Two recent orders show that the North American Electric Reliability Corporation (NERC) can be caught between the sometimes conflicting demands of its stakeholder-driven reliability standard development process and FERC directives. NERC plays a role as the nation's developer and chief enforcer of Reliability Standards.

In the first order, FERC accepted NERC's three-year performance assessment finding that NERC continues to fulfill its statutory and regulatory responsibilities as the nation's electric reliability organization (ERO) to develop and enforce Reliability Standards. NERC was certified as the ERO in 2006 and the three-year performance assessment was filed on July 20, 2009. NERC has developed — and FERC thereafter approved — at least 95 mandatory Reliability Standards. Additionally, NERC, and the regional reliability organizations, have registered more than 1,800 entities, including entities in Canada, responsible for compliance with Reliability Standards.

While FERC accepted NERC's performance assessment, it ordered NERC to make an informational filing within six months to address concerns regarding the Reliability Rtandards development process and activities of the regional entities. In the informational filing, NERC must update FERC on the status of the 120 action items NERC identified in the performance assessment. FERC directed NERC to comment on implementing certain practices in the Reliability Standards development process, including:

  • Posting proposed regional Reliability Standards for comment from the continent-wide pool of interested stakeholders for consideration, while allowing the regional open processes to make final determinations to be submitted to NERC
  • Providing for comments from NERC technical staff on proposed regional Reliability Standards
  • Including regional Reliability Standards in other NERC review processes that it uses for continent-wide Reliability Standards
  • Additionally, NERC must continue to submit quarterly updates to FERC on Reliability Standards

development. FERC instructed NERC to develop criteria for evaluating events that have the highest impact on reliability and procedures to ensure timely communication between FERC Staff, NERC, and the regional entities. NERC also must develop a plan to address capacity and energy in its reliability assessment methodology and a timeline for executing the plan.

In the second order, FERC rejected NERC's request for rehearing and/or clarification of a March 18, 2010 order that required NERC to propose revisions to its procedural rules. FERC ordered revisions to NERC's procedural rules to address a conflict between its standards development process and its obligation as the ERO to submit to FERC new or modified Reliability Standards under the Federal Power Act. Additionally, FERC ordered NERC to develop modifications to Reliability Standards that govern Bulk-Power System facility ratings (FAC-008-1). FERC issued the order because the procedural rules had prevented NERC from fully complying with FERC's order to modify FAC-008-1.

FERC stated that its order was intended to prevent standards development procedures being used to block FERC directives. In the case of FAC-008-1, the procedural rules resulted in FERC-ordered changes not passing the NERC balloting process. FERC emphasized that it was not attempting to “dictate” the content of Reliability Standards; however, NERC was not allowed to ignore a FERC directive.

The ERO is not required to develop a modification or new Reliability Standard that rigidly adheres to the technical approach specified in a final FERC directive, but it must develop and submit to FERC some proposal that affirmatively responds to the concern or goal underlying the directive and an adequate technical analysis if it decides to take a different approach. The ERO has a statutory obligation to comply with FERC directives under section 215(d)(5); it is not absolved of that obligation by merely considering a FERC directive in the standards development process. NERC must propose revisions to its Reliability Standards development procedures by December 13, 2010.

FERC will hold a commissioner-led technical conference to discuss reliability monitoring, enforcement, and compliance issues in November 2010 as well as a commissioner-led conference in either January or February 2011. The final agenda for these conferences will be determined based on discussions between NERC, FERC Staff, and Canadian regulators.