On October 8, 2009, the Federal Energy Regulatory Commission (“FERC” or the “Commission”) approved a Stipulation and Consent Agreement (the “Agreement”) between the Office of Enforcement, the North American Electric Reliability Corporation (“NERC”), and Florida Power and Light Company (“FPL”).  Under the Agreement, FPL agreed to pay a $25 million civil penalty to resolve an investigation into whether FPL violated Reliability Standards associated with a Florida blackout on February 26, 2008.

 According to the Agreement, $10 million will be paid to both NERC and the United States Treasury (the “Treasury”).  An additional $5 million will be spent by FPL, pending FERC and NERC approval, on measures that go beyond Reliability Standards requirements.  If the $5 million is not spent within three years, the remainder will be divided equally between NERC and the Treasury.  FPL must make quarterly reports to FERC’s Office of Enforcement and to NERC on the progress of compliance.  FPL has also agreed to conduct an independent audit in one year to ensure adherence to the Agreement.

 FERC launched a nonpublic investigation into the incident in March 2008, the first of its kind under the new Reliability Standards (see March 21, 2008 and February 6, 2009 editions of the WER).  Although the Agreement represents the largest penalty imposed since the Reliability Standards were implemented under section 215 of the Federal Power Act in 2007, FPL has denied violating any rules.  FPL believes they were in full compliance with the Reliability Standards at the time of the blackout. 

 FPL believes the blackout was caused by a field engineer who disabled breaker failure protections at a circuit switcher at their Flagami substation near Miami.  While the substation would normally be able to account for faults, both the local primary protection and the local backup breaker had been removed manually by a FPL field relay engineer.  When a fault could not be cleared, the substation shut down roughly 1,350 MW of customer load and 2,500 MW of generation.  The substation, in order to maintain grid stability, shut down an additional 2,300 MW of customer load and 1,800 MW of generation in the region, causing widespread blackouts.

 FERC’s order accepting the Agreement is available online at: http://www.ferc.gov/EventCalendar/Files/20091008102212-IN08-5-0001.pdf.