NERC as the ERO

Craig LawrenceManager of Organization

Registration, Certification, and Compliance Monitoring

U.S. Energy Policy Act of 2005Reliability 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

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 Standards Response to January 18 FERC Order

● Apr. 2007 Order on Compliance Programand Delegation Agreements

● Summer 2007 – Mandatory Compliance

NERC OrganizationPresident

& CEO

Members’ Forums

Compliance&

OrganizationCertification

Situation Awareness & Infrastructure

Security

Standards

ReliabilityReadiness & Improvement

Training, Education & Personnel

Certification

Information Technology

Legal & Regulatory

Finance & Accounting

Reliability Assessment & Performance

Analysis

Human Resources

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

Questions

NERC Standards Development Process and Standards Work Plan

Standards Establish the Basis

Elected StandardsCommittee

StandardsRequestors

StandardsProcessManager

SAR & StandardDrafting Teams

BallotPools

Established by the IndustryANSI-accredited process

ERO Standards Process● ANSI-accredited open process● Registered ballot body of stakeholders

vote on standards● Elected standards committee● Participation is encouraged:

It’s free Provide comments and vote remotely online Go to www.nerc.com and click on Standards

Standards Work Plan: Overview

● Work plan filed December 1, 2006● Dynamic management tool

Communicate vision Coordinate work Measure progress

● 31 projects grouped by subject matter● Aggressive but achievable schedule● Detailed project descriptions listing ‘to dos’● More efficient use of drafting teams● Integrates ‘fill-in-the-blank’ plan

Standards Work Plan: Inputs● FERC NOPR on reliability standards● FERC staff assessment of standards● Version 0 comments● Comments on other standards projects● Comments from missing compliance

elements and risk factor teams● Blackout report● Other reports and references

Projects Started in 2006● 2006-01 System Personnel Training● 2006-02 Transmission Assessments & Plans● 2006-03 System Restoration and Blackstart● 2006-04 Backup Facilities● 2006-05 Phase III & IV Field Tests● 2006-06 Reliability Coordination● 2006-07 ATC, TTC, CBM, and TRM● 2006-08 Transmission Loading Relief● 2006-09 Facility Ratings

Projects Starting in 2007● 2007-01 Underfrequency Load Shedding● 2007-02 Operating Personnel Communications● 2007-03 TOP and BA Operations● 2007-04 Certifying System Operators● 2007-05 Balancing Authority Controls● 2007-06 System Protection● 2007-07 Vegetation Management● 2007-08 Emergency Operations● 2007-09 Generator Verification● 2007-10 Modeling Data● 2007-11 Disturbance Monitoring

Projects Starting in 2008● 2008-01 Voltage and Reactive Control● 2008-02 Undervoltage Load Shedding● 2008-03 Demand Data● 2008-04 Protection Systems● 2008-05 Cyber Security● 2008-06 Phasor Measurement Units● 2008-07 Resource Adequacy Assessments

Projects Starting in 2009/10● 2009-01 Disturbance/Sabotage Reporting● 2009-02 Facility Connections● 2009-03 Interchange Information● 2010-01 Support Personnel Training

Representative Changes to Standards● Concise title/purpose with a reliability

value● Applicability

More specific with regard to entity, facilities, and responsibilities

Changes from Functional Model Remove RRO (RE remains compliance

monitor)● Compliance elements

Measures, violation severity levels, risk factors, time horizons, etc.

Other Improvements● Review technical adequacy and

performance metrics● Address fill-in-the-blank standards● Reorganize, streamline standards● Merge in organization certification

standards● References● Variances

Violation Severity Levels

● Level 1: mostly compliant with minor exceptions

● Level 2: mostly compliant with significant exceptions

● Level 3: marginal performance or results

● Level 4: poor performance or results

Questions

NERC Organization Registration Program

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

Functional Responsibilities

ReliabilityCoordinator

TransmissionOperator

GenerationOperator

BalancingAuthority

TransmissionOwner

GenerationOwner

DistributionProvider

Load ServingEntity

PlanningAuthority

PurchasingSellingEntity

RegionalReliability

Organization

ReserveSharingGroup

TransmissionPlanner

TransmissionServiceProvider

ResourcePlanner

RegisteredIn

2005

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

Bulk Power System Owner, Operator, or User

Minimum Size Criteria

Functional Entities Identified in Reliability Standards

Joint Registration Org.

Registration Selection Criteria

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

Current Regional Registration Data

RegionNumber of

Entities Total Functions

ERCOT 166 215FRCC 82 253MRO 97 402NPCC 239 516RFC 365 701SERC 223 616SPP 126 402WECC 525 1337  1823 4442

Questions

NERC Compliance Monitoring

Compliance Monitoring MethodsCompliance Monitoring● Periodic reporting● Self-certification● Exception reporting● Investigations● Random spot-checking

or audits● Compliance audits● Self Reporting

Compliance Program – RequirementsFERC Order 672

● Single audit program for rigorous audit activities

● Prompt reporting● Confidentiality provisions● ERO files summary reports to FERC● ERO or region imposes fair penalties

and sanctions● Single appeals process

NERC Sanction GuidelinesERO Sanction Guidelines● Comparable to levels of threat to reliability ● Promotes compliance with standards● Rewards self-reporting & voluntary

corrective actions● Flexible to adapt to all relevant facts

surrounding the violation ● Consistent application of guidelines● Meets FERC policy statement

Application of Penalties● Penalties will be applied by the

Regional Entity Staff will determine initial penalty or

sanction Regions may reach a settlement – must

be filed with FERC Penalties may be appealed

● Once finalized NERC files “notice of penalty” Penalties may be adjusted by FERC Penalties become effective 31 days

after filing Remedial actions may be applied

immediately to preserve reliability

Questions