[Federal Register Volume 75, Number 227 (Friday, November 26, 2010)]
[Rules and Regulations]
[Pages 72910-72933]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-29570]
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Part III
Department of Energy
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Federal Energy Regulatory Commission
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18 CFR Part 40
Revision to Electric Reliability Organization Definition of Bulk
Electric System; Final Rule
Federal Register / Vol. 75 , No. 227 / Friday, November 26, 2010 /
Rules and Regulations
[[Page 72910]]
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DEPARTMENT OF ENERGY
Federal Energy Regulatory Commission
18 CFR Part 40
[Docket No. RM09-18-000; Order No. 743]
Revision to Electric Reliability Organization Definition of Bulk
Electric System
Issued November 18, 2010.
AGENCY: Federal Energy Regulatory Commission.
ACTION: Final rule.
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SUMMARY: In this Final Rule, pursuant to section 215 of the Federal
Power Act (FPA),\1\ the Federal Energy Regulatory Commission
(Commission) adopts, with modifications, the proposal outlined in its
March 18, 2010 Notice of Proposed Rulemaking to require the Electric
Reliability Organization (ERO) to revise its definition of the term
``bulk electric system.'' \2\ The Commission directs the ERO, through
the ERO's Reliability Standards Development Process, to revise the
definition to address the Commission's technical concerns, as discussed
fully below, and ensure that the definition encompasses all facilities
necessary for operating an interconnected electric transmission
network. The Commission believes that the best way to accomplish these
goals is to eliminate the regional discretion in the current
definition, maintain a bright-line threshold that includes all
facilities operated at or above 100 kV except defined radial
facilities, and establish an exemption process and criteria for
excluding facilities that are not necessary for operating the
interconnected transmission network. However, this Final Rule allows
the ERO, in accordance with Order No. 693, to develop an alternative
proposal for addressing the Commission's concerns with the present
definition with the understanding that any such alternative must be as
effective as, or more effective than, the Commission's proposed
approach in addressing the identified technical and other concerns, and
may not result in a reduction in reliability.
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\1\ 16 U.S.C. 824o.
\2\ Revision to Electric Reliability Organization Definition of
Bulk Electric System, Notice of Proposed Rulemaking, 75 FR 14097
(Mar. 24, 2010), FERC Stats. & Regs. ] 32,654 (2010).
DATES: Effective Date: This Final Rule will become effective January
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25, 2011.
FOR FURTHER INFORMATION CONTACT:
Robert V. Snow (Technical Information), Office of Electric Reliability,
Division of Reliability Standards, Federal Energy Regulatory
Commission, 888 First Street, NE., Washington, DC 20426, Telephone:
(202) 502-6716.
Patrick A. Boughan (Technical Information), Office of Electric
Reliability, Division of Reliability and Engineering Services, Federal
Energy Regulatory Commission, 888 First Street, NE., Washington, DC
20426, Telephone: (202) 502-8071.
Jonathan E. First (Legal Information), Office of the General Counsel,
Federal Energy Regulatory Commission, 888 First Street, NE.,
Washington, DC 20426, Telephone: (202) 502-8529.
Mindi Sauter (Legal Information), Office of the General Counsel,
Federal Energy Regulatory Commission, 888 First Street, NE.,
Washington, DC 20426, Telephone: (202) 502-6830.
SUPPLEMENTARY INFORMATION:
Table of Contents
Paragraph
No.
I. Background............................................... 3
A. Section 215 of the FPA................................. 3
B. Order No. 693.......................................... 5
C. NERC's June 14, 2007 Filing............................ 8
D. NPCC's Identification of Bulk Electric System 11
Facilities...............................................
E. Notice of Proposed Rulemaking.......................... 13
II. Discussion.............................................. 16
A. Overview............................................... 16
1. Definition of Bulk Electric System................... 17
(a) Commission Authority.............................. 17
(1) Comments........................................ 18
(i) NERC Standards Development Process and 19
Deference to NERC and the Regional Entities......
(ii) Bulk-Power System............................ 24
(iii) Distribution Facilities..................... 26
(2) Commission Determination........................ 29
(i) Overview...................................... 29
(ii) NERC Standards Development Process and 34
Deference to NERC and the Regional Entities......
(iii) Bulk-Power System........................... 36
(iv) Distribution Facilities...................... 37
(b) Scope of the Definitional Change of ``Bulk 42
Electric System''....................................
(1) NOPR Proposal................................... 42
(2) Comments........................................ 43
(3) Commission Determination........................ 52
(c) Technical and Historical Justification for 56
Modification.........................................
(1) NOPR Proposal................................... 56
(2) Comments........................................ 58
(3) Commission Determination........................ 72
(i) Impact-Based Methodology and Regional 76
Variation........................................
(ii) FRCC Event................................... 87
(iii) ReliabilityFirst Event...................... 88
(iv) Astoria West Event........................... 89
(v) Relevance of TLR.............................. 90
(vi) International Concerns....................... 91
(4) Summary......................................... 96
(d) Usage and Definition of ``Bulk-Power System''..... 97
(1) Comments........................................ 97
(2) Commission Determination........................ 100
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2. Exemption Process.................................... 101
(a) Comments.......................................... 102
(b) Commission Determination.......................... 111
3. Transition Process................................... 122
(a) Comments.......................................... 123
(b) Commission Determination.......................... 131
4. Cost Recovery........................................ 133
(a) Comments.......................................... 133
(b) Commission Determination.......................... 134
5. Issues Regarding the Western Interconnection......... 135
(a) Comments.......................................... 135
(b) Commission Determination.......................... 139
6. Impact on Generation Owners and Operators............ 142
(a) Comments.......................................... 142
(b) Commission Determination.......................... 144
7. Clarifying Terms..................................... 146
(a) Comments.......................................... 146
(b) Commission Determination.......................... 149
III. Information Collection Statement....................... 151
IV. Environmental Analysis.................................. 158
V. Regulatory Flexibility Act Analysis...................... 161
A. NOPR Proposal.......................................... 166
B. Comments............................................... 167
C. Commission Determination............................... 169
VI. Document Availability................................... 170
VII. Effective Date and Congressional Notification.......... 173
Before Commissioners: Jon Wellinghoff, Chairman; Marc Spitzer, Philip
D. Moeller, John R. Norris, and Cheryl A. LaFleur.
1. In this Final Rule, pursuant to section 215 of the FPA,\3\ the
Commission adopts, with modifications described below, the proposal set
forth in its March 18, 2010 Notice of Proposed Rulemaking (NOPR)
requiring the Electric Reliability Organization (ERO) to revise its
definition of the term ``bulk electric system.'' \4\ The Commission
directs the ERO, through the ERO's Reliability Standards Development
Process, to revise the definition to address the Commission's technical
concerns, as discussed fully below, and ensure that the definition
encompasses all facilities necessary for operating an interconnected
electric transmission network. The Commission believes that the best
way to accomplish these goals is to eliminate the regional discretion
in the current definition, maintain a bright-line threshold that
includes all facilities operated at or above 100 kV except defined
radial facilities, and establish an exemption process and criteria for
excluding facilities that are not necessary for operating the
interconnected transmission network. However, this Final Rule allows
the ERO, in accordance with Order No. 693, to develop an alternative
proposal for addressing the Commission's concerns with the present
definition with the understanding that any such alternative must be as
effective as, or more effective than,\5\ the Commission's proposed
approach in addressing the identified technical and other concerns, and
may not result in a reduction in reliability.\6\
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\3\ 16 U.S.C. 824o.
\4\ Revision to Electric Reliability Organization Definition of
Bulk Electric System, Notice of Proposed Rulemaking, 75 FR 14097
(Mar. 24, 2010), FERC Stats. & Regs. ] 32,654 (2010).
\5\ Mandatory Reliability Standards for the Bulk-Power System,
Order No. 693, FERC Stats. & Regs. ] 31,242, at P 31 (2007), order
on reh'g, Order No. 693-A, 120 FERC ] 61,053 (2007).
\6\ See, e.g., Version One Regional Reliability Standard for
Resource and Demand Balancing, 133 FERC ] 61,063, at P 14 (2010)
(Noting the Commission's concern that approving a proposed
Reliability Standard may result in reduced reliability). In
addition, as a general matter, any proposed regional difference must
be: (1) More stringent than the continent-wide definition, including
a regional difference that addresses matters that the continent-wide
Reliability Standard does not, or (2) necessitated by a physical
difference in the Bulk-Power System. See Rules Concerning
Certification of the Electric Reliability Organization; and
Procedures for the Establishment, Approval, and Enforcement of
Electric Reliability Standards, Order No. 672, FERC Stats. & Regs. ]
31,204, at P 291 (2006), order on reh'g, Order No. 672-A, FERC
Stats. & Regs. ] 31,212 (2006).
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2. In Order No. 693, the Commission noted its concern that the
current ``bulk electric system'' definition has the potential for gaps
in coverage of facilities, and indicated that it would revisit the
issue. This Final Rule is the next step towards addressing the
Commission's concerns. The approved changes will help ensure
reliability and consistency in the bulk electric system classification
throughout the interconnected United States. The Commission takes this
action as a continuation of Order No. 693's efforts to ensure that the
mandatory Reliability Standards fulfill the intent of Congress in
enacting section 215 of the FPA to protect reliability of the nation's
Bulk-Power System. The aim of the Final Rule is to eliminate
inconsistencies across regions, eliminate the ambiguity created by the
current discretion in NERC's definition of bulk electric system,
provide a backstop review to ensure that any variations do not
compromise reliability, and ensure that facilities that could
significantly affect reliability are subject to mandatory rules. The
Commission is not adding any new or modified text to its regulations.
I. Background
A. Section 215 of the FPA
3. On August 8, 2005, the Energy Policy Act of 2005 (EPAct 2005)
was enacted into law. Title XII of EPAct 2005 added a new section 215
to the FPA,\7\ which requires a Commission-certified ERO to develop
mandatory and enforceable Reliability Standards, subject to Commission
review and approval. Once approved, the Reliability Standards may be
enforced by the ERO, subject to Commission oversight, or by the
Commission independently.\8\
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\7\ Public Law 109-58, Title XII, Subtitle A, 119 Stat. 594, 941
(2005) (codified at 16 U.S.C. 824o).
\8\ See 16 U.S.C. 824o(e)(3).
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4. In February 2006, the Commission issued Order No. 672 \9\ in
which the Commission certified one organization, the North American
Electric Reliability Corporation (NERC), as the ERO.\10\
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\9\ Order No. 672, FERC Stats. & Regs. ] 31,204, order on reh'g,
Order No. 672-A, FERC Stats. & Regs. ] 31,212.
\10\ North American Electric Reliability Corp., 116 FERC ]
61,062, order on reh'g and compliance, 117 FERC ] 61,126 (2006)
(certifying NERC as the ERO responsible for the development and
enforcement of mandatory Reliability Standards), aff'd sub nom.
Alcoa Inc. v. FERC, 564 F.3d 1342 (D.C. Cir. 2009).
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B. Order No. 693
5. On March 16, 2007, in Order No. 693, pursuant to section 215(d)
of the FPA,\11\ the Commission approved 83 of 107 proposed Reliability
Standards, six of the eight proposed regional differences, and the
Glossary of Terms Used in Reliability Standards developed by NERC, the
Commission-certified ERO. In addition, Order No. 693 addressed the
applicability of mandatory Reliability Standards to the statutorily
defined Bulk-Power System.
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\11\ See Order No. 693, FERC Stats. & Regs. ] 31,242 (directing
improvements to 56 of the 83 approved Reliability Standards and
leaving 24 Reliability Standards as pending until further
information is provided), order on reh'g, Order No. 693-A, 120 FERC
] 61,053 (2007).
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6. In Order No. 693, the Commission explained that section 215(a)
of the FPA broadly defines the Bulk-Power System as:
Facilities and control systems necessary for operating an
interconnected electric energy transmission network (or any portion
thereof) [and] electric energy from generating facilities needed to
maintain transmission system reliability.\12\
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\12\ Order No. 693, FERC Stats. & Regs. ] 31,242 at P 76.
The Commission also approved NERC's definition of ``bulk electric
system,'' which is an integral part of the NERC Reliability Standards
and is included in the NERC Glossary of Terms Used in Reliability
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Standards (NERC Glossary):
As defined by the Regional Reliability Organization, the
electrical generation resources, transmission lines,
interconnections with neighboring systems, and associated equipment,
generally operated at voltages of 100 kV or higher. Radial
transmission facilities serving only load with one transmission
source are generally not included in this definition.\13\
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\13\ Order No. 693, FERC Stats. & Regs. ] 31,242 at P 75 n.47
(quoting NERC's definition of ``bulk electric system'').
7. The Commission approved NERC's definition of ``bulk electric
system'' with reservations. The Commission stated in Order No. 693
that, ``at least for an initial period, the Commission will rely on the
NERC definition of `bulk electric system' and NERC's registration
process to provide as much certainty as possible regarding the
applicability to and the responsibility of specific entities to comply
with the Reliability Standards.'' \14\ In approving the use of NERC's
definition of ``bulk electric system,'' the Commission stated that
``[it] remains concerned about the need to address the potential for
gaps in coverage of facilities.'' \15\
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\14\ Id. P 75; see also Order No. 693-A, 120 FERC ] 61,053 at P
19 (``the Commission will continue to rely on NERC's definition of
bulk electric system, with the appropriate regional differences, and
the registration process until the Commission determines in future
proceedings the extent of the Bulk-Power System'').
\15\ Order No. 693, FERC Stats. & Regs. ] 31,242 at P 77
(footnotes omitted). For example, the Commission noted that some
regional definitions of bulk electric system exclude facilities
below 230 kV and transmission lines that serve Washington, DC and
New York City and the Commission stated its intent to address this
matter in a future proceeding. Id.
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C. NERC's June 14, 2007 Filing
8. In a June 14, 2007 filing, NERC submitted the regional
definitions of ``bulk electric system.'' \16\ NERC represented that
``[e]ach Regional Entity utilizes the definition of bulk electric
system in the [NERC Glossary of Terms Used in Reliability Standards];
however, as permitted by that definition * * * several Regional
Entities define specific characteristics or criteria that the Regional
Entity uses to identify the bulk electric system facilities for its
members.[\17\] In addition, the Reliability Standards apply to load
shedding and special protection relay facilities below 100 kV, which
are monitored by Regional Entities, in compliance with NERC's
Reliability Standards.'' \18\
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\16\ NERC Informational Filing in Response to Paragraph 77 of
Order No. 693, Docket No. RM06-16-000 (Jun. 14, 2007) (June 2007
Filing).
\17\ Id. at 7. NERC also noted that the Texas Regional Entity,
Florida Reliability Coordinating Council (FRCC), Midwest Reliability
Organization, and SERC Reliability Corporation use the NERC
definition of bulk electric system without modification. In a
supplemental filing, NERC informed the Commission that Western
Electricity Coordinating Council (WECC) uses the NERC definition
alone in its implementation of Regional Entity activities. See NERC
Supplemental Informational Compliance Filing, Docket No. RM06-16-000
(Mar. 6, 2009). Three other Regional Entities, ReliabilityFirst
Corporation (ReliabilityFirst), Southwest Power Pool (SPP Regional
Entity), and Northeast Power Coordinating Council, Inc. (NPCC),
stated that they use the NERC definition supplemented with
additional criteria. For example, SPP Regional Entity indicated that
it uses the criteria specified in the NERC Statement of Registry
Criteria (with one exception). ReliabilityFirst supplemented the
NERC definition with specific voltage-based inclusions and
exclusions. For example, ReliabilityFirst includes ``lines operated
at voltage of 100 kV or higher.'' June 2007 Filing at 10.
ReliabilityFirst excludes certain radial facilities, balance of
generating plant control and operation functions, and ``all other
facilities operated at voltages below 100 kV.''
\18\ June 2007 Filing at 7.
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9. As noted in the NOPR, NERC's June 2007 Filing indicated that
NPCC uses the NERC definition of ``bulk electric system'' supplemented
by additional criteria. Unlike the supplemental criteria of other
Regional Entities, however, NPCC utilizes a significantly different
approach to identifying bulk electric system elements. According to
NERC, NPCC identifies elements of the bulk electric system using an
impact-based methodology, as opposed to a voltage-based methodology.
Further, as part of its approach to defining the ``bulk electric
system,'' NPCC includes its own definition of ``bulk power system.''
\19\
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\19\ ``The interconnected electrical systems within northeastern
North America comprised of system elements on which faults or
disturbances can have a significant adverse impact outside of the
local area.'' Id., Attachment 1 (NPCC Document A-10, Classification
of Bulk Power System Elements (Apr. 28, 2007)).
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10. According to NERC, NPCC analyzes all system elements within its
footprint regardless of size (voltage) to determine their impact based
on its ``bulk electric system'' definition. NPCC also utilizes a
guidance document, which provides further information on the NPCC
definition of ``bulk power system'' and how it is applied.\20\
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\20\ Id.
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D. NPCC's Identification of Bulk Electric System Facilities
11. In a December 2008 Order, the Commission directed NERC and NPCC
to submit to the Commission a comprehensive list of bulk electric
system facilities located within the United States portion of the NPCC
region.\21\ The Commission explained that there appeared to be
conflicting lists of bulk electric system elements developed by one of
the balancing authorities in the United States portion of the NPCC
region and it was not clear which, if any, of the lists were submitted
to NPCC or approved by NPCC's Task Force on System Studies. In a
compliance filing, NERC and NPCC indicated that the ``NPCC Approved
Bulk Electric System List'' of June 2007 was the only listing of bulk
electric system facilities approved by NPCC and is the current list of
facilities within the U.S. portion of NPCC to which the NERC
Reliability Standards apply.\22\
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The filing indicated that a majority of the 115 kV and 138 kV
transmission facilities in the NYISO Balancing Authority Area of the
NPCC region are excluded from the NPCC list of bulk electric system
facilities, including those associated with nuclear power plants, and
thus are excluded from compliance with mandatory Reliability
Standards.\23\ The information provided by NPCC also indicated that
numerous transmission lines at 100 kV or above that interconnect with
registered generation facilities are excluded from NPCC's list of bulk
electric system facilities.
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\21\ North American Electric Reliability Corp., 125 FERC ]
61,295 (2008) (December 2008 Order).
\22\ NERC and NPCC Compliance Filing at 5, Docket No. RC09-3-000
(Feb. 20, 2009). The February 20 Compliance Filing also indicated
that the NPCC approved list of bulk electric system elements was not
developed pursuant to NPCC's Document A-10, Classification of Bulk
Power System Elements, identified in the June 2007 Filing. Rather,
the approved NPCC list was developed pursuant to an earlier version
of the NPCC impact-based methodology.
\23\ In addition, NPCC excludes approximately seven higher
voltage (e.g., 230 kV, 345 kV and 500 kV) transmission facilities,
some connecting to nuclear power plants.
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12. In September 2009, NERC and NPCC submitted a compliance filing
in which NPCC evaluated the impact and usefulness of a 100 kV ``bright-
line'' ``bulk electric system'' definition as well as another optional
method, which utilizes Transmission Distribution Factor calculations to
determine reliability impacts. The NPCC definition would exclude radial
network portions of the transmission system, as opposed to radial
lines.\24\ However, NPCC stated that it continues to believe that its
current impact-based approach provides an adequate level of reliability
and, therefore, intends to continue to apply the impact-based approach
in classifying its bulk electric system elements.\25\
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\24\ NERC and NPCC Compliance Filing and Assessment of Bulk
Electric System Report, Docket No. RC09-3-000 (Sep. 21, 2009). NPCC
would define ``radial portions of the transmission system to include
(1) an area serving load that is connected to the rest of the
network at a single transmission substation at a single transmission
voltage by one or more transmission circuits; (2) tap lines and
associated facilities which are required to serve local load only;
(3) transmission lines that are operated open for normal operation;
or (4) additionally as an option, those portions of the NPCC
transmission system operated at 100 kV or higher not explicitly
designated as a bulk electric system path for generation which have
a one percent or less participation in area, regional or inter
regional power transfers. Id. at 11.
\25\ Id. at 7-8; see also id. at 14 (``If directed by the
Commission to adopt the developed [bulk electric system] definition
for U.S. Registered Entities within the NPCC footprint, NPCC would
need additional time to carefully consider and develop a more
extensive and detailed implementation plan.'').
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E. Notice of Proposed Rulemaking
13. On March 18, 2010, the Commission issued a NOPR proposing to
direct NERC to revise the definition of ``bulk electric system'' in the
NERC Glossary. The current ``bulk electric system'' definition provides
Regional Entities discretion to define ``bulk electric system,''
including the ability to exclude facilities 100 kV or above, without
ERO or Commission oversight. The Commission's proposed revised
definition would continue to include all facilities rated above 100 kV
and eliminate regional variations, providing a consistent
identification of bulk electric system facilities across the nation's
reliability regions. The proposal called for Commission and NERC
approval for exempting facilities that would otherwise qualify as part
of the bulk electric system on a facility-by-facility basis.
14. The NOPR identified inconsistencies between regions that
resulted from the existing definition, such as NPCC not including two
115 kV transmission lines as part of the bulk electric system in its
region even though the sections of these same lines that connect to
PJM's balancing authority area are considered bulk electric system
elements within the ReliabilityFirst footprint. As an additional
example, seven higher voltage (e.g., 230 kV, 345 kV, and 500 kV)
transmission facilities (some connecting to nuclear power plants)
excluded from the list of bulk electric system facilities in NPCC would
be included in other regions. Further, the NOPR provided several
examples of disturbances that either began on or were propagated by
100-200 kV facilities including a February 26, 2008 event in FRCC
originating at a 138 kV facility that resulted in the loss of 24
transmission lines and 4,300 MW of generation.
15. The Commission issued the NOPR on March 18, 2010, and required
that comments be filed within 45 days after publication in the Federal
Register.\26\ More than eighty comments and reply comments to the NOPR
proposal were submitted to the Commission.\27\ Upon consideration of
the comments, the Commission modifies certain proposals from the NOPR
in this Final Rule, as described below.
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\26\ See 75 FR 14097 (Mar. 24, 2010).
\27\ A list of commenters appears in Appendix A.
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II. Discussion
A. Overview
16. After consideration of the comments submitted, the Commission
adopts the NOPR's proposal with some modifications. The Commission
directs the ERO to revise the definition of ``bulk electric system''
through the NERC Standards Development Process to address the
Commission's concerns discussed herein. The Commission believes the
best way to address these concerns is to eliminate the Regional
Entities' discretion to define ``bulk electric system'' without ERO or
Commission review, maintain a bright-line threshold that includes all
facilities operated at or above 100 kV except defined radial
facilities, and adopt an exemption process and criteria for excluding
facilities that are not necessary to operate an interconnected electric
transmission network. However, NERC may propose a different solution
that is as effective as, or superior to, the Commission's proposed
approach in addressing the Commission's technical and other concerns so
as to ensure that all necessary facilities are included within the
scope of the definition.
1. Definition of Bulk Electric System
(a) Commission Authority
17. In the NOPR, the Commission proposed, pursuant to section
215(d)(5) of the FPA and Sec. 39.5(f) of our regulations, to require
NERC to submit a revised NERC definition of ``bulk electric system''
that provides a 100 kV threshold for facilities that are included in
the bulk electric system and eliminates the currently-allowed
discretion of a Regional Entity to define ``bulk electric system''
within its system without NERC or Commission oversight.
(1) Comments
18. Several commenters argue that the Commission's proposal exceeds
its statutory authority.\28\ Other commenters contend that the
Commission's proposal is inconsistent with the statutory regime
envisioned in section 215 of the FPA, requiring the Commission to defer
to the ERO on technical issues and for the ERO to have primary
responsibility for developing specific Reliability Standards.
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\28\ See, e.g., APPA/NRECA, NYPSC, NYSRC, EEI, Joint Western
Commenters, NERC, Snohomish, Tacoma Power, and PGE. Note that
although the parties we have identified as the ``Joint Western
Commenters'' submitted separate comments, the comments were
virtually identical. Consequently, we cite their comments as a
single group.
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(i) NERC Standards Development Process and Deference to NERC and the
Regional Entities
19. NERC supports the Commission's objectives of ensuring a common
understanding and consistent application of ``bulk electric system''
across the regions, while allowing variations to the definition based
on reliability. However, NERC objects to the Commission making
unilateral decisions with respect to the definition, as it did in the
NOPR, rather than allowing this issue to be addressed through the NERC
Reliability Standards
[[Page 72914]]
Development Process.\29\ NERC states that the NERC Glossary of Terms is
part-and-parcel of the Reliability Standards and therefore falls under
the same section 215 process. NERC argues that the Commission may order
the ERO, pursuant to section 215(d)(5) of the FPA, to submit a proposed
Reliability Standard or modification to a Reliability Standard to the
Commission. Following this submission, NERC continues, the Commission
may then approve the proposal or remand it to the NERC Reliability
Standards Development Process for further consideration.
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\29\ NERC at 8-11.
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20. NERC states that by directing this change, the Commission is
bypassing the NERC Reliability Standards Development Process, and the
Commission will not have the opportunity to consider NERC's guidance in
developing an equally effective and perhaps superior alternative. NERC
states that the approach in the Commission's NOPR would accomplish
indirectly that which it is prohibited from doing directly, in
contravention of well-established judicial precedent. NERC notes that
the Commission refrained from taking similar unilateral action in Order
No. 693. NERC requests the Commission clarify in the Final Rule that
any modification to the definition of bulk electric system be
accomplished through the NERC Reliability Standards Development
Process.
21. Similarly, EEI, Duke Energy, APPA/NRECA, and other commenters
assert that the Commission should defer to the NERC Reliability
Standards Development Process, and allege that the proposal
unreasonably departs from the Commission's precedent in Order No. 693.
22. Snohomish also asserts that the proposed rule fails to defer to
the technical expertise of the regional reliability organizations and
inappropriately interferes in the local work of Snohomish's Board
regarding decisions on levels of service.
23. TAPS states that Congress did not intend for the Commission to
undertake a facility-by-facility review of all facilities above 100 kV,
and that the proposed rule is contrary to section 215's apportionment
of primary responsibility for reliability administration to the
ERO.\30\ Additionally, TAPS states that the Commission's proposed
facility-by facility review would not satisfy section 215's goal of
effective and efficient reliability administration.
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\30\ TAPS at 4; see also Snohomish at 22-28.
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(ii) Bulk-Power System
24. NYSRC argues that section 215 does not provide a ``bright-
line'' test for Bulk-Power System facilities and states that the
statutory intent of section 215 limits the Commission's jurisdiction to
facilities that are necessary for the reliable operation of the Bulk-
Power System.\31\ Several commenters state that the Commission's
proposal exceeds its statutory authority as described in the definition
of ``Bulk-Power System'' because the proposed definition of bulk
electric system would likely encompass facilities not necessary for
operating the interconnected network,\32\ and that the statutory
definitions of ``Reliability Standard'' and ``Reliable Operation''
refer to protecting the system from instability, uncontrolled
separation, or cascading failures, not local-area outages.\33\ The
commenters contend that a functional test, such as NPCC's current
material impact assessment would be more appropriate since it is
tailored to include facilities that are necessary for operation of an
interconnected electric energy transmission network.
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\31\ NYSRC at 7-8.
\32\ See, e.g., NYPSC, NYSRC, Duke Energy, Indicated New York
Transmission Owners, Snohomish and Joint Western Commenters.
\33\ NYSRC at 7.
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25. GTC/GSOC add that the proposed change would make the definition
of ``bulk electric system'' broader than the statutory definition of
``Bulk-Power System,'' and therefore would exceed the Commission's
authority.
(iii) Distribution Facilities
26. Several other parties assert that the proposed rule will
inappropriately include distribution facilities as part of the bulk
electric system, and argue that the Commission's proposal is contrary
to Congress's definition of ``Bulk-Power System'' and the Commission's
own precedent regarding transmission versus local distribution.\34\
Several parties state that FPA section 215 specifically excludes
distribution facilities and that they therefore should be excluded from
the definition of ``bulk electric system.'' Constellation/CENG argues
that the Commission's proposal to exclude from the definition of ``bulk
electric system'' ``[r]adial transmission facilities serving only load
with one transmission source'' is too limiting. Constellation/CENG
believes that this approach will include local distribution facilities
in a manner contrary to section 215 of the FPA.
---------------------------------------------------------------------------
\34\ See, e.g., Constellation/CENG, Dow, Duke Energy, GTC/GSOC,
Hydro-Qu[eacute]bec, Indicated New York Transmission Owners, Joint
Western Commenters, NARUC, NV Energy, NYSRC, PGE, Public Power
Council, Snohomish Tacoma Power, TIEC.
---------------------------------------------------------------------------
27. The NYPSC contends that the Commission's proposal exceeds its
jurisdiction by encompassing local distribution facilities that are not
necessary for operating the interconnected transmission network. It
states that 138 kV facilities in New York City operate above 100 kV but
do not serve a bulk system function due to the high concentration of
load served by these lines. It asserts that transmission facilities
such as these that move power between Bulk-Power System and
distribution facilities do not affect the reliable operation of the
bulk system. The New York Transmission Owners contend that the Long
Island Power Authority's (LIPA) system east of the Northport system is
composed of 138 kV lines with limited connections to other areas that
is not affected by other regional flows, but instead mirrors a radial
system feeding local load.
28. Snohomish, Consumers Energy, PGE, Tacoma Power and other
commenters argue that the Commission's proposal, unless clarified to
exclude distribution facilities, is contrary to statute because section
215 directs that distribution facilities should be excluded on a
functional basis regardless of voltage.\35\ Snohomish argues that the
Commission's proposal departs from its previous determinations in Order
No. 693 regarding the difference between transmission and distribution
systems.\36\ Further, it states that section 215 emphasizes how
facilities are used rather than their voltage level, and asserts that
the NOPR's definition runs counter to the statutory definition.
---------------------------------------------------------------------------
\35\ See, e.g., Snohomish at 20-22; PGE at 3-6; Tacoma Power at
2-3.
\36\ Snohomish at 20-21 (citing Order No. 693, FERC Stats. and
Regs. ] 31,242 at P 23 n.20).
---------------------------------------------------------------------------
(2) Commission Determination
(i) Overview
29. We disagree that the Commission exceeded its statutory
authority by directing the ERO to revise the definition of bulk
electric system in its Glossary of Terms. We agree with NERC that the
NERC Glossary is part of the Reliability Standards and therefore falls
under the same section 215 process. Pursuant to section 215(d)(5), the
Commission may order the ERO to submit a proposed Reliability Standard
or a modification to a Reliability Standard that addresses a specific
matter. Here, by directing a revision to the definition of bulk
electric system, the Commission orders a modification to a definition
of a term contained in a
[[Page 72915]]
number of Commission-approved Reliability Standards.\37\ Because this
term is contained within Commission-approved Reliability Standards, the
Commission has the authority to direct the ERO to develop a
modification of the definition of a defined term contained in the
Reliability Standards under the process delineated in section 215 of
the FPA.
---------------------------------------------------------------------------
\37\ See, e.g., CIP-002-2, COM-001-1.1, EOP-004-1, EOP-005-1,
FAC-008-1, FAC-009-1, FAC-010-2, FAC-011-2, FAC-013-1, FAC-014-2,
IRO-001-1.1, IRO-002-1, IRO-003-2, IRO-004-1, IRO-005-2, IRO-006-
4.1, NUC-001-2, PER-001-0.1, PER-002-0, PER-003-0, PRC-004-1, PRC-
005-1, PRC-021-1, PRC-022-1, PRC-023-1, TOP-001-1, TOP-002-2, TOP-
008-1, TPL-002-0, TPL-003-0, TPL-004-0.
---------------------------------------------------------------------------
30. For the reasons discussed more fully below, the Commission
finds that the current definition of bulk electric system is
insufficient to ensure that all facilities necessary for operating an
interconnected electric energy transmission network are included under
the ``bulk electric system'' rubric. Therefore, pursuant to section
215(d)(5) of the FPA,\38\ the Commission directs the ERO to modify,
through the Standards Development Process, the definition of ``bulk
electric system'' to address the Commission's technical and policy
concerns described more fully herein. The Commission believes the best
way to address these concerns is to eliminate the regional discretion
in the ERO's current definition, maintain the bright-line threshold
that includes all facilities operated at or above 100 kV except defined
radial facilities, and establish an exemption process and criteria for
excluding facilities the ERO determines are not necessary for operating
the interconnected transmission network. It is important to note that
the Commission is not proposing to change the threshold value already
contained in the definition, but rather seeks to eliminate the
ambiguity created by the current characterization of that threshold as
a general guideline.\39\
---------------------------------------------------------------------------
\38\ 16 U.S.C. 824o(d)(5).
\39\ We note that all regions except NPCC currently utilize 100
kV as a general threshold.
---------------------------------------------------------------------------
31. In accordance with Order No. 693, the ERO may develop an
alternative proposal for addressing the Commission's concerns with the
present definition with the understanding that any such alternative
must be as effective as, or more effective than, the Commission's
proposed approach in addressing the identified technical and other
concerns,\40\ and may not result in a reduction in reliability.\41\ If
the ERO decides to propose an alternative approach, it must explain in
detail, and with a technical record sufficient enough for the
Commission to make an informed decision, how its alternative addresses
each of the Commission's concerns in a manner that is as effective as,
or more effective than, the Commission's identified solution.\42\
Additionally, the ERO would need to address the factors the Commission
will consider in determining whether a proposed Reliability Standard is
just and reasonable, as outlined in Order No. 672. In particular, Order
No. 672 states that proposed Reliability Standards ``should be clear
and unambiguous regarding what is required and who is required to
comply.'' \43\ Another factor indicates that a ``proposed Reliability
Standard should be designed to apply throughout the interconnected
North American Bulk-Power System, to the maximum extent this is
achievable with a single Reliability Standard.'' \44\ As Order No. 672
further requires, any proposed regional difference must be: (1) More
stringent than the continent-wide definition, including a regional
difference that addresses matters that the continent-wide definition
does not; or (2) necessitated by a physical difference in the Bulk-
Power System.\45\
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\40\ Order No. 693, FERC Stats. & Regs. 31,242 at P 31.
\41\ See, e.g., Version One Regional Reliability Standard for
Resource and Demand Balancing, 133 FERC ] 61,063, at P 14 (2010);
North American Electric Reliability Corporation Reliability
Standards Development and NERC and Regional Entity Enforcement, 132
FERC ] 61,217, at P 112 (2010).
\42\ Order No. 693 FERC Stats. & Regs. 31,242 at P 31.
\43\ See Order No. 672, FERC Stats. & Regs. 31,204 at P 325.
\44\ See id. P 331.
\45\ Id. P 291.
---------------------------------------------------------------------------
32. The Commission further finds that revising the definition to
address the identified concerns is a significant step toward improving
the reliability of the Bulk-Power System in North America because it
protects the reliability of the bulk electric system and provides
clarity and consistency across the nation's reliability regions in
identifying bulk electric system facilities.
33. The Commission directs the ERO to submit these modifications no
later than one year from the effective date of this Final Rule. We will
address each proposal and the specific comments received on each
proposal in the remainder of this Final Rule.
(ii) NERC Standards Development Process and Deference to NERC and the
Regional Entities
34. With regard to the concerns raised by some commenters about the
prescriptive nature of the Commission's proposed modifications, we
agree that, consistent with Order No. 693, a direction for modification
should not be so overly prescriptive as to preclude the consideration
of viable alternatives that may produce an equally effective or
efficient solution. However, some guidance is necessary, as the
Commission explained in Order No. 693:
[I]n identifying a specific matter to be addressed in a
modification * * * it is important that the Commission provide
sufficient guidance so that the ERO has an understanding of the
Commission's concerns and an appropriate, but not necessarily
exclusive, outcome to address those concerns. Without such direction
and guidance, a Commission proposal to modify a Reliability Standard
might be so vague that the ERO would not know how to adequately
respond.\46\
---------------------------------------------------------------------------
\46\ Order No. 693, FERC Stats. & Regs. ] 31,242 at P 185.
35. Thus, due to the importance of the bulk electric system
definition to our overall ability to carry out the mandates of section
215, and the problems we have identified with the current definition,
we provide specific details regarding the Commission's expectations. We
intend by doing so to provide useful direction to assist in the
Reliability Standards Development Process, not to impede it. As we
explained in Order No. 693, we find that this is consistent with
statutory language that authorizes the Commission to direct the ERO to
submit a modification ``that addresses a specific matter'' if the
Commission considers it appropriate to carry out section 215 of the
FPA.\47\ Although some commenters' contend that we should ``defer to
regional expertise,'' we note that the statute specifies that we should
``give due weight'' to the ERO's technical expertise.\48\ The
Commission's action here does not conflict with that statutory
requirement. In this Final Rule, we have considered commenters'
concerns and, although we have identified a proposed approach, the
Commission provides flexibility by directing the ERO to address the
underlying issue through the Reliability Standards Development
Process.\49\ Consequently, consistent with Order No. 693, we clarify
that where the Final
[[Page 72916]]
Rule identifies a concern and offers a specific approach to address
that concern, we will consider an equivalent alternative approach
provided that the ERO demonstrates that the alternative will adequately
address the Commission's underlying concern or goal as efficiently and
effectively as the Commission's proposal.\50\
---------------------------------------------------------------------------
\47\ Id. P 186 (citing 16 U.S.C. 824o(d)(5)).
\48\ 16 U.S.C. 824o(d)(2); see also Order No. 672, FERC Stats. &
Regs. ] 31,204 at P 345 (``We do not agree that giving due weight
means a rebuttable presumption that the Reliability Standard meets
the statutory requirement of being just, reasonable, not unduly
discriminatory or preferential, and in the public interest.'').
\49\ Order No. 693, FERC Stats. & Regs. ] 31,242 at P 186.
\50\ Id.
---------------------------------------------------------------------------
(iii) Bulk-Power System
36. With regard to the alleged conflict between ``bulk electric
system'' and ``Bulk-Power System,'' the Commission noted in Order No.
693 that Congress chose to create a new term, ``Bulk-Power System,''
with a definition that is distinct from the term of art (``bulk
electric system'') used by industry, and thus there is an intentional
distinction between the Bulk-Power System and the bulk electric
system.\51\ The Commission further noted that the statutory term
``Bulk-Power System'' has not been definitively defined but does not
establish a voltage threshold limit of applicability or configuration
as does the NERC definition of ``bulk electric system,'' and therefore
may reach more facilities than NERC's definition of ``bulk electric
system.'' \52\
---------------------------------------------------------------------------
\51\ Id. P 76.
\52\ See id. P 76; Order No. 693-A, 120 FERC ] 61,053 at P 17-
18.
---------------------------------------------------------------------------
(iv) Distribution Facilities
37. The Commission has stated that the statutory term ``Bulk-Power
System'' defines the jurisdiction of the Commission.\53\ The Commission
noted that it has not defined the extent of the facilities covered by
the Bulk-Power System, but that Congress specifically exempted
``facilities used in the local distribution of electric energy'' from
the definition. FPA section 215 defines the term ``Bulk-Power System''
as encompassing the ``facilities and control systems necessary for
operating an interconnected electric energy transmission network (or
any portion thereof).'' \54\ In ascertaining the extent of the
facilities included in the ``Bulk-Power System'' definition, the
Commission's prior discussion regarding the inclusion of generation
facilities as part of the Bulk-Power System is instructive. In the
discussion, the Commission stated that, ``if electric energy from a
generating facility is needed to maintain a reliable transmission
system, that facility is part of the Bulk-Power System with respect to
the energy it generates that is needed to maintain reliability.'' \55\
Similarly, several 115 and 138 kV facilities that some entities term as
``distribution'' may be needed to reliably operate the interconnected
transmission system. Determining where the line between
``transmission'' and ``local distribution'' lies, which includes an
inquiry into which lower voltage ``transmission'' facilities are
necessary to operate the interconnected transmission system, should be
part of the exemption process the ERO develops.
---------------------------------------------------------------------------
\53\ Order No. 693-A, 120 FERC ] 61,053 at P 19.
\54\ 16 U.S.C. 824o(a)(1).
\55\ Order No. 672, FERC Stats. & Regs. ] 31,204 at P 71.
---------------------------------------------------------------------------
38. The Commission disagrees with comments that appear to assert
that the Commission's jurisdiction extends only to facilities that
could, if improperly operated, singularly cause cascading outages,
uncontrolled separation or instability. By this narrow metric, the
facilities that caused the 2003 Blackout would not be viewed as
critical since not one of the individual facilities caused the outage.
In defining jurisdictional facilities, section 215(a)(1) focuses on
whether facilities are necessary to operate the interconnected
transmission system, not solely on the consequences of unreliable
operation of those facilities. Lower voltage facilities needed to
reliably operate the grid tend to operate in parallel with other high
voltage and extra high voltage facilities, interconnect significant
amounts of generation sources and may operate as part of a defined flow
gate. These parallel facilities operated at 100-200 kV will experience
similar loading as higher voltage facilities at any given time.
Additionally, the lower voltage facilities will be relied upon during
contingency scenarios.
39. For example, we are not persuaded by the NYPSC's argument that
the 138 kV system in New York, and specifically the 138 kV system
including those facilities in the Astoria area, are all distribution
facilities. We do not believe that most of these facilities are local
distribution because: the facilities are not primarily radial in
character, as they are connected to the 345 kV network in the Astoria
area at over six different points; the 138 kV system is networked
amongst itself; power flows both in and out of the system into both
NYISO and PJM facilities depending on time of day and loading; and the
system is not constrained to a comparatively restricted geographical
area due to multiple interconnections. The 138 kV system in the Astoria
area includes six major substations that are interconnected at 345 kV
to both NYISO and PJM facilities that are integral parts of the Eastern
Interconnection. There are ten 138 kV phase angle regulators connecting
the 345 kV stations to the 138 kV network, which are necessary to
control the appropriate distribution of power flows between the 345 kV
and 138 kV systems to accommodate power transfers from upstate New York
and PJM into southeastern New York. In addition, there are
approximately 9,000 MW of capacity resources directly connected to the
138 kV network in the New York City area at different points, 2,000 MW
of which is connected in the Astoria area. Similarly over 10,000 MW of
customer firm demand in the area is supplied from the 138 kV to lower
voltage levels via step-down transformers. None of these
characteristics is consistent with any reasonable definition of local
distribution.\56\ To the extent that any individual line would be
considered to be local distribution, that line would not be considered
part of the bulk electric system.
---------------------------------------------------------------------------
\56\ This example illustrates one of the deficiencies of the
NPCC impact-based approach for identifying bulk electric system
facilities, discussed more fully below.
---------------------------------------------------------------------------
40. Nor are we persuaded by the Indicated New York Transmission
Owners' statement that LIPA's service territory--which includes a
majority of Long Island, identified as Zone K by NYISO and, as reported
in the NYISO ``Load & Capacity Data,'' had a 2010 summer peak load of
5,300 MW--``mirrors a radial system feeding local load.'' As with the
138 kV network in New York City discussed above, the LIPA system
contains significant capacity resources (5,700 MW), is interconnected
with other portions of NYISO, ISO-NE, and PJM, and its operations
affect and depend on operations in other portions of New York, as well
as New Jersey and Connecticut.\57\
---------------------------------------------------------------------------
\57\ See http://www.nyiso.com/public/webdocs/services/planning/reliability_assessments/AppxE.pdf and http://www.nyiso.com/public/webdocs/services/planning/planning_data_reference_documents/2010_GoldBook_Public_Final_033110.pdf.
---------------------------------------------------------------------------
41. Some commenters allege that the proposal is an unexpected
departure from the Commission's previous actions regarding the bulk
electric system in Order No. 693. To the contrary, the Commission was
very clear about its reservations in accepting the NERC bulk electric
system definition in Order No. 693 and expressly accepted the
definition for an ``initial period'' \58\ subject to subsequent
review.\59\ The
[[Page 72917]]
Commission's action here will ensure that all facilities necessary to
maintain a reliable transmission system are included as part of the
bulk electric system and thus will be subject to ERO and Commission
oversight.\60\
---------------------------------------------------------------------------
\58\ Order No. 693, FERC Stats. & Regs. ] 31,242 at P 75.
\59\ In accepting NERC's definition of ``bulk electric system,''
the Commission explained: ``Although we are accepting the NERC
definition of bulk electric system and NERC's registration process
for now, the Commission remains concerned about the need to address
the potential for gaps in coverage of facilities. For example, some
current regional definitions of bulk electric system exclude
facilities below 230 kV and transmission lines that serve major load
centers such as Washington, DC and New York City. The Commission
intends to address this matter in a future proceeding.''
Id. P 77 (footnotes omitted).
\60\ While the Commission seeks to ensure that the definition of
``bulk electric system'' includes all facilities 100 kV or above
that are necessary for reliable operation, our action here is not
intended to determine the extent of the facilities included in the
Bulk-Power System. As stated in Order No. 693-A, the Commission
believes that the Bulk-Power System reaches farther than those
facilities that are included in NERC's definition of the bulk
electric system, but we have not definitively defined the extent of
the facilities covered by the Bulk-Power System, and we are not
doing so here. See Order No. 693-A at P 17-18.
---------------------------------------------------------------------------
(b) Scope of the Definitional Change of ``Bulk Electric System''
(1) NOPR Proposal
42. In the NOPR, the Commission proposed to direct the ERO to
revise its definition of the term ``bulk electric system'' to include
all electric transmission facilities with a rating of 100 kV or
above.\61\ The Commission's proposal further states that a Regional
Entity must seek ERO and Commission approval before exempting any
facility rated at 100 kV or above from compliance with mandatory
Reliability Standards.
---------------------------------------------------------------------------
\61\ NOPR, FERC Stats. & Regs. ] 32,654 at P 1.
---------------------------------------------------------------------------
(2) Comments
43. NERC argues that the proposed definitional change would have a
much broader impact than acknowledged by the Commission. Among other
things, NERC states that the proposed change to ``rated at'' from the
current ``operated at'' will dramatically expand the scope of
facilities and entities affected by the change. NERC states that the
proposal will unnecessarily include some facilities that entities built
at higher voltage levels (i.e., 138 kV) to accommodate future load
growth while presently operating the facilities at lower voltages
(i.e., 69 kV).
44. Several commenters seek clarification that the definition of
``bulk electric system'' is not intended to supersede voltage
thresholds specified in specific Reliability Standards.\62\ For
example, Reliability Standard FAC-003 generally applies to transmission
lines 200 kV and above.
---------------------------------------------------------------------------
\62\ See, e.g., EEI, Dominion Power, National Grid, and Southern
Company.
---------------------------------------------------------------------------
45. Joint Western Commenters and Bay Area Municipal argue that the
definition of ``bulk electric system'' that the Commission ultimately
accepts should clarify that if an element is determined to be part of
the bulk electric system, such an element is not necessarily a
transmission asset.
46. Joint Western Commenters state that an entity should be able to
de-register as a Distribution Provider and Load-Serving Entity if it
does not own any bulk electric system elements.\63\ They state that an
entity with no elements in the bulk electric system cannot be
considered an owner or operator of the bulk electric system, and
because operation of that entity's distribution assets has no material
impact on the bulk electric system, it should be exempt from regulation
as transmission and the need to register and participate in the
regulatory framework for transmission facilities. These commenters also
state that requiring an entity with no bulk electric system elements to
comply with the mandatory Reliability Standards would be an unnecessary
burden on the entity, and a diversion of resources by the Regional
Entity, NERC, and the Commission.\64\
---------------------------------------------------------------------------
\63\ Joint Western Commenters at section IV.B.
\64\ Id.
---------------------------------------------------------------------------
47. Although EEI supports the Commission's proposal not to change
the ERO treatment of radials under the ERO definition of bulk electric
system, several commenters raise concerns about the scope of the
exemption going forward.
48. Several commenters believe that the statement in the NOPR that
radial lines would not be part of the bulk electric system is not
enough to remove ambiguity.\65\ APPA/NRECA notes that the NOPR leaves a
question open as to whether radial lines would be automatically exempt
under the bulk electric system definition or whether entities would
have to go through the multi-tiered exemption process.\66\ Other
commenters point out that certain Regional Entities currently provide a
clearer and more valid approach to determining whether facilities
should be classified as exempt radial facilities. They state for
example that the WECC process includes additional detail regarding
demarcation points and system characteristics that are important in
defining ``radial.'' Commenters also state that the WECC transmission
system includes radial lines, where a backup feed is possible, but is
normally open, and a utility should not be penalized for having a
secondary feed via a normally open line by requiring it to
automatically become part of the bulk electric system. The bright line
100 kV threshold would encourage small utilities to choose not to
provide backup service options, reducing overall customer service.
---------------------------------------------------------------------------
\65\ See, e.g., id. at section III.C.
\66\ APPA/NRECA at 19-23.
---------------------------------------------------------------------------
49. Arguing that NERC's current definition of radial transmission
facilities, defined as ``facilities serving only load with one
transmission source,'' is too narrow, National Grid supports adoption
of a broader definition that includes tap lines and associated
facilities used to serve local load only, and transmission lines that
are operated in an open position for normal operations.\67\
---------------------------------------------------------------------------
\67\ National Grid at 10.
---------------------------------------------------------------------------
50. ELCON states that the Final Rule should specify that radial
lines do not have to go through the exemption process.
51. FRCC states the Commission should afford the Regional Entities
sufficient time to complete their efforts to define the scope of the
bulk electric system, since they are in the process of establishing
criteria for the exclusion of facilities as ``radial transmission
facilities.''
(3) Commission Determination
52. We grant the clarification sought by commenters that the 100 kV
threshold will not modify thresholds established in individual
Reliability Standards such as FAC-003.
53. In response to comments, although the NOPR used the term
``rated at,'' the Commission did not intend to require NERC to utilize
that term rather than the term ``operated at'' which is reflected in
the current definition of bulk electric system. While the Commission
does not have firm data on the number of facilities that operate at a
voltage significantly lower than the rated voltage, we find that the
term ``rated at'' could generate confusion.\68\
---------------------------------------------------------------------------
\68\ Operating voltage usually encompasses a small range of
voltages around the expected or normal operating value while rated
voltage depends on the design of the facilities.
---------------------------------------------------------------------------
54. We believe that the issues of whether a distribution provider
or load-serving entity may de-register if it is shown not to own any
bulk electric system elements, and whether the inclusion of a facility
as part of the bulk electric system is or is not determinative of that
facility's status as a transmission asset, are addressed by the NERC
Registry Criteria and beyond the scope of this proceeding.
[[Page 72918]]
55. As we stated in the NOPR, we do not seek to modify the second
part of the definition through this Final Rule, which states that
``[r]adial transmission facilities serving only load with one
transmission source are generally not included in this definition.''
While commenters would like to expand the scope of the term ``radial''
to exclude certain transmission facilities such as tap lines and
secondary feeds via a normally open line, we are not persuaded that
such categorical exemption is warranted. For example, when the normally
``open'' line is ``closed,'' it becomes part of the transmission
network and therefore should be subject to mandatory Reliability
Standards. Commenters also argued that the bright line 100 kV threshold
would encourage small utilities to choose not to provide backup service
options, reducing overall customer service. We acknowledge these
concerns, and direct the ERO to consider these comments regarding
radial facilities in crafting an exemption methodology.
(c) Technical and Historical Justification for Modification
(1) NOPR Proposal
56. In the NOPR, the Commission stated its concern that if it does
not clarify the ``bulk electric system'' definition to apply a stricter
100 kV threshold, it would not be fulfilling Congress's intent in
enacting section 215. The NOPR stated that the Commission believes
there is an adequate technical and reliability-related justification,
discussed further below, for the proposed 100 kV operating threshold
for identifying bulk electric system facilities. Additionally, the NOPR
noted that NERC already applies a general 100 kV threshold.\69\
Further, at present all regions, with the exception of NPCC, also apply
a 100 kV threshold.
---------------------------------------------------------------------------
\69\ NOPR, FERC Stats. & Regs. ] 32,654 at P 13-14.
---------------------------------------------------------------------------
57. The NOPR identified inconsistencies between regions, such as
two transmission lines that are classified as bulk electric system in
ReliabilityFirst but not in NPCC.\70\ The NOPR also offered examples of
disturbances that either began on or were propagated by 100-200 kV
facilities, including a February 26, 2008 event in FRCC originating at
a 138 kV facility that resulted in the loss of 24 transmission lines
and 4,300 MW of generation, and a June 27, 2007 event on 138 kV
transmission lines in the NPCC region that included sequential tripping
of four 138 kV cable-circuits without a contingency. The June 27, 2007
NPCC event (the ``Astoria West event'') resulted in the interruption of
service to about 137,000 customers as well as the loss of five
generators and six 138 kV transmission lines. Further, the NOPR pointed
to Transmission Loading Relief (TLR) issuances on non-bulk electric
system elements in New York and the historical basis for a 100 kV
threshold as justification.
---------------------------------------------------------------------------
\70\ See NERC/NPCC, compliance filing, Docket No. RC09-3 (filed
Feb. 20, 2009).
---------------------------------------------------------------------------
(2) Comments
58. Several commenters including ISO-NE, BGE, Northeast Utilities,
ReliabilityFirst, Manitoba Hydro, and Dominion Power support the
proposed change, arguing that the increased consistency and
applicability of NERC Reliability Standards will ensure reliability.
Moreover, a number of other commenters who ultimately suggest that
other processes are more appropriate for undertaking a modification to
the definition of ``bulk electric system'' agree with the overriding
goal to develop a more consistent definition of ``bulk electric
system.'' For example, NERC notes that it ``supports the Commission's
objectives of ensuring a common understanding and consistent
application of the definition of `bulk electric system' across the
regions,'' with variations justified on the basis of reliability.\71\
Likewise, ReliabilityFirst supports the creation of a bright-line rule
for determining which facilities are subject to Reliability Standards
(with appropriate process for refinement or exemption), and both SCE
and WECC generally support a rebuttable presumption that transmission
facilities above 100 kV should be initially classified as ``bulk
electric system'' facilities, as long as appropriate mechanisms for
exclusion are in place.\72\
---------------------------------------------------------------------------
\71\ NERC at 2.
\72\ ReliabilityFirst at 2; SCE at 2; WECC at 3.
---------------------------------------------------------------------------
59. Several other commenters contend that the proposal does not
explain how the proposed changes to bulk electric system classification
would have prevented the discussed events or improved reliability.\73\
They argue that the NOPR did not describe whether these events took
place on facilities classified as ``bulk electric system'' or non-
``bulk electric system.'' Similarly, commenters contend that the NOPR
does not show the connection between regional inconsistencies and
reliability concerns.\74\ Commenters also assert the proposal will be
expensive and lengthy to implement without improving reliability.
---------------------------------------------------------------------------
\73\ See, e.g., FRCC, NARUC, NYSRC, Redding, GTC/GSOC.
\74\ See, e.g., NARUC, NYPSC, FRCC, Dow, GTC/GSOC, Hydro-
Qu[eacute]bec, Ontario Power, NV Energy, Snohomish, Southern.
---------------------------------------------------------------------------
60. Additionally, several commenters state that a material impact
assessment should be used instead of a ``bright-line'' test, thus
deferring to the Regional Entities' technical expertise.\75\ Commenters
also contend that the Commission has not shown how the current NPCC
method is flawed or how it has harmed reliability. They conclude that a
material impact assessment is preferable to a ``bright-line'' test
because they believe it will focus limited resources towards critical
facilities that have the largest impact.
---------------------------------------------------------------------------
\75\ See, e.g., NARUC, NYSRC.
---------------------------------------------------------------------------
61. APPA/NRECA, NARUC, CMUA, CPUC, and TANC state that the specific
examples cited by the Commission of outages on lower voltage lines in
one region do not support making sweeping changes to the definition of
bulk electric system as proposed in the NOPR. APPA/NRECA notes that the
Commission's stated concerns about facilities inappropriately excluded
from the bulk electric system definition are limited to the NPCC
region, while the Commission's proposed solution is directed at and
would affect all regions.\76\ APPA/NRECA asserts that the Commission's
limited examples of outages on lines excluded from the bulk electric
system definition in NPCC cannot support imposing the Reliability
Standards on all lower-voltage facilities, regardless of the function
and impact of such facilities.\77\ Finally, APPA/NRECA notes that the
Commission's attempt to justify the proposal based on the total amount
of 100 kV facilities in service is inapposite, as it has no bearing on
whether or not those facilities function as part of the bulk electric
system.\78\ Similarly, CMUA asserts that it is inappropriate to draw
conclusions regarding the effect of disturbances on lower-voltage
facilities based on a limited number of cases in one region, without
consideration of the nature of the facilities and particular features
of that region.\79\ NARUC also contends that a key part of the
historical approach to the ``bulk electric system'' definition was the
Regional Entities' ability to define the bulk electric system for its
own region. Further, NARUC states that the NOPR does not identify any
excluded lines critical to reliability. Additionally,
[[Page 72919]]
NARUC believes NPCC's estimated $280 million cost to comply with the
new ruling will outweigh the expected minimal to negligible benefit.
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\76\ APPA/NRECA at 15-16.
\77\ Id. at 30-31.
\78\ Id. at 32.
\79\ CMUA at 5.
---------------------------------------------------------------------------
62. The Joint Canadian Parties assert that the impact-based
methodology ensures that all facilities critical to wide-area
reliability, independent of voltage level, are covered by the bulk
electric system definition. Similarly, they argue that the NERC
Reliability Standards should apply only to facilities that, if lost,
would have the potential for a wide-area reliability impact.
63. The Indicated New York Transmission Owners and NYSRC state that
the NOPR does not sufficiently account for the time and cost required
to implement the proposed rule change. Further, they contend that the
TLR events cited in the NOPR were issued in order to mitigate an
unanticipated clockwise flow around Lake Erie, and that classification
of lower voltage facilities as part of the ``bulk electric system''
would not have affected the need for the TLR. The NYPSC and Duke Energy
contend that the 115 kV facility in the Central East ties flowgate
constitutes a minor element of the flowgate that would not result in a
cascading event on the bulk system.
64. NYSRC also contends that the February 26, 2008 and the June 13,
2008 events cited in the NOPR occurred in regions that already use a
100 kV threshold and therefore do not show that the 100 kV threshold is
more effective at protecting reliability than the impact-based
approach. Additionally, NYSRC believes that the current methodology
appropriately defers to regional expertise.
65. NYPSC also states that the June 27, 2007 event ``was caused by
lighting [sic] strikes on the telecommunications system over which
several relay signals were carried,'' and that the utility involved has
since ensured separate paths are provided for telecommunications beyond
the fence of the electric utility's facilities.\80\ Additionally, the
NPCC Working Group concluded that the event was confined to the Astoria
West load pocket and that no other portions of the Consolidated Edison
(ConEd) system were affected. Separately, the NYPSC states that the
Commission has not provided evidence as to how the regional
inconsistencies identified in the NOPR jeopardize reliability.
---------------------------------------------------------------------------
\80\ NYSPC at 10.
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66. Alcoa states that it supports NPCC's current material impact
assessment because it believes most of the facilities not included in
the bulk electric system are accurately excluded. Alcoa further
contends that the Commission has not shown how inclusion of lines like
these will improve reliability and that the reliability benefit is only
presumed. Dow likewise argues that it does not believe that the
applicability of NERC Reliability Standards is a sufficient basis to
assume that reliability will improve and argues that the NOPR does not
provide any additional evidence.
67. Constellation/CNEG supports continued use of Regional
Reliability Organizations' technical discretion as opposed to the
Commission's proposal. Constellation/CNEG states that current proposals
from WECC utilizing a Short Circuit Megavolt Ampere methodology, or a
three-phase fault with delayed clearing analysis, demonstrate the
proper regional discretion and technical expertise. Similarly, Tacoma
Power requests that the WECC Bulk Electric System Definition Task Force
(BESDTF) be allowed to complete its work, and states that the
Commission has not provided sufficient technical support for requiring
a bright-line voltage-based standard.\81\ The Joint Western Commenters
state that the Final Rule should be consistent with the WECC BESDTF's
efforts that will utilize an impact based approach. Further, if the
Commission has issues with the NPCC method, Constellation/CNEG state
that the Commission should address its concerns with NPCC specifically
rather than through an across the board proposal. The Joint Western
Commenters similarly state that the Western entities should not be
penalized for NPCC's actions, which actions are the apparent impetus
for issuance of the NOPR.
---------------------------------------------------------------------------
\81\ Tacoma Power at 6.
---------------------------------------------------------------------------
68. Hydro-Qu[eacute]bec and Ontario Power state that application of
the NERC Reliability Standards should be limited to facilities with a
material impact on reliability, based on regional variances and
expertise. The proposed change would divert needed resources from more
important facilities.
69. NESCOE requests the Commission study the impact of the proposal
more before implementing the rule.
70. Bay Area Municipal agrees that 115 kV and 138 kV facilities
have either caused or contributed to significant bulk system
disturbances and cascading outages. Utah Municipal also concedes that
some facilities rated at 100 kV and above may have been improperly
excluded from classification in the bulk electric system, at least in
the NPCC. However, Utah Municipal also states that unless the
facilities described were not included in the bulk electric system of
the applicable Regional Entities, the cited events do not show a flaw
in the existing definition.\82\ Utah Municipal also disputes the NOPR's
claim of a historical precedent supporting the 100 kV threshold since
the previous threshold was presumptive rather than a ``bright-line.''
Utah Municipal recommends that the Commission allow WECC's BESDTF to
complete its work on a hybrid definition that utilizes a presumptive
100 kV threshold and a material impact assessment. Utah Municipal
suggests that this model be used as a template for other Regional
Entities' bulk electric system definitions.
---------------------------------------------------------------------------
\82\ Utah Municipal at 8.
---------------------------------------------------------------------------
71. The WPSC and Consumers Energy state that without substantial
refinement, the proposal will cause public utilities to experience
significant but unnecessary compliance costs. Additionally, the WPSC
anticipates that utilities would elect to build facilities below the
100 kV threshold to avoid ``bright-line'' oversight, which will in turn
result in a lower voltage, less technically capable system and will
therefore adversely affect reliability.\83\
---------------------------------------------------------------------------
\83\ WPSC at 2-3.
---------------------------------------------------------------------------
(3) Commission Determination
72. The Commission finds sufficient justification for the action in
this Final Rule. The current definition has failed to ensure that all
facilities necessary for operation of the interconnected transmission
network are covered by the Reliability Standards. As discussed above,
the current definition allows broad regional discretion without ERO or
Commission oversight, which has resulted in reliability issues such as
the exclusion of transmission serving bulk electric generators
(including nuclear plants), inconsistency in classification at the
seams that compromises the effectiveness of the Reliability Standards,
routine TLR events on non-bulk electric system facilities, and the
exclusion of elements necessary to operate the interconnected
transmission network. Given the inconsistency of the application among
regions and the reliability issues created as a result of the current
definition, we conclude that it is necessary to direct the ERO to
revise the definition of ``bulk electric system'' to ensure that all
facilities necessary to operate the interconnected transmission network
are included and to address the concerns noted herein. We believe that
the Commission's proposed approach of adopting a bright-line, 100 kV
threshold, along with a NERC-developed, Commission-approved exemption
process, as well as
[[Page 72920]]
eliminating regional variations unless approved by the Commission as
provided in Order No. 672,\84\ is an appropriate action to ensure bulk
electric system reliability.
---------------------------------------------------------------------------
\84\ See Order No. 672, FERC Stats. & Regs. ] 31,204 at P 291.
---------------------------------------------------------------------------
73. As discussed in this Final Rule, many facilities operated at
100 kV and above have a significant effect on the overall functioning
of the grid. The majority of 100 kV and above facilities in the United
States operate in parallel with other high voltage and extra high
voltage facilities, interconnect significant amounts of generation
sources and operate as part of a defined flow gate, which illustrates
their parallel nature and therefore their necessity to the reliable
operation of the interconnected transmission system. Parallel
facilities operated at 100-200 kV will experience similar loading as
higher voltage parallel facilities at any given time and the lower
voltage facilities will be relied upon during contingency scenarios.
Further, as illustrated by the Commission's examples and as Bay Area
Municipal states, 115 kV and 138 kV facilities have either caused or
contributed to significant bulk system disturbances and cascading
outages. Additionally, the current definition's broad regional
discretion has allowed classification inconsistencies to develop within
and along the borders of Regional Entities, as discussed in further
detail herein.\85\ The proposed 100kV threshold is intended to ensure
facilities necessary for reliable operation are captured by the
definition and to avoid entities exempting their facilities by any
means other than through a Commission-approved exemption process.
---------------------------------------------------------------------------
\85\ See NERC Petition, Docket No. RM08-013-000, at 18 (filed
July 30, 2008). There NERC indicated that the PRC-023 standard
drafting team selected a voltage threshold for the Reliability
Standard's applicability because the bulk electric system definition
has too many variances to be effective for defining a Reliability
Standard's applicability: ``This conclusion [to use a voltage-
specific-threshold] was reached by considering the potential
variances in the facilities included as the bulk power system in
different Regional Entities, together with an observation that the
effects of the proposed reliability standard are not constrained to
Regional boundaries. For example, if one Region has a purely
performance-based criteria and an adjoining Region has a voltage-
based criteria, these criteria may not permit consideration of the
effects of protective relay operation in one Region upon the
behavior of facilities in the adjoining Region.''
---------------------------------------------------------------------------
74. While the Commission believes the solution described above is
the best way to address the identified problems with the current
definition, the ERO has the discretion to develop an alternate solution
that is as effective as, or superior to, the Commission's proposed
approach in addressing the identified technical and other concerns, and
may not result in a reduction in reliability. If the ERO chooses to
propose a different solution, it must demonstrate that its proposal is
equally effective or more effective at ensuring that all facilities
necessary to operate the interconnected transmission network are
captured by the definition and that the proposal will not produce the
inconsistencies and inaccuracies that result from the current
definition, as described in this Final Rule. The ERO must support any
alternate proposal with a technical analysis that demonstrates and
explains, with a technical record sufficient for the Commission to make
an informed decision, how its proposal provides the same level of
reliability as the Commission's proposal, and reflects the reality of
how entities use and rely on their 100 kV and above facilities.
75. Finally, we believe use of the term ``operated at'' rather than
``rated at'' together with the exemption methodology that NERC will
develop as discussed in this Final Rule addresses the WPSC's concern
that utilities may elect to build facilities below 100 kV to avoid
oversight.
(i) Impact-Based Methodology and Regional Variation
76. Several commenters argue that the Commission did not adequately
justify the proposed changes to the ``bulk electric system'' definition
and that the technical examples provided similarly do not justify the
proposed changes. In their opinion, an impact-based methodology is
superior to the proposed approach. The Commission does not support
using the material impact tests proffered by commenters as a basis for
determining a facility's importance. Section 215 states that the
Reliability Standards apply to facilities that are necessary for
operating an interconnected electric energy transmission network (or
any portion thereof). The material impact tests that either are under
development or implemented appear to exclude facilities without regard
to whether they are necessary to operate the system, and instead seek
to determine the impact of the loss of an element. The Commission is
not aware of any consistent and comprehensive material impact test that
the industry has implemented to date. The scale and magnitude of
generation and load loss during the Astoria West event described herein
further demonstrates the shortcomings of NPCC's material impact
assessment in determining bulk electric system elements necessary to
ensure reliable operation. We disagree with assertions that the Astoria
West event was an invalid example, as the commenters did not provide
sufficient evidence supporting their assertions.
77. We disagree with commenters who assert that NPCC's current
material impact assessment, referred to as NPCC Document A-10, ensures
that the proper facilities are included in the bulk electric system.
Although the NPCC Document A-10 provides a test methodology to identify
elements of the bulk electric system, the tests prescribed are
subjective. In the test, a specific bus is subjected to a three-phase
fault and the impacts on other buses are determined.\86\ NPCC Document
A-10 states that ``a transient stability test may be done first to
identify buses at which faults may cause a significant adverse impact
outside of the `local area.' '' \87\ The term ``local area'' is broadly
defined and is open to interpretation.\88\ Thus, under NPCC Document A-
10, if an entity chooses a large geographical area for its ``local
area,'' the impact resulting from a fault at a specific bus could be
considered a ``significant adverse impact,'' but since the impact falls
within the large ``local area,'' the bus may not be declared part of
the bulk electric system. For example, if one entity defines the
``local area'' as the boundary of the balancing authority, while
another entity defines the local area as adjacent buses, the outcome of
the two tests could vary significantly. In particular, this likely
could result in an exclusion of a large number of facilities from the
purview of the bulk electric system for the first entity that applies a
broader view of ``local area.''
---------------------------------------------------------------------------
\86\ NPCC Document A-10 defines the term bus as ``a junction
with sensing or protection equipment within a substation or
switching station at which the terminals of two or more elements are
connected, regardless of whether circuit breakers are provided.''
See NPCC Document A-10 at page 2.
\87\ See NPCC Document A-10 at 4.
\88\ See NPCC Glossary of Terms, NPCC Document A-7 at 13-14
(``Local area--An electrically confined or radial portion of the
system. The geographic size and number of system elements contained
will vary based on system characteristics. A local area may be
relatively large geographically with relatively few buses in a
sparse system, or be relatively small geographically with a
relatively large number of buses in a densely networked system.'').
---------------------------------------------------------------------------
78. NPCC Document A-10 does not assess whether the facilities
within the ``local area'' are necessary for reliable operation of the
interconnected transmission network and also does not discuss system
performance or any ``significant adverse impact'' on the facilities
within the ``local area.'' Therefore, facilities within a local area
could operate in an unstable manner or violate emergency operating
limits, and as long as these adverse effects are
[[Page 72921]]
contained within the defined ``local area,'' NPCC's Document A-10
assessment would deem those facilities outside the scope of the bulk
electric system. For these reasons, we believe NPCC's Document A-10
assessment has resulted in an inconsistent process that excludes
facilities from the bulk electric system.
79. NARUC and other commenters contend that the Commission has not
demonstrated any reliability issues created by NPCC's current
methodology.\89\ To the contrary, the NOPR noted that seven high and
extra-high voltage lines in NPCC are not included in the bulk electric
system under the current definition, including some serving nuclear
power plants, and pointed to several events that occurred in other
regions on facilities that may not have been included in the bulk
electric system if they were under NPCC's current methodology.
Additionally, thousands of megawatts of capacity resources are
connected to these excluded transmission facilities.
---------------------------------------------------------------------------
\89\ See, e.g., APPA, NRECA, CMUA, CPUC, and TANC.
---------------------------------------------------------------------------
80. Further, there is even inconsistency within NPCC in that a 345
kV tie-line between ISO-NE and NYISO is classified as part of the
``bulk electric system'' in one ISO but not the other. Regional
classification inconsistencies can also lead to issues under TOP-002,
Requirement R7.\90\ If one Regional Entity or balancing authority
within a region complies with TOP-002, Requirement R7 by ensuring
system deliverability during a single contingency along its portion of
an intra-regional tie-line while the other Regional Entity or the other
balancing authority within the same region on the other end of the tie-
line does not, during a contingency, deliverability is not ensured,
which could lead to loss of load and undermine reliability.
---------------------------------------------------------------------------
\90\ TOP-002, Requirement R7 provides that ``each Balancing
Authority shall plan to meet capacity and energy reserve
requirements, including the deliverability/capability for any single
Contingency.''
---------------------------------------------------------------------------
81. Moreover, one of the main justifications for the Final Rule is
to reduce inconsistencies across regions in order to increase the
effectiveness of the NERC Reliability Standards. Some commenters
challenge the supposition that regional inconsistency is a drawback of
the current definition. Commenters state that regional variation allows
regional entities to use their technical expertise to adopt a tailored
regional bulk electric system definition. NARUC and Utah Municipal
contend that a key part of the historical approach was the discretion
of the Regional Entities.
82. In response, as the Commission stated in Order No. 672, uniform
Reliability Standards, and uniform implementation, should be the goal
and the practice, the rule rather than the exception, absent a showing
that a regional variation is superior or necessary due to regional
differences.\91\ Consistency is important as it sets a common bar for
transmission planning, operation, and maintenance necessary to achieve
reliable operation. As noted, we have found several reliability issues
with allowing Regional Entities broad discretion without ERO or
Commission oversight. The Commission's proposed approach to addressing
these concerns will enable affected entities to pursue exemptions for
facilities they believe should not be included in the bulk electric
system, and also will allow Regional Entities to add facilities below
100 kV they believe should be included.
---------------------------------------------------------------------------
\91\ Order No. 672, FERC Stats. & Regs. ] 31,204 at P 290.
---------------------------------------------------------------------------
83. Additionally, Requirement R4 of PRC-001-1 (System Protection
Coordination) requires that ``[e]ach Transmission Operator shall
coordinate protection systems on major transmission lines and
interconnections with neighboring Generator Operators, Transmission
Operators and Balancing Authorities.'' If the protection systems on one
end of the tie line that are not classified as bulk electric system are
not coordinated with protection systems on the other end or with those
protection systems on the major transmission lines connected to the
same end, the protection system will not operate as desired and
cascading outages are likely to occur. This could lead to a significant
system event. Deficiencies and lack of coordination in protection
systems have been and remain a major cause of power outages since the
Reliability Standards became effective in June 2007.\92\ These are but
a few examples of how uniform application of the Reliability Standards
to lines operated at 100 kV or above results in improved reliability.
These examples demonstrate that NPCC's current methodology does not
necessarily accurately assess situations that warrant exclusion of
facilities from the bulk electric system definition.
---------------------------------------------------------------------------
\92\ See, e.g., Mandatory Reliability Standards for the Bulk
Power System, Notice of Proposed Rulemaking, FERC Stats. & Regs.,
Proposed Regulations 2004-2007 ] 32,608, at P 280 (2006); U.S.-
Canada Power System Outage Task Force, Final Report on the August
14, 2003 Blackout in the United States and Canada: Causes and
Recommendations 107 (2004) (Blackout Report), available at http://www.ferc.gov/industries/electric/indus-act/reliability.asp.
---------------------------------------------------------------------------
84. Separately, the NPCC impact-based test has excluded elements
that interconnect generators, including multiple nuclear facilities.
Nuclear facilities generally are significantly larger than other power
plants, serve as base load, and often are critical to meeting capacity
demand. They require external interconnections to provide power to
auxiliary equipment within the plant under normal and emergency
conditions, which includes issues related to black starts and system
restoration. Additionally, many non-nuclear generators representing
over 10,000 MW of capacity resources that are subject to reliability
rules and which provide needed capacity are interconnected to the
network through facilities that are not classified as bulk electric
system facilities under NPCC's rules, which may undermine the
reliability of the capacity provided. The facilities that these
generators connect to tend to be 100 kV and above facilities that are
operated in parallel with extra high voltage facilities and have
numerous interconnections to the extra high voltage network while also
serving some distribution facilities.
85. Given the questionable and inconsistent exclusions of
facilities from the bulk electric system by the material impact
assessment and the variable results of the Transmission Distribution
Factor test proposed in NPCC's compliance filing in Docket No. RC09-3,
there are no grounds on which to reasonably assume that the results of
the material impact assessment are accurate, consistent, and
comprehensive.\93\
[[Page 72922]]
Additionally, we have noted how the results of multiple material impact
tests can vary depending on how the test is implemented. In contrast,
the proposed ``bright-line'' test would continue the 100 kV threshold
currently in use throughout much of the industry without allowing
entities to vary this definition outside a Commission-approved
exemption process. Further, since most regions currently use the 100 kV
general threshold, most regions should have little difficulty
maintaining a 100 kV bright-line threshold. If NERC proposes an
alternate methodology, it must ensure that the method is consistent,
repeatable, and verifiable, which the material impact tests we have
discussed are not.
---------------------------------------------------------------------------
\93\ See WECC BESDTF Proposal V5 Appendix B, at B-11-B-12,
available at http://www.wecc.biz/Standards/Development/BES/Shared%20Documents/WECC-058%20BES%20Comments%20Posting%205/P5%20Appendix%20B%20FINAL%20CLEAN.doc: ``The BESDTF considered the
Northeast Power Coordinating Council's Transfer Distribution Factor
(TDF) approach to determining which networked Elements and
facilities are used to distribute electricity locally and do not
provide meaningful flow-through capability for the BES. In general,
the TDF approach increases generation on one side of a transmission
interface, decreases generation on the other side of the
transmission interface, and measures the resulting change in flow
across the interface. NPCC proposed that an Element with a TDF of
less than 1% would not be part of the BES.
WECC staff expressed concern that the results of the TDF studies
subjectively depended on which generating units had their output
increased and which generating units had their output decreased. The
results would also depend on the location, and what kind, of slack
bus [a designated generator bus without a real power injection
setting used in power system modeling for the purpose of producing
or absorbing real power such as change in real losses, loss of
generation or interchange] used in the power flow simulation. As a
result, the BESDTF did not propose to adopt the TDF method to
determine which networked facilities could be classified as Local
Distribution Networks and excluded from the BES.''
---------------------------------------------------------------------------
86. With respect to the comments about the relevance of the FRCC,
ReliabilityFirst and Astoria West events, and statements that they do
not provide an adequate basis for our action here, the Commission
emphasizes that for the Reliability Standards to have their intended
outcome of protecting the system from instability, uncontrolled
separation, or cascading failures, the bulk electric system definition
must include the facilities necessary for reliable operation of the
system and the registered entities must comply with the requirements of
the Reliability Standards applicable to those facilities. If the
definition excludes facilities that are necessary for reliable
operation, the result is that more system events may occur, the impact
of such events may be broader, and NERC and the Commission may have
little or no authority to require the entities to mitigate the issues
going forward. The FRCC, ReliabilityFirst and Astoria West examples
demonstrate that, had all the relevant requirements in the Reliability
Standards been adhered to, such as those in the PRC, IRO and TOP
categories, the impacts of the events could have been minimized, if not
avoided all together. The examples also illustrate that, because FRCC
and ReliabilityFirst classify the facilities at issue as part of the
bulk electric system, NERC and the Commission could require mitigation
or take other action to ensure that the entities comply with the
Reliability Standards in the future, thus enhancing system reliability.
On the other hand, NERC and the Commission were unable to require
mitigation with respect to the NPCC event because NPCC's definition
excluded the facilities involved from the bulk electric system. We will
address our specific concerns with each event in turn, below.
FRCC Event
87. The FRCC event originated from a single fault on a 138 kV
facility, which is included in the ``bulk electric system'' according
to FRCC's definition. This single 138 kV fault led to the loss of 22
transmission lines, 4,300 MW of generation, and 3,650 MW of customer
service or load distributed over the lower two thirds of Florida. It is
clear from the facts that this was a wide-scale cascading outage, which
deserves the Commission's attention. Subsequent to this event, Florida
Power & Light implemented mitigation plans that would preclude similar
problems. The Commission notes that if this same event had occurred in
NPCC, the Commission or NERC would not have had the chance to require
mitigation of the issue because these facilities would not be
considered part of the bulk electric system.
(iii) ReliabilityFirst Event
88. Similarly, the June 13, 2008 event in ReliabilityFirst
demonstrates how problems on 100-200 kV facilities can cascade into
significant outages. As noted in NOPR, ``the inappropriate operation of
the relay on a 138 kV facility contributed to the loss of three 138 kV-
13 kV transformers, three 138 kV transmission lines, and estimated loss
of approximately 150 MW of firm load in a critical high population
density area,'' \94\ that includes the White House, for over four
hours.\95\ Because ReliabilityFirst classifies these facilities as part
of the bulk electric system, the circumstances are covered by the
Reliability Standards. Thus, ReliabilityFirst, NERC and the Commission
are able to require mitigation, which can be informed by the mandatory
Reliability Standards. Facilities similar to those involved in this
example would not, in NPCC, be included under the bulk electric system
definition. Thus those facilities would not have to be operated
pursuant to the Reliability Standards and, if a problem occurred,
neither the Commission nor NERC could require a mitigation plan to be
developed and completed.
---------------------------------------------------------------------------
\94\ NOPR, FERC Stats. & Regs. ] 32,654 at 22.
\95\ See, e.g., WTOP story ``Friday the 13th'' Blackout hits DC
(June 13, 2008), available at http://www.wtop.com/?sid=1421434&nid=25; CBS News story ``Power Outage Knocks Out D.C.''
(June 13, 2008) (`` `The White house had been running on generator
power,' said deputy press secretary Tony Fratto.'') available at
http://www.cbsnews.com/stories/2008/06/13/national/main4178695.shtml.
---------------------------------------------------------------------------
(iv) Astoria West Event
89. On the other hand, the ConEd Astoria West facilities are not
part of the bulk electric system according to NPCC's impact-based
criteria. Nonetheless, as reported by the news media, the event
resulted in widespread loss of load affecting around 385,000 people in
parts of Manhattan and the Bronx.\96\ The NYPSC identified the cause of
the outage as a lightning strike not to any ConEd transmission
facilities, but a communications facility. The Commission understands
that this communication disruption to a protection system by itself did
not cause any faults on the 138 kV facilities. However, as explained
earlier, this non-fault (N-0) event resulted in the interruption of
service to about 137,000 customers, affecting portions of two boroughs
in New York City, as well as the loss of five generators and six 138 kV
transmission lines. Unlike the FRCC event, ConEd was not required to
mitigate, under section 215, the root cause of the Astoria event
because the facilities are not included under the bulk electric system
definition. We note that these facilities are not included in the
definition despite the fact that the 138 kV network is heavily
interconnected to the extra-high voltage network through ten 138 kV
phase angle regulators in 345 kV stations. Additionally, approximately
2,000 MW of capacity resources and a similarly large quantity of
customer firm demand in the Astoria area is directly connected to the
138 kV network or supplied from the 138 kV to lower voltage levels via
step-down transformers. While the NYPSC stated that ConEd did mitigate
the communication issue at the cited location, it is not clear if ConEd
addressed similar vulnerabilities at other locations or if other
underlying root cause items were identified or addressed.\97\
---------------------------------------------------------------------------
\96\ See, e.g., New York Times article, ``Brief Power Failure Is
Long Enough to Unsettle'' (June 28, 2007), available at http://query.nytimes.com/gst/fullpage.html?res=9A02E0DB163EF93BA15755C0A9619C8B63&sec=&spon=&&scp=1&sq=Brief%20Power%20Failure%20Is%20Long%20Enough%20to%20Unsettle&st=cse; ABC News story ``Power Back on in NYC after Outages'' (June 27,
2007), available at http://abclocal.go.com/wabc/story?section=weather&id=5428326.
\97\ NYPSC at 10-11. The NYPSC's comments do not specify whether
ConEd took any action besides the telecommunications fixes.
---------------------------------------------------------------------------
(v) Relevance of TLR
90. Reliability Standard IRO-006-4.1--Reliability Coordination--
Transmission Loading Relief has the purpose of providing
``Interconnection-wide transmission loading relief
[[Page 72923]]
procedures that can be used to prevent or manage potential or actual
[System Operating Limit] and [Interconnection Reliability Operating
Limit] violations to maintain reliability of the Bulk Electric
System.'' The only time that transmission loading relief (TLR)
procedures can be used is when a Reliability Coordinator is
experiencing a potential or actual System Operating Limit (SOL) \98\ or
Interconnection Reliability Operating Limit (IROL) \99\ on the bulk
electric system within its Reliability Coordinator area.\100\ The
Commission understands that TLR procedures used to curtail firm and
non-firm transactions \101\ have been activated in NPCC on flowgates
that contain facilities that are not part of the bulk electric system
under NPCC's definition, but were needed to prevent or manage potential
or actual SOL or IROL violations on the NPCC-defined bulk electric
system. Since a flowgate generally defines facilities that operate in
parallel and collectively respond to a transmission loading relief
event as if it were a single transmission facility, it is logical that
these 115 and 138 kV parallel facilities are included in these
flowgates. Therefore, we disagree with ICNU's and NYSRC's claims that
these facilities can be dismissed as unimportant. If a flowgate
contains facilities that are needed to prevent or manage SOL or IROL
violations, they should be included in the bulk electric system. Since
the material impact test did not show this, this is another indication
that the test does not adequately identify bulk electric system
elements.
---------------------------------------------------------------------------
\98\ The NERC Glossary defines System Operating Limit as: ``The
value (such as MW, MVar, Amperes, Frequency or Volts) that satisfies
the most limiting of the prescribed operating criteria for a
specified system configuration to ensure operation within acceptable
reliability criteria.''
\99\ The NERC Glossary defines Interconnection Reliability
Operating Limit as ``A System Operating Limit that, if violated,
could lead to instability, uncontrolled separation, or Cascading
Outages that adversely impact the reliability of the Bulk Electric
System.''
\100\ See IRO-006-4.1, Requirement R1.
\101\ Flowgate 7004 in NPCC, which contains non-bulk electric
system facilities, had 31 TLR events totaling 484 hours in 2009 and
44 TLR events totaling 798 hours to date in 2010. Additionally,
three other NPCC flowgates that contain non-bulk electric system
facilities had TLR events called in 2009 and 2010. Specifically,
flowgates 7001, 7002, and 7010 were collectively subject to 11 TLR
events totaling 91 hours during that period. See NERC Transmission
Loading Relief Procedure Logs (October 28, 2010) available at http://www.nerc.com/filez/Logs/tlrlogs.html.
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(vi) International Concerns
91. Ontario Power contends that the Commission must explicitly
state that the proposed change applies only to those jurisdictions
within the United States. Ontario Power argues that although the
Commission indicates that the proposal seeks to increase consistency
across reliability regions by imposing a bright line definition,
Ontario Power believes that implementation of the Order as currently
proposed will not achieve this goal. Specifically, Ontario Power argues
that the proposed modification ``will simply move the point of
demarcation from one methodology to the other (i.e., 100 kV threshold
versus a performance-based approach) from Regional Entity borders to
National borders.'' \102\ Ontario Power reiterates that it is not aware
of any significant reliability issues attributable to the use of NPCC's
performance-based methodology. Accordingly, Ontario Power does not
believe that Canadian jurisdictions maintaining the performance-based
approach would suffer reduced reliability as compared to those who are
required to adopt the 100 kV threshold.
---------------------------------------------------------------------------
\102\ Ontario Power at 4.
---------------------------------------------------------------------------
92. Hydro-Qu[eacute]bec contends that the NOPR's proposal does not
take into account the characteristics of the Qu[eacute]bec
Interconnection, particularly that it is asynchronous with the other
systems that make up the Eastern Interconnection and thus is not freely
influenced by power flows in other balancing areas. According to Hydro-
Qu[eacute]bec, application of the NERC Reliability Standards should be
limited to facilities with a material impact on reliability, and this
decision is best left to the Regional Entities.
93. The Joint Canadian Parties argue that the NOPR's proposal would
result in the Reliability Standards being applied to the majority of
facilities 100 kV and above, a significant number of which only impact
the local area in the event of a contingency, and often under the
purview of different regulatory authorities. Additionally, they state
that the proposed ``one-size fits all'' approach does not give due
consideration to either regional variations or the technical expertise
of the regions. According to the Joint Canadian Parties, the impact-
based methodology ensures that all facilities critical to wide-area
reliability are included in the bulk electric system definition.
94. The Commission acknowledges that it does not have jurisdiction
to enforce a modified definition with respect to non-U.S. entities.
However, as Ontario Power correctly notes, the problems discussed above
with respect to transmission lines classified as ``bulk electric
system'' in one region but not classified as such in a connected region
also can occur when lines cross the international border. Thus, we
will, and we encourage NERC to, work with the Canadian authorities to
ensure consistent treatment of transmission lines that cross the
border.
95. In response to Ontario Power's statement that it is not aware
of any significant reliability issues attributable to use of NPCC's
material impact test, and the Joint Canadian Parties' argument that the
NOPR proposal would result in Reliability Standards being applied to
facilities that only impact the local area, we have discussed elsewhere
in this order our concerns with the NPCC methodology including the
reliability concerns arising from that test's inconsistent results and
our concerns with the subjective nature of the term ``local area'' as
defined in NPCC Document A-10. We also note that the Final Rule directs
the ERO to consider adopting an exemption process that would help
alleviate the Joint Canadian Parties' concerns about a ``one-size fits
all'' approach. Finally, because this Final Rule directs the ERO to
develop a revised bulk electric system definition through the Standards
Development process, the Canadian commenters will be able to raise and
address a number of their substantive concerns in that forum.
(4) Summary
96. In general, the Final Rule identifies the reliability concerns
created by the current definition and a method to ensure that certain
facilities needed for the reliable operation of the nation's bulk
electric system are subject to mandatory and enforceable Reliability
Standards, and that exemption methodologies would be developed by NERC
and subject to Commission review. From the Commission's review, the
material impact assessments implemented by NPCC are subjective in
nature, and results from such tests are inconsistent in application, as
shown through the exclusion of facilities that clearly are needed for
reliable operation. Further, we find that the vast majority of 100 kV
and above facilities are part of parallel networks with high voltage
and extra high voltage facilities and are necessary for reliable
operation. As a result, and consistent with our previous statements in
Order No. 672,\103\ we find it is best for the ERO to establish a
uniform definition that eliminates subjectivity and regional variation
in order to ensure reliable operation of the bulk electric system. We
further find that the existing
[[Page 72924]]
NPCC impact test is not a consistent, repeatable, and comprehensive
alternative to the bright-line, 100 kV definition we prefer. By
directing the ERO to revise the definition of ``bulk electric system,''
through the approach proposed by the Commission, or through an equally
effective alternative proposed approach, the Commission is fulfilling
its responsibility to ensure reliable operation of the grid.\104\ Any
alternative proposal from the ERO must be as effective as, or more
effective than the 100 kV threshold at ensuring facilities necessary
for reliable operation are captured in the definition while also
addressing the issues outlined in this Final Rule.
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\103\ Order No. 672, FERC Stats. & Regs. ] 31,204 at P 290.
\104\ As noted previously, any alternative proposal must be as
effective as, or superior to, the Commission's proposed approach in
addressing the identified technical and other concerns, and may not
result in a reduction in reliability.
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(d) Usage and Definition of ``Bulk-Power System''
(1) Comments
97. Anaheim states that the Commission's observation that the term
``Bulk-Power System'' is somehow broader than the term ``bulk electric
system,'' coupled with its refusal to define, explain, or otherwise
implement the statutory term, creates substantial uncertainty within
the industry concerning the scope of the Reliability Standards going
forward.
98. ReliabilityFirst states the use of the terms ``bulk electric
system'' and ``Bulk-Power System'' at times has created confusion
within the industry and in compliance enforcement matters. Therefore,
ReliabilityFirst believes that NERC should formally document the use of
both terms and, going forward, use a single term and definition for all
compliance and enforcement of the Reliability Standards.\105\
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\105\ ReliabilityFirst at 10.
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99. SCE states that the industry has been seeking final resolution
of the statutory term ``Bulk-Power System'' and requests that the
Commission act now and through this Final Rule to resolve the statutory
term ``Bulk-Power System.'' It requests that the Commission's Final
Rule recognize that the definition of ``bulk electric system''
developed under this Final Rule is identical to the statutory term
``Bulk-Power System'' and no further definitional change will take
place.
(2) Commission Determination
100. In the NOPR, the Commission addressed the definition of ``bulk
electric system'' and not the definition of the statutory term ``Bulk-
Power System.'' Although the statutory term Bulk-Power System defines
our jurisdiction, the Commission believes more clarity and certainty is
achieved in this context by focusing on whether facilities are part of
the bulk electric system. Ensuring that the bulk electric system
definition encompasses all facilities necessary to reliably operate an
interconnected electric transmission system will not cause the
application of the Reliability Standards to extend beyond the
jurisdiction prescribed in section 215. The Commission, the ERO, and
the Regional Entities will continue to enforce Reliability Standards
for facilities that are included in the bulk electric system.
2. Exemption Process
101. The NOPR proposed that a Regional Entity must seek ERO and
Commission approval before exempting any transmission facility rated at
100 kV or above from compliance with mandatory Reliability
Standards.\106\ Pursuant to the NOPR proposal, a Regional Entity would
submit proposed facility exclusions to the ERO and then, in turn, the
ERO would submit to the Commission for review on a facility-by-facility
basis any ERO-approved exception to the proposed threshold of all
transmission facilities at 100 kV or above, except for radial
transmission facilities serving only load with one transmission source.
Any such submission would also include adequate supporting information
explaining why it is appropriate to exempt a specific transmission
facility that would otherwise satisfy the proposed 100 kV threshold.
Only after Commission approval would the proposed exclusion take
effect.
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\106\ NOPR, FERC Stats. & Regs. ] 32,654 at P 18.
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(a) Comments
102. Most commenters disagree with the exemption process outlined
in the NOPR, and several requested that the Commission abandon the
NOPR's proposal or adopt a more streamlined process. NERC and other
commenters characterize the Commission's proposal as costly, time
consuming, and potentially unworkable.\107\ Some parties suggested
alternatives, such as the Commission reviewing and approving a Regional
Entity's exemption methodology rather than reviewing each individual's
exemption application. Other commenters argue that the Commission
should approve a methodology that allows the Regional Entities or ERO
to perform a facility-by-facility review rather than the
Commission.\108\ Several commenters requested that the Commission adopt
a blanket exemption for distribution facilities, as defined by the
Regional Entities, or clarification that the Commission did not intend
to include distribution facilities within the scope of the definition
of bulk electric system.\109\ Commenters also request that the
Commission suspend enforcement of Reliability Standards to newly-
classified bulk electric system facilities while the Regional Entities
evaluate exemption requests.
---------------------------------------------------------------------------
\107\ See, e.g., Alcoa, BPA, CMUA, Palo Alto, Redding,
Constellation/CENG, ICNU, APPA/NRECA, National Grid, NERC, NESCOE,
NCPA, NV Energy, Public Power Council, SWTDUG, NYSRC, SCE, State
Utility Commissions and Consumer Counsel, TANC, TAPS, Utah
Municipal, Wells, WPSC.
\108\ See, e.g., EEI, BPA, Utility Services, Inc., NPCC, WECC,
TAPS, Santa Clara, NUSCO, Indicated New York Transmission Owners,
SWTDUG.
\109\ See, e.g., GTC/GSOC, Redding, Dow, NV Energy, PGE, TIEC.
---------------------------------------------------------------------------
103. APPA/NRECA argues that the NOPR's approach represents an
extreme departure from current practice with respect to allowing
appropriate exemptions from the Reliability Standards requirements.
APPA/NRECA notes that entities seeking an exemption for even radial
line facilities may require NERC and Commission approval before that
exemption would take effect, and that these entities would not only
have the burden of obtaining the necessary approvals for the exemption
but also would have to comply with the Reliability Standards while
those approvals are pending.\110\ APPA/NRECA contends that the proposal
could impose significant burdens on many smaller utilities, some of
which have never been subject to Reliability Standards, without
affording them any procedural protections and without imposing on
Regional Entities the appropriate and parallel burden of demonstrating
that expanded authority over low-voltage (less than 100 kV) facilities
is necessary to preserve reliability.\111\
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\110\ APPA/NRECA at 19-23.
\111\ Id. at 25-27.
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104. Alcoa points out that the proposal would increase the costs
associated with their facilities in the NPCC region either through
additional compliance measures associated with mandatory Reliability
Standards or by obtaining approvals for an exemption from such
requirements. EEI believes that NERC should determine whether to grant
or deny a specific request for an exemption and that Commission
approval should not be required in every case. Instead, an appeal to
the
[[Page 72925]]
Commission should be available as an option.
105. GTC/GSOC proposes that the definition for a blanket exemption
of localized and load-serving lines include: An area serving load that
is connected to the rest of that network at a single transmission
substation at a single transmission voltage by one or more transmission
circuits; tap lines and associated facilities that are required to
serve local load only; and transmission lines that are operated open
for normal operation.
106. On the other hand, Manitoba Hydro supports the Commission's
proposal to require a Regional Entity to obtain NERC and Commission
approval prior to exempting any facility rated at 100 kV or above,
except for radial transmission facilities serving only load. Manitoba
Hydro also believes regulatory review provides a wider opportunity for
stakeholder review.
107. Several commenters argue that the Commission should direct
modifications to section 500 of the NERC Rules of Procedure, which
governs NERC's business practices, including its operation and review
processes.\112\ For example, NPCC proposes minimal revision to the NERC
Rules of Procedure, Section 500 to include a process for evaluating
bulk electric system exclusions recommended to NERC by the Regional
Entities. NERC states that changes likely will be necessary in the NERC
Rules of Procedure and the NERC Statement of Compliance Registry
Criteria.
---------------------------------------------------------------------------
\112\ See, e.g., NERC, NPCC, and Utility Services.
---------------------------------------------------------------------------
108. TIEC states that many industrial sites are interconnected to
the grid through lines rated at or above 100 kV, or otherwise contain
lines rated at 100 kV or above within a private use network. TIEC notes
that although these lines are operated at a high voltage due to the
size of the industrial loads, they are used to provide electric service
to end-use industrial customers and do not serve a ``transmission''
function for the interconnected grid within the meaning of the
Commission rules and NERC Reliability Standards. Instead, these
facilities deliver electricity from the grid or a cogeneration facility
to the consuming loads within a plant site. TIEC states that the
Commission should clarify that customer-owned facilities that are used
to distribute electricity to consuming facilities on the customer's
premises, which do not therefore serve a ``transmission'' function for
the interconnected grid, are not part of the bulk electric system.
Alcoa contends that its industrial facilities are connected to the grid
using 115 kV lines for efficiency purposes, but that they have no
practical impact on the grid, and therefore would be improperly
included in the bulk electric system by the proposal.
109. ExxonMobil suggests modifying the definition of the bulk
electric system to include ``those facilities rated at 100 kV or above
intended for the transmission of power within an interconnected grid,''
i.e., ExxonMobil suggests that the Commission draw a distinction
between facilities that could under limited circumstances transmit
power but were not intended or designed to be a transmission path.
ExxonMobil notes that in order to meet the reliability target
requirements to safely and economically operate manufacturing and
production facilities, many industrial facilities are fed by two or
more utility transmission lines that originate at different utility
substations. Due to the magnitude of an industrial site's load, these
transmission lines are typically designed to operate at levels in
excess of 100 kV at the request of the utility company. These
transmission lines typically terminate into an interconnection
facility, owned by the industrial facility, that networks the
transmission lines together within the industrial facility's private
use network in order to serve the load of the facility's private use
network. ExxonMobil states that its proposed approach is consistent
with the Commission's stated goal of requiring the Regional Entities to
register transmission lines that are operated at the 100 kV level and
above; while at the same time clearly excluding end user facilities
rated 100 kV or above.
110. ERCOT suggests that the Commission should consider imposing a
parallel process for including facilities that are below 100 kV in the
bulk electric system. ERCOT notes that presently, facilities below 100
kV generally are not considered part of the bulk electric system, but
the Regional Entities can explicitly include facilities below 100 kV if
they are deemed ``critical facilities.'' ERCOT states that ``Regional
Entities should not have unbounded unilateral discretion to make such
designations given the potential impact to affected parties.'' \113\
Thus, consistent with the Commission's proposal to subject all 100 kV
and above exemptions to due process, ERCOT asks the Commission to
consider imposing a similar process for the inclusion of facilities
below 100 kV.
---------------------------------------------------------------------------
\113\ ERCOT at 2.
---------------------------------------------------------------------------
(b) Commission Determination
111. As mentioned above, the NOPR proposed an exemption process
pursuant to which a Regional Entity would seek ERO and Commission
approval before exempting a transmission facility rated at 100 kV or
above from compliance with the Reliability Standards. In response to
the NOPR proposal, we received numerous comments that the proposed
exemption process would be costly, time-consuming and potentially
unworkable. Other commenters expressed concern that the proposal was
unduly burdensome, particularly on smaller entities. We continue to
believe that an exemption process is appropriate and is complementary
to our directive, discussed earlier, that the ERO develop a revised
definition of the term bulk electric system that addresses the concerns
resulting from the current discretion of Regional Entities to develop
alternative regional definitions of the term. However, we are persuaded
by the commenters' concerns and the Final Rule does not adopt the
exemption model proposed in the NOPR.
112. Rather than devising a revised exemption process in the Final
Rule, we direct the ERO to develop a proposed exemption process. We
believe that it is appropriate that NERC develop the process in its
function as the ERO. Further, allowing the ERO to develop an
appropriate exemption process should provide interested stakeholders an
opportunity to participate in the development of the process, as
requested by some commenters. This stakeholder participation should
result in a process with practical application that is less burdensome
than the NOPR proposal.
113. The ERO must submit the proposed exemption process within one
year of the effective date of this Final Rule. After notice and
opportunity for comment, the Commission will act on the ERO's proposal.
114. We will not dictate the substance or content of the exemption
process in this Final Rule. Rather, we identify below several matters
or concerns that should be addressed in an acceptable exemption
process.
115. NERC should develop an exemption process that includes clear,
objective, transparent, and uniformly applicable criteria for exemption
of facilities that are not necessary for operating the grid. The ERO
also should determine any related changes to its Rules of Procedures
that may be required to implement the exemption process, and file the
proposed
[[Page 72926]]
exemption process and rule changes with the Commission.
116. As indicated above, since we are not adopting the exemption
model proposed in the NOPR, we no longer contemplate a process that
requires Commission review of each request for exemption. However, in
order to avoid an inconsistent application of the exemption process,
NERC should oversee the facility-by-facility exemption process to
ensure an objective and uniform application of the exemption criteria
that it develops. NERC may consider delegating responsibilities for the
exemption process to Regional Entities, so long as the process is clear
and capable of being applied consistently, objectively and uniformly
across all regions. However, consistent with our statements in Order
No. 672 regarding the need for a strong ERO, NERC should maintain
oversight of any Regional Entity activity.\114\ We believe ERO
oversight is also vital in ensuring consistent application of any
nation-wide exemption criteria that the ERO develops.
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\114\ Order No. 672, FERC Stats. & Regs ] 31,204 at P 140, 654.
---------------------------------------------------------------------------
117. While the Commission will not require that we review each
exemption on a facility-by-facility basis, we would maintain the
authority to conduct audits to determine the appropriateness of a
particular exemption. We contemplate that a Commission staff audit
would review the application of the exemption criteria developed by
NERC in NERC's or a Regional Entity's determination to approve an
exemption for a particular facility. However, to facilitate such
audits, the ERO should maintain a list of exempted facilities that can
be made available to the Commission upon request. NERC can decide how
best to maintain the list, including determining whether or not to post
it on the NERC Web site.
118. Additionally, the ERO should consider developing criteria for
revoking an exemption if a particular transmission facility no longer
qualifies for such an exemption. This may be appropriate, for example,
when a transmission system in the vicinity undergoes a significant
change.
119. A number of comments raised concerns that the Commission's
directive that the ERO revise the definition of bulk electric system
would result in the erroneous inclusion of distribution facilities
within the definition. As we explained above, these arguments are
unconvincing because the majority of facilities operated at or above
100 kV are parallel paths that are necessary for the reliable operation
of the transmission system. In addition, the exemption process provides
a means of ensuring that relatively high voltage distribution
facilities are excluded from compliance with mandatory Reliability
Standards. In this light, we believe that it would be beneficial for
the ERO, in maintaining a list of exempted facilities, to consider
including a means to track and review facilities that are classified as
local distribution to ensure accuracy and consistent application of the
definition. Similarly, the ERO could track exemptions for radial
facilities.
120. In response to comments seeking a blanket exemption for
industrial facilities, the Commission is not inclined to grant
categorical exemptions of any kind. However, NERC should consider the
parties' concerns regarding exemption categories in developing an
exemption process and criteria. Entities can submit specific facilities
for exemption through the NERC-developed exemption process. As
previously discussed, radial facilities, as well as facilities used in
the local distribution of electric energy as provided in section 215,
will continue to be excluded.
121. We agree with ERCOT's suggestion that the ERO should develop a
parallel process for including as part of the bulk electric system
``critical'' facilities, operated at less than 100 kV, that the
Regional Entities determine are necessary for operating the
interconnected transmission network. Currently, Regional Entities have
the ability to include ``critical'' facilities operated below 100
kV.\115\ We believe that it would be worthwhile for NERC to consider
formalizing the criteria for inclusion of critical facilities operated
below 100 kV in developing the exemption process. Additionally, we note
that Order No. 716 creates a process to include critical facilities
under NUC-001-1.\116\ Similarly, we note that Order No. 733 creates an
additional ``add in'' approach to sub-100 kV facilities that Regional
Entities and planning coordinators have identified as critical to the
reliability of the bulk electric system.\117\
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\115\ See, e.g., Order No. 693, FERC Stats. & Regs. ] 31,242 at
P 77.
\116\ Mandatory Reliability Standard for Nuclear Plant Interface
Coordination, Order No. 716, 125 FERC ] 61,065, at P 51-53 (2008),
order on reh'g, Order No. 716-A, 126 FERC ] 61,122 (2009).
\117\ Transmission Relay Loadability Reliability Standard, Order
No. 733, 130 FERC ] 61,221, at P 20-25, 47, 60, 62 (2010).
---------------------------------------------------------------------------
3. Transition Process
122. In the NOPR, the Commission proposed to allow a Regional
Entity affected by the Commission's Final Rule to submit a transition
plan that allows a reasonable period of time for affected entities
within that region to achieve compliance with respect to facilities
that are subject to Commission-approved Reliability Standards for the
first time.\118\
---------------------------------------------------------------------------
\118\ NOPR, FERC Stats. & Regs. ] 32,654 at P 27.
---------------------------------------------------------------------------
(a) Comments
123. Certain commenters argue that the NOPR fails to clearly detail
a transition process for bringing additional facilities into compliance
with Commission-approved Reliability Standards.\119\ APPA/NRECA believe
that if the definition of bulk electric system is ultimately modified,
NERC should be responsible for developing a clear and achievable
transition plan to bring new facilities (and entities) into
compliance.\120\ APPA/NRECA further note that the NOPR is somewhat
inconsistent in its discussion of a transition plan and required
compliance, recognizing at one point that a transition plan for newly-
affected facilities would be appropriate while elsewhere stating that
facilities falling within the broad definition of bulk electric system
would only be exempt after Commission approval.\121\
---------------------------------------------------------------------------
\119\ See, e.g., APPA/NRECA and Bay Area Municipal.
\120\ APPA/NRECA at 4.
\121\ Id. at 35.
---------------------------------------------------------------------------
124. National Grid requests that the Commission allow entities
affected by the new rule the opportunity to develop a reasonable
transition plan for bringing existing facilities into compliance with
newly-applicable Commission-approved Reliability Standards, through a
collaborative process involving NERC, Regional Entities, state
commissions and other affected parties.\122\ National Grid notes that
the process for bringing all of its and its subsidiaries' newly-
affected facilities into compliance could take several years and would
require significant increases in operations and maintenance costs as
well as capital expenditures.\123\ National Grid suggests a transition
period of 24-36 months would be necessary to study and to begin to
implement compliance programs.\124\
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\122\ National Grid at 5.
\123\ Id. at 3, 8 (estimating compliance costs for transmission
planning standards alone to be $75 million to $125 million).
\124\ Id. at 5-6.
---------------------------------------------------------------------------
125. Several commenters state that the Final Rule should include a
sufficient transition period, and many propose specific minimum
transition time periods.\125\ For example, FRCC
[[Page 72927]]
recommends a transition period of 24 months for Registered Entities to
phase in compliance of additional facilities with Commission-approved
Reliability Standards.\126\
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\125\ See, e.g., APPA/NRECA, EEI, FRCC, NERC, NPCC, National
Grid, NYISO, Northeast Utilities, Indicated New York Transmission
Owners, and Utah Municipal.
\126\ FRCC at 9.
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126. NPCC recommends that the effective date of any new bulk
electric system definition be 24 months following the Commission's
Final Rule and that within 90 days of the Final Rule, all Registered
Entities be required to submit implementation plans to bring all newly
identified bulk electric system facilities into compliance and submit
any needed changes in registration by the effective date of the bulk
electric system definition.\127\
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\127\ NPCC at 5.
---------------------------------------------------------------------------
127. Likewise, NYISO recommends that the effective date of any new
definition should be no sooner than 24 months following the effective
date of a Commission order requiring compliance with that
definition.\128\ NYISO further argues that during the transition
period, no parties should be required to self-report or be deemed non-
compliant by NPCC.\129\
---------------------------------------------------------------------------
\128\ NYISO at 8-9.
\129\ Id.
---------------------------------------------------------------------------
128. Several commenters request that the Commission provide for
temporary waivers from enforcement of Commission-approved Reliability
Standards while entities wait for initial exemption requests to be
processed.\130\ For example, Utility Services argues that the
Commission must grant a temporary waiver for audit, certification, or
other compliance requirements to any requesting Registered Entity while
its application is pending at the regional, NERC, or Commission levels,
as this process has already been deemed acceptable by the Commission in
the technical feasibility exemptions for cyber security.\131\
Similarly, ELCON argues that the Commission should clarify that a
facility will not be subject to the obligations of registered status
until the notification and any review process, followed by the
transition period, is completed.\132\
---------------------------------------------------------------------------
\130\ See, e.g., Utility Services, Dow, and ELCON.
\131\ Utility Services at 5.
\132\ ELCON at 5.
---------------------------------------------------------------------------
129. Dow argues that the Commission must afford companies an
opportunity to secure facility-specific exemptions before the
Commission-approved Reliability Standards become applicable to those
facilities.\133\
---------------------------------------------------------------------------
\133\ Dow at 7.
---------------------------------------------------------------------------
130. NYISO further argues that during the transition period no
parties should be required to self-report or be deemed non-compliant by
a Regional Entity.
(b) Commission Determination
131. As discussed above, we are directing the ERO to revise the
definition through the Standards Development Process. We direct NERC to
work with the Regional Entities affected by this Final Rule to submit
for Commission approval transition plans that allow a reasonable period
of time for the affected entities within each region to achieve
compliance with respect to facilities that are subject to Commission-
approved Reliability Standards for the first time based on a revised
bulk electric system definition. The Commission expects that NPCC is
the only region that will be significantly affected. Based on
ReliabilityFirst's experience in adopting a ``bright-line'' definition
for bulk electric system facilities, we expect transition periods not
to exceed 18 months from the time the Commission approves a revised
definition and exemption process, unless the Commission approves a
longer transition period based on specific justification. The
Commission directs NERC to file the proposed transition plans within
one year of the effective date of this Final Rule.
132. While the Commission is sensitive to commenters' concerns
regarding non-compliance during the transition period, the Commission
will not provide a trial period, as we declined to do in Order No.
693,\134\ with respect to those facilities that are subject to
Commission-approved Reliability Standards for the first time. We expect
that the transition periods will be long enough for exemption requests
to be processed and to allow entities to bring newly-included
facilities into compliance prior to the mandatory enforcement date.
Additionally, the ERO and Regional Entities may exercise their
enforcement discretion during the transition period.
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\134\ Order No. 693, FERC Stats. and Regs. ] 31,242 at P 221-
222.
---------------------------------------------------------------------------
4. Cost Recovery
(a) Comments
133. The Indicated New York Transmission Owners requested that the
Commission provide a new process to ensure recovery for costs incurred
by NPCC members to comply with implementation of the new definition of
bulk electric system.\135\ While not seeking a specific cost recovery
mechanism, other commenters noted their concern that the transition
period established by the Commission must be sufficient to allow
affected companies to recover any one-time or annual compliance costs
incurred.\136\ NYISO states that implementing the 100 kV ``bulk
electric system'' definition in the New York Control Area will cause it
to incur increased capital costs and staff additions for which cost
recovery will be required.\137\
---------------------------------------------------------------------------
\135\ Indicated New York Transmission Owners at 11.
\136\ See, e.g., Northeast Utilities at 6.
\137\ NYISO at 11.
---------------------------------------------------------------------------
(b) Commission Determination
134. We note that the Commission has adopted an explicit rule, as
required under Section 219(b)(4) of EPAct 2005, allowing the recovery
of ``all prudently incurred costs necessary to comply with mandatory
reliability standards issued pursuant to section 215,'' \138\ and that
the proposed modifications to the definition of bulk electric system do
not raise any new issues with respect to cost recovery of reliability
compliance costs. Finally, the transition plan that we direct herein
will facilitate an opportunity for transmission owners and any other
affected entities to recover any one-time or annual costs of compliance
that result from any changes to the definition of ``bulk electric
system'' as ultimately adopted by NERC.
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\138\ 16 U.S.C. 824s(b)(4)(A); see also 18 CFR 35.35(f)(2010).
---------------------------------------------------------------------------
5. Issues Regarding the Western Interconnection
(a) Comments
135. Several entities from the Western Interconnection state that
the proposal should not apply to the Western Interconnection because
the West is built and operated differently.\139\ The parties argue that
100-200 kV facilities in the West are often used for distribution of
power and have a limited or no impact on reliability over the wider
area.\140\ Multiple entities supported utilizing a technical test to
differentiate which facilities should be included, such as the material
impact assessment methodology currently being developed by the WECC
BESDTF.\141\ Several commenters also argue that the proposal would be
expensive to implement while providing minimal reliability benefits.
---------------------------------------------------------------------------
\139\ See, e.g., WECC, State Utility Commissions and Consumer
Counsel, WPSC, Joint Western Commenters, Snohomish.
\140\ Id.
\141\ See, e.g., Bay Area Municipal, Joint Western Commenters,
Redding, NV Energy, Snohomish, Tacoma Power, Utah Municipal.
---------------------------------------------------------------------------
136. State Utility Commissions and Consumer Counsel state that
facilities ranging from 100-199 kV in the West are typically used for
radial distribution or local area distribution networks, and not
necessarily for bulk power
[[Page 72928]]
transmission.\142\ They believe that a 200 kV bulk electric system
threshold reflects the usage and history of the Western
Interconnection.\143\ They further argue that nearly all new
transmission in the West is being built at 500 and 230 kV and that the
average line capacity of 100-199 kV lines makes up a very small
percentage of the overall network capacity in the West.\144\
---------------------------------------------------------------------------
\142\ State Utility Commissions and Consumer Counsel at 2.
\143\ Id.
\144\ Id.
---------------------------------------------------------------------------
137. The WPSC notes that certain utilities within its service area
have elected to build distribution facilities above 100 kV, and such
utilities could become subject to substantial compliance costs without
measurable benefits under the proposed bright-line rule.\145\ Moreover,
if the 100 kV threshold is adopted, certain commenters are concerned
that utilities will elect to build facilities below 100 kV in order to
avoid complying with the Commission-approved Reliability
Standards.\146\
---------------------------------------------------------------------------
\145\ WPSC at 2-3.
\146\ Id. at 2-3, 5; Utah Municipal at 6-7.
---------------------------------------------------------------------------
138. Likewise, Utah Municipal argues that any proposal to classify
facilities in excess of 100 kV as part of the bulk electric system may
be appropriate for the Eastern Interconnection, but that such an
approach is inappropriate and extremely burdensome for entities in the
Western Interconnection.\147\ Utah Municipal further notes that the
NOPR does not address the ``demonstrable differences between the
Western and Eastern Interconnections,'' i.e., that the spread out
nature of the West makes use of lines over 100 kV appropriate for use
as distribution lines.\148\ Rather than adopting an across the board
change in each region's approach to determining ``bulk electric
system'' facilities, Utah Municipal recommends letting the WECC BESDTF
finish work on its hybrid threshold and material impact assessment
classification, and requests that the Commission defer to the technical
experts at Regional Entities such as WECC regarding any bulk electric
system definition change.\149\
---------------------------------------------------------------------------
\147\ Utah Municipal at 5-7.
\148\ Id. at 8.
\149\ Id. at 13.
---------------------------------------------------------------------------
(b) Commission Determination
139. The Commission does not agree with the commenters' arguments
that 100-199 kV facilities in the Western Interconnection should be
treated differently than facilities in the Eastern Interconnection as a
threshold matter. The bulk electric system definition should include
all facilities that are necessary for operating an interconnected
electric transmission network. While commenters have implied that not
all 100-199 kV facilities are needed for reliable operation, the
Commission notes that 100 kV and some lower voltage facilities are
included in some of the WECC Rated Paths. Clearly, these facilities are
operationally significant and needed for reliable operation as
identified by certain WECC documents.\150\ Any entity wishing to seek
exemption of non-radial facilities from compliance with Commission-
approved Reliability Standards may utilize the exemption process NERC
will develop. While the Western Interconnection has a higher percentage
of transmission facilities above 200 kV compared to the Eastern
Interconnection,\151\ it is how the lines below 200 kV are
interconnected with higher voltage facilities that determines their
significance.
---------------------------------------------------------------------------
\150\ See WECC Rated Path Catalog.
\151\ In the Western Interconnection, 59 percent of the total
circuit miles of transmission lines above 100 kV also are above 200
kV, compared to 43 percent in the Eastern Interconnection. See NOPR,
FERC Stats. & Regs. ] 32,654 at n. 36.
---------------------------------------------------------------------------
140. Therefore, commenters have not provided adequate explanation
in this proceeding, supported by data and analysis, as to why there is
a physical difference upon which to treat the Western Interconnection
differently. In fact, the present WECC definition uses 100 kV as the
threshold for classifying bulk electric system facilities.\152\ The
Commission understands that the audits performed by WECC and self-
reporting by entities includes all facilities 100 kV and above.\153\
---------------------------------------------------------------------------
\152\ See http://www.wecc.biz/Standards/Development/BES/default.aspx.
\153\ June 2007 Filing at 13-14.
---------------------------------------------------------------------------
141. Further, the suggestion that the modifications should not
apply to the West contradicts guidance regarding Reliability Standards
from Order No. 672. Order No. 672 details several factors the
Commission will consider in determining whether a proposed Reliability
Standard is just and reasonable. One of the factors indicates that a
``proposed Reliability Standard should be designed to apply throughout
the interconnected North American Bulk-Power System, to the maximum
extent this is achievable with a single Reliability Standard.'' \154\
Moreover, and particularly compelling with respect to the definition of
bulk electric system, Order No. 672 indicates that proposed Reliability
Standards ``should be clear and unambiguous regarding what is required
and who is required to comply.'' \155\ Eliminating broad regional
discretion without ERO or Commission oversight and maintaining a 100 kV
bright-line definition, coupled with an exemption process, removes any
ambiguity regarding who is required to comply and accomplishes the goal
of reducing inconsistencies across regions. Commenters have not
provided compelling evidence that the proposed definition should not
apply to the United States portion of the Western Interconnection as a
threshold matter. As Order No. 672 detailed, however, the regions may
propose: (1) A regional difference that is more stringent than the
continent-wide definition, including a regional difference that
addresses matters that the continent-wide definition does not; or (2) a
regional definition that is necessitated by a physical difference in
the Bulk-Power System. Should a region decide to propose a regional
difference, in addition to the criteria above, such a proposal must
address the Commission's concerns with the present definition with the
understanding that any such alternative must be as effective as, or
more effective than, the Commission's proposed approach in addressing
the identified technical and other concerns, and may not result in a
reduction in reliability.\156\
---------------------------------------------------------------------------
\154\ Order No. 672, FERC Stats. & Regs. ] 31,204 at P 331.
\155\ Id. at P 325.
\156\ See, e.g., Version One Regional Reliability Standard for
Resource and Demand Balancing, 133 FERC ] 61,063, at P 14 (2010);
North American Electric Reliability Corporation Reliability
Standards Development and NERC and Regional Entity Enforcement, 132
FERC ] 61,217 at P 112 (2010).
---------------------------------------------------------------------------
6. Impact on Generation Owners and Operators
(a) Comments
142. NERC and several other commenters raise the concern that the
revised definition could bring a large number of generator owners and
generator operators within the ambit of the Reliability Standards for
the first time, and could result in an extremely large number of
exemption requests despite the fact that the relevant facilities can
have limited or no impact on the Bulk-Power System.\157\ NERC and other
commenters generally request that the Ad Hoc Group for Generator
Requirements at the Transmission Interface (the ``GOTO task force'')
\158\
[[Page 72929]]
findings and process be taken into account as part of any final
Commission rule, and/or that any new ``bulk electric system''
definition otherwise adopted be developed in concert with the GOTO task
force findings.\159\
---------------------------------------------------------------------------
\157\ NERC at 12-14; see also Palo Alto at 6-7, NCPA at 6-10.
\158\ NERC has undertaken an initiative to address the special
circumstances associated with generators and to determine which
Reliability Standards might be inappropriate for such limited
facilities. The GOTO task force was formed in February 2009, and
included a broad array of participants across regions and industry
segments, with representatives from operating and planning
perspectives. The GOTO task force developed a Final Report, issued
in November 2009, and has submitted a Standards Authorization
Request to NERC to implement its proposed recommendations. See Final
Report from the Ad Hoc Group for Generator Requirements at the
Transmission Interface and related materials, available at http://www.nerc.com/filez/standards/Project2010-07_GOTO_Project.html.
\159\ NERC at 14; Palo Alto at 7, NCPA at 9-10.
---------------------------------------------------------------------------
143. A few other parties request additional clarification with
respect to the proposed rule's applicability to generation facilities.
The U.S. Department of the Interior suggests that the Commission
clarify its policy regarding the exclusion of radial lines from the
bulk electric system definition, such that transmission facilities
linking small generators are also treated as excluded radial
lines.\160\ WECC notes that the Commission's proposed bright-line
standard is somewhat unclear, in that parts of the NOPR suggest that
the 100 kV standard would apply only to transmission facilities, while
the current ``bulk electric system'' definition used by NERC applies to
transmission, generation, and interconnection facilities.
---------------------------------------------------------------------------
\160\ U.S. Department of Interior at 1-2 (suggesting that small
generators be defined as set out in the NERC Statement of Compliance
Registry Criteria, Section III(c)).
---------------------------------------------------------------------------
(b) Commission Determination
144. We expect that our decision to direct NERC to develop a
uniform modified definition of ``bulk-electric system'' will eliminate
regional discretion and ambiguity. The change will not significantly
increase the scope of the present definition, which applies to
transmission, generation and interconnection facilities. The proposed
exemption process will provide sufficient means for entities that do
not believe particular facilities are necessary for operating the
interconnected transmission system to apply for an exemption.
145. As noted above, NERC has undertaken an initiative to address
the special circumstances associated with such generators.\161\
Although the NERC Board of Trustees has not approved any action arising
from the GOTO task force at this time, the task force members may
submit their comments and report to NERC for its consideration as NERC
develops an exemption process.
---------------------------------------------------------------------------
\161\ The GOTO task force was formed in February 2009, and
included a broad array of participants across regions and industry
segments, with representatives from operating and planning
perspectives. The GOTO task force developed a Final Report, issued
in November 2009, and has submitted a Standards Authorization
Request to NERC to implement its proposed recommendations. NERC and
other commenters generally request that the GOTO task force findings
and process be taken into account as part of any final Commission
rule, and/or that any new ``bulk electric system'' definition
otherwise adopted be developed in concert with the GOTO task force
findings.
---------------------------------------------------------------------------
7. Clarifying Terms
(a) Comments
146. Several commenters seek clarification on the definitions and
implications of specific terms and concepts such as ``integrated
transmission element'' and ``material impact.'' \162\
---------------------------------------------------------------------------
\162\ See, e.g., North Carolina Independent Cooperatives,
SWTDUG.
---------------------------------------------------------------------------
147. For example, the North Carolina Independent Cooperatives
request that the Commission clarify the terms ``integrated transmission
element'' and ``material impact.'' They state that unless these terms
are clarified there is a real danger that very small facilities will be
unnecessarily included in the bulk electric system and their owners
subjected to unreasonable compliance costs. The North Carolina
Independent Cooperatives propose that the Commission adopt additional
factors to determine the types of facilities that fall within or
outside of the scope of these terms.
148. ReliabilityFirst requests clarification on whether
transformers with a high side winding above 100 kV and a low side
winding below 100 kV are included in the bulk electric system
definition. It argues that, to eliminate uncertainty, ``any and all''
facilities that operate at 100 kV or above should be considered bulk
electric system facilities, even if, for example, one transformer
winding operates below 100 kV.\163\
---------------------------------------------------------------------------
\163\ ReliabilityFirst at 6.
---------------------------------------------------------------------------
(b) Commission Determination
149. With regard to ReliabilityFirst's comments, we agree with its
developed delineation point with regard to ``step-down'' transformers,
but note that these kinds of refinements can and should be addressed as
part of NERC's exemption process.
150. We disagree with commenters that definitions of ``integrated
transmission elements'' and ``material impact'' are needed to implement
this Final Rule. These terms are not defined by the present bulk
electric system definition, and defining these terms is not necessary
to revise the definition as directed herein. Whether specific
facilities have a material impact is not dispositive with respect to
whether they are needed for reliable operation. These questions are
more appropriately addressed through development of an exemption
process at NERC.
III. Information Collection Statement
151. The information collection requirements in this Final Rule are
identified under the Commission data collection, FERC-725-A ``Revision
of Definition of Bulk Electric System.'' Under section 3507(d) of the
Paperwork Reduction Act of 1995,\164\ the proposed reporting
requirements in the subject rulemaking will be submitted to OMB for
review. Interested persons may obtain information on the reporting
requirements by contacting the Federal Energy Regulatory Commission,
888 First Street, NE., Washington, DC 20426 (Attention: Michael Miller,
Office of the Executive Director, 202-502-8415) or from the Office of
Management and Budget (Attention: Desk Officer for the Federal Energy
Regulatory Commission, fax: 202-395-7285, e-mail: [email protected]).
---------------------------------------------------------------------------
\164\ 44 U.S.C. 3507(d).
---------------------------------------------------------------------------
152. The ``public protection'' provisions of the Paperwork
Reduction Act of 1995 require each agency to display a currently valid
control number and inform respondents that a response is not required
unless the information collection displays a valid OMB control number
on each information collection or provides a justification as to why
the information collection number cannot be displayed. In the case of
information collections published in regulations, the control number is
to be published in the Federal Register.
153. Public Reporting Burden: In the NOPR, the Commission based its
estimate of the Public Reporting Burden on its belief that only one
Regional Entity, NPCC, would be immediately affected by the
Commission's proposal. In particular the Commission stated that the
transmission owners, transmission operators and transmission service
providers in the U.S. portion of the NPCC region would be affected by
the Commission's proposal. Based on registration information available
on NPCC's Web site, it appeared that approximately 33 transmission
owners, transmission operators and transmission service providers in
the U.S. portion of the NPCC region would potentially be affected by
the Commission's proposal.\165\ These entities are currently
responsible for complying with applicable mandatory Reliability
[[Page 72930]]
Standards approved by the Commission in Order No. 693 and subsequent
orders. Given these parameters, the Commission estimated the Public
Reporting Burden as follows:
---------------------------------------------------------------------------
\165\ ``NPPC Registered Entities as of January 13, 2010,''
available on the NPCC Web site: http://www.npcc.org/.
----------------------------------------------------------------------------------------------------------------
Data collection
----------------------------------- Numbers of Numbers of Hours per respondent Total annual hours
FERC-725-A respondents responses
----------------------------------------------------------------------------------------------------------------
Transmission Owners, Transmission 33 1 Reporting: 0......... Reporting: 0.
Operators and Transmission
Service Providers in the U.S.
portion of the NPCC Region.
---------------------------------------------
Recordkeeping: 500... Recordkeeping:
16,500.
Total......................... .............. .............. ..................... 16,500.
----------------------------------------------------------------------------------------------------------------
154. Based on the available information, the Commission estimated
that 33 entities would be affected by the proposal. The Commission also
estimated that it would require 16,500 total annual hours for
collection (reporting and recordkeeping) and that the average
annualized cost of compliance would be $660,000 ($40/hour for 16,500
hours; the Commission based the $40/hour estimate on $17/hour for a
file/record clerk and $23/hour for a supervisor).
155. Commenters argue that the Commission has severely
underestimated the potential impact of the change in the definition of
bulk electric system and the exemption process as proposed in the NOPR.
APPA/NRECA asserts that the NOPR is deficient in its assessment of the
public reporting burden.\166\ APPA/NRECA argues that the burden of
compliance and/or of obtaining exempt status is significant and reaches
far beyond entities in NPCC. Moreover, APPA/NRECA notes that the
Commission has used underlying assumptions about the kind and cost of
work needed to comply with the change in rules that significantly
underestimate the costs associated with compliance. Finally, APPA/NRECA
argues that the NOPR is deficient in failing to make any assessment of
the increased burden related to the change in the Commission's approach
to allowing lower-voltage (less than 100 kV) facilities to be included
as part of the bulk electric system by a Regional Entity.
---------------------------------------------------------------------------
\166\ APPA/NRECA at 37-40.
---------------------------------------------------------------------------
156. Snohomish argues that the NOPR does not reflect the existing
practice outside NPCC and that the Commission is simply wrong in
asserting that the NOPR proposal would not substantially increase
regulatory compliance burdens. Snohomish asserts that the Commission's
stated basis for compliance with the Paperwork Reduction Act and
associated regulations is incorrect.
157. Given the Commission's decision to direct NERC to develop a
revised bulk electric system definition, rather than implement the
NOPR's proposal, and by granting certain clarifications, some of the
comments are no longer relevant and the remainder are best responded to
in a future order addressing the revised definition developed by NERC.
By directing NERC to develop a revised definition, the Commission is
maintaining the status quo (i.e., the current bulk electric system
definition) until the Commission approves a revised definition. Thus,
the Commission's action does not add to or increase entities' reporting
burden.
IV. Environmental Analysis
158. The Commission is required to prepare an Environmental
Assessment or an Environmental Impact Statement for any action that may
have a significant adverse effect on the human environment.\167\ The
Commission has categorically excluded certain actions from this
requirement as not having a significant effect on the human
environment. The actions proposed here fall within the categorical
exclusion in the Commission's regulations for rules that are
clarifying, corrective or procedural, for information gathering,
analysis, and dissemination.\168\ Accordingly, neither an environmental
impact statement nor environmental assessment is required.
---------------------------------------------------------------------------
\167\ Regulations Implementing the National Environmental Policy
Act, Order No. 486, 52 FR 47897 (Dec. 17, 1987), FERC Stats. &
Regs., Regs. Preambles 1986-1990 30,783 (1987).
\168\ 18 CFR 380.4(a)(5).
---------------------------------------------------------------------------
159. Greenburgh Environmental Forum LORAX Working Group
(Greenburgh) states that the Commission must address the environmental
impact of the NOPR on the human environment.\169\
---------------------------------------------------------------------------
\169\ Greenburgh at 2.
---------------------------------------------------------------------------
160. We disagree with Greenburgh. Any revised bulk electric system
definition the ERO develops will not modify thresholds established in
individual Reliability Standards such as FAC-003 with respect to
vegetation management. The Final Rule requires the ERO to clarify which
facilities will be included within the definition of ``bulk electric
system'' and the actions proposed here fall within the categorical
exclusion in the Commission's regulations for rules that are
clarifying, corrective or procedural, for information gathering,
analysis, and dissemination.
V. Regulatory Flexibility Act Analysis
161. The Regulatory Flexibility Act of 1980 (RFA) generally
requires a description and analysis of any final rule that will have
significant economic impact on a substantial number of small entities.
The RFA does not mandate any particular outcome in a rulemaking, but
rather requires consideration of alternatives that are less burdensome
to small entities and an agency explanation of why alternatives were
rejected.
162. In drafting a rule, an agency is required to: (1) Assess the
effect that its regulation will have on small entities; (2) analyze
effective alternatives that may minimize a regulation's impact; and (3)
make the analyses available for public comment. In its NOPR, the agency
must either include an Initial Regulatory Flexibility Act Analysis
(Initial Analysis) or certify that the proposed rule will not have a
``significant impact on a substantial number of small entities.''
163. If, in preparing the NOPR, an agency determines that the
proposal could have a significant impact on a substantial number of
small entities, the agency shall ensure that small entities will have
an opportunity to participate in the rulemaking procedure.
164. In its Final Rule, the agency must also either prepare a Final
Regulatory Flexibility Act Analysis (Final Analysis) or make the
requisite certification. Based on the comments the agency receives on
the NOPR, it can alter its
[[Page 72931]]
original position as expressed in the NOPR but it is not required to
make any substantive changes to the proposed regulation.
165. The statute provides for judicial review of an agency's final
RFA certification or Final Analysis. An agency must file a Final
Analysis demonstrating a ``reasonable, good-faith effort'' to carry out
the RFA mandate. However, the RFA is a procedural, not a substantive,
mandate. An agency is only required to demonstrate a reasonable, good
faith effort to review the impact the proposed rule would place on
small entities, any alternatives that would address the agency's and
small entities' concerns and their impact, provide small entities the
opportunity to comment on the proposals, and review and address
comments. An agency is not required to adopt the least burdensome rule.
Further, the RFA does not require an agency to assess the impact of a
rule on all small entities that may be affected by the rule, only on
those entities that the agency directly regulates and that are subject
to the requirements of the rule.
A. NOPR Proposal
166. In the NOPR, the Commission stated that the immediate effect
of the proposed directive that the ERO revise its current definition of
bulk electric system to establish a 100 kV threshold would likely be
limited to certain transmission owners, transmission operators and
transmission service providers in the U.S. portion of the NPCC region.
Most transmission owners, transmission operators and transmission
service providers do not fall within the definition of small entities.
The Commission estimated that approximately four of the 33 transmission
owners, transmission operators and transmission services providers may
fall within the definition of small entities. The Commission determined
that this rule will not have a significant economic impact on a
substantial number of small entities. Accordingly, no regulatory
flexibility analysis is required.
B. Comments
167. APPA/NRECA state that the Commission's RFA statement is
flawed, in that the likely impacts of the proposed rule will reach far
beyond entities in NPCC. APPA/NRECA argues that it is a substantial
possibility that a substantial number of entities outside of NPCC will
be affected by the proposal. As such, it asks for a delay in
implementing the proposal in order to avoid impacting a broader group
of smaller entities.\170\
---------------------------------------------------------------------------
\170\ APPA/NRECA at 41-42.
---------------------------------------------------------------------------
168. TAPS generally supports the APPA/NRECA comments on the
Commission's RFA analysis. TAPS argues that the NOPR's RFA
Certification, which states that only a few (presumably already-
registered) transmission owners, transmission operators, and
transmission service providers in the NPCC footprint would be affected
by this rulemaking, is fatally flawed.\171\
---------------------------------------------------------------------------
\171\ TAPS at 12.
---------------------------------------------------------------------------
C. Commission Determination
169. The Commission disagrees with commenters that challenge the
Commission's conclusion that the rule will not have a significant
economic impact on a substantial number of small entities. Commenters
have not made specific assertions regarding how the Commission's
analysis is erroneous or in what ways the Final Rule will have a
significant economic impact on a substantial number of small entities.
As the Commission stated in its NOPR, most transmission owners,
transmission operators and transmission service providers do not fall
within the definition of small entities. Further, the Commission has
suggested that the ERO create an appropriate exemption process and this
will further ensure that the Final Rule minimally affects small
entities. In addition, the ability of Regional Entities to identify
``critical'' facilities, operated at less than 100 kV, and require
these facilities to comply with mandatory Reliability Facilities is not
new. Our direction here that the ERO formalize the process for
including such facilities will provide additional protections to small
entities. Based on this analysis, we certify that this Final Rule will
not have a significant economic impact on a substantial number of small
entities. Accordingly, no further RFA analysis is required.
VI. Document Availability
170. In addition to publishing the full text of this document in
the Federal Register, the Commission provides all interested persons an
opportunity to view and/or print the contents of this document via the
Internet through the Commission's Home Page (http://www.ferc.gov) and
in the Commission's Public Reference Room during normal business hours
(8:30 a.m. to 5 p.m. Eastern time) at 888 First Street, NE., Room 2A,
Washington, DC 20426.
171. From the Commission's Home Page on the Internet, this
information is available on eLibrary. The full text of this document is
available on eLibrary in PDF and Microsoft Word format for viewing,
printing, and/or downloading. To access this document in eLibrary, type
the docket number excluding the last three digits of this document in
the docket number field.
172. User assistance is available for eLibrary and the Commission's
Web site during normal business hours from FERC Online Support at (202)
502-6652 (toll free at 1-866-208-3676) or e-mail at
[email protected], or the Public Reference Room at (202) 502-
8371, TTY (202) 502-8659. E-mail the Public Reference Room at
[email protected].
VII. Effective Date and Congressional Notification
173. These regulations are effective January 25, 2011. The
Commission has determined, with the concurrence of the Administrator of
the Office of Information and Regulatory Affairs of OMB, that this rule
is not a ``major rule'' as defined in section 351 of the Small Business
Regulatory Enforcement Fairness Act of 1996.
List of Subjects in 18 CFR Part 40
Electric power, Electric utilities, Reporting and recordkeeping
requirements.
By the Commission.
Nathaniel J. Davis, Sr.,
Deputy Secretary.
Appendix A
------------------------------------------------------------------------
Commenter Abbreviation
------------------------------------------------------------------------
Alcoa Inc. and Alcoa Power Generating Inc.. Alcoa
American Public Power Association and the APPA/NRECA
National Rural Electric Cooperative
Association.
[[Page 72932]]
Baltimore Gas and Electric Company......... BGE
Bay Area Municipal Transmission Group...... Bay Area Municipal
Bonneville Power Administration............ BPA
California Municipal Utilities Association. CMUA
California Public Utilities Commission..... CPUC
Central Hudson Gas & Electric Corporation, Indicated New York
Consolidated Edison Company of New York, Transmission Owners
Inc., Long Island Power Authority, New
York Power Authority, New York State
Electric & Gas Corporation, Orange and
Rockland Utilities, Inc. and Rochester Gas
and Electric Corporation.
City of Anaheim, California................ Anaheim
City of Palo Alto, California.............. Palo Alto
City of Redding, California................ Redding
City of Santa Clara, California d/b/a Santa Clara
Silicon Valley Power.
Constellation Energy Commodities Group, Constellation/CENG
Inc., Constellation Energy Control and
Dispatch, LLC, Constellation Energy
Nuclear Group, LLC, Constellation
NewEnergy, Inc. and Constellation Power
Source Generation, Inc.
Consumers Energy Company................... Consumers Energy
Dow Chemical Company....................... Dow
Duke Energy Corporation.................... Duke Energy
Edison Electric Institute.................. EEI
Electric Reliability Council of Texas, Inc. ERCOT
Electricity Consumers Resource Council..... ELCON
ExxonMobil Research and Engineering........ ExxonMobil
Florida Reliability Coordinating Council... FRCC
Georgia Transmission Corporation and GTC/GSOC
Georgia System Operations Corporation.
Greenburgh Environmental Forum LORAX Greenburgh
Working Group.
Hydro-Qu[eacute]bec Trans[Eacute]nergie.... Hydro-Qu[eacute]bec
Independent Electricity System Operator, Joint Canadian Parties
Hydro One Networks Inc., Ontario Power
Generation Inc., Five Nations Energy Inc.,
Brookfield Renewable Power Inc., New
Brunswick System Operator, and Nova Scotia
Power Inc.
Industrial Customers of Northwest Utilities ICNU
ISO New England Inc........................ ISO-NE
Large Public Power Council ...........................
Manitoba Hydro ...........................
National Association of Regulatory Utility NARUC
Commissioners.
National Grid USA.......................... National Grid
Nevada Power Company and Sierra Pacific NV Energy
Power Company, d/b/a NV Energy.
New England States Committee on Electricity NESCOE
New York Independent System Operator, Inc.. NYISO
New York State Public Service Commission... NYPSC
New York State Reliability Council, L.L.C.. NYSRC
North American Electric Reliability NERC
Corporation.
North Carolina Independent Cooperatives ...........................
Northeast Power Coordinating Council, Inc.. NPCC
Northeast Utilities Service Company........ Northeast Utilities
Northern California Power Agency........... NCPA
Ontario Power Generation Inc............... Ontario Power
Joint Western Commenters................... Joint Western Commenters
Benton Rural Electric Association ...........................
Big Bend Electric Cooperative ...........................
Blachley-Lane Electric Cooperative ...........................
Central Electric Cooperative ...........................
Central Lincoln People's Utility ...........................
District
City of Ellensburg, Washington ...........................
City of Richland, Washington ...........................
Clearwater Power Company ...........................
Consumers Power ...........................
Coos-Curry Electric Cooperative ...........................
Douglas Electric Cooperative ...........................
Eugene Water & Electric Board ...........................
Fall River Rural Electric Cooperative ...........................
Fergus Electric Cooperative, Inc. ...........................
Idaho Falls Power ...........................
Inland Power and Light Company ...........................
Lane Electric Cooperative ...........................
Lincoln Electric Cooperative ...........................
Lost River Electric Cooperative ...........................
Northern Lights ...........................
Northwest Public Power Association ...........................
Northwest Requirements Utilities ...........................
Okanogan Electric Cooperative ...........................
Pacific Northwest Generating ...........................
Cooperative
Public Utility District No. 1 of ...........................
Douglas County, Washington
[[Page 72933]]
Public Utility District No. 1 of ...........................
Klickitat County, Washington
Raft River Rural Electric Cooperative ...........................
Salmon River Electric Cooperative ...........................
Tillamook PUD ...........................
Umatilla Electric Cooperative ...........................
Wells Rural Electric Company ...........................
West Oregon Electric Cooperative ...........................
Western Montana Electric Generating and ...........................
Transmission Cooperative, Inc
Portland General Electric Company.......... PGE
Public Power Council ...........................
Public Utility District No. 1 of Snohomish Snohomish
County, Washington.
ReliabilityFirst Corporation............... ReliabilityFirst
Southern California Edison Company......... SCE
Southern Company Services, Inc............. Southern Company
Southwest Transmission Dependent Utility SWTDUG
Group.
State Utility Commissions and Consumer ...........................
Counsel
Idaho Public Utilities Commission ...........................
Montana Public Service Commission ...........................
Montana Consumer Counsel ...........................
Oregon Public Utility Commission ...........................
Utah Public Service Commission ...........................
Washington Utilities and Transportation ...........................
Commission
Tacoma Power............................... ...........................
Texas Industrial Energy Consumers.......... TIEC
Transmission Access Policy Study Group..... TAPS
Transmission Agency of Northern California. TANC
U.S. Department of the Interior ...........................
Utah Associated Municipal Power Systems.... Utah Municipal
Utility Services, Inc...................... Utility Services
Virginia Electric and Power Company, d/b/a Dominion Power
Dominion Virginia Power.
Western Electricity Coordinating Council... WECC
Wyoming Public Service Commission.......... WPSC
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[FR Doc. 2010-29570 Filed 11-24-10; 8:45 am]
BILLING CODE 6717-01-P