Power & Pipes

FERC, CFTC, and State Energy Law Developments

FERC recently issued an order approving revisions to the North American Electric Reliability Corporation (NERC) Rules of Procedures to modify the rules for developing mandatory reliability standards. These changes, reflected in Section 300 and Appendix 3A to the NERC Rules, will allow NERC to curtail the use of its traditional stakeholder-driven reliability standards development process where NERC leadership concludes that the process would be too cumbersome in addressing the reliability risk.

Within Section 300, FERC approved proposed modifications to four subsections. First, NERC proposed to add Section 322, Special Authority to Address Reliability Matters Necessary to Maintain the Reliability of the Bulk Power System, to authorize the NERC Board of Trustees to direct the development of a new or revised reliability standard in the event its stakeholder process fails to do so and “a directive is essential to provide for an adequate level of reliability for the Bulk Power System.”

Second, NERC sought modifications to Section 321, Special Rule to Address Certain Regulatory and Board of Trustees Directives, to align with Section 322 by allowing NERC board directives to be made pursuant to the scope of directives provided in Section 322.

Third, NERC proposed to retire Section 316, Accreditation, which had committed NERC to seek and maintain American National Standards Institute certification, as these new processes would likely result in the loss of such accreditation, which NERC argued was not required by the Commission in any case.

FERC also approved modifications to Appendix 3A to align with the aforementioned proposed actions. Notable modifications include

  • clarifying that the Standards Committee has traditionally made the determination of when a standard authorization request addresses revisions to reliability standards that may be posted for informal comment;
  • specifying how the Standards Committee may end a project where it is clear that the drafting team cannot develop a clear, consensus-based reliability standard;
  • ensuring that the drafting team may conclude the standards actions without conducting a final ballot;
  • implementing a tiered comment approach; and
  • permitting the NERC Board of Trustees to direct further work in accordance with the NERC Rules and Procedure.

Finally, FERC directed NERC to submit an informational report within 18 months to demonstrate the effectiveness of the new provisions in addressing reliability issues in a timely manner and whether any further refinements are needed.

The approved modifications to Section 300 and Appendix 3A modify the stakeholder development process and provide NERC with significant discretion to revise standards on the authority of its leadership. Registered entities subject to the mandatory reliability standards should be aware of this new discretion and NERC’s ability to issue standards on a shorter timeline with less public participation.

Stakeholders will retain opportunities to participate in the standards development process at NERC and, because all standards are subject to public notice and comment at FERC before becoming effective, interested parties can participate in rulemaking proceedings, although changes at that stage in the approval process may be more difficult to achieve.