FERC, CFTC, and State Energy Law Developments

On August 15, the U.S. Court of Appeals for the District of Columbia Circuit rejected the challenges filed By various utilities, industry groups, and state commissions that claimed that the Federal Energy Regulatory Commission (FERC or the Commission) overstepped its authority when promulgating Order No. 1000.[1] The court’s decision in South Carolina Public Service Authority v. FERC,[2] which FERC Chairman Cheryl LaFleur hailed as “critical to the Commission’s efforts to support efficient, competitive, and cost-effective transmission,”[3] substantially strengthens FERC’s ability to establish the structures necessary to encourage and facilitate competitive transmission planning and development.

On July 17, the Federal Energy Regulatory Commission (FERC) proposed to approve[1] a new mandatory reliability standard that would require electric utilities to protect their transmission facilities and control centers against physical threats. Although FERC did not take issue with most of the language in the CIP-014-1[2] standard proposed By the North American Electric Reliability Corporation (NERC), FERC did express concern over the ability of utilities to identify their own critical facilities, even when that determination is subject to third-party review. To address that concern, FERC proposed to direct NERC to modify the standard so that FERC, or other appropriate federal agencies, could direct electric utilities to add additional facilities to their list of facilities that need physical security protections.

In a Notice of Proposed Rulemaking issued on June 19, FERC proposed to approve a new Reliability Standard—MOD-001-2 (Modeling, Data, and Analysis)—to govern the calculation of the various components of Available Transfer Capability (ATC), including Total Transfer Capability, Existing Transmission Commitments, Transmission Reliability Margin, and Capacity Benefit Margin. If approved, MOD-001-2 will replace multiple existing Reliability Standards that currently address these issues, including MOD-001-1a, MOD-004-1, MOD-008-1, MOD-028-2, MOD-029-1a, and MOD-030-2.

FERC has approved a new Reliability Standard to address Geomagnetic Disturbances (GMDs). EOP-010-1 (Geomagnetic Disturbance Operations) is the first in a set of Reliability Standards addressing the threat of GMDs to bulk-power system reliability. FERC’s concern with GMDs has been that they can create geomagnetically induced currents in transformers, which can, in turn, increase the absorption of reactive power, create harmonics, and cause transformer spot-heating. Ultimately, the loss of reactive power this causes could result in voltage instability, relay misoperations, and equipment damage.

On August 12, 2013, FERC issued an order extending the deadline for responsible entities to comply with the Version 4 Critical Infrastructure Protection (CIP) Reliability Standards. Responsible entities now have until October 1, 2014 to comply; the previous deadline, established in Order No. 761, was April 1, 2014. The CIP Reliability Standards require the cyber and physical protection of assets critical to the reliable operation of the bulk-power system.

On June 13, 2013, FERC approved a one-year extension for utilities to prepare to implement the new definition of the “bulk electric system” (BES). As a result of this order, the new BES definition approved By FERC in Order No. 773 will not go in effect until July 1, 2014.

On April 18, the Federal Energy Regulatory Commission (FERC) issued a Notice of Proposed Rulemaking (NOPR) that would approve version 5 of the North American Electric Reliability Corporation's (NERC's) Critical Infrastructure Protection (CIP) Reliability Standards. The proposed rule aims to expand the scope of bulk electric system (BES) cyber systems protected By the CIP Reliability Standards. The proposal also includes 12 requirements with new cybersecurity controls as well as proposed modifications and clarifications to the CIP Reliability Standards. If approved, the revised CIP Reliability Standards will address a wider variety of utility computer systems and equipment, with the strictest protections applied to the most critical equipment.

In a Notice of Proposed Rulemaking issued on October 18, 2012, FERC proposed to direct NERC to develop reliability standards addressing the risk posed By geomagnetic disturbances (GMDs). As a first stage, FERC proposed to direct NERC to develop a standard within 90 days of the final rule mandating that bulk-power system owners and operators develop operating procedures to mitigate the effects that GMDs have on reliability.

At FERC’s open meeting on April 19, 2012, FERC approved several orders addressing core aspects of Reliability Standards compliance, including cybersecurity Reliability Standards, compliance registration, and contingency planning issues. The newly approved cybsersecurity Reliability Standards significantly increase the scope of facilities subject to those requirements, the compliance registration decisions clarify the jurisdictional boundary between distribution and transmission facilities, and the planning orders represent a rejection of NERC’s approach to planning for firm load loss following a single contingency.

In a move intended to improve the efficiency of the Reliability Standard violation enforcement process, the Federal Energy Regulatory Commission (FERC or the Commission) yesterday approved the North American Electric Reliability Corporation's (NERC's) "Find, Fix & Track" (FFT) enforcement proposal. The FFT process should provide NERC and the Regional Entities with increased flexibility to address low-risk Reliability Standard violations, avoiding the need for a lengthy settlement process for minor violations that pose little risk to bulk-power system reliability. While NERC will continue to report all violations, this change will eliminate—for those low-risk violations selected for FFT treatment—the extensive mitigation and settlement paperwork that historically accompanied minor violations. Despite this increased flexibility for NERC and the Regional Entities, the Commission promised strict oversight of this process.

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