As the U.S. electric power industry unbundles, the industry and its regulators grapple with two big questions concerning the degree to which distribution services should be unbundled. First, what...
NERC Today and Tomorrow
Living in the new world of mandatory reliability standards.
will become clearer.
Effectiveness of NERC Standards
From the currently available information, it’s difficult to determine the effectiveness of NERC standards. The annual CMEP reports show both a lack of change and possible improvements, while the Three Year ERO Performance Assessment Report optimistically finds that reliability indeed has improved. 45
Yet the numbers from the compliance monitoring reports and other assessments don’t provide clear evidence to support a finding of improved reliability due to the mandatory standards. In 2008, the most violated standards involved sabotage reporting and transmission and generation protection system maintenance and testing, the same top standards violated in 2007. 46 Furthermore, the total number of disturbances increased from 30 to 43, although the increase was due to less severe category 2 disturbances. 47 On a positive note, the number of violations for each type of standard decreased dramatically. In 2007 there were a total of 560 violations for the sabotage reporting standard and 256 for the transmission and generation protection system maintenance and testing standard, but only 190 and 204 respectively in 2008. 48 The comparison may be unfair because of the six months transition period in 2007 when registered entities were encouraged to self-report because of the enforcement entities’ increased discretion to dismiss self-reported violations.
Another positive effect of mandatory standards, although small, is the decrease of the total number of vegetation-related outages within rights-of-way from 16 in 2007 to 11 in 2008. 49 By 2009, for the third quarter from July to September, there were no transmission outages caused by vegetation growing into the lines from within rights-of-way and only three outages caused by vegetation falling into lines from outside rights-of-way. 50
The success of mandatory standards also might be suspect because the anticipated deterrence effect of fines hasn’t materialized. Although fines have been assessed, they are much less than the $1 million per day maximum allowed. As of June 2009, only a total of $833,000 in penalties has been assessed against 10 registered entities. 51 The largest fine so far has been against Florida Power & Light for a February 2008 blackout that lasted several hours. 52
While the numbers don’t give conclusive evidence of success, the three-year ERO performance assessment makes three valid points that indicate that the mandatory reliability regime is proceeding in the right direction. First, one might conclude with some certainty that voluntary standards were ineffective in the past. Because no blackout of the same severity as the 2003 blackout has occurred since 2006, the mandatory standards are at least more effective than the voluntary standards. 53 Second, the registration of the owners, operators, and users of the bulk-power system clearly identifies which parties are responsible for what functions of the system, ensuring that industry players are aware of their roles in ensuring reliability. 54 Last, NERC’s role as compliance and enforcement coordinator and its annual assessment of the program promotes communication among the regions and timely improvements of the reliability regime as a whole. 55
Due to the lack of long-term assessments, it’s difficult to determine whether the standards, audits and