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Preparing for the Inevitable

Mitigating enforcement penalties in NERC hearings and appeals.

Fortnightly Magazine - March 2010

the NERC and regional entity hearing and appeals procedures. But with increasingly severe monetary penalties, it’s only a matter of time before alleged violations and proposed penalties are challenged using the available procedures. Registered entities can take certain measures immediately to enhance their chances in these challenges. Taking those measures sooner rather than later will help avoid violations and mitigate penalties should violations occur—and might improve the reliability of the grid.



1. The one exception is Baltimore Gas & Electric Co.’s acceptance of the penalty proposed by the regional entity. See North American Electric Reliability Corp. , “NERC Notice of Penalty regarding Baltimore Gas & Electric Company,” FERC Docket No. NP08-1-000 (filed June 4, 2008).

2. This article focuses on the hearing and appeals process outlined in NERC’s Compliance Monitoring and Enforcement Program (CMEP), Appendix 4C to the NERC Rules of Procedure (effective Oct. 2, 2009). Regional variations may apply.

3. CMEP at § 3.0.

4. Id. at § 5.2. A mitigation plan also is required within 30 days of the NAVAPS if the registered entity fails to contest the violation or proposed penalty. Id. at 6.4.

5. CMEP at § 5.1.

6. All mitigation plans are subject to approval by NERC. Once approved, the plan must be carried out immediately in accordance with its terms. NERC will forward the mitigation plan to FERC for additional review, but FERC’s review doesn’t stay the timeline in which the alleged violator must commence implementation of the plan. See North American Electric Reliability Corp. , 119 FERC ¶ 61,274 (2007) (order clarifying procedures).

7. CMEP at § 5.2.

8. Id. Settlement negotiations may take place at any time up until a notice of penalty is filed with FERC.

9. Id.

10. Federal Power Act (FPA) § 215(e)(2).

11. 18 C.F.R. § 39.7(e)(1) (2009). FERC also has its own independent enforcement authority beyond NERC’s powers. If FERC chooses, it can conduct its own investigations and impose its own penalties, subject to notice and an opportunity for a hearing. FPA § 215(e)(3); 18 C.F.R. § 39.7(f) (2009).

12. CMEP at Att. 2, §§ 1.3.1, 1.9. A remedial action directive is intended to address immediate threats to the reliability of the bulk power system, and therefore the procedures for processing proposed remedial action directives and challenges to them are substantially shortened.

13. Id. at § 1.1.1.

14. Id.

15. Id.

16. See id . at §§ 1.5, 1.6, 1.7.

17. Id. at §§ 1.1.2, 1.6.11.

18. Id. at § 1.1.3.

19. Id. at § 1.7.4.

20. Id.

21. Id. at § 1.7.5.

22. Id. at § 1.7.8.

23. Id. at § 1.7.10; NERC Rule of Procedure § 410.

24. NERC Rule of Procedure § 410.

25. CMEP at § 5.5.

26. NERC CMEP, Attachment 2, p. 32.

27. FPA § 215(e)(2).

28. Id.

29. 18 C.F.R. § 39.7(e)(3) (2009).

30. 18 C.F.R. § 39.7(e)(1) (2009).

31. 18 C.F.R. § 39.7(e)(6) (2009).

32. FPA § 215(e)(2).

33. Sanction Guidelines of the North American Electric Reliability Corporation , Appendix 4B