On November 5, 2015, NERC reported to the NERC Board of Trustees (“NERC Board”) that it had been unable to identify groups of similarly-situated Transmission Owners (“TOs”), Transmission Operators (“TOPs”), Generator Owners (“GOs”), or Generator Operators (GOPs”), that should automatically qualify for a reduced set of compliance obligations through a “sub-set” list of Reliability Standards, as part of Phase II of NERC’s Risk-Based Registration (“RBR”) initiative. The NERC Board accepted the report, and endorsed a recommendation from NERC that such “sub-set” lists be granted by the NERC-led review panel to individual entities on a case-by-case basis, rather than as a class, at least for the time being.

NERC’s RBR initiative is being implemented in two phases. In Phase I, NERC amended its Rules of Procedure (see October 19, 2015 edition of the WER) to establish the regulatory framework to implement RBR. As part of this framework, NERC is now authorized under the NERC Rules of Procedure to establish a NERC-led review panel, which has authority to grant “sub-set” lists of Reliability Standards to individual entities, based on technical facts and circumstances. While an entity registered for a NERC function (e.g. TOP) is normally responsible for compliance with all Reliability Standards applicable to that function, an entity with a sub-set list is only responsible for compliance with the Reliability Standards, requirements, and/or sub-requirements specifically enumerated on its sub-set list.

Phase II of the RBR initiative focused on whether there were similarly-situated groups of TOs, TOPs, GOs, or GOPs that would, as a class, qualify for a reduced set of compliance obligations through a sub-set list of Reliability Standards.

In its November, 2015, report to the NERC Board, NERC stated that it had explored various options and approaches throughout Phase II, including: i) four workshops aimed at identifying potential risk categories for TOs, TOPs, GOs, and GOPs; ii) meetings and conference calls with the Risk-Based Registration Advisory Group (“RBRAG”) and the RBRAG Technical Task Force; and iii) analysis of event and enforcement information. Despite these efforts, NERC stated that it “had not identified a consistent set of criteria or system characteristics that defines a group or groups of lower risk registered entities within the four referenced functions.” NERC stated that it had instead concluded that “the proper approach at this time is to refer individual potential candidates to the NERC-led review panel.” NERC specified that “[p]otential candidates will be considered on a case-by-case basis, accounting for their individual facts and circumstances, until such time as a consistent pattern emerges that warrants a common sub-set list.”

In light of these findings, NERC recommended to the NERC Board: i) the use of the NERC-led review panel to address an individual entity’s facts and circumstances to determine potential reduced compliance obligations; and ii) continued monitoring of the results of the NERC-led review panel to identify consistent potential groups of entities that qualify for a sub-set of Reliability Standards. The NERC Board adopted these recommendations at its November 5, 2015 meeting.

A copy of NERC’s report may be found here.