FERC, CFTC, and State Energy Law Developments

On June 30, 2011, NERC filed its remaining responses to FERC’s recent questions on the expected scope of bulk-power system facilities considered Critical Assets under the proposed CIP-002-4 Reliability Standard.  The proposed standard would, for the first time, create bright-line criteria for identifying the facilities subject to NERC’s CIP-002 through CIP-009 Critical Infrastructure Protection Reliability Standards, moving away from the current criteria that grant a great deal of discretion to individual entities.

On June 15, 2011, NERC filed with FERC for approval of the revised Reliability Standard FAC-008-3 (Facility Ratings), which would replace the currently effective FAC-008-1 and FAC-009-1 Reliability Standards. The central revisions to the Standard include the following:

On June 1, 2011, Morgan Lewis's Energy Practice is hosting an all-day seminar on reliability standards compliance. Discussions will include:

  • Emerging NERC compliance issues
  • Cyber security compliance issues and preparation for Version 4 standards
  • Preparing for NERC Reliability Standards audits
  • Impact of Compliance Application Notices on requests for interpretation
  • Responding to NERC alerts
  • Issues related to NERC event analyses
  • Prospects for energy legislation

Earlier today, in Order No. 750, FERC approved an interpretation of IRO-005-1 and TOP-005-1, but decided not to adopt the NOPR proposal to direct NERC to modify the Reliability Standards to mandate reporting whenever a Special Protection System (SPS) loses a redundant communication channel. In deciding against its NOPR proposal, FERC relied on the “expert opinion” of NERC and the industry that no reliability gap exists under the proposed interpretation. As a result, the interpretations will take effect as proposed By NERC.

On March 17, the Federal Energy Regulatory Commission (FERC or the Commission) issued an order denying rehearing of Order No. 743, in which the Commission had directed the North American Electric Reliability Corporation (NERC) to modify its definition of “bulk electric system,” which serves to identify those entities subject to mandatory Reliability Standards. While the Commission explained that a new definition was needed to remove the discretion granted to Regional Entities under the existing definition, the Commission stressed that NERC need not implement the 100 kV bright-line proposal put forward By FERC in Order No. 743 but could exercise its discretion and technical expertise to propose an alternative method for defining “bulk electric system,” so long as it was “consistent, repeatable, and verifiable with supporting technical analysis.”

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Describing what it considers "a significant number of outages of generating facilities" along with disruptions in natural gas deliveries during the recent extreme cold weather across Texas and the Southwest, on February 14, the Federal Energy Regulatory Commission (FERC or Commission) directed the creation of a staff task force to conduct a broad inquiry into those events. Unlike the FERC-led investigation following the 2008 Florida Blackout, this investigation is not, at this time, intended to discover whether any regulations, requirements, or standards were violated. Instead, the investigation is intended to identify (1) the causes of the outages and disruptions and (2) the actions FERC might undertake to prevent a recurrence of these issues.

On February 8, 2011, the Federal Energy Regulatory Commission (FERC) will hold a Reliability Technical Conference addressing issues related to prioritizing reliability risks confronting the Bulk Power System and prioritizing the Reliability Standards related to such risks.

The Federal Energy Regulatory Commission (FERC or Commission), in an order released on November 18, has directed changes to the definition of the term "Bulk Electric System," a definition that determines which facilities are subject to mandatory Reliability Standards. According to the order, the North American Electric Reliability Corporation (NERC) may either adopt the Commission's preferred approach and define all facilities operated at or above 100 kV as part of the Bulk Electric System, or develop its own recommendation to address the Commission's concerns with the present definition that would be "as effective, or more effective than, the Commission's proposed approach." The imposition of a 100 kV bright-line threshold within the Northeast Power Coordinating Council, Inc. (NPCC) Region and the Western Electricity Coordinating Council (WECC) Region will result in capturing a significant number of facilities that have previously been considered non-Bulk Electric System facilities.

On October 7, the North American Electric Reliability Corporation (NERC) issued a Recommendation to Industry (Recommendation) requesting that transmission owners review their current Facility Ratings Methodology for their transmission facilities to determine whether the methodologies incorporate the actual field conditions of the facilities. NERC is concerned that transmission owners have not considered the existing field conditions surrounding a transmission facility when establishing facility ratings. Under the Recommendation, all of the identified entities are required to submit a plan for how they will assess the actual condition of all of their transmission facilities, potentially leading to widespread revisions of transmission facilities ratings. Entities that formally received the Recommendation are required to submit a receipt of acknowledgment By October 20, 2010, and submit plans for assessing their transmission facilities By December 15, 2010. While the Recommendation is not itself an enforceable Reliability Standard, the reporting obligations are binding on the recipients pursuant to federal regulations.

The Recommendation arose out of a conductor-to-ground fault resulting from vegetation contact with a bulk power transmission line of a transmission owner. Upon a subsequent review using Light Detection and Ranging (LiDAR) technology, the transmission owner found more than 100 conductor-to-ground clearance issues that had previously gone undetected due to inconsistencies between the actual topography surrounding the transmission lines and the lines’ design. As a result of this finding, NERC issued the Recommendation as a way to prod the industry to identify and eliminate these inconsistencies. Read more…