FERC’s proposed penalty guidelines provide the opportunity for improved regulation. More practical and consistent characteristics for determining penalty fine ranges will increase penalty...
NERC Today and Tomorrow
Living in the new world of mandatory reliability standards.
director or manager level, excluding the one manager with more than five years of tenure, the average staff has been with NERC for a little over two years. 24 The main problems reported by regional entities and the industry are twofold: the lack of uniformity and the lack of transparency in the compliance and enforcement process. 25 Attempts to modify and clarify the compliance and enforcement process are ongoing as the bulk-power system participants and stakeholders respond to the initial audits. 26 One important aspect of the perception that there is lack of uniformity in compliance guidance and enforcement involves the confusion over the individual roles of FERC, NERC and regional entities in the process. The industry is unsure of the weight of one entity’s conclusions over another. 27 This confusion is understandable, as Section 215 of the Federal Power Act creates a fair amount of overlap in the responsibilities of FERC, NERC and regional entities. Specifically, FERC is assigned the primary responsibility of ensuring the reliability of the bulk-power system. 28 This was the first goal of Section 215—to end the debates on whether FERC had the appropriate authority to enforce reliability standards under the Federal Power Act. By authorizing FERC to ensure reliability and enforce reliability standards, FERC then could delegate to NERC the responsibility to create and enfforce reliability standards. FERC continues to oversee NERC’s tasks and ensures that NERC is operating effectively and efficiently according to FERC’s standards. Although NERC has the daily task of maintaining reliability within the North American electricity grid, by executing delegation agreements with regional entities, another level of authority is created. Nevertheless, the confusion can be clarified by three points.
First, NERC’s main duty is to develop and establish reliability standards because it has delegated its enforcement powers to the regional entities and only retains a small appellate review role. 29 Second, the regional entities and FERC mainly are responsible for compliance and enforcement. Third, because FERC has the overriding power to approve settlements and penalties determined by the regional entities and reviewed by NERC, the FERC is the final decision maker in enforcement proceedings. Accordingly, these three points are illustrated by specific compliance and enforcement concerns.
One particular point of contention is whether NERC has passed all tasks of monitoring and auditing for compliance to the regional entities through the delegation agreements. In fact, NERC is active in compliance auditing and shares in the responsibility. While section 1 of NERC’s Compliance Monitoring and Enforcement Program 2009 Implementation Plan states that monitoring and enforcement of compliance is delegated to regional entities, the NERC organizational chart in section 3 simultaneously includes compliance program auditors. 30 Just last year, FERC offered guidance on the often confusing compliance audit process. FERC requires compliance audits to be based on recognized U.S. professional standards to allow flexibility, but recognizes the need for a more unified process. 31 Under this guidance, when a NERC auditor takes the lead role because he or she is perceived to be the more independent auditor, the regional entity member will serve as only