FERC, CFTC, and State Energy Law Developments

On November 29 and 30, 2011, FERC hosted a technical conference to explore the progress made on addressing concerns raised at the February 8, 2011 Reliability Technical Conference. The first day of the conference focused on the effectiveness of NERC’s prioritization tool and addressed issues relating to the NERC compliance and enforcement process. With regard to FERC’s directives, the panelists stated that they need greater clarity, more relaxed time frames, and a streamlined system that encourages input from industry members. FERC Chairman Jon Wellinghoff asked the panelists for suggestions on how FERC can accelerate the development of robust standards that minimize the risk of outages. In response, the panelists suggested that FERC Staff participate on taskforces, offer written input while reliability standards are being developed, focus audits on issues FERC finds most important, and focus directives on high-level, instead of specific, issues.

On August 29, the Commission approved a $350,000 settlement between the Grand River Dam Authority, NERC, and FERC to settle allegations of Reliability Standard violations By the Grand River Dam Authority, an Oklahoma state agency. NERC and the Commission ultimately concluded that the Grand River Dam Authority violated 52 Requirements in 19 Reliability Standards. This appears to be the first settlement of a reliability investigation By the Commission that was not explicitly tied to a bulk-power system incident.

On August 16, FERC and NERC issued a joint report on the outages and curtailments that occurred in the southwest during the extraordinary cold snap in early February 2011.

The report summarizes the events that occurred in early February, describing the scope of the generator outages that occurred and the natural gas production that declined due to the extreme cold weather. As noted in the report, the cold weather led to the unavailability of approximately one-third of Electric Reliability Council of Texas (ERCOT) generation at one point during the event, and spot prices in the ERCOT market hit $3,000 per MWh. In addition, the loss of natural gas production resulted in the curtailment of 50,000 customers in the southwest.

At the NERC Board of Trustees meeting this week in Vancouver, Canada, NERC outlined a new initiative intended to reduce the administrative burden on Registered Entities associated with the processing of Reliability Standard violations. The procedure, which has yet to be spelled out in detail, would adjust the administrative process based on the risk to bulk power system reliability presented By a given violation.

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

Recognizing that tree contact with transmission lines is a leading cause of electric power outages, the Federal Energy Regulatory Commission has established a new section on its website: Tree Trimming and Vegetation Management.

The website includes information regarding the mandatory Electric Reliability Standards governing vegetation management, as well as landowner rights and proper tree care information.

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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On March 17, 2011, the Federal Energy Regulatory Commission (Commission) issued an order affirming a notice of penalty filed By the North American Electric Reliability Corporation (NERC) regarding an alleged violation of Reliability Standard FAC-003-1 Requirement R2 (Annual Plan for Vegetation Management) By the Turlock Irrigation District (Turlock). Turlock’s alleged violation of FAC-003-1 Requirement R2 resulted in the loss of firm load due to tree contact with a 230 kV transmission line, combined with a human error related to a communication switch. The Commission affirmed the $80,000 penalty agreed upon By Turlock and the Western Electricity Coordinating Council (WECC), and provided guidance on how future penalties should be assessed for reliability violations that incur a loss of load.