FERC, CFTC, and State Energy Law Developments

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 November 17th, Morgan Lewis and Ernst & Young presented a joint webcast on structuring your company’s compliance program to avoid repetitive reliability violations.

Topics included:

  • How to avoid repeat violations of NERC and Regional Entity Standards
  • Ways to properly structure your compliance program
  • Strategic, tactical, and operational approaches
  • How to develop appropriate monitoring tools

A recording of the webcast and associated materials are available:

On October 15, 2010, the North American Electric Reliability Corporation (“NERC”) submitted in Docket No. RM06-22-000, to the Federal Energy Regulatory Commission (“FERC”), a status report concluding that all of the balance of plant within a nuclear facility is subject to the cyber security standards of the Nuclear Regulatory Commission (“NRC”), and not subject to NERC’s Critical Infrastructure Protection (“CIP”) Reliability Standards.

In Order No. 706, FERC directed NERC to determine whether the balance of a nuclear power plant facility is subject to CIP regulation. The purpose of the directive is to assure that there is no regulatory “gap” between the CIP standards and the NRC cyber security regulations. Further, in Order No. 706-B, FERC directed NERC to find “bright-line” criteria to determine whether the balance of a nuclear plant’s equipment is subject to the CIP standards. Read more....

During last week’s Open Meeting, the Federal Energy Regulatory Commission (FERC or Commission) firmly rebuffed challenges to its prior order directing the North American Electric Reliability Corporation (NERC) to revise its Rules of Procedure. The prior order was made to ensure that NERC responds to the Commission’s directives to make changes to Reliability Standards, as FERC holds that it is not sufficient for NERC to merely consider Commission-directed revisions in the Reliability Standards development process. While reiterating its order, however, the Commission softened its earlier language regarding NERC’s obligation to comply with FERC directives, explaining that NERC remains free to develop alternative approaches to address the issues underlying such directives. This order confirms that, while the Commission cannot “dictate the specific content” of a Reliability Standard, NERC is obligated to respond to such directives By developing appropriate changes.

The Commission has certified NERC as the Electric Reliability Organization (ERO) under Section 215 of the Federal Power Act. As the ERO, NERC is the sole entity that may draft Reliability Standards that are enforceable By the Commission, NERC, and the Regional Entities against all users, owners, and operators of the bulk-power system. However, this authority to draft Reliability Standards is subject to Commission oversight, and all Reliability Standards must be submitted to and approved By FERC before they can be enforced. As part of that oversight function, the Commission has the authority to direct the ERO to develop revisions to a Reliability Standard. Read more…

In a Guidance Order issued on August 27, the Federal Energy Regulatory Commission (FERC or the Commission) provided guidance on how the North American Electric Reliability Corporation (NERC) and the Regional Entities responsible for the enforcement of mandatory Reliability Standards should assess repeated violations By the same or affiliated companies. The Commission expressed concern that NERC and the Regional Entities have not sufficiently considered repeated violations as an aggravating factor in approving monetary sanctions. To address this concern, the Commission provided new guidance that broadens the category of what will be considered a “repetitive” violation of a Reliability Standard in the future. As a result, the compliance risk presented By many Reliability Standards, particularly those dependent on human judgments and procedures, will significantly increase. Read more…

On July 6, the North American Electric Reliability Corporation (NERC) filed with the Federal Energy Regulatory Commission (FERC or the Commission) the first batch of Notices of Penalty describing violations of Critical Infrastructure Protection (CIP) Reliability Standards By users, owners, and operators of the bulk-power system. Most of these notices involved inappropriate access to Critical Cyber Assets, and all of the violations were settled for small amounts. Notably, these Notices of Penalty also utilized an abbreviated, confidential format that removed the name of the registered entity and most of the detail regarding the violations at issue. Read more…

Following its March 2010 Open Meeting, the Federal Energy Regulatory Commission issued a series of orders that represent significant modifications in the way mandatory reliability standards are developed and enforced By the North American Electric Reliability Corp. (NERC).

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On March 18, 2010, the Federal Energy Regulatory Commission (FERC or the Commission) issued several orders that portend a significant expansion of FERC control over the development and drafting of mandatory Reliability Standards By the North American Electric Reliability Corporation (NERC). On June 11, FERC denied requests for rehearing of one of these orders, which had directed NERC to propose By June 30, 2010, modifications to Reliability Standard TPL-002-0, to prevent transmission planners from planning to permit the loss of nonconsequential load under single contingency conditions. However, FERC granted an extension of time until March 31, 2011 for the requested modification, and clarified that the modification may permit transmission planners to plan for the loss of firm service at the fringes of their system, so long as these exceptions are technically justified and case-specific.

NERC and others had challenged FERC’s March 18 order, arguing that it does not allow NERC to develop alternatives, that it threatens to impose costs that far exceed the benefit to bulk electric system reliability, and that it fails to give “due weight” to the technical expertise of NERC as required By the Federal Power Act. The Commission rejected all of these arguments.  Read more…