On July 10, 2009, the North American Electric Reliability Corporation (“NERC”) filed with the Federal Energy Regulatory Commission (“FERC” or “Commission”) four notices of penalties with a proposed total of $75,000 in fines for violations of mandatory reliability standards. A fifth notice of violation did not include a financial penalty. All of the companies are also implementing mitigation plans.

The Energy Policy Act of 2005 directed the Commission to designate an electric reliability organization (“ERO”) which, in turn, is responsible for establishing a system of mandatory reliability standards, subject to the Commission’s approval. NERC, as the ERO, is authorized to impose penalties for violations of Reliability Standards, subject to the Commission’s review (see April 18, 2008 edition of the WER).

NERC proposed a $50,000 penalty to Lincoln Electric System (Docket No. NP09-31) for violating a communication standard and a vegetation maintenance standard. NERC also proposed a $5,000 penalty for BTU QSE Services Inc. (Docket No. NP09-30) for violating a critical infrastructure protection standard. NERC proposed to assess a $10,000 penalty to Louisiana Generating, a subsidiary of NRG Energy Inc. (Docket No. NP09-28), for violating a voltage control standard. All three companies entered into separate settlements with their reliability entities to resolve the violations.

NERC proposed to assess a $10,000 penalty to Dairyland Power Cooperative (Docket No. NP09-29) for violating two standards for failure to produce documentation of system maintenance and testing procedures of its protection systems and under-frequency load-shedding equipment.

Finally, NERC also cited a fifth company, Eastman Cogeneration, LP (Docket No. NP09-32), for failing to have documented procedures for recognizing sabotage events and making operating personnel aware of them as required. However, NERC proposed no financial penalty partially because the facility is completely enclosed within the perimeter of an Eastman Chemical Company manufacturing facility, and the host chemical facility provides security for both the chemical and cogenerating facility.

The companies subject to the notices may file an application for review within 30 days.