FERC, CFTC, and State Energy Law Developments

On June 9, the U.S. House of Representatives passed the Grid Reliability and Infrastructure Defense Act (GRID Act), which is intended to strengthen the U.S. electrical grid against terrorist attacks, cyber threats, electromagnetic pulse weapons, and solar storms. The GRID Act authorizes the Federal Energy Regulatory Commission (FERC) to issue emergency orders to protect critical electric infrastructure, and to take other measures to address current and potential vulnerabilities.

The GRID Act amends the Federal Power Act to permit FERC to issue orders for emergency measures to protect the reliability of either the bulk-power system or critical electric infrastructure whenever the President issues a written directive or determination identifying an imminent grid security threat. FERC’s authority to take such action can be employed without notice or hearing. However, FERC, to the extent practicable in light of the nature of the grid security threat and the urgency for emergency measures, is instructed to consult with certain governmental authorities, including the governments of Canada and Mexico, regarding implementation of such emergency measures. Any orders issued By FERC that implement emergency measures must be discontinued within 30 days of (i) the President providing a directive that an imminent security threat no longer exists, or (ii) FERC determining that the need for emergency measures no longer exists. In no case may a Commission order implementing emergency measures continue for longer than one year.  Read more…

How does one successfully prepare for a NERC audit?  Each year, the Regional Entities of the North American Electric Reliability Corporation (“NERC”) conduct audits of companies to determine compliance with Reliability Standards.

On June 3, our presenters reviewed:

  • How to prepare Reliability Standard Audit Worksheets and mark appropriate documentation.
  • How to best answer auditor questions and present material during the audit.
  • How to address issues that emerge during the audit.
  • NERC’s process for conducting the audit and drafting the audit report.

A recording of the webcast and the associated materials are available.

In its June 2010 issue, The Electricity Journal published an article By Daniel Skees titled "Inventing the Future of Reliability: FERC’s Recent Orders and the Consolidation of Reliability Authority."

The Energy Policy Act of 2005 established mandatory reliability standard enforcement under a system in which the Federal Energy Regulatory Commission and the Electric Reliability Organization would have their own spheres of responsibility and authority. Recent orders, however, reflect the Commission's frustration with the reliability standard drafting process and suggest that the Electric Reliability Organization's discretion is likely to receive less deference in the future.

On April 27, Morgan Lewis's Energy Practice presented this webcast on the current issues in transmission development. Topics of discussion included:

  • Necessary state and/or federal approvals for new transmission
  • Rate incentives for new transmission
  • Corporate structures for holding and developing new transmission
  • Financing options for developing new transmission

A recording of the webcast and the associated materials are available.

On March 18, the Federal Energy Regulatory Commission (FERC or the 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 Corporation (NERC).  Read more…

On March 18, in a Notice of Proposed Rulemaking (NOPR) likely to have wide-ranging effects on the planning of transmission systems across the United States, the Federal Energy Regulatory Commission (FERC) proposed to reject the industry understanding of a crucial Transmission Planning (TPL) Reliability Standard developed by the North American Electric Reliability Corporation (NERC), and instead impose a broader requirement on Planning Authorities and Transmission Planners when they assess the reliability of their systems under single contingency conditions and plan appropriate changes to their systems.  Read more…

Earlier today, the Federal Energy Regulatory Commission (FERC) approved the implementation plan for Critical Infrastructure Protection (CIP) Reliability Standards compliance By nuclear generator owners and operators in the United States. As a result, the timeline for achieving compliance with these complex Reliability Standards on cyber-security protections has begun. Compliance with two CIP Reliability Standard Requirements, CIP-002-1 Requirements R1 and R2, must be achieved within 12 months. Compliance with the remaining Requirements is dependent on future developments, but will likely be due within 18 months. Due to the complexity of implementing these measures alongside the separate cyber-security regulations of the Nuclear Regulatory Commission (NRC), achieving auditable compliance By these deadlines is likely to be a lengthy process, specific to the facilities of each licensee.  Read more...

On February 26, the Federal Energy Regulatory Commission (FERC) for the first time initiated a review of a Notice of Penalty filed By the North American Electric Reliability Corporation (NERC) regarding the settlement of an alleged violation of mandatory Reliability Standards. According to FERC, the $80,000 proposed penalty amount in the Notice of Penalty may be insufficient under the circumstances surrounding the violations at issue, because the vegetation-related outage led to a combined loss of 270 MW of firm load in the systems of two Registered Entities: Turlock Irrigation District (Turlock), the subject of the Notice of Penalty, and Modesto Irrigation District. In order to determine whether the penalty is appropriate, and to determine if there are any other violations that may have contributed to the loss of firm load, FERC stayed the effectiveness of the settlement and established a deadline of March 18, 2010 for answers, interventions, and comments on these issues.  Read more…

For its March 2010 issue, The Electricity Journal published an article By Levi McAllister and Kelly L. Dawson titled "Restoring Faith in the Bulk-Power System: An Early Assessment of Mandatory Reliability Standards."

The driving force underlying creation of mandatory reliability standards was the prevention of widespread outages, such as those that occurred in 1965, 1977 and 2003. So far, no similar outage has occurred when an entity is in full compliance with the standards, and NERC and FERC have demonstrated that they will actively enforce compliance while aggressively pursuing entities alleged to be non-compliant.

On January 21, 2010, the Federal Energy Regulatory Commission (FERC) approved Technical Feasibility Exception (TFE) rules proposed By the North American Electric Reliability Corporation (NERC) applicable to certain Critical Infrastructure Protection (CIP) mandatory Reliability Standards. However, reiterating its prior conclusions from Order No. 706, FERC directed NERC to revise the rules to clarify that the TFE rules will apply to the compensating or alternative measures implemented By Responsible Entities under CIP-006-1 R1.1 and CIP-007-1 R3.  Read more…