Electric utilities (Federal Power Act): Bulk-power system; mandatory reliability standards,
[Federal Register: November 3, 2006 (Volume 71, Number 213)]
[Proposed Rules]
[Page 64769-64879]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr03no06-19]
[[Page 64769]]
Part II
Department of Energy
Federal Energy Regulatory Commission
18 CFR Part 40
Mandatory Reliability Standards for the Bulk-Power System; Proposed Rule
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DEPARTMENT OF ENERGY
Federal Energy Regulatory Commission
18 CFR Part 40
Docket No. RM06-16-000]
Mandatory Reliability Standards for the Bulk-Power System
October 20, 2006. AGENCY: Federal Energy Regulatory Commission, DOE.
ACTION: Notice of proposed rulemaking.
SUMMARY: Pursuant to section 215 of the Federal Power Act (FPA), the Commission is proposing to approve 83 of 107 proposed Reliability Standards, including six of the eight regional differences, and the Glossary of Terms Used in Reliability Standards developed by the North American Electric Reliability Council, on behalf of its wholly-owned subsidiary, the North American Electric Reliability Corporation (NERC), which the Commission has certified as the Electric Reliability Organization (ERO) responsible for developing and enforcing mandatory Reliability Standards. Those Reliability Standards meet the requirements of section 215 of the FPA and Part 39 of the Commission's regulations. However, although we believe it is in the public interest to make these Reliability Standards mandatory and enforceable by June 2007, we also find that much work remains to be done. Specifically, we believe that many of these Reliability Standards require significant improvement to address, among other things, the recommendations of the Blackout Report. We therefore propose, pursuant to section 215(d)(5), to require the ERO to make significant improvements to many of the 83 Reliability Standards that are being approved as mandatory and enforceable. Appendix D provides a list of the Reliability Standards that should be given the highest priority when the ERO undertakes to make these improvements. With respect to the remaining 24 Reliability Standards, the Commission proposes that they remain pending at the Commission until further information is provided. The Commission is not proposing to remand any Reliability Standards.
The Commission proposes to amend the text of its regulation to require that each Reliability Standard identify the subset of users, owners and operators to which that particular Reliability Standard applies. The Commission also is proposing to amend its regulations to require that each Reliability Standard that is approved by the Commission will be maintained in the Commission's Public Reference Room and on the ERO's Internet Web site for public inspection.
DATES: Comments are due January 2, 2007.
ADDRESSES: You may submit comments, identified by Docket No. RM06-16- 000, by one of the following methods:
Agency Web site: http://ferc.gov. Follow the instructions
for submitting comments via the eFiling link found in the Comment Procedures section of the Preamble.
Mail: Commenters unable to file comments electronically must mail or hand deliver an original and 14 copies of their comments to: Federal Energy Regulatory Commission, Office of the Secretary, 888 First Street. NE., Washington, DC 20426. Refer to the Comment Procedures section of the preamble for additional information on how to file paper comments.
FOR FURTHER INFORMATION CONTACT: Jonathan First (Legal Information), Office of the General Counsel, Federal Energy Regulatory Commission, 888 First Street, NE., Washington, DC 20426, (202) 502-8529. Paul Silverman (Legal Information), Office of the General Counsel, Federal Energy Regulatory Commission, 888 First Street, NE., Washington, DC 20426, (202) 502-8683. Robert Snow (Technical Information), Office of Energy Markets and Reliability, Division of Reliability, Federal Energy Regulatory Commission, 888 First Street, NE., Washington, DC 20426, (202) 502- 6716. Kumar Agarwal (Technical Information), Office of Energy Market and Reliability, Division of Policy Analysis and Rulemaking, Federal Energy Regulatory Commission, 888 First Street, NE., Washington, DC 20426, (202) 502-8923.
SUPPLEMENTARY INFORMATION:
Paragraph Numbers
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Introduction............................................
1 II. Background.............................................
12
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Voluntary Reliability Standards.....................
12
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EPAct 2005 and Order No. 672........................
15
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The Electric Reliability Organization...............
21
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NERC Petition for Approval of Reliability Standards.
24
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Staff Preliminary Assessment........................
29 III. Discussion............................................
33
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The Commission's Reliability Standards Proposal.....
33 1. Applicability...................................
35 2. Mandatory Reliability Standards.................
37 3. Availability of Reliability Standards...........
39
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Applicability Issues................................
42 1. Definition of User of the Bulk-Power System.....
42 2. Use of the NERC Functional Model................
44 3. Applicability to Small Entities.................
49 4. Regional Reliability Organizations..............
54 5. Bulk-Power System v. Bulk Electric System.......
60
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Mandatory Reliability Standards.....................
72 1. Legal Standard for Approval of Reliability
72 Standards......................................... 2. Commission Options When Acting on a Reliability
76 Standard.......................................... 3. Prioritizing Modifications to Reliability
83 Standards......................................... 4. Trial Period....................................
90 5. International Coordination of Remands...........
94
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Common Issues Pertaining to Reliability Standards...
96 1. Blackout Report Recommendations.................
97
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Measures and Levels of Non-Compliance...........
103 3. Ambiguities and Potential Multiple
108 Interpretations................................... 4. Technical Adequacy..............................
113 5. Fill-in-the-Blank Standards.....................
116
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Discussion of Each Individual Reliability Standard..
124 1. BAL: Resource and Demand Balancing..............
125 2. CIP: Critical Infrastructure Protection.........
217 3. COM: Communications.............................
232 4. EOP: Emergency Preparedness and Operations......
263 5. FAC: Facilities Design, Connections,
343 Maintenance, and Transfer Capabilities............ 6. INT: Interchange Scheduling and Coordination....
427 7. IRO: Interconnection Reliability Operations and
497 Coordination...................................... 8. MOD: Modeling, Data, and Analysis...............
588 9. PER: Personnel Performance, Training and
749 Qualifications.................................... 10. PRC: Protection and Control....................
802 11. TOP: Transmission Operations...................
951 12. TPL: Transmission Planning.....................
1037 13. VAR: Voltage and Reactive Control..............
1129 14. Glossary of Terms Used in Reliability Standards
1151 IV. Information Collection Statement.......................
1157 V. Environmental Analysis..................................
1171 VI. Regulatory Flexibility Act Certification...............
1172 VII. Comment Procedures....................................
1177 VIII. Document Availability................................
1179
Appendix A: Proposed Disposition of Standards, Glossary and Regional Differences Appendix B: Commenters on Staff Preliminary Assessment Appendix C: Abbreviations in this Document Appendix D: High Priority List
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Introduction
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Pursuant to section 215 of the Federal Power Act (FPA), the Commission is proposing to approve 83 of 107 proposed Reliability Standards, including six of the eight regional differences, and the Glossary of Terms Used in Reliability Standards (glossary) developed by the North American Electric Reliability Council, on behalf of its wholly-owned subsidiary, the North American Electric Reliability Corporation (NERC), which the Commission has certified as the Electric Reliability Organization (ERO) responsible for developing and enforcing mandatory Reliability Standards. Those Reliability Standards meet the requirements of section 215 of the FPA and Part 39 of the Commission's regulations. However, although we believe it is in the public interest to make these Reliability Standards mandatory and enforceable by June 2007, we also find that much work remains to be done. Specifically, we believe that many of these Reliability Standards require significant improvement to address, among other things, the recommendations of the Blackout Report. We therefore propose, pursuant to section 215(d)(5), to require the ERO to make significant improvements to many of the 83 Reliability Standards that are being approved as mandatory and enforceable. Appendix D provides a list of the Reliability Standards that should be given the highest priority when the ERO undertakes to make these improvements. With respect to the remaining 24 Reliability Standards, the Commission proposes that they remain pending at the Commission until further information is provided. The Commission is not proposing to remand any Reliability Standards.
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The Commission proposes to amend the text of its regulations to require that each Reliability Standard identify the subset of users, owners, and operators to which that particular Reliability Standard applies. The Commission also is proposing to amend its regulations to require that each Reliability Standard that is approved by the Commission will be maintained in the Commission's Public Reference Room and on the ERO's Internet Web site for public inspection.
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On August 8, 2005, The Electricity Modernization Act of 2005, which is Title XII of the Energy Policy Act of 2005 (EPAct 2005), was enacted into law.\1\ EPAct 2005 adds a new section 215 to the FPA, which requires a Commission-certified ERO to develop mandatory and enforceable Reliability Standards, which are subject to Commission review and approval. Once approved, the Reliability Standards may be enforced by the ERO, subject to Commission oversight.
\1\ The Energy Policy Act of 2005, Pub. L. No. 109-58, Title XII, Subtitle A, 119 Stat. 594, 941 (2005), to be codified at 16 U.S.C. 824o (2000).
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On February 3, 2006, the Commission issued Order No. 672, which implements section 215 of the FPA and provides specific processes for the certification of one entity as the ERO, the development and approval of mandatory Reliability Standards, and the compliance with and enforcement of approved Reliability Standards.\2\ On April 4, 2006, NERC made two filings: (1) An application for certification of NERC Corporation as the ERO and (2) a petition for Commission approval of 102 Reliability Standards, as well as eight regional differences and a glossary of terms.\3\ On July 20, 2006, the Commission issued an order certifying NERC Corporation as the ERO.\4\ This rulemaking proceeding addresses NERC's submission of Reliability Standards and represents the next
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significant step toward achieving the statutory goal of mandatory and enforceable Reliability Standards.
\2\ Rules Concerning Certification of the Electric Reliability Organization; Procedures for the Establishment, Approval and Enforcement of Electric Reliability Standards, Order No. 672, 71 FR 8662 (February 17, 2006), FERC Stats. & Regs. ] 31,204 (2006), order on reh'g, Order No. 672-A, 71 FR 19814 (April 18, 2006), FERC Stats. & Regs. ] 31,212 (2006).
\3\ The April 4, 2006 filing contained 102 Reliability Standards, a Glossary of Terms Used in Reliability Standards and eight regional differences. On August 28, 2006, NERC filed an additional 19 Reliability Standards and withdrew three of the 102 Reliability Standards. Eleven of the nineteen reliability Standards replace those filed on April 4, 2006.
\4\ ERO Certification Order, 116 FERC ] 61,062.
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The ERO's filing is comprehensive, and represents a significant effort by NERC, the industry representatives who serve on NERC's standards development teams, and the entities that participate in NERC's Reliability Standards development process. After the August 2003 cascading blackout that affected large portions of the central and eastern United States and Canada, NERC revised many of the then- existing NERC operating policies and planning standards to provide greater clarity and compliance guidance. These revised standards (referred to as ``Version 0'' and ``Version 1'') were developed using NERC's American National Standards Institute (ANSI)-accredited Reliability Standards development process and are what has been filed with the Commission for approval.
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The Commission believes that these Reliability Standards will form a solid foundation on which to develop and maintain the reliability of the North American Bulk-Power System. At the same time, the Commission recognizes, as does NERC,\5\ that the Version 0 and Version 1 standards were developed as an initial step in the transition to clear, enforceable Reliability Standards. As such, some technical, enforceability and policy aspects of the 107 proposed Reliability Standards submitted by the ERO can, and should, be improved.
\5\ See NERC Petition at 69.
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Therefore, in evaluating NERC's proposal, the Commission recognizes that the Reliability Standards are in a state of transition and that NERC has ongoing plans to improve them. Thus, at this juncture, we will approve a proposed Reliability Standard that needs clarification, improvement, or strengthening, provided that we are confident that it satisfies the statutory requirement that a Reliability Standard must be ``just, reasonable, not unduly discriminatory or preferential, and in the public interest.'' \6\ Rather than remanding an imperfect Reliability Standard, the NOPR generally proposes to approve such a Reliability Standard. In addition, as a distinct action under the statute, the Commission proposes to direct that the ERO modify such a Reliability Standard, pursuant to section 215(d)(5) of the FPA, to address the identified issues or concerns. This approach would allow the proposed Reliability Standard to be enforceable while the ERO develops any required modifications.
\6\ 16 U.S.C. 824o(d)(2).
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The Commission believes that, for this period of transition from a voluntary to a mandatory system of compliance, the above course of action is appropriate when reviewing the ERO's first set of proposed Reliability Standards. This action provides the benefit that mandatory and enforceable Reliability Standards will be in effect prior to the summer of 2007, the next anticipated peak season for the nation's Bulk- Power System. Critical to our decision to propose to approve such Reliability Standards is NERC's representation to the Commission that approval of the existing Reliability Standards ``will reinforce the importance of these standards and will have an immediate positive benefit with regard to the reliability performance of all bulk power system owners, operator and users * * *.'' \7\
\7\ NERC Petition at 25.
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Accordingly, the Commission proposes to approve the Reliability Standards based on recognizing this period of transition, the importance of making them mandatory before the summer of 2007, and by giving due weight to the technical expertise of the ERO with the expectation that the Reliability Standards will accomplish the purpose represented to the Commission by the ERO; and that they will improve the reliability of the Bulk-Power System by proactively preventing situations that can lead to blackouts. By taking this approach, we believe that the responsibility for the technical adequacy of the proposed Reliability Standards falls squarely on the ERO, and we expect the ERO to monitor the effectiveness of the proposed Reliability Standards and inform us if any Reliability Standard proves, in practice, to be inadequate in protecting and improving Bulk-Power System reliability.
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Further, the Commission proposes to request additional information with regard to 24 proposed Reliability Standards. These proposed Reliability Standards would not be approved or remanded by the Commission until further action is taken by the ERO. This group of Reliability Standards includes NERC's so-called ``fill-in-the-blank'' standards that require regional reliability organizations to develop-- and users, owners, or operators to comply with--regional criteria.\8\ Until the Commission receives this supplemental information to fill in the ``blanks'' \9\ and assurances that the processes to fill in the blanks satisfy our procedural requirements, the Commission is not in a position to approve or remand such Reliability Standards. Second, a proposed Reliability Standard that would apply only to regional reliability organizations will not be approved or remanded until the ERO identifies a user, owner or operator of the Bulk-Power System as the applicable entity.\10\
\8\ See id. at 87-90.
\9\ The ERO is reminded when filling in these blanks that a regional difference is generally permitted when it is more stringent or when there is a geographical/physical reason for the difference. Consolidation of regional standards into a single continent-wide standard should not result in a lowest common denominator. Order No. 672 at P 291.
\10\ In addition, some of the proposed Reliability Standards overlap with other Commission regulatory initiatives. For example, in a recent Notice of Proposed Rulemaking, the Commission has proposed to direct public utilities, in conjunction with NERC and the North American Energy Standards Board to provide for greater consistency in Available Transmission Capacity (ATC) calculation. See Preventing Undue Discrimination and Preference in Transmission Service, 71 FR 32636 (June 6, 2006), 71 FR 39251 (July 12, 2006), FERC Stats. & Regs. ] 39,602 (May 19, 2006) (OATT Reform NOPR).
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Although the proposed Reliability Standards for which the Commission is requesting additional information will not be enforceable under section 215, this does not mean that no standards governing a particular matter are in place. Rather, in the interim, though not enforceable under section 215, compliance with these Reliability Standards would be expected as a matter of good utility practice.
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Background
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Voluntary Reliability Standards
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In the aftermath of the 1965 blackout in the northeast United States, the electric utility industry established NERC, a voluntary reliability organization. Since its inception, NERC has developed Operating Policies and Planning Standards that provide voluntary guidelines for operating and planning the North American Bulk-Power System.
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A common cause of the past three major regional blackouts was violation of NERC's then existing Operating Policies and Planning Standards. During July and August 1996, the west coast of the United States experienced two cascading blackouts caused by violations of voluntary Operating Policies.\11\ In response to the outages, the Secretary of Energy convened a task force to advise the U.S. Department of
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Energy (DOE) on issues needed to be addressed to maintain the reliability of the Bulk-Power System. In a September 1998 report, the task force recommended, among other things, that federal legislation should grant more explicit authority for the Commission to approve and oversee an organization having responsibility for bulk-power reliability standards.\12\ Further, the task force recommended that such legislation provide for Commission jurisdiction over reliability of the Bulk-Power System and Commission implementation of mandatory, enforceable reliability standards.
\11\ The Electric Power Outages in the Western United States, July 2-3, 1996, at 76 (ftp://www.nerc.com/pub/sys/all_updl/docs/pubs/doerept.pdf ) and WSCC Disturbance Report, for the Power System
Outage that Occurred on the Western Interconnection August 10, 1996, at 4 (ftp://www.nerc.com/pub/sys/all_updl/docs/pubs/AUG10FIN.pdf).
\12\ Maintaining Reliability in a Competitive U.S. Electricity Industry, Final Report of the Task Force on Electric System Reliability, Secretary of Energy Advisory Board, U.S. Department of Energy (September 1998), at 25-27, 65-67.
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On August 14, 2003, a blackout affected significant portions of the Midwest and Northeast United States, and Ontario, Canada. This blackout affected an estimated 50 million people and 61,800 megawatts of electric load. A joint U.S.-Canada task force studied the causes of the August 14, 2003 blackout and determined that several entities violated NERC's then-effective Operating Policies and Planning Standards, and that several of the standards contained ambiguities that rendered the standards ineffective. Those violations and ambiguities directly contributed to the blackout.\13\ The joint task force, in its recommendations to prevent or minimize the scope of future blackouts, identified the need for legislation to make reliability standards mandatory and enforceable, with penalties for non-compliance and identified specific ambiguities within the standards that should be corrected to make the standards effective.\14\
\13\ The joint team, known as the U.S.-Canada Power System Outage Task Force, issued a Final Report on the August 14, 2003 Blackout in the United States and Canada: Causes and Recommendations (Blackout Report) on April 5, 2004, which presented an in-depth analysis of the causes of the blackout and recommendations for avoiding future blackouts.
\14\ See id. at 140-42.
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EPAct 2005 and Order No. 672
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EPAct 2005 adds a new section 215 to the FPA, which provides for a system of mandatory and enforceable Reliability Standards. On February 3, 2006, the Commission issued Order No. 672, implementing section 215 of the FPA.\15\ Pursuant to Order No. 672, the Commission certified one organization, NERC, as the ERO. The ERO is required to develop Reliability Standards, which are subject to Commission review and approval.\16\ Once approved, the Reliability Standards may be enforced by the ERO, subject to Commission oversight.\17\ The Reliability Standards will apply to users, owners and operators of the Bulk-Power System. The ERO must submit each proposed Reliability Standard to the Commission for approval.
\15\ Order No. 672, 71 FR 8662 (Feb. 17, 2006), FERC Stats. & Regs. ] 31,204 (2006), order on reh'g, Order No. 672-A, 71 FR 19814 (Apr. 18, 2006), FERC Stats. & Regs. ] 31,212 (2006). Terms defined in Order No. 672 are capitalized in this order.
\16\ Section 215(a)(3) of the FPA defines the term Reliability Standard to mean ``a requirement, approved by the Commission under this section, to provide for reliable operation of the bulk-power system. This term includes requirements for the operation of existing bulk-power system facilities, including cybersecurity protection, and the design of planned additions or modifications to such facilities to the extent necessary to provide for the reliable operation of the bulk-power system, but the term does not include any requirement to enlarge such facilities or to construct new transmission capacity or generation capacity.'' 16 U.S.C. 824o(a)(3).
Section 215(a)(4) of the FPA defines the term ``reliable operation'' broadly to mean, ``* * * operating the elements of the bulk-power system within equipment and electric system thermal, voltage, and stability limits so that instability, uncontrolled separation, or cascading failures of such system will not occur as a result of a sudden disturbance, including a cybersecurity incident, or unanticipated failure of system elements.'' 16 U.S.C. 824o(a)(4).
\17\ The Commission can independently enforce Reliability Standards. 16 U.S.C. 824o(e)(3).
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Section 215(d)(2) of the FPA and the Commission's regulations provide that the Commission may approve a proposed Reliability Standard if it determines that the proposal is just, reasonable, not unduly discriminatory or preferential, and in the public interest. The Commission specified in Order No. 672 certain general factors it would consider when assessing whether a particular Reliability Standard is just and reasonable.\18\ According to this guidance, a proposed Reliability Standard must provide for the Reliable Operation of Bulk- Power System facilities and may impose a requirement on any user, owner, or operator of such facilities. It must be designed to achieve a specified reliability goal and must contain a technically sound means to achieve this goal. The proposed Reliability Standard should be clear and unambiguous regarding what is required and who is required to comply. The possible consequences for violating a proposed Reliability Standard should be clear and understandable to those who must comply. There should be a clear criterion or measure of whether an entity is in compliance with a proposed Reliability Standard. While a proposed Reliability Standard does not necessarily need to reflect the optimal method for achieving its reliability goal, a proposed Reliability Standard should achieve its reliability goal effectively and efficiently. A proposed Reliability Standard must do more than simply reflect stakeholder agreement or consensus around the ``lowest common denominator.'' It is important that the Reliability Standards developed through any consensus process be sufficient to adequately protect Bulk- Power System reliability.\19\
\18\ Order No. 672 at P 262, 321-337.
\19\ Order No. 672 at P 329.
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A proposed Reliability Standard may take into account the size of the entity that must comply and the costs of implementation. However, the ERO should not propose standards that would achieve less than operational excellence or otherwise be inadequate to support Bulk- Power System reliability. A proposed Reliability Standard should be a single standard that applies across the North American Bulk-Power System to the maximum extent this is achievable taking into account geographic variations in grid characteristics, terrain, weather, and other factors. It should also account for regional variations in the organizational and corporate structures of transmission owners and operators, variations in generation fuel type and ownership patterns, and regional variations in market design if these affect the proposed Reliability Standard. Finally, a proposed Reliability Standard should have no undue negative effect on competition.\20\ Order No. 672 directs the ERO to explain how the proposal satisfies the factors the Commission identified and how the ERO balances any conflicting factors when seeking approval of a proposed Reliability Standard.\21\
\20\ Order No. 672 at P 332.
\21\ Id. at P 337.
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Pursuant to section 215(d)(2) of the FPA and section 39.5(c) of the Commission's regulations, the Commission is required to give due weight to the technical expertise of the ERO with respect to the content of a Reliability Standard or to a Regional Entity organized on an Interconnection-wide basis with respect to a proposed Reliability Standard or a proposed modification to a Reliability Standard to be applicable within that Interconnection. However, the Commission is not required to defer to the ERO or a Regional Entity with respect to the effect of a proposed Reliability Standard or proposed modification to a Reliability Standard on competition.\22\
\22\ 18 CFR 39.5(c)(1), (3).
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The Commission's regulations require the ERO to file with the
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Commission each new or modified Reliability Standard that it proposes to be made effective under section 215 of the FPA. The filing must include a concise statement of the basis and purpose of the proposed Reliability Standard, a summary of the Reliability Standard development proceedings conducted by either the ERO or Regional Entity, together with a summary of the ERO's Reliability Standard review proceedings, and a demonstration that the proposed Reliability Standard is just, reasonable, not unduly discriminatory or preferential, and in the public interest.\23\
\23\ 18 CFR 39.5(a).
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The Commission will remand to the ERO for further consideration a proposed new or modified Reliability Standard that the Commission disapproves in whole or in part.\24\ When remanding a Reliability Standard to the ERO, the Commission may order a deadline by which the ERO must submit a proposed or modified Reliability Standard.
\24\ 18 CFR 39.5(e).
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The Electric Reliability Organization
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NERC is a New Jersey nonprofit corporation with a membership comprised of the eight regional reliability councils covering the contiguous 48 States, several provinces in Canada and a portion of Baja California Norte, Mexico. NERC has operated as a voluntary, industry- sponsored reliability organization formed to ensure the reliability of the North American Bulk-Power System.
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NERC filed an application with the Commission on April, 4, 2006 seeking certification as the ERO. NERC stated that it expects NERC Council and NERC Corp. to merge upon being certified as the ERO by the Commission. NERC Corp. will be the surviving entity and will assume the assets and liabilities of NERC Council.
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In its July 20, 2006 order certifying NERC as the ERO, the Commission directed NERC to submit a compliance filing incorporating various clarifications and revisions to its bylaws and rules of procedure. Among the improvements the Commission has directed NERC to undertake as the ERO are changes to expedite the existing process for developing new Reliability Standards in response to a Commission deadline to deal with an urgent situation. The order also directs NERC to modify its proposed pro forma delegation agreement for delegating enforcement authority to a Regional Entity.\25\
\25\ Although the ERO Certification Order directs NERC to modify the pro forma delegation agreement, the pro forma agreement will not be re-filed with the Commission before negotiating the individual delegation agreements. The pro forma agreement will form the basis for the individual Regional Entity delegation agreements that will be filed with the Commission. ERO Certification Order, 116 FERC ] 61,062 at P 518.
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NERC Petition for Approval of Reliability Standards
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On April 4, 2006, as modified on August 28, 2006 NERC submitted to the Commission a petition seeking approval of the 107 proposed Reliability Standards that are the subject of this NOPR (NERC Petition).\26\ NERC states that 90 of these Reliability Standards, known as ``Version 0'' standards, became effective on a voluntary basis on April 1, 2005. It explains that the Version 0 standards ``are a translation, with certain improvements, of NERC's operating policies that were developed over several decades and its planning standards, which were approved in September 1997.'' \27\ In addition, the April 4, 2006 filing includes 12 new Reliability Standards that were approved by the NERC board of trustees for implementation in February 2006. According to NERC, the 107 proposed Reliability Standards collectively define overall acceptable performance with regard to operation, planning and design of the North American Bulk-Power System. Seven of these Reliability Standards specifically incorporate one or more ``regional differences'' (which can include an exemption from a Reliability Standard) for a particular region or subregion, resulting in eight regional differences. NERC requests that the Reliability Standards become effective on January 1, 2007, or an alternative date determined by the Commission. NERC also states that it simultaneously filed the proposed Reliability Standards with governmental authorities in Canada.
\26\ The filed proposed Reliability Standards are not attached to this NOPR but are available on the Commission's eLibrary document retrieval system in Docket No. RM06-16-000 and are available on the ERO's Web site, http://www.nerc.com/~filez/nerc_filings_ferc.html.
\27\ See NERC Petition at 28.
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Each proposed Reliability Standard follows a common format that includes five organizational elements: a. Introduction
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Title: a phrase that describes the topic of the Reliability Standard.
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Number: A unique identification number that starts with three letters to identify the group followed by a dash and a three digit number, followed by a dash and the version number e.g., PRC-014-0.
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Purpose: One or more sentences that explicitly states the outcome to be achieved by the adoption of the Reliability Standard.
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Applicability:
4.1 Each entity, as defined by the NERC Functional Model, that must comply with the Reliability Standard, such as Transmission Owner. b. Requirements
R1. A listing of explicitly stated technical, performance and preparedness requirements and who is responsible for achieving them. c. Measures
M1. A listing of the factors and the process NERC will use to assess performance and outcomes in order to determine non-compliance, and who is responsible for achieving the measures. Measures are ``the evidence that must be presented to show compliance'' with a standard and ``are not intended to contain the quantitative metrics for determining satisfactory performance.'' \28\
\28\ NERC Comments at 104. NERC clarified its position that Measures did not include metrics after the Staff Preliminary Assessment interpreted the Measures section as including metrics.
d. Compliance
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Compliance Monitoring Process
1.1 Compliance Monitoring Responsibility: NERC's explanation of who is responsible for assessing performance or outcomes.
1.2 Compliance Monitoring Period and Reset Timeframe: The timeframe for each compliance monitoring period before it is reset for the next period.
1.3 Data Retention: How long compliance documentation needs to remain on file.
1.4 Additional Compliance Information: Any other information relating to compliance.
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Levels of Non-Compliance: Usually four levels of non-compliance are identified, with level 1 being used for the least severe non- compliance and level 4 for the most severe non-compliance. e. Regional Differences
Identification of any regional differences that have been approved by the applicable NERC Committee (including Regions that are exempt).
Version History: The chronological history of changes to the standard.
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In its April 4, 2006 petition, NERC requested ``unconditional'' approval of 77 proposed Reliability Standards and the glossary of terms. Further, NERC
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requested ``conditional'' approval of 25 proposed Reliability Standards.
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In a June 26 filing, NERC revised its recommended action on the proposed Reliability Standards: (1) Unconditional approval of 51 proposed Reliability Standards, to become enforceable in the U.S. on a date in 2007 to be determined by the Commission; (2) conditional approval of 26 proposed `fill-in-the-blank' Reliability Standards, to become enforceable in the U.S. on a date in 2007 to be determined by the Commission. NERC recommends that ``conditional approval'' shall mean ``that any limitation of the standard caused by the presence of a regional `fill-in-the-blank' requirement * * * would be considered as a factor in the evaluation of circumstances surrounding an alleged violation of the standard and the determination of a violation and setting of an appropriate penalty;'' and (3) conditional approval of another 25 proposed Reliability Standards lacking Measures or Levels of Non-Compliance, to become enforceable in the U.S. on a date in 2007 to be determined by the Commission. In addition, NERC plans to file modified Reliability Standards in early November 2006 that will add missing Measures and Levels of Non-compliance elements as well as risk factors. NERC recommends that the Commission act on the proposed modifications to Reliability Standards that are currently before the Commission in the same proceeding to achieve an initial set of Reliability Standards.
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On August 28, 2006, NERC submitted 27 new and revised standards. The Commission will address these proposed new and revised Reliability Standards in this rulemaking proceeding, except for eight proposed Reliability Standards that relate to cyber security. Reliability Standards CIP-002 through CIP-009 will be addressed in a separate rulemaking proceeding in Docket No. RM06-22-000.
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Staff Preliminary Assessment
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On May 11, 2006, Commission staff issued a ``Staff Preliminary Assessment of the North American Electric Reliability Council's Proposed Mandatory Reliability Standards'' (Staff Preliminary Assessment). The Staff Preliminary Assessment identified staff's preliminary observations and concerns regarding NERC's then-current voluntary reliability standards. The Staff Preliminary Assessment describes issues common to a number of proposed Reliability Standards. It reviewed and identified issues regarding each individual Reliability Standard but did not make specific recommendations regarding the appropriate action on a particular proposal.
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The Staff Preliminary Assessment provided a basis for soliciting input regarding which of the proposed Reliability Standards should be approved, approved on an interim basis, or remanded to the ERO; established a platform from which to identify and prioritize potential problems with the proposed Reliability Standards; and provided a comprehensive and objective assessment of NERC's then- current 102 Reliability Standards.
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Comments on the Staff Preliminary Assessment were due by June 26, 2006. Entities that filed comments are listed in Appendix A to this NOPR. Approximately 50 persons filed comments in response to the Staff Preliminary Assessment. In addition, on July 6, 2006, the Commission held a technical conference to discuss NERC's proposed Reliability Standards, the Staff Preliminary Assessment and other related issues. The technical conference was transcribed, and is a part of the record in this docket.
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The written comments as well as the panel discussions at the technical conference have been very informative, and reference to the public comments is mentioned throughout the NOPR. Moreover, our proposed disposition of the Reliability Standards reflects our consideration of all comments that were submitted.
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Discussion
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The Commission's Reliability Standards Proposal
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The Commission's proposed reliability regulation is entitled Mandatory Reliability Standards for the Bulk-Power System. Section 215(b) of the FPA obligates all users, owners and operators of the Bulk-Power System to comply with Reliability Standards that become effective pursuant to the processes set forth in the statute and in Part 39 of the Commission's regulations. The complete text of the proposed rule is provided in the Attachment to this notice of proposed rulemaking.
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The proposed regulation is organized into three sections:
40.1--Applicability;
40.2--Mandatory Reliability Standards; and
40.3--Availability of Reliability Standards. 1. Applicability
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Section 40.1(a) of the proposed regulations provides that this Part applies to all users, owners and operators of the Bulk-Power System within the United States (other than Alaska and Hawaii) including, but not limited to, the entities described in section 201(f) of the FPA. This statement is consistent with Sec. 215(b) of the FPA and section 39.2 of the Commission's regulations.
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Section 40.1(b) requires each Reliability Standard made effective under this Part to identify the subset of users, owners and operators to whom that particular Reliability Standard applies. 2. Mandatory Reliability Standards
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Section 40.2 (a) of the proposed regulations requires that each applicable user, owner or operator of the Bulk-Power System comply with Commission-approved Reliability Standards developed by the ERO, and provides that the Commission-approved Reliability Standards can be obtained from the Commission's Public Reference Room at 888 First Street, NE., Room 2A, Washington, DC 20426.
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Section 40.2(b) of the proposed regulations provides that a proposed modification to a Reliability Standard proposed to become effective pursuant to Sec. 39.5 shall not be effective until approved by the Commission. 3. Availability of Reliability Standards
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Section 40.3 of the proposed regulations would require that the ERO maintain in electronic format that is accessible from the Internet the complete set of effective Reliability Standards that have been developed by the ERO and approved by the Commission. The Commission believes that ready access to an electronic version of the effective Reliability Standards will enhance transparency and help avoid confusion as to which Reliability Standards are mandatory and enforceable. We note that NERC currently maintains the existing, voluntary reliability standards on the NERC Web site.
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While the NOPR discusses each proposed Reliability Standard and identifies the Commission's proposed disposition for each Reliability Standard, neither the text nor the title of an approved Reliability Standard would be codified in the Commission's regulations. Rather, as indicated above, each applicable user, owner or operator of the Bulk- Power System would be required to comply with Commission-approved Reliability Standards that are available in the Commission's Public Reference Room and on the Internet at the ERO's Web site.
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This approach would preserve the statutory options of approving a proposed Reliability Standard or modification to a Reliability Standard
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``by rule or order.'' \29\ While we anticipate that the Commission would address through the rulemaking process most, if not all, new Reliability Standards proposed by NERC, certain modifications may be appropriately addressed by order.
\29\ See 16 U.S.C. 824o(d)(2).
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Applicability Issues
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Definition of User of the Bulk-Power System
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In Order No. 672, the Commission acknowledged that, generally, a person directly connected to the Bulk-Power System selling, purchasing or transmitting electric energy over the Bulk-Power System is a ``User of the Bulk-Power System.'' However, the Commission declined to adopt a formal definition, explaining that, ``until we have proposed Reliability Standards before us, we will reserve further judgment on whether a definition of `User of the Bulk-Power System' is appropriate or whether the decision of who is a `User of the Bulk-Power System' should be made on a case-by-case basis.'' \30\
\30\ Order No. 672 at P 99.
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We do not propose a generic definition of the term ``User of the Bulk-Power System.'' Rather, the Commission will determine applicability on a standard-by-standard basis.\31\ The phrase ``user, owner or operator of the Bulk-Power System'' as used in section 215(b) of the FPA indicates the scope of the Commission's authority with regard to compliance with Reliability Standards. The proposed regulations would require that the ERO identify in each proposed Reliability Standard the specific subset of users, owners and operators of the Bulk-Power System to which the proposed Reliability Standard would apply. In fact, this is NERC's current practice, and each of the 107 proposed Reliability Standards submitted by NERC includes an ``applicability'' provision that identifies the specific categories of applicable entities based on NERC's Functional Model.\32\ Parties concerned that a proposed Reliability Standard would apply more broadly than the statute allows may raise their concern in the context of the specific Reliability Standard. We believe that this approach provides sufficient notice regarding which entities are ``users of the Bulk- Power System'' that must comply with a specific Reliability Standard.
\31\ Many of the proposed Reliability Standards apply to reliability coordinators and balancing authorities and other clearly appropriate entities. We believe that such Reliability Standards do not raise applicability issues. Thus, in our standard-by-standard analysis, the Commission's silence as to applicability issues means that it agrees with the ERO's proposed applicability of a Reliability Standard.
\32\ See NERC Petition at 80-81. For information regarding the Functional Model, see NERC Reliability Functional Model, Function Definitions and Responsibility Entities, Version 2, February 10, 2004. NERC is currently developing revisions to the Functional Model (referred to as ``Version 3'') that, among other things, changes the name of the reliability authority to ``reliability coordinator'' and explains its role in ``wide area'' reliability oversight. Both versions of the Functional Model are available on NERC's Web site at: http://www.nerc.com/~filez/functionalmodel.html.
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Use of the NERC Functional Model
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As mentioned above, each Reliability Standard proposed by the ERO identifies entities to which the Reliability Standard applies based on the NERC Functional Model.\33\ The Staff Preliminary Assessment observed that the Functional Model omits the categories of ``users, owners and operators,'' and includes other categories of entities that are not users, owners or operators of the Bulk-Power System.\34\
\33\ The functional categories include: (1) Reliability coordinator, (2) balancing authority, (3) planning authority, (4) transmission planner, (5) transmission operator, (6) transmission service provider, (7) transmission owner, (8) resource planner, (9) distribution provider, (10) generator owner, (11) generator operator, (12) load-serving entity, (13) purchasing-selling entity, (14) compliance monitor. ERO Certification Order, 116 FERC ] 61,062, at n.247.
\34\ Staff Preliminary Assessment at 24.
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NERC states that, while the term ``users, owners and operators'' defines the statutory applicability of the Reliability Standards, the Functional Model adds descriptive detail to reliability functions so the applicability of each Reliability Standard can be clearly defined. NERC explains that ``every entity class described in the Reliability Functional Model performs functions that are essential to the reliability of the bulk power system.'' \35\ Several commenters concur with NERC and suggest that the Commission approve the Functional Model so that future modifications would require Commission approval. MISO and Allegheny point to specific examples of what they consider ambiguities in the NERC Functional Model, primarily in the context of applicability to RTO or ISO functions.
\35\ NERC Comments at 96. In addition to its April 4, 2006, Petition, NERC filed comments in response to the Staff Preliminary Assessment on June 26, 2006 (NERC Comments).
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The objective here is to make sure that each Reliability Standard is sufficiently clear with respect to applicability and specifically identifies each category of entities to which it applies. The NERC Functional Model represents a reasonable and practical approach to determining the applicability of a particular Reliability Standard. This approach is consistent with the ERO Certification Order, in which the Commission, in the context of addressing NERC's proposed compliance registry, found that ``NERC's functional approach provides a reasonable means to ensure that the proper entities are registered and that each knows which Commission-approved Reliability Standard(s) are applicable to it.'' \36\ Thus, we agree with NERC that identifying specific functional categories of entities that comprise users, owners and operators of the Bulk-Power System provides a useful level of detail and appears to be more practical than simply identifying an applicable entity as a user, owner or operator. Accordingly, we propose to use the NERC functional model to identify the applicable entities to which each Reliability Standard applies.
\36\ ERO Certification Order, 116 FERC ] 61,062, at P 689.
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We are mindful of the concerns of certain commenters that the Functional Model may contain ambiguities and add or omit certain entities or functions. Elsewhere in the NOPR we are proposing to require NERC to specifically address these concerns.\37\ Further we note that NERC's Rules of Procedure pertaining to the NERC compliance registry provide that NERC will notify an entity before it is formally registered and allow an opportunity for an entity to challenge its inclusion on the compliance registry.\38\ This process should resolve any specific disputes that may arise.
\37\ For example, commenters' concerns regarding applicability to ISOs and RTOs are discussed in detail in the chapter on proposed communications Reliability Standards.
\38\ See NERC Rule of Procedure section 501.1.3.
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Some commenters suggest that any future modification to the Functional Model could affect the categories of entities that must comply with a particular Reliability Standard, without the benefit of the open, stakeholder process required when the ERO develops a modification to a Reliability Standard. Because the Functional Model is so closely linked with applicability of the Reliability Standards, the Commission proposes to require the ERO to submit any future modifications to the Functional Model that may affect the applicability of the Reliability Standards for Commission approval. 3. Applicability to Small Entities
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NERC indicates that a Reliability Standard may identify limitations on
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applicability based on electric facility characteristics ``such as generators with a nameplate rating of 20 MW or greater, or transmission facilities energized at 200 kV or greater.'' \39\ It explains that, ``to ensure that the standards are applied in a cost effective manner and the applicability of the standards is focused on entities having a material impact on reliability of the bulk power system, it is necessary in the future to begin providing greater specificity in the applicability section of the standards.'' \40\ NERC, as the ERO, indicates that it plans to develop a set of guidelines on such limitations for the standard drafting teams and to require that a new Reliability Standard or a modification to an existing Reliability Standard, going forward, include this degree of specificity.
\39\ NERC Petition at 9.
\40\ Id. at 82.
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A number of commenters advocate that a mandatory Reliability Standard should not apply to entities that have no ``material impact'' on the Bulk-Power System.\41\ These commenters also ask that the Commission encourage and facilitate contractual arrangements for the delegation of compliance obligations faced by small entities to Joint Action Agencies (JAAs) and other organizations that have ongoing relationships with NERC.
\41\ See, e.g., Alcoa, APPA, BPA and TAPS.
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While NERC has yet to submit a specific proposal, the Commission agrees that it is important to examine the impact a particular entity may have on the Bulk-Power System in determining the applicability of a specific Reliability Standard. However, we do not believe that a ``blanket waiver'' approach that would exempt entities below a threshold level from compliance with all Reliability Standards would be appropriate because there may be instances where a small entity's compliance is critical to reliability. For instance, the reporting of a sabotage event required by CIP-001-0 may be important regardless of the size of the entity since such reporting helps others by putting them on notice of potential attacks to their own systems. For purposes of assessing compliance with a particular Reliability Standard, it may be appropriate to differentiate among certain subsets of users, owners, and operators. For example, the requirement to have adequate communications capabilities to address real-time emergency conditions (COM-001-0 and COM- 002-1) may be necessary for all applicable entities regardless of size or role, although we understand that the implementation of these requirements for applicable entities may vary based on size or role.\42\ Therefore, we propose to direct NERC to take such factors into account in determining applicability, as well as compliance requirements, for a particular Reliability Standard.
\42\ For example, a dedicated phone line that would remain operative during a power failure may suffice for a small cooperative with minimal Bulk-Power System facilities, while a large investor- owned utility may need a sophisticated communication system with redundancy and diverse routing requirements.
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In addition, the Commission solicits comment on whether, despite the existence of a threshold in a particular standard (e.g., generators with a nameplate rating of 20 MW or over), the ERO or a Regional Entity should be permitted to include an otherwise exempt facility, e.g., a 15 MW generator, on a facility-by-facility basis, if it determines that the facility is needed for Bulk-Power System reliability. If so, what if any process should the ERO or Regional Entity provide when making such a determination?
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NERC has proposed registration of joint action agencies or similar organizations that would register on behalf of their members. APPA asks that NERC permit a joint action agency or similar organization to accept compliance responsibilities on a standard-by- standard basis. We propose to direct NERC to develop procedures which permit a joint action agency or similar organization to accept compliance responsibility on behalf of their members. 4. Regional Reliability Organizations
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NERC has proposed 28 Reliability Standards that would apply, in whole or in part, to a regional reliability organization.\43\ Many of the 28 Reliability Standards concern such matters as data gathering, data base maintenance, preparation of assessments and other ``process'' related responsibilities. Others are what have been referred to as ``fill-in-the-blank'' Reliability Standards. Many of the proposed Reliability Standards that have compliance measures refer to the regional reliability organization as a compliance monitor.
\43\ NERC states that the regional reliability organizations are the same as the existing eight regional reliability councils and that ``a regional reliability organization may or may not be the same organization that is providing statutory functions delegated by agreement with a regional entity.'' NERC Comments at 101. In the order certifying NERC as the ERO, the Commission asked that NERC provide additional information regarding the possible ongoing role of the regional reliability organizations and their relationship with Regional Entities. ERO Certification Order, 116 FERC ] 61,062, at P 76.
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The Staff Preliminary Assessment expressed concern as to whether a Reliability Standard that applies to a regional reliability organization is enforceable pursuant to section 215(e) of the FPA, since it is not clear whether a regional reliability organization is a user, owner or operator of the Bulk-Power System. NERC contends that such Reliability Standards are enforceable, and identifies several legal theories to support its position. Specifically, NERC contends that such Reliability Standards are enforceable because: (1) Each regional reliability organization will voluntarily register as a member of NERC and thereby be bound to comply; \44\ (2) a regional reliability organization performs functions on behalf of its members that are users, owners and operators of the Bulk-Power System; and (3) NERC is in the process of updating its functional model to provide a functional description of a regional reliability organization that includes functions that NERC believes are consistent with a system operator. EEI and other commenters question whether a Reliability Standard can be enforced against a regional reliability organization.
\44\ Pursuant to NERC's ERO application, a member ``accepts the responsibility to promote, support, and comply with the Bylaws, Rules of Procedure, and Reliability Standards * * *.''
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The Commission is not persuaded that a regional reliability organization's compliance with a Reliability Standard can be enforced as proposed by NERC. Section 215 of the FPA does not appear to recognize a regional reliability organization as a user, owner or operator of the Bulk-Power System. Moreover, NERC's arguments assume that each regional reliability organization will voluntarily join as a member of NERC and be legally bound as a member to comply. Further, NERC's claim that a regional reliability organization will perform functions on behalf of its members that are users, owners and operators of the Bulk-Power System does not establish a binding agency relationship that would create a legal basis for requiring regional reliability organization compliance with Reliability Standards. While it is important that the existing regional reliability organizations continue to fulfill their current roles during the transition to a regime where Reliability Standards are mandatory and enforceable, we do not understand why, once the transition is complete, a regional reliability organization should play a role separate from a Regional Entity whose function and
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responsibility is explicitly recognized by section 215 of the FPA. We seek comment on whether there is any need to maintain separate roles for regional reliability organizations with regard to establishing and enforcing Reliability Standards under section 215.
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At present, 28 of the proposed Reliability Standards are written to apply solely or partially to regional reliability organizations.\45\ We do not believe it is necessary or useful to remand those Reliability Standards simply because they refer to the regional reliability organization. For the five standards that apply partially to regional reliability organizations, the Commission proposes action similar to other Reliability Standards that need improvement, i.e., to approve them and direct modification.\46\ For the other Reliability Standards, as an interim measure, we propose to direct the ERO to use its authority pursuant to Sec. 39.2(d) of our regulations to require users, owners, and operators to provide to the regional reliability organizations the information \47\ related to data gathering, data maintenance, reliability assessments and other ``process''-type functions.\48\ We believe that this approach is necessary to ensure that there will be no ``gap'' during the transition from the current voluntary reliability model to a mandatory system in which Reliability Standards are enforced by the ERO and Regional Entities. In the long run, we propose to make the Regional Entities responsible, through delegation by the ERO, for the functions currently performed by the regional reliability organizations. As part of this change, the delegation agreements to the Regional Entities should be modified to bind the Regional Entities to assume these duties and responsibility for noncompliance. In addition, the Reliability Standards should be modified to apply through the Functional Model, to the users, owners and operators of the Bulk-Power System that are responsible for providing information.
\45\ BAL-002, EOP-004, EOP-007, FAC-003, IRO-001, MOD-001, MOD- 002, MOD-003, MOD-004, MOD-005, MOD-008, MOD-009, MOD-011, MOD-013, MOD-014, MOD-015, MOD-016, MOD-024, MOD-025, PRC-002, PRC-003, PRC- 006, PRC-012, PRC-013, PRC-014, PRC-020, TPL-005, and TPL-006.
\46\ BAL-002, EOP-004, FAC-003, IRO-001, and MOD-016. Three of these (EOP-004, FAC-003 and MOD-016) are ``data-gathering'' or ``process-type'' Reliability Standards.
\47\ EOP-007, MOD-011, MOD-013, MOD-014, MOD-015, MOD-024, MOD- 025, PRC-002, PRC-003, PRC-006, PRC-012, PRC-013, PRC-014, PRC-020, TPL-005, and TPL-006.
\48\ 18 CFR 39.2(d).
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Further, the Commission proposes to require that any Reliability Standard that references a regional reliability organization as a compliance monitor be modified to refer to the ERO as the compliance monitor.
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Finally, for the remaining seven Reliability Standards (fill- in-the-blank standards),\49\ we propose to request additional information on these proposed Reliability Standards pending receipt of additional information, as detailed below in the discussion on fill-in- the-blank standards.
\49\ MOD-001, MOD-002, MOD-003, MOD-004, MOD-005, MOD-008, and MOD-009.
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Bulk-Power System v. Bulk Electric System
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As noted above, Commission-approved Reliability Standards are to provide for the Reliable Operation of the Bulk-Power System. Generally speaking, the Nation's Bulk-Power System has been described as consisting of ``generating units, transmission lines and substations, and system controls.'' \50\ The transmission system component of the Bulk-Power System is understood to provide for the movement of power in bulk to points of distribution for allocation to retail electricity customers. Essentially, whereas transmission lines and other parts of the transmission system, including control facilities serve to transmit electricity in bulk form from the generation sources to concentrated areas of retail customers, the distribution system moves the electricity to where these retail customers consume it at a home or business.
\50\ Maintaining Reliability in a Competitive U.S. Electricity Industry, Final Report of the Task Force on Electric System Reliability, Secretary of Energy Advisory Board, U.S. Department of Energy (September 1998) at 2, 6-7.
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Section 215(b)(1) of the FPA provides that all users, owners and operators of the Bulk-Power System must comply with Commission- approved Reliability Standards. For purposes of section 215, the statute defines ``Bulk-Power System'' to mean:
(A) Facilities and control systems necessary for operating an interconnected electric energy transmission network (or any portion thereof); and (B) electric energy from generating facilities needed to maintain transmission system reliability. The term does not include facilities used in the local distribution of electric energy.\51\
\51\ 16 U.S.C. 824o(a)(1).
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Notably, the statutory definition of Bulk-Power System does not establish voltage threshold limits on applicable transmission facilities or electric energy from generating facilities. It does, however explicitly exclude facilities used in the local distribution of electricity. The NERC glossary, in contrast, states that Reliability Standards apply to the ``bulk electric system,'' which is defined in
terms of a voltage threshold, as follows:
As defined by the Regional Reliability Organization, the electrical generation resources, transmission lines, interconnections with neighboring systems, and associated equipment, generally operated at voltages of 100 kV or higher. Radial transmission facilities serving only load with one transmission source are generally not included in this definition.\52\
\52\ See NERC Petition, Exhibit A, NERC glossary at 2.
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While NERC's definition generally excludes transmission facilities operated below 100 kV, NERC allows each regional reliability organization to add specificity to this general obligation.
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The Staff Preliminary Assessment expressed concern that differences between the statutory definition of Bulk-Power System and NERC's definition of bulk electric system create a discrepancy that could result in reliability gaps.\53\ Staff also expressed concern that allowing a regional reliability organization to define what facilities are included in the bulk electric system could result in conflicting definitions--potentially subjecting or excluding similar facilities from compliance with the Reliability Standards.
\53\ Staff Preliminary Assessment at 25-26. For example, the two 230 kV cables that connect Mirant's Potomac River Plant and the 69 kV transmission facilities that supply portions of Washington, DC were not included in the MAAC definition of bulk electric system. New York City's 138 kV system is not included in NPCC's definition of bulk electric system.
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NERC recommends that, for the initial approval of proposed Reliability Standards, the continued use of NERC's definition of Bulk Electric System is appropriate. In the longer term, NERC suggests that change may be appropriate but that any global change at this juncture will affect many Reliability Standards and is best achieved through the Reliability Standards development process. Some commenters emphasize that all facilities necessary for Bulk-Power System reliability must be covered by the Reliability Standards, and none should be omitted by a discretionary act of a regional reliability organization. Many commenters, however, state that these excluded transmission systems have not been the cause of any of the large blackouts and therefore should not be considered as part of the Bulk-Power System.\54\
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Furthermore, some commenters, including those representing small transmission owners, prefer the continued use of the NERC definition and caution against simply replacing all references to bulk electric system with Bulk-Power System because (1) the latter term as defined in section 215 of the FPA is ambiguous and (2) it would likely lead to an unintended substantive change in various Reliability Standards.
\54\ Staff review of selected Form No. 1 reports filed with the Commission indicates that 25 percent or more of many public utilities' total transmission line miles operate below 100 kV. Yet such facilities may well be as much a part of an entity's portion of the nation's integrated transmission system component of the Bulk- Power System as the transmission facilities operating at or above 100 kV because these lower voltage facilities support the higher voltage facilities. Indeed, it is not unusual to see outages of 69 kV transmission facilities limiting the higher voltage transmission facilities with which they are networked.
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We believe that Congress intended that the definitions of Bulk- Power System and Reliable Operation \55\ in section 215 of the FPA to further the objective of maintaining the reliability of the entire Bulk-Power System, including maintaining the reliability of all of the elements of the transmission component of the Bulk-Power System. We believe that the transmission elements excluded under NERC's bulk electric system approach, including transmission that serves critical load centers, are subject to the Commission's jurisdiction under section 215.
\55\ As mentioned earlier, ``Reliable Operation means operating the elements of the Bulk-Power System within equipment and electric system thermal, voltage, and stability limits so that instability, uncontrolled separation, or cascading failures of such system will not occur as a result of sudden disturbance, including a Cybersecurity Incident, or unanticipated failure of system elements.'' See Order No. 672 at P 64. See also 18 CFR 39.1.
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The term Bulk-Power System as defined in section 215 of the FPA is one determinant of the Commission's jurisdiction for reliability purposes (the phrase ``user, owner or operator'' being another). While we do not believe that it is appropriate to categorically exclude any class of facilities from the definition of Bulk-Power System, we recognize that a particular Reliability Standard may appropriately only need to apply to a subset of facilities that comprise the Bulk-Power System. Thus, the Commission may approve a Reliability Standard that applies to the bulk electric system as defined by NERC without limiting the ability of the ERO to develop and propose standards applicable to the broader set of facilities encompassed by the statutory definition as may be necessary.
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The Commission believes that the ERO has suggested a sensible transition approach. The Commission proposes that, for the initial approval of proposed Reliability Standards, the continued use of NERC's definition of bulk electric system as set forth in the NERC glossary is appropriate.\56\ However, we interpret the term ``bulk electric system'' to apply to all of the >= 100 kV transmission systems and any underlying transmission system (
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