NERC board to consider penalties for reliability violators

Jan. 5, 2001 — The North American Electric Reliability Council (NERC), the organization which promotes reliability of the bulk electric transmission system, will consider fines and sanctions against companies violating its reliability standards at the February board meeting.

In addition, NERC's board will consider a new funding model incorporating user fees. The proposal is part of the not-for-profit organization's planned transition from a voluntary group to an independent self-regulated industry organization.

Composed of 10 regional reliability councils accounting for most of the electricity supplies in the U.S., Canada, and a portion of Baja California, NERC was established after the Northeast blackout of 1965. Up to now, it has worked as a voluntary association developing standards for reliable operation of the grid and encouraging compliance.

But the organization has no legislated authority to enforce its rules. Federal open access rules and electricity deregulation have heightened NERC's profile at a time fears are growing the grid is open to abuse.

Details of NERC's proposal are contained in the group's response to a U.S. Energy Department (DOE) call for comments on whether DOE should institute a rulemaking procedure to impose mandatory electric reliability standards for the interstate electric grid under the Federal Energy Regulatory Commission's (FERC) jurisdiction.

In a sharply worded rebuke, NERC said the DOE should focus its time and attention on "securing legislation" that will give NERC authority to set and enforce rules governing the grid "rather than pursuing a rulemaking."

Noting the U.S. Senate passed a bill last June establishing an independent reliability organization, NERC said under existing law, FERC does not have adequate or clear-cut responsibility for reliability and a rulemaking procedure is inadequate to overcome that shortcoming. It says legislation is the "only effective" means of making accountability enforceable.

Funding needed
Under proposed federal legislation, an electric reliability organization would set and enforce rules for the reliable operation of the bulk power system and report on the adequacy of generation capacity and the transmission system—many of the duties NERC performs today as a voluntary group.

Among its members would be the regional transmission organizations (RTO), acting as system operators. FERC has ordered owners of the bulk power grid to ban together into regional groups to increase efficiency and make the system more accessible at reasonable charges to independent power producers.

The RTOs would be obligated to comply with reliability standards developed by the reliability organization and approved by FERC.

With use rising and mutual self-help declining, NERC says it is only a matter of time before the next major grid failure occurs. Already, serious violations, including unreported use of the grid, refusal to reduce scheduled transactions when called upon by security coordinators, and failure to eliminate violations within prescribed time periods, are on the rise.

NERC says DOE also could advance the "urgent need" for mandatory and enforceable standards by funding development of tools for monitoring system conditions and managing flows on congested interfaces. With such government help, NERC says, all security coordinators would then have the best tools available.

Presently, NERC is only able to fund projects which the regional councils and their members are willing to support. And with many utilities operating under rate caps and freezes, money is sometimes short for NERC projects.

Once reliability legislation is adopted, NERC says it will have authority to fund badly needed improvements via charges to all users of the system.

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