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

Naturally, the councils will continue to be dominated by the same investor-owned utilities that send scores of representatives to regional and national standards-development meetings. However, the new oversight of the process by both the ERO and FERC should reduce instances of discrimination. For example, the Regional Entity Agreement that was part of NERC's application to become the ERO called for both uniform dispute resolution requirements and a baseline measure of independent governance of the regional councils. To take advantage of these new engagement opportunities, stakeholders will again need to carefully assess their personnel resources with an eye toward expressing their opinions and concerns as early as possible.

Grace period ends next July

Under one scenario, the ERO's reliability standards will become mandatory and enforceable as of January 2007. Between January and June of next year, compliance will be monitored and notices will be sent to noncompliant entities without the accompanying financial penalties or other mitigation measures that could be taken. Starting in July 2007, sanctions will be possible. Financial sanctions will run between $1,000 and $100,000 per incident, with a maximum fine of $1,000,000 per day for extreme violations.

Each standard will be assigned a risk factor (high, medium, or low) that reflects the potential of a violation contributing to a cascading outage event or system instability. NERC is developing a matrix—which itself will become a reliability standard—that will define how risk factors are assigned to standards.

 

New machine

The bureaucracy under which mandatory reliability standards will be developed by the ERO, overseen by FERC, and implemented by NERC's regional councils is a new and complicated machine we will all have to learn to operate. It has many more switches, controls, meters, and data ports than we are accustomed to.

The stakeholders likely to benefit most from the new ERO regime will be entities that keep track of new reliability standards being developed, participate in the process, and prepare to comply with the standards as they become effective. Sitting back and waiting to see what pops out of the process and then trying to catch up and deal with it will no longer be a smart business strategy.

—Jim Stanton, director of reliability compliance for Calpine Corp., represents marketers and brokers as a member of NERC's Standards Committee. He also is a member of NERC's Compliance and Certification Committee and its Enforcement, Sanctions and Disclosure Subcommittee.