[BETA] Fortnightly

September meeting sends draft legislation back to the drawing board.

Reliability is a self-correcting issue (em if we let it slide, something will happen and it will be corrected ¼ [But] do you want the government to do it?"

That was one industry representative speaking of attempts by the North American Electric Reliability Council (known as NERC) to evolve into a self-regulating reliability organization, or SRRO. But despite a reluctance for more government regulation, the same industry concedes that any transformation will likely require federal legislation, or at least a transfer of oversight to a federal agency, such as the Federal Energy Regulatory Commission.

This past summer the NERC Board of Trustees sought public comments after releasing draft legislation on electric reliability that would restructure the group as an SRRO known as the North American Electric Reliability Organization or "NAERO," the only SRRO in the country. Section 215 of the draft law defines NAERO's threefold mission: 1) develop, promote, and enforce standards to provide for the reliability in operation of the North American interconnected bulk electric system; 2) maintain security for short-term reliability; and 3) assess and encourage long-term adequacy of electric power supply. (See http://www.naero.org/legislation.html.)

Nevertheless, as seen by the public comments, the draft legislation has done little to dispel the controversy that attended NERC's release last winter of the "Blue Ribbon" report of its Electric Reliability Panel. That report drew comments from more than 30 different interests, including most of NERC's 10 regional councils, various utilities, marketers, state PUCs and trade organizations, as well as the Army Corps of Engineers. (See http://www.nerc.com/~blue/)

Those comments, plus those submitted on the draft legislation, have revealed a long list of issues surrounding NERC's transformation to NAERO:

• Structure. A national or a regional organization?

• Governance. What role for regional councils?

• States Rights. Can PUCs participate in NAERO, or impose their own reliability rules?

• Congressional Strategy. Should NAERO wait for a comprehensive electric restructuring bill?

• Generation. Should NAERO still monitor and ensure adequacy of supply?

• Standard-Setting. What process to set reliability rules? Use old procedures or those in place at other institutions, such as ANSI or IEEE?

• FERC Oversight. De novo review of technical standards? Or should FERC defer to NAERO?

• Lawsuits. Immunity for violation of NAERO standards?

• Enforcement. Is NAERO both standard-setter and police force?

• Funding. A nonbypassable charge? Who is at risk if costs are not recovered? Are NAERO participants salaried or will they work voluntarily?

Even as NERC ponders its transformation to NAERO, policy may also develop on two additional fronts.

First, during the past year, the FERC has found itself called upon to rule on the efficacy of proposed NERC standards (em whether they are consistent with the FERC's standards for open transmission set down in Orders 888 and 889. In fact, a coalition of power marketers has filed a petition for rulemaking asking the FERC to take a more active role in reliability and to revamp rules to guarantee transmission access on a commercial basis, while ending preferences for so-called native load.

Second, acting on a parallel track,