoting effective collaboration, cooperation, and communication around important risks to reliability; and utilizing expertise from the industry to produce outcomes that improveeffectively manage risks to reliability. Core Values and Guiding Principles The following core values and guiding principles serve as guidelines for the conduct and behavior of all involved in the ERO Enterprise. Accountability and Independence — The ERO Enterprise will:

• Be accountable for the public responsibilities delegated to it (a public trust obligation).

• Be impartial, independent of special interests, and impervious to improper influence.

• Balance its own independent regulatory judgment with the need to involve those with expert knowledge and experience in bulk power system reliability matters.

Responsiveness — The ERO Enterprise will act in a timely manner on the basis of unfolding events, emerging reliability risks, and the needs of industry and other stakeholders. Fairness and Inclusiveness — The ERO Enterprise will:

• Be open and transparent.

• Provide access for clear communication with stakeholders.

Agenda Item 5c CGHRC Closed SessionBoard of Trustees February 5May 9,, 2013

mcclellantText BoxAgenda Item 5Board of Trustees MeetingMay 9, 2013

ERO Enterprise Strategic Plan 2013-2016 MayJanuary 2013 2

• Ensure the legitimate interests of all parties, including costs imposed on registered entities, are duly considered and balanced in the development of policies and reliability standards, and in its programs and operations.

• Conduct compliance and enforcement actions judiciously and in proportion to risk, paying regard to risks both potential and actual (realized).

Adaption and Innovation — The ERO Enterprise will:

• Continuously assess and prioritize its goals.

• Embrace change and encourage new ideas that contribute to effective action.

• Recognize the complex relationships and potential tensions between reliability objectives and business imperatives (including cost control).

• Be nimble and artful in development of tools and dissemination of lessons learned and other information to responding to novel, unfamiliar, and emerging challenges.

Excellence —The ERO Enterprise will:

• Promote and rely upon the active participation of the best technical leaders from industry.

• Strive for excellence and efficiency in all aspects of Enterprise activities. Efficiency —The ERO Enterprise will make informed decisions regarding efficient use of its resources and resources shared by industry, with due consideration of the cost to industry. Integrity — The ERO Enterprise will:

• Maintain the highest levels of professional and ethical conduct.

• Be independent, impartial, fair, intellectually honest, truthful, and candid, and without bias.

• Be rigorous and thorough in all it does, doing the right things the right way.

• Earn trust by treating every person with fairness and respect.

• Work to meet or exceed expectations of stakeholders. Four Pillars for Success In order to succeed, the ERO Enterprise will emphasize:

• Reliability – to address events and identifiable risks, thereby improving ensuring the reliability of the bulk power system through proper mitigation and remediation.

• Assurance – to provide assurance to the public, industry, and government for the reliable performance of the bulk power system.

• Learning – to promote learning and continuous improvement of operations and adapt to lessons learned for improvement offor bulk power system reliability.

• Risk-based Approach – to focus attention, resources and actions on issues most important to bulk power system reliability.


Strategic Goals 2013 – 2016 The ERO Enterprise has identified seven goals in the strategic areas of standards; compliance, registration and certification; risks to reliability; and coordination and collaboration. Standards

Goal 1. Develop clear, reasonable and technically sound mandatory reliability standards in a timely

and efficient manner. These standards establish threshold requirements for ensuring the bulk power system is planned, operated, and maintained in a manner that minimizes risks of cascading failures, avoids damage to major equipment, or limits interruptions of bulk power supply.

Objectives and valued outcomes include:

a. Standards are timely, clear and responsive to reliability and security risks. Key deliverables include:

• Complete standards development governance and process reforms as identified in 2012 resolutions by the NERC Board of Trustees.

• Ensure all existing and new standards meet quality and results-based criteria1

• Evaluate significant bulk power system events (Category 3 and above) to identify gaps in standards and address any gaps

within five years with subsequent review every five years thereafter

• Develop a bulk power system risk profile and assess standards compared to the profile, address the most important risk gaps

• Address all high-risks designated for control by a standard within one year or two years if technical study is required

• Address all new FERC directives within one year or two years if technical study is required; close existing directives by 2015 (by filing or negotiated resolution)

b. Standards are practical to implement and cost effective. Key deliverables include:

• Facilitate smooth transition of new standards (e.g., CIP Version 5)

• Consolidate to a common set of application guides or RSAWs for all standards

• Identify and file requirements to be retired (Paragraph 81 Phase 2)

• Explore options for assessing the cost effectiveness of appropriate reliability standards

1 Quality criteria are the attributes of excellent reliability standards as stated in Section 300 of NERC’s Rules of Procedure. Results based criteria mean each requirement defines a performance outcome, risk mitigation, or essential competency necessary for a reliable bulk power system.


Compliance, Registration and Certification Goal 2. Be a strong enforcement authority that is independent, without conflict of interest,

objective and fair. The ERO retains and refines its ability to use standards enforcement when warranted and impose penalties and sanctions commensurate with risk.


a. The ERO registers entities commensurate with risk to the bulk power system and ensures all key reliability entities are certified to have essential capabilities.

Key deliverables include:

• Develop and implement BES exception process

• Evaluate certification program for sufficiency and effectiveness, modify as needed

• Develop framework and criteria for registration based on risk to the bulk power system

• Develop common and consistent registration processes, information systems and methods among regions

b. The ERO holds industry accountable for violations that create serious risk to the bulk power system; resulting actions are timely and transparent to industry.


• Develop and implement Reliability Assurance Initiative (compliance reform) which includes the objective of improving the efficiency and effectiveness of NERC and Regional Entity operations, reducing unnecessary costs of compliance on registered entities while, in each case, ensuring reliability objectives are achieved.

• Develop and implement new caseload and mitigation aging curves and monitor caseload and mitigation performance

• Develop and implement enforcement strategies based on Reliability Assurance Initiative

•c. The ERO monitors registered entities and standards requirements commensurate with the risk and role of each type of registered entity.

Goal 3. Promote a culture of compliance which is driven by a culture of reliability excellence that

addressinges reliability risks across the industry. The ERO works with industry to identify standards, procedures, practices and controls to address reliability risks.


a. Industry has effective procedures and programs to monitor, detect, correct, report, and prevent compliance, reliability, and security issues.


• Develop and implement Reliability Assurance Initiative (compliance reform) (same as 2b)

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• Make effective internal controls models and information available to industry

• Initiate compliance phase-in learning periods for new standards


b. The ERO uses efficient processes and proportional exercise of discretion to verify that compliance objectives are met by industry.


• Continue to expand use of discretion through Find, Fix, and Track (FFT)


Risks to Reliability Goal 4. Identify the most significant risks to reliability. The ERO identifies and prioritizes reliability

risks, facilitates effective solutions and interventions, and monitors results. Objectives and valued outcomes include:

a. Risks are identified and prioritized based on reliability impacts, cost/practicality assessments, projected resources, and emerging issues.


• Continue to mature RISC and develop risk profile to include HILF issues

• Prepare an annual state of reliability report

• Develop project plans and business case assessments for high priority risks; implement or facilitate initiatives to address high priority risks (see 5a first bullet)

b. Events and system performance are consistently analyzed for sequence, cause, and remediation to identify reliability risks and trends, and to inform standards, compliance, and other programs. Industry is well informed of system events, emerging trends, risk analysis, lessons learned and expected actions.


• Analyze significant events to identify gaps in standards, compliance effectiveness, registration, and risk controls effectiveness

• Make all bulk power system event reports available to industry through secure portal

• Provide lessons learned and recommendations from events and identified risks

• Merge event driven databases and cause codes into one (e.g., event analysis, TADS, GADS, relay mis-operations)

Goal 5. Be accountable for mitigating reliability risks. The ERO works with industry stakeholders and

experts to ensure the mitigation of known risks to reliability.


a. The ERO is tracking industry accountability for critical reliability and security recommendations.



• Manage risk control initiatives to be completed by ERO and coordinate other initiatives with industry (e.g., relay misoperations, situational awareness, human error, cyber attack)

• Develop and deploy a recommendations tracking system

b. Industry is aware of and is effectively addressing security vulnerabilities and threats. Industry security posture is being evaluated and continuously improved. During crisis situations, ERO facilitates sharing of information among industry, Regions, and government.


• Expand security maturity model assessments to be widely accessible across industry

• Issue and track security recommendations to protect the bulk power system (related to 5a second bullet)

• Expand the use and value of security threat and vulnerability information sharing, analytics, and analysis

• Implement periodic wide area security exercises (e.g., GridEx)

• Increase security clearances available to industry and facilitate access to secured briefings through local fusion centers

Goal 6. Promote a culture of reliability excellence. The ERO facilitates a learning environment

throughout the industry through event causal analysis, communication of lessons learned, tracking of recommendations, and implementation of best practices.


a. ERO is a leading resource to industry and policy makers for reliability information. Key deliverables include:

• Publish quality reliability assessment reports (LTRA, seasonal and special reports)

• Promote effective actions as needed to address identified gaps in future reliability

b. Reliability models and data accurately represent system behavior and are shared among reliability entities.


• Assess data and modeling needs and develop recommendations to ensure quality planning and operating data/models are available to registered entities across each interconnection

• Evaluate event disturbances using phasor measurements and other methods to assess sufficiency of data and models


Coordination and Collaboration

Goal 7. Improve transparency, consistency, quality and timeliness of results; operate as a

collaborative enterprise; and improve efficiencies and cost effectiveness. The ERO accomplishes this through working with the Regional Entities and registered entities to ensure effective coordination, collaboration and process improvements. The ERO communicates expectations clearly and fosters collaboration to deliver important results in advancing system reliability. The ERO engages the support and expertise of stakeholders, is an efficient steward of resources, and leverages information systems to create efficiencies and process controls.


a. The ERO acquires, engages, and retains highly qualified talent suited to the mission. Key deliverables include:

• Implement employee climate surveys and succession planning and promote favorable hiring and retention of ERO staffs

• Develop ERO qualifications requirements for auditors and other key positions across the ERO and implement training as needed

b. The ERO internal risks are understood and managed; ERO processes are effective, efficient, and continuously improved.


• Develop test and deploy ERO enterprise applications, platform and database

• Develop five-year ERO self-assessment and close all recommendations from three-year assessment and FERC audit

• Implement an ERO-wide internal risk management program

Electric Reliability Organization Enterprise Strategic Plan 2013-2016 This plan was expanded and updated from 2012 to provide more transparency in the setting of goals for the ERO Enterprise and to accommodate the 2013-2016 planning period. The ERO Enterprise is a collaborative, international network comprised of the North American Electric Reliability Corporation (NERC) and the eight Regional Entities that brings together collective leadership, experience, judgment, skills, and technologies for ensuring the reliability of the North American bulk power system. This plan summarizes the ERO Enterprise’s mission, vision, values and goals; and provides strategic direction and priorities for 2013 and beyond. The plan will be reviewed, revised, and supplemented every two years or more frequently as needed. Mission To ensure the reliability of the North American bulk power system. Vision To be the trusted leadership that ensures the reliability of the North American bulk power system by implementing relevant standards; promoting effective collaboration, cooperation, and communication around important risks to reliability; and utilizing expertise from the industry to produce outcomes that effectively manage risks to reliability. Core Values and Guiding Principles The following core values and guiding principles serve as guidelines for the conduct and behavior of all involved in the ERO Enterprise. Accountability and Independence — The ERO Enterprise will:

• Be accountable for the public responsibilities delegated to it (a public trust obligation).

• Be impartial, independent of special interests, and impervious to improper influence.

• Balance its own independent regulatory judgment with the need to involve those with expert knowledge and experience in bulk power system reliability matters.

Responsiveness — The ERO Enterprise will act in a timely manner on the basis of unfolding events, emerging reliability risks, and the needs of industry and other stakeholders. Fairness and Inclusiveness — The ERO Enterprise will:

• Be open and transparent.

• Provide access for clear communication with stakeholders.

Agenda Item 5 Board of Trustees Meeting May 9, 2013

ERO Enterprise Strategic Plan 2013-2016 May 2013 - Final 2

• Ensure the legitimate interests of all parties, including costs imposed on registered entities, are duly considered and balanced in the development of policies and reliability standards, and in its programs and operations.

• Conduct compliance and enforcement actions judiciously and in proportion to risk, paying regard to risks both potential and actual (realized).

Adaption and Innovation — The ERO Enterprise will:

• Continuously assess and prioritize its goals.

• Embrace change and encourage new ideas that contribute to effective action.

• Recognize the complex relationships and potential tensions between reliability objectives and business imperatives (including cost control).

• Be nimble and artful in development of tools and dissemination of lessons learned and other information to respond to novel, unfamiliar, and emerging challenges

Excellence —The ERO Enterprise will:

• Promote and rely upon the active participation of the best technical leaders from industry.

• Strive for excellence and efficiency in all aspects of Enterprise activities. Efficiency —The ERO Enterprise will make informed decisions regarding efficient use of its resources and resources shared by industry, with due consideration of the cost to industry Integrity — The ERO Enterprise will:

• Maintain the highest levels of professional and ethical conduct.

• Be independent, impartial, fair, intellectually honest, truthful, and candid.

• Be rigorous and thorough in all it does, doing the right things the right way.

• Earn trust by treating every person with fairness and respect.

• Work to meet or exceed expectations of stakeholders. Four Pillars for Success In order to succeed, the ERO Enterprise will emphasize:

• Reliability – to address events and identifiable risks, thereby ensuring the reliability of the bulk power system through proper mitigation and remediation.

• Assurance – to provide assurance to the public, industry, and government for the reliable performance of the bulk power system.

• Learning – to promote learning and continuous improvement of operations and adapt to lessons learned for bulk power system reliability.

• Risk-based Approach – to focus attention, resources and actions on issues most important to bulk power system reliability.


Strategic Goals 2013 – 2016 The ERO Enterprise has identified seven goals in the strategic areas of standards; compliance, registration and certification; risks to reliability; and coordination and collaboration. Standards

Goal 1. Develop clear, reasonable and technically sound mandatory reliability standards in a timely

and efficient manner. These standards establish threshold requirements for ensuring the bulk power system is planned, operated, and maintained in a manner that minimizes risks of cascading failures, avoids damage to major equipment, or limits interruptions of bulk power supply.


a. Standards are timely, clear and responsive to reliability and security risks. Key deliverables include:

• Complete standards development governance and process reforms as identified in 2012 resolutions by the NERC Board of Trustees.

• Ensure all existing and new standards meet quality and results-based criteria1

• Evaluate significant bulk power system events (Category 3 and above) to identify gaps in standards and address any gaps

within five years with subsequent review every five years thereafter

• Develop a bulk power system risk profile and assess standards compared to the profile, address the most important risk gaps

• Address all high-risks designated for control by a standard within one year or two years if technical study is required

• Address all new FERC directives within one year or two years if technical study is required; close existing directives by 2015 (by filing or negotiated resolution)

b. Standards are practical to implement and cost effective. Key deliverables include:

• Facilitate smooth transition of new standards (e.g., CIP Version 5)

• Consolidate to a common set of application guides or RSAWs for all standards

• Identify and file requirements to be retired (Paragraph 81 Phase 2)

• Explore options for assessing the cost effectiveness of appropriate reliability standards

1 Quality criteria are the attributes of excellent reliability standards as stated in Section 300 of NERC’s Rules of Procedure. Results based criteria mean each requirement defines a performance outcome, risk mitigation, or essential competency necessary for a reliable bulk power system.


Compliance, Registration and Certification Goal 2. Be a strong enforcement authority that is independent, without conflict of interest,

objective and fair. The ERO retains and refines its ability to use standards enforcement when warranted and impose penalties and sanctions commensurate with risk.


a. The ERO registers entities commensurate with risk to the bulk power system and ensures all key reliability entities are certified to have essential capabilities.


• Develop and implement BES exception process

• Evaluate certification program for sufficiency and effectiveness, modify as needed

• Develop framework and criteria for registration based on risk to the bulk power system

• Develop common and consistent registration processes, information systems and methods among regions

b. The ERO holds industry accountable for violations that create serious risk to the bulk power system; resulting actions are timely and transparent to industry.


• Develop and implement Reliability Assurance Initiative (compliance reform) which includes the objective of improving the efficiency and effectiveness of NERC and Regional Entity operations, reducing unnecessary costs of compliance on registered entities while, in each case, ensuring reliability objectives are achieved.

• Develop and implement new caseload and mitigation aging curves and monitor caseload and mitigation performance

• Develop and implement enforcement strategies based on Reliability Assurance Initiative

c. The ERO monitors registered entities and standards requirements commensurate with the risk and role of each type of registered entity.

Goal 3. Promote a culture of compliance which is driven by a culture of reliability excellence

addressing reliability risks across the industry. The ERO works with industry to identify standards, procedures, practices and controls to address reliability risks.


a. Industry has effective procedures and programs to monitor, detect, correct, report, and prevent compliance, reliability, and security issues.




• Make effective internal controls models and information available to industry

• Initiate compliance phase-in learning periods for new standards The ERO uses efficient processes and proportional exercise of discretion to verify that compliance objectives are met by industry.


• Continue to expand use of discretion through Find, Fix, and Track (FFT)


Risks to Reliability Goal 4. Identify the most significant risks to reliability. The ERO identifies and prioritizes reliability

risks, facilitates effective solutions and interventions, and monitors results. Objectives and valued outcomes include:

a. Risks are identified and prioritized based on reliability impacts, cost/practicality assessments, projected resources, and emerging issues.


• Continue to mature RISC and develop risk profile to include HILF issues

• Prepare an annual state of reliability report

• Develop project plans and business case assessments for high priority risks; implement or facilitate initiatives to address high priority risks (see 5a first bullet)

b. Events and system performance are consistently analyzed for sequence, cause, and remediation to identify reliability risks and trends, and to inform standards, compliance, and other programs. Industry is well informed of system events, emerging trends, risk analysis, lessons learned and expected actions.


• Analyze significant events to identify gaps in standards, compliance effectiveness, registration, and risk controls effectiveness

• Make all bulk power system event reports available to industry through secure portal

• Provide lessons learned and recommendations from events and identified risks

• Merge event driven databases and cause codes into one (e.g., event analysis, TADS, GADS, relay mis-operations)

Goal 5. Be accountable for mitigating reliability risks. The ERO works with industry stakeholders and

experts to ensure the mitigation of known risks to reliability.



a. The ERO is tracking industry accountability for critical reliability and security recommendations.


• Manage risk control initiatives to be completed by ERO and coordinate other initiatives with industry (e.g., relay misoperations, situational awareness, human error, cyber attack)

• Develop and deploy a recommendations tracking system

b. Industry is aware of and is effectively addressing security vulnerabilities and threats. Industry security posture is being evaluated and continuously improved. During crisis situations, ERO facilitates sharing of information among industry, Regions, and government.


• Expand security maturity model assessments to be widely accessible across industry

• Issue and track security recommendations to protect the bulk power system (related to 5a second bullet)

• Expand the use and value of security threat and vulnerability information sharing, analytics, and analysis

• Implement periodic wide area security exercises (e.g., GridEx)

• Increase security clearances available to industry and facilitate access to secured briefings through local fusion centers

Goal 6. Promote a culture of reliability excellence. The ERO facilitates a learning environment

throughout the industry through event causal analysis, communication of lessons learned, tracking of recommendations, and implementation of best practices.


a. ERO is a leading resource to industry and policy makers for reliability information. Key deliverables include:

• Publish quality reliability assessment reports (LTRA, seasonal and special reports)

• Promote effective actions as needed to address identified gaps in future reliability

b. Reliability models and data accurately represent system behavior and are shared among reliability entities.


• Assess data and modeling needs and develop recommendations to ensure quality planning and operating data/models are available to registered entities across each interconnection


• Evaluate event disturbances using phasor measurements and other methods to assess sufficiency of data and models

Coordination and Collaboration

Goal 7. Improve transparency, consistency, quality and timeliness of results; operate as a

collaborative enterprise; and improve efficiencies and cost effectiveness The ERO accomplishes this through working with the Regional Entities and registered entities to ensure effective coordination, collaboration and process improvements. The ERO communicates expectations clearly and fosters collaboration to deliver important results in advancing system reliability. The ERO engages the support and expertise of stakeholders, is an efficient steward of resources, and leverages information systems to create efficiencies and process controls.


a. The ERO acquires, engages, and retains highly qualified talent suited to the mission. Key deliverables include:

• Implement employee climate surveys and succession planning and promote favorable hiring and retention of ERO staffs

• Develop ERO qualifications requirements for auditors and other key positions across the ERO and implement training as needed

b. The ERO internal risks are understood and managed; ERO processes are effective, efficient, and continuously improved.


• Develop test and deploy ERO enterprise applications, platform and database

• Develop five-year ERO self-assessment and close all recommendations from three-year assessment and FERC audit

• Implement an ERO-wide internal risk management program

Agenda Item 6a Board of Trustees Meeting May 9, 2013

Generator Verification – PRC-024-1

Action Adopt the following standard documents and direct staff to file with applicable regulatory authorities:

• Reliability Standards

PRC-024-1 — Generator Frequency and Voltage Protective Relay Settings

[PRC-024-1 clean]

• Violation Risk Factors (VRFs) and Violation Severity Levels (VSLs)

[PRC-024-1 VRFs and VSLs]

• Implementation Plan

[PRC-024-1 Implementation Plan]

• Definitions

None

• Retirements

None

Background PRC-024-1 is part of the Generator Verification project which was approved by the Board of Trustees (Board) in February (MOD-25-2, MOD-26-1, MOD-27-1 and PRC-019-1). Collectively, the five Generator Verification Reliability Standards address generator verifications needed to support bulk power system (BPS) reliability and enhance coordination on important technical items necessary for generator-to-grid coordination. These reliability standards reduce the risk of generator trips during specified voltage and frequency excursions or as a result of improper coordination between generator protective relays and generator voltage regulator controls and limit functions, and aim to ensure that Transmission Planners (TPs) and Planning Coordinators (PCs) have accurate models and model parameters on which to base system models and simulations. PRC-024-1 consists of four Requirements and two incorporated attachments. Requirement R1 ensures that generating units remain connected during frequency excursions and Requirement R2 ensures that generating units remain connected during voltage excursions. The performance requirements of R1 and R2 are contained in Attachment 1 (generator frequency protective relay settings) and Attachment 2 (generator voltage protective relay settings). Requirement R3 allows for the Generator Owner to communicate equipment limitations that prevent the generator from meeting the performance requirements of R1 and R2. Requirement R4 ensures that expected generating unit performance during frequency and voltage excursions is communicated to PCs and TPs for accurate system modeling.

http://www.nerc.com/docs/standards/sar/PRC-024-1_recirculation_ballot_clean_2013March14.pdf�http://www.nerc.com/docs/standards/sar/Project%202007-09%20GVSDT%20-%20PRC-024-1%20VRF%20and%20VSL_clean_2013March14.pdf�http://www.nerc.com/docs/standards/sar/Project_2007-09_GV_PRC-024_Implementation_Plan-clean_2013March14.pdf�

Typically, generator protection system setting changes are made during scheduled generator outages. The Implementation Schedule set forth for this standard requires that entities verify compliance with the Requirements over a five-year period. The five-year window corresponds to typical outage cycles; generating units that have outage cycles longer than five years are generally not base-load units and offer opportunities to effect protection system settings changes during economic shut down periods. Pertinent FERC Order No. 693 directives The Generator Verification Standard Drafting Team has addressed two directives from Paragraph 1787 of Order No. 693 during the development of this standard. The Consideration of Issues document for PRC-024-1 provides the details regarding how each directive was met. Standard Development Process PRC-024-1 progressed through the normal standards development process, including six postings for stakeholder comments. The recirculation ballot for PRC-024-1 closed on March 27, 2013 with a quorum of 81 percent and an approval of 89 percent. Unresolved Minority Issues There were no minority issues raised by industry stakeholders. FERC staff expressed concerns with how the drafting team met the directive in Paragraph 1787 “to modify the Reliability Standard to explicitly require either that all generators are capable of riding through the same set of Category B and C contingencies, as required by wind generators in Order No. 661, or that those generators that cannot ride through be simulated as tripping.” The drafting team believes that it has met the intent of the directive by requiring that relays be set such that generators remain on-line in the “no trip zone” of the voltage curve of Attachment 2 of the standard. The relay settings will, in effect, prevent generators from tripping for voltage deviations defined by the curve, unless they have equipment or regulatory limitation that does not allow the relays to be set according to the curve. Proposed VRFs and VSLs PRC-024-1 is a new standard; consequently, all of the requirements and their associated VRFs and VSLs are new. The Standard Drafting Team developed VRFs and VSLs according to NERC and FERC guidelines. The non-binding poll of VRFs and VSLs for PRC-024-1 was conducted in March 2013. It achieved a quorum with 76 percent of those who registered to participate providing an opinion and 84 percent of those who provided an opinion indicating support for the VRFs and VSLs that were proposed. NERC standards staff has reviewed all proposed VRFs and VSLs and recommends them for adoption. Additional Information A link to the project history and files is included here for reference: http://www.nerc.com/filez/standards/Generator-Verification-Project-2007-09.html

http://www.nerc.com/docs/standards/sar/Project_2007-09_GV_Consideration_of_Issues_and_Directives_PRC-024_2013March14.pdf�http://www.nerc.com/docs/standards/sar/Project_2007-09_GV_Consideration_of_Issues_and_Directives_PRC-024_2013March14.pdf�http://www.nerc.com/filez/standards/Generator-Verification-Project-2007-09.html�

Agenda Item 6b Board of Trustees Meeting May 9, 2013

Violation Risk Factor (VRF) Revision to Requirement 2 of FAC-003-2

Action Adopt the Violation Risk Factor (VRF) revision to Requirement 2 of FAC-003-2 directed in FERC Order No. 777 and direct staff to file with applicable regulatory authorities:

[FAC-003-2-clean.pdf] [FAC-003-2 redline]

Background On November 3, 2011, the Board of Trustees (Board) approved Reliability Standard FAC-003-2 — Transmission Vegetation Management. NERC filed a petition seeking approval of FAC-003-2 with FERC in Docket No. RM12-4-000 on December 21, 2011. FERC issued Order No. 777 on March 21, 2013, approving FAC-003-2 and requiring a compliance filing by NERC to be made within 45 days of the effective date of Order No. 777 that modifies the VRF for Requirement R2 by raising it from “medium” to “high.” Given that VRFs are part of the NERC Rules of Procedure, a VRF modification requires approval by the Board before it can be submitted to FERC for approval. NERC must submit a compliance filing in response to Order No. 777 by July 12, 2013. Therefore, NERC management recommends the Board approve the attached VRF modification for Reliability Standard FAC-003-2 to be filed with FERC.

http://www.nerc.com/docs/standards/FAC-003-2-clean.pdf�http://www.nerc.com/docs/standards/FAC-003-2-redline.pdf�

Agenda Item 6c Board of Trustees Meeting May 9, 2013

Phase 1 of Glossary Updates: Statutory Definitions Action Adopt the following definitions to the NERC Glossary of Terms and supporting documents, and direct NERC staff to file with applicable regulatory authorities:

• “Bulk-Power System” means, (A) facilities and control systems necessary for operating an interconnected electric energy transmission network (or any portion thereof); and (B) electric energy from generation facilities needed to maintain transmission system reliability. The term does not include facilities used in the local distribution of electric energy.

• “Reliability Standard” means a requirement, approved by the United States Federal Energy Regulatory Commission under Section 215 of the Federal Power Act, or approved or recognized by an applicable governmental authority in other jurisdictions, to provide for reliable operation [Reliable Operation] 1

• “Reliable Operation” means operating the elements of the bulk-power system [Bulk-Power System]. within equipment and electric system thermal, voltage, and stability limits so that instability, uncontrolled separation, or cascading failures of such system will not occur as a result of a sudden disturbance, including a cybersecurity incident, or unanticipated failure of system elements.

of the bulk-power system [Bulk-Power System]. The term includes requirements for the operation of existing bulk-power system [Bulk-Power System] facilities, including cybersecurity protection, and the design of planned additions or modifications to such facilities to the extent necessary to provide for reliable operation [Reliable Operation] of the bulk-power system [Bulk-Power System], but the term does not include any requirement to enlarge such facilities or to construct new transmission capacity or generation capacity.

• Implementation Plan for Glossary Definitions: [Implementation Plan] Background Phase 1 of the Glossary Project addresses the directives issued by FERC in Order No. 693 which directed the Electric Reliability Organization (ERO) to include the statutory definitions of Bulk-Power System, Reliability Standard, and Reliable Operation in the NERC Glossary of Terms used in Reliability Standards. These definitions are contained in Section 215 of the Federal Power Act (16 U.S.C. § 824o). The definitions were initially posted from June 19 to August 2, 2012 with an initial ballot held during the final 10 days of the comment period, to align with definitions in the NERC Rules of

1 The words “bulk-power system” are found in the definitions for “Reliability Standard” and “Reliable Operation.” Also the words “reliable operation” appear in the “Reliability Standard” definition. These terms will be capitalized before the definitions are added to the Glossary, as indicated by the capitalized term in brackets. The terms are not currently capitalized or adopted because they are not currently defined Glossary Terms because the Board of Trustees has yet to adopt these terms.

http://www.nerc.com/docs/standards/sar/2012-08.1_Implementation_Plan_Clean.pdf�

Procedure. Based on the comments received from that posting, the proposed definitions were amended to match the statutory language found in Section 215 of the Federal Power Act.2

The revised definitions were posted for a second comment period from February 21 through March 22, 2013, with a successive ballot held during the final 10 days of the comment period. The Glossary terms passed the ballot with an approval of 84.27 percent. The recirculation ballot for the glossary definitions closed after these materials were distributed and will be presented at the May 9, 2013 Board meeting. Additional Information A link to the project history and files is included here for reference: Glossary Updates Statutory Definitions Project History and Files

2 The words “Section” and “Commission” were modified in the final version presented for approval to add clarification for the Canadian entities. The definition for Reliability Standard now states that “Commission” equates to FERC in the United States, and for other jurisdictions, “Commission” means the applicable governmental authority approving or recognizing the standard. Also, the word “section” has been replaced with “Section 215 of the Federal Power Act.”

http://www.nerc.com/filez/standards/Project_2012-08.1_Phase_1_Glossary_Updates_Statutory_Definitions.html�

Agenda Item 6d Board of Trustees Meeting May 9, 2013

Adequate Level of Reliability (ALR) Definition

Action Approve the following documents to be filed with applicable regulatory authorities for information:

• Definition of Adequate Level of Reliability: [Clean] [Redline to Version Last Presented to the MRC]

• Technical Report Supporting Definition of Adequate Level of Reliability: [Clean] [Redline to Version Last Presented to the MRC]

Agenda Board of Trustees - Balch & Bingham · 2013-04-24 · Standard PRC-006-SERC-01 —Automatic...

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