State commissions can select from a toolkit of regulatory approaches to promote desired utility cybersecurity behavior. One approach is to allow the industry to selfregulate, and another approach...
The Rush to Reliability
FERC races to impose NERC’s new rules, raising howls of protest in the process.
Yet his words seemed naïve to the then-sitting FERC Commissioner Nora Mead Brownell, who doubted if Congress would have patience, especially after giving NERC everything it had asked for in the 2005 Energy Policy Act (EPACT), which empowered NERC to issue mandatory rules:
“I’m thinking perhaps I don’t agree with your sense of urgency,” said Brownell.
“I would not [like] to be sitting in front of a congressional oversight hearing saying, yes, … you gave use this responsibility, but we kind of decided to take part of the old regime and let that continue.
“I don’t see that reflected in EPACT. … I certainly don’t want to be sitting in those chairs.”
FERC Chairman Joseph T. Kelliher agreed with Brownell, as NERC already had been reporting violations for two years on an informal basis:
“They’ve just had two years of field testing in 2004 and 2005. To me, I’m focused on the summer of ’07. I think our job is to get as many standards that meet the statutory test enforceable before the summer of 2007.”
Thus, in its notice of proposed rulemaking issue last fall, in which it reviewed some 107 new and revised standards proposed by NERC, FERC declined to grant any blanket waiver of financial penalties for reliability violations. It explained that the industry already had had time to familiarize itself with the new regime. Instead, FERC said it would call for discretion in enforcement of penalties only for violations involving those industry entities having to comply with reliability standards for the first time. (See, Mandatory Reliability Standards for the Bulk Power System [NOPR], Docket No. RM06-16, issued Oct. 20, 2006, 117 FERC ¶61,084.)
With its refusal to OK a trial period, FERC has disappointed virtually the en-tire power industry, judging from the scores of comments filed in early January by utilities (public and private), regulators, trade associations, and regional reliability organizations (RROs). Yet other findings also provided cause for complaint.
Thus, the industry overall offered a scathing critique of many of FERC’s NOPR recommendations. Public power complained of high compliance costs for small municipal systems and questioned whether FERC had given full faith to the Regulatory Flexibility Act (5 U.S.Code secs. 601-612), which otherwise protects small business from onerous regulations. Cogenerators worried about protecting behind- the-meter generation from unwarranted interference, and that standards would not remain fuel- and resource-neutral, making it difficult to promote demand-response resources for ancillary services, such as contingency reserves or even AGC—automatic generation control.
Overall, the industry appeared nearly unanimous in faulting FERC’s interpretation and handling of several key ideas. Those concepts included (1) the “NERC Functional Model,” (2) NERC’s “Statement of Compliance Registry Criteria,” and (3) the basic definitions of the terms “bulk power system,” and “bulk electric system.”
No one faults the commission much for its sense of urgency to get enforceable standards in place by June 1. Rather, the comments suggest that FERC has overshot its authority, both in telling NERC how to refine the standards now awaiting approval, and in defining the sectors and players within the electric utility industry