Energy

On March 21, 2013, the Federal Energy Regulatory Commission (“FERC”) issued its Final Rule, Order No. 777, approving an updated North American Electric Reliability Corporation (“NERC”) Reliability Standard, FAC-003-2, regarding vegetation management along transmission lines. In Order No. 777, FERC approved FAC-003-2, which NERC submitted to FERC for approval on December 21, 2011 (“NERC Petition”). FERC also approved the associated definitions, violation severity levels, implementation plan and effective dates as proposed by NERC. Order No. 777 will become effective on May 28, 2013 (i.e., 60 days after its March 28, 2013 publication in the Federal Register).

FAC-003-2 expands the applicability of FAC-003-1 to include an overhead transmission line that is operated below 200 kV provided that such line is an element of an Interconnection Reliability Operating Limit (“IROL”) or an element of a Major WECC Transfer Path. The new standard also explicitly establishes a transmission owner’s obligation to prevent encroachments into the minimum vegetation clearance distances (“MVCDs”), calculated using the Gallet equation, for lines subject to the standard - regardless of whether such encroachment results in a sustained outage or fault (i.e., “zero-tolerance” approach).

FERC directed NERC to develop empirical evidence to confirm the assumptions (e.g., the gap factor) used in the Gallet equation when calculating the MVCD values. NERC is required to make an informational filing within 45 days after Order No. 777 becomes effective regarding the scope and timeline for testing such assumptions.

A number of stakeholders opposed FERC’s proposal in the Notice of Proposed Rulemaking (“NOPR”) that preceded Order No. 777 to direct NERC to assign a “high” Violation Risk Factor (“VRF”) to FAC-003-2 R2, which requires transmission owners to prevent encroachments into the MVCD of applicable lines that are not an element of an IROL or Major WECC Transfer Path. NERC had instead proposed a “medium” VRF. Such parties argued that FAC-003-2 R1, which requires transmission owners to prevent encroachments of lines that are an element of an IROL or Major WECC Transfer Path, is also assigned a “high” VRF even though these lines are higher risk facilities than those lines subject to FAC-003-2 R2. FERC asserted that the transmission lines subject to FAC-003-2 R2 (i.e., are not an element of an IROL or a Major WECC Transfer Path) have contributed to major cascading outages and a “high” VRF is supported. FERC, therefore, directed NERC to modify the VRF associated with FAC-003-2 R2 from “medium” to “high” within 45 days of the effective date of Order No. 777.

A number of stakeholders also expressed concern in their response to the NOPR over how IROL status updates will be communicated to transmission owners now that FAC-003-2 applies to lines that are an IROL element. While FERC acknowledged this concern from multiple parties, it declined to establish a specific communication process regarding IROL status updates. Instead, FERC directed NERC to determine the most appropriate means for communicating such status to transmission owners.

Under FAC-003-2 R6, transmission owners are required to inspect all lines subject to the standard at least once per calendar year and with no more than 18 calendar months between inspections on the same right of way. Furthermore, under FAC-003-2 R7, transmission owners are required to complete 100% of their annual vegetation work plan with respect to applicable lines to ensure no encroachments into the MVCD. FERC clarified that the fall-in of a danger tree that is outside of the defined Right-of-Way, but within the transmission owner’s control “would likely merit examination” to determine whether the transmission owner properly conducted its annual vegetation inspection and its annual vegetation work plan.

FERC also clarified that when a transmission owner does not have any of the records to determine the “Right-of-Way” (e.g., construction documents or pre-2007 vegetation maintenance records), an alternative approach must be used to set the “Right-of-Way.” FERC noted that the width of the Right-of-Way, even when set without such records, must meet engineering or construction standards. Further, FERC noted that one way to ensure that such standards are met is for transmission owners to work with NERC and the relevant Regional Entity to develop Right-of-Way widths on a case-by-case basis applying recognized industry procedures.

FAC-003-2 eliminates the training requirement that FAC-003-1 contained (i.e., “[a]ll personnel directly involved in the design and implementation of the [Transmission Vegetation Management Program] shall hold appropriate qualifications and training, as defined by the Transmission Owner, to perform their duties…”). NERC, in its Petition, noted that such a requirement was “effectively meaningless” because transmission owners had discretion over the “appropriate” qualifications and training. While stating that such discretion does not render the requirement unenforceable, FERC was not persuaded by stakeholder comments requesting that it require NERC to include a training requirement in the revised standard.

Implementation

FAC-003-2 becomes effective on “the first calendar day of the first calendar quarter one year after the date of the order approving the standard” (i.e., July 1, 2014). FERC also approved NERC’s implementation plan which sets forth implementation periods for lines that become, or lose designation as, elements of an IROL or a Major WECC Transfer Path.

Transmission owners should begin to revamp their vegetation management practices in advance of the FAC-003-2 implementation date to ensure that, once the standard becomes effective, they can be in full compliance with the new requirements.