On August 20, 2010, the Federal Energy Regulatory Commission (“FERC” or the “Commission”) approved an audit report on the Western Electricity Coordinating Council (“WECC”), and in that order, FERC directed WECC to make organizational changes that will separate certain operational functions from the functions of overseeing regional reliability standards. The audit was conducted to assess whether WECC has separated its Compliance Monitoring and Enforcement Program (“CMEP”) and the reliability oversight functions from other functions that were in place prior to being named the regional entity by the North American Electric Reliability Corporation (“NERC”).
In Order No. 672, Rules Concerning Certification of the Electric Reliability Organization; and Procedures for the Establishment, Approval, and Enforcement of Electric Reliability Standards, FERC designated NERC as the Electric Reliability Organization, and NERC was then allowed to delegate a regional entity to enforce reliability standards. However, the regional entity has to show autonomy in the oversight role. FERC approved NERC’s delegation of WECC as the regional entity, but stated WECC must demonstrate strong separation between the oversight and operational functions since WECC is also the reliability coordinator for the region. As the reliability coordinator WECC is a user, owner, and operator of the bulk-power system.
In 2008, FERC issued a public letter to WECC announcing they would audit the organization, and Enforcement staff closely examined the division between WECC Regional Entity (“RE”) and WECC Member Services. Member Services consists of users, owners, and operators of the Western Interconnect. The audit found five major areas of concern:
- WECC’s accounting procedures and the ability to separate statutory and non-statutory monies and track statutory and non-statutory costs;
- WECC’s registration as the Interchange Authority (“IA”) without FERC approval;
- The need for RE independence from the performance of CMEP functions and the confidential treatment of information with respect to the WECC Compliance Committee;
- The reduction of the current caseload of compliance matters and verification to completed mitigation plans; and
- The lack of procedures to address inappropriate communication between WECC staff and entities registered with WECC.
In April of this year, WECC responded to FERC by disagreeing with the audit findings. However, WECC has agreed to accept the audit recommendations and implement the suggested changes to the organization. Therefore, WECC must:
- Separate the cost of performing the IA functions from any funding from FERC to perform regional entity functions;
- Strengthen accounting to better delineate statutory and non-statutory activities and ensure non-statutory activities are not funded by money granted under the Federal Power Act; and
- WECC must also design an implementation plan to adopt the recommendations of the audit and make all recommended changes to the organization.
The implementation plan must be submitted to Enforcement staff for approval within sixty days of issuance of the FERC order approving the audit report. Thereafter, WECC must make quarterly compliance filings with FERC until the implementation is completed, and once completed WECC will have satisfactorily completed the requirements of Order No. 672.