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NERC's Reliability Standards: The Good, the Bad, and the Fill-in-the-Blanks

How to prepare for mandatory enforcement.

Fortnightly Magazine - August 2006

primer on the EPACT and NERC standards, see sidebars) . As part of its petition, NERC requests that FERC institute a Notice of Proposed Rulemaking so that industry participants could comment fully on the proposed standards.

On May 11, 2006, the staff of FERC’s Division of Reliability, at the direction of FERC Chairman Joseph T. Kelliher, filed a Preliminary Assessment of NERC’s Proposed Reliability Standards. FERC invited interested parties to comment on staff’s assessment and held a technical conference in early July to explore issues surrounding the proposed standards. Panelists at the technical conference included the president of NERC and senior leaders from investor-owned utilities, public power utilities, power marketers, regional transmission operators, and other industry groups.

FERC staff’s Preliminary Assessment centered on technical issues and identified a number of potential deficiencies in the proposed reliability standards. FERC staff noted that in its reliability standards filing, NERC had acknowledged a number of deficiencies in the proposed standards and had proposed a work plan for addressing them. FERC staff’s Preliminary Assessment identified those deficiencies and a number of other deficiencies as well. FERC staff identified the following major areas of concern:

Blackout Report Recommendations. Staff noted that although the report of the United States-Canada Power System Outage Task Force on the August 2003 blackout identified many of the primary causes of that blackout and other major blackouts in the United States, many of the task force’s recommendations were not yet reflected in NERC’s proposed reliability standards. FERC staff acknowledged that NERC has activities in place to address the recommendations, but those activities have not yet resulted in full implementation of the proposed reliability standards.

Ambiguity. Staff concluded that elements of numerous proposed reliability standards appear to be subject to multiple interpretations, especially with regard to the specificity of the standards’ requirements, measurability, and levels of compliance. 

Technical Adequacy. Staff concluded that the requirements specified in some of the proposed reliability standards may not be sufficient to ensure an adequate level of reliability. Staff noted that while the final rule states that “best practice” may be an inappropriately high standard, the final rule also warns that a “lowest common denominator” approach will not be acceptable if it is not sufficient to ensure an adequate level of system reliability. 

Measures and Compliance. FERC staff noted that many of the proposed reliability standards lack adequate criteria for measuring compliance with the NERC standards, and that such failure could lead to inconsistent interpretation and enforcement of the standards. Staff noted that NERC’s petition identifies certain standards in this category and acknowledged that a project is underway for NERC to file measures and compliance components by November, 2006.

Undue Negative Effects on Competition. FERC staff stated that the primary purpose of its Preliminary Assessment was to provide a technical reliability analysis of the proposed Reliability Standards, rather than to identify those that could have an undue negative effect on competition. However, in certain instances FERC staff identified standards that could raise such concerns, such as the standards that govern the calculation of available