September 15, 2006

Mandatory reliability rules are coming. Are you ready to comply?

Jim Stanton, Calpine Corp.

The Energy Policy Act of 2005 (EPAct) created a new regulatory entity—called the Electric Reliability Organization (ERO)—and made it responsible for defining and regulating the overall U.S. electricity transmission grid. As for oversight, EPAct states that "The [Federal Energy Regulatory] Commission shall have jurisdiction, within the U.S., over the ERO, any regional entities, and all users, owners and operators of the bulk-power system . . . for purposes of approving reliability standards . . . and enforcing compliance."

The key responsibility of the ERO is to set reliability standards for the national grid that will be mandatory, enforceable, and applicable to all "users of the bulk electric system." Entities that fail to comply with the standards and associated measures will incur monetary penalties and other possible sanctions. Because ignorance of the law is no excuse, here's a short course on transmission reliability that should help keep you out of hot water.

New sheriff in town

Established in June 1968—31 months after a widespread blackout left 30 million residents of eight northeast states and Ontario without power for as long as 13 hours—the North American Electric Reliability Council (NERC):

• Develops and enforces voluntary reliability standards.
• Monitors the bulk power system and assesses its future adequacy.
• Audits owners, operators, and users for preparedness and educates and trains industry personnel.

NERC is a self-regulating organization that relies on the diversity and collective expertise of members of the electric power industry. It has worked over the years with a small staff and legions of volunteers to draft voluntary policies addressing reliability concerns and to develop new measures to keep up with the ever-increasing power needs of North America. Constantly refined and expanded over the years, NERC's procedures and standards have served the continent's bulk power system well, but they were voluntary requirements. Peer pressure and public notice of violations were considered sufficient incentives to ensure reasonable compliance.

Clearly, the drafters of EPAct and the legislators who voted for it felt that voluntary compliance was no longer acceptable. As a result, reliability standards and associated measures developed under the auspices of the ERO soon will carry the weight and penalty of federal law.

In 2003, NERC took the historic step of becoming a standards-setting organization accredited by the American National Standards Institute (ANSI). ANSI's requirements ensure that NERC standards are developed in a fair, open, balanced, and inclusive manner; that all industry stakeholders are afforded the opportunity to participate in the process; and that all comments for and against proposed new standards and their provisions are responded to in a public forum by the people who have drafted them.

NERC's current operating policies and planning standards were put through this process. Now, new standards are being developed to address new concerns that have emerged in recent years. Two that bear directly on issues related to the blackout of August 14, 2003, are the Cyber Security Standard and the System Personnel Training Standard. As required by the ANSI process, each phase of development—from the initial Standard Authorization Request to posting of the standard's language and the request for comments and balloting—is transparent. Anyone interested in the details can visit https://standards.nerc.net/.