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Reliability in Flux

NERC Assessments are Fine, but DOE Task Force Gets Last Word

Fortnightly Magazine - January 1 1998

lacks a statutory framework for federal government oversight and thus violates antitrust principles.

After all, NERC enjoys neither express nor implicit antitrust immunity, as do some other self-regulating organizations, such as the National Association of Securities Dealers, which runs stock trading as an SRO subject to continuing and mandatory oversight from the Securities and Exchange Commission. ELCON, led by Anderson, is urging the DOE Reliability Task Force to recommend legislation to create a new, self-regulating reliability organization - an "SRRO" - subject to limited FERC oversight. With Anderson's appointment to the task force, ELCON seized the moment to educate the other task force member on the state of the law.

"We have been asked," wrote law firm partner Sara D. Schotland, "to provide our legal analysis as to whether the Department of Energy or NERC has adequate legal authority to address reliability in the era of open access. Our brief answer to this question is 'no,' even though NERC's activities are intended to carry out the public interest."

Posturing and Word Smithing

There's something to be said for keeping words vague.

At the November meeting, as the reliability task force conducted its final review of language in the Oct. 27 draft of its position paper on reliability (Maintaining Bulk-Power Reliability Through Use of a Self-Regulating Organization), a document very much the product of committee and compromise. The members debated whether to leave in a footnote that included a specific recommendation to model the new SRRO directly after the NASD. Task force chairman and ex-congressman Phil Sharp jumped in immediately, drawing on his experience in mark-up of energy bills, and said he would delete the footnote. Sharp appeared intent to avoid language in the position paper that would suggest either criticism or accidental praise of the present system.

Later, the task force weighed carefully whether to recommend specific oversight authority for FERC. Sending in her comments by proxy, absent member Susan F. Tierney wanted to insert language that the FERC would "conduct a review" of NERC standards. John Anderson countered, winning the argument to retain the draft language, which appeared tailored to suggest a lack of open access at NERC:

"It is not clear whether the FERC has sufficient statutory authority to enforce NERC rules. The FERC has issued several orders requiring parties to abide by the NERC standards and parties have assented¼ However, the use of FERC's conditioning authority to enforce NERC standards has not yet been challenged. Others question whether the FERC should enforce these rules in light of concerns over NERC's governance and decision-making procedures."

The task force continued with its word smithing. José Manuel Delgado (director, electric system operations, Wisconsin Electric) questioned another footnote recommending that the SRRO consider "distribution-level reliability concerns," saying it would upset state regulators. "Is there a difference between transmission and distribution reliability," asked Ralph Cavanagh, from the Natural Resources Defense Council. Former FERC Commissioner Matthew Holden: "I hate for the committee to say things definitionally when we don't have to, and then get fly-specked."

The mark-up continued, with Sharp killing the footnote about distribution