On May 26, 2015, FERC approved a stipulation and consent agreement (“Settlement”) between FERC’s Office of Enforcement (“Enforcement”) and the North American Electric Reliability Corporation (“NERC”), and the Western Electricity Coordinating Council (“WECC”) and Peak Reliability—WECC’s NERC-certified Reliability Coordinator.  Among other items, the Settlement provides for a $16 million civil penalty against WECC, and resolves FERC and NERC’s investigation of WECC for Reliability Standard violations that contributed to the September 8, 2011 Southwest Blackout.

The Southwest Blackout was the result of a cascading outage that occurred in the Southwestern United States that left approximately 2.7 million customers without power, including some for several hours that extended into the following day.  The aggregate load loss for the event was in excess of 30,000 MWh.  At the time of the event, WECC occupied two regulatory roles—it was both a NERC Regional Entity (with delegated authority to enforce Reliability Standard violations), and the NERC-registered Reliability Coordinator (the highest level of reliability authority, subject to civil penalties for Reliability Standard violations) for the Western Interconnection.  Since the Southwest Blackout, WECC has transferred its Reliability Coordinator function to an entirely separate entity (Peak Reliability), primarily to remove the potential conflict of interest between its Reliability Coordinator function and its enforcement role as a NERC Regional Entity.

After their investigations of the Southwest Blackout concluded, FERC Enforcement and NERC determined that WECC had violated nine requirements of five Reliability Standards from the Facilities Design, Connection and Maintenance (“FAC”) and Interconnection Reliability Operations and Coordination (“IRO”) families of Reliability Standards.

Under the approved Settlement, WECC agreed to pay a civil penalty of $16 million, even though WECC neither admitted nor denied that its actions during the Southwest Blackout constituted violations of the Reliability Standards.  Of this total, the Settlement states that $3 million will be paid to the United States Treasury and NERC, divided in equal amounts, and $13 million will be invested by WECC and Peak Reliability into various reliability enhancements.  FERC concluded that the civil penalty was appropriate considering that the Southwest Blackout caused a loss of 10,000 MWh or more of firm load, and because WECC had a prior history of violating Reliability Standards in its role as Reliability Coordinator for the Western Interconnection.  FERC also noted WECC’s cooperation during the process, and WECC’s efforts thus far to address reliability issues identified during the investigation.  Going forward, WECC and Peak Reliability also agreed to mitigation and reliability activities, and to submit to compliance monitoring requirements.

A copy of FERC’s May 26, 2015 order may be found here.