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.
an expert on subject matter and monitor the process. 32 Additionally, FERC seeks to separate the compliance audit process from any enforcement roles by discouraging consideration of monetary penalties, sanctions, or decisions regarding violations during the audit. 33
The electric industry and regional entities have complained that the compliance and enforcement process isn’t sufficiently transparent. The compliance process is confidential until NERC files notice of the penalty with FERC; it’s therefore difficult for nonparties to gain knowledge of the process. Although NERC is aware of the benefits of not publicizing an alleged violation until the recipient has an opportunity to contest the allegations and an opportunity for a hearing, NERC is committed to share process information while honoring confidentiality at the same time. 34 NERC has posted on its Web site charts and timelines showing compliance and enforcement procedures. NERC also improved the auditing process by posting the audit schedule earlier. 35 Likewise, NERC addressed the industry’s uncertainty about the variability of audits across regions. NERC developed reliability standard audit worksheets and provides information to the industry about the types of evidence required to show compliance with a reliability standard. 36 Moreover, in May 2008, the NERC board of trustees compliance committee began conducting open quarterly meetings to address compliance questions. 37 NERC also reached out to the compliance coordinators of regional entities and informed them of the registration database on the NERC Web site, which provides not only up-to-date audit worksheets and the audit schedule, but also new compliance reports, notice of penalty filings, and guidance documents. 38
In addition to compliance, NERC assigns the enforcement authority of all regulated entities to the regional entities via the FERC-approved delegation agreements. 39 The delegation agreements authorize the regional entities to impose penalties for violation of reliability standards. 40 Still, NERC maintains the ability to impose penalties on its own initiative. 41 The authority granted to it as the ERO under Section 215 remains intact despite the delegation of that authority to the regional entities. Yet in practice, NERC rarely imposes penalties, because as originally intended by Section 215, NERC is considered to have the technical expertise as to reliability standards, not enforcement. 42 In fact, FERC maintains the authority to issue a penalty in absence of NERC action. 43 Additionally, any proposed penalty by a regional entity or NERC is subject to review by FERC with or without an application for review by the registered entity. However, while FERC is cautious to retain authority, FERC is equally wary of weakening the enforcement efforts of NERC and the regional entities. 44 Neither the legislature nor FERC ever intended to review every notice of penalty filed by NERC and there’s a level of trust in NERC’s discretion of enforcement.
In the end, it’s important to remember that overall, FERC has the duty to ensure uniformity in compliance and enforcement, with assistance from NERC and regional entities. These issues are unlikely to be resolved quickly, and as more enforcement actions make their way through the administrative process, the three entities’ roles in compliance and enforcement