On November 4, 2015, FERC issued an order conditionally accepting the North American Electric Reliability Corporation’s (“NERC”) compliance filings articulating its Reliability Assurance Initiative (“RAI”) concepts and programs, and providing details on NERC’s oversight and evaluation of the RAI program (“November Order”). FERC’s acceptance is conditioned upon NERC providing additional information in its annual report on RAI and making an additional compliance filing to modify its Rules of Procedure within 120 days of the November Order.
On February 19, 2015, FERC approved NERC’s implementation of RAI, also known as NERC’s risk-based compliance monitoring and enforcement program, which represents NERC’s transition to a risk-based approach to compliance monitoring and enforcement. Under this approach, NERC focuses compliance resources on certain activities based on the proportional risk that those activities pose to the reliability of the Bulk Electric System. In approving the RAI, FERC directed NERC to submit a compliance filing that would (1) revise NERC’s Rules of Procedure that articulate the RAI concepts and programs and (2) provide details on NERC’s planned oversight and evaluation of the RAI program. On May 20, 2015, NERC submitted an initial compliance filing describing the methodologies used to evaluate a registered entity’s processes to identify, assess, and correct noncompliance (see May 20, 2015 edition of the WER).
On July 6, 2015, NERC submitted another compliance filing containing proposed revisions to the NERC Rules of Procedure. In particular, NERC proposed definitions for key RAI-related terms and revisions to the Rules of Procedure to: (1) highlight the types of data NERC uses to identify annual risk elements; (2) explain that a particular entity’s type and frequency of the compliance monitoring tools are based on that entity’s specific reliability risk; and (3) include the principles related to the exercise of enforcement discretion. In addition, NERC proposed to revise: (1) certain requirements for inclusion in the Regional Entity RAI implementation plan; (2) details on the regional risk assessment process and results; (3) the Reliability Standards and requirements identified by regional risk assessments; and (4) the Regional Entity annual audit plan.
In the November Order, FERC accepted NERC’s additional information regarding its oversight of the RAI program, on the condition that NERC provide in its annual reports additional information, including: (1) the results of NERC’s phase 1 assessment, as well as future assessments, of its oversight of the RAI program; (2) an analysis of self-logging data provided by each Regional Entity; and (3) revised success factors and metrics to evaluate the RAI program. In addition, FERC found that NERC’s proposed 12-month data retention period was insufficient to allow NERC and FERC to maintain proper oversight of compliance exceptions. Accordingly, FERC conditioned its acceptance of the filing on NERC requiring registered entities to maintain evidence related to compliance exceptions for at least 18 months from the later of the date the Regional Entity sent the notice of compliance exception treatment or the date the registered entity completes the mitigation activities. Furthermore, FERC directed NERC to make a compliance filing within 120 days of the order to modify the Rules of Procedure to codify NERC’s proposal that registered entities submit their self-logs for review by the Regional Entity every three months, with the possibility of adjustment to six months. Finally, FERC required NERC to make numerous changes and updates to the Rules of Procedure to reflect the risk-based RAI within 120 days of the order.
A copy of the order is available here.