On November 2, 2015, the Commission conditionally approved revised Regional Delegation Agreements (“RDAs”) between the North American Electric Reliability Corporation (“NERC”) and the eight NERC Regional Entities. The RDAs are the agreements through which NERC delegates to the Regional Entities its legal authority under Section 215 of the Federal Power Act to propose and enforce mandatory Reliability Standards.

In its order, the Commission focused on NERC’s proposed revisions to the pro forma RDA, which was submitted with the eight conforming individual, Regional Entity-specific RDAs in NERC’s June 26, 2015 petition. Acknowledging that the RDAs “are the product of negotiations between NERC and the Regional Entities,” the Commission largely accepted NERC’s proposed revisions, with several notable exceptions.

First, the Commission expressed concern that NERC’s proposed revisions removed any reference to NERC’s obligation under the NERC Rules of Procedure to audit Regional Entity Compliance Monitoring and Enforcement Program (“CMEP”) activities at least once every five years, and replaced it with a general, periodic review of the Regional Entity’s performance of all “delegation-related activities.” The Commission concluded that removal of references to the five-year audit requirement “could result in confusion or disagreements regarding NERC’s responsibility to audit each Regional Entity at least every five years,” and accordingly ordered the reference to audits reinstated. The Commission also stated its belief that NERC’s proposed amendments “may not grant the Commission sufficient access to NERC reviews (and audits) of the Regional Entities,” and ordered NERC to revise the RDAs accordingly so as to grant such access.

Second, NERC had proposed in its June 26, 2015 petition to revise the RDAs so that the RDAs would apply for an initial five-year term ending on December 31, 2020 and automatically renew for one additional five-year term ending on December 31, 2025, unless either party terminated the RDA through written notice no later than December 31, 2019. The Commission noted that this provision would permit ten years to elapse without Commission review of the RDAs in their entirety, despite the possibility of significant changes within the ERO enterprise during that time. Accordingly, the Commission ordered this language removed.

Third, NERC proposed language requiring Regional Entities to report information regarding noncompliance with a Reliability Standard, and its eventual disposition by the Regional Entity, in accordance with the confidentiality and disclosure provisions of “guidance that NERC may from time to time develop,” in addition to the NERC Rules of Procedure, among other things. The Commission expressed concern how this “guidance” would supplement the NERC Rules of Procedure, which must be filed with the Commission for approval prior to becoming effective. In light of this, the Commission directed NERC to revise this language to clarify that any such “guidance” must likewise be filed with the Commission for approval prior to becoming effective.

A copy of the Commission’s order may be found here.