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DRAFT Agenda Compliance and Certification Committee September 12, 2012 | 1:00–5:00 p.m. September 13, 2012 | 8:00 a.m.–Noon NERC Atlanta Headquarters 3353 Peachtree Rd. NE Suite 600, North Tower Atlanta, GA 30326 Introductions and Chair’s Remarks NERC Antitrust Compliance Guidelines and Public Announcement Agenda

1. Administrative – Secretary

a. Announcement of Quorum

b. Compliance and Certification Committee (CCC) Roster Update

c. Action Item Update

2. Member Round Table – Initial – Terry Bilke

3. Committee Business

a. Review and Approve CCC June 2012 Meeting Minutes – Terry Bilke

b. Report of August 2012 Member Representative Committee and Board of Trustees Meeting – Patti Metro*

c. Reliability Issues Steering Committee (RISC) Update – Clay Smith

d. 2013 CCC Work Plan – Terry Bilke

i. Response from Bruce Scherr on CCC Activities for 2013*

e. Audit of NERC Compliance Monitoring Enforcement Program (CMEP) and Organization Registration and Certification Program (ORCP) – Mechelle Ferguson and Clay Smith

4. Subcommittee Updates

a. ERO Monitoring Subcommittee (EROMS) – Ted Hobson

i. 2012 Stakeholder Survey Update

CCC Draft Agenda September 2012 Meeting

2

ii. 2013 Annual Monitoring Plan of NERC

b. Standards Interface Subcommittee (SIS) – Jim Stanton

c. Procedures Subcommittee (PROCS) – Matt Goldberg

d. Organization and Certification Subcommittee (ORCS) – Howard Rulf

i. Southwest Blackout Report Review of Certification and Registration Issues

ii. Rules of Procedure 500 and Appendix 5A Update

e. Nominating Subcommittee – Martin Huang

5. Project 2013-02 Paragraph 81 Update – Brian Murphy, Chair of SAR Drafting Team *

6. KCMI Update – Greg Pierce

7. NERC Staff Update

a. NERC Self-Certification Presentations

i. CMEP – Mike Moon, Earl Shockley and Ed Kichline

ii. Organization Registration and Certification – Jack Wiseman

iii. Standards Applicable to NERC – Marvin Santerfeit

iv. Standards Process Manual – Herb Schrayshuen

b. Compliance Enforcement Initiative (CEI) Update – Ed Kichline

i. Internal and Reliability Risk Controls – Earl Shockley

ii. Entity Impact Evaluation (EIE) Update – Jim Armstrong

c. OC/PC/CCC Southwest Blackout Recommendation Review – Mike Moon

d. Use of the Southwest Blackout Report and Certification – Jack Wiseman

e. Enforcement Statistics – Ed Kichline

8. Member Round Table – Final – Terry Bilke

9. Future Meetings

i. December 5-6, 2012 – Phoenix, AZ

ii. March 13-14, 2013 – Las Vegas, NV

10. Adjourn

Antitrust Compliance Guidelines I. General It is NERC’s policy and practice to obey the antitrust laws and to avoid all conduct that unreasonably restrains competition. This policy requires the avoidance of any conduct that violates, or that might appear to violate, the antitrust laws. Among other things, the antitrust laws forbid any agreement between or among competitors regarding prices, availability of service, product design, terms of sale, division of markets, allocation of customers or any other activity that unreasonably restrains competition. It is the responsibility of every NERC participant and employee who may in any way affect NERC’s compliance with the antitrust laws to carry out this commitment. Antitrust laws are complex and subject to court interpretation that can vary over time and from one court to another. The purpose of these guidelines is to alert NERC participants and employees to potential antitrust problems and to set forth policies to be followed with respect to activities that may involve antitrust considerations. In some instances, the NERC policy contained in these guidelines is stricter than the applicable antitrust laws. Any NERC participant or employee who is uncertain about the legal ramifications of a particular course of conduct or who has doubts or concerns about whether NERC’s antitrust compliance policy is implicated in any situation should consult NERC’s General Counsel immediately. II. Prohibited Activities Participants in NERC activities (including those of its committees and subgroups) should refrain from the following when acting in their capacity as participants in NERC activities (e.g., at NERC meetings, conference calls and in informal discussions):

• Discussions involving pricing information, especially margin (profit) and internal cost information and participants’ expectations as to their future prices or internal costs.

• Discussions of a participant’s marketing strategies.

• Discussions regarding how customers and geographical areas are to be divided among competitors.

• Discussions concerning the exclusion of competitors from markets.

• Discussions concerning boycotting or group refusals to deal with competitors, vendors or suppliers.

NERC Antitrust Compliance Guidelines 2

• Any other matters that do not clearly fall within these guidelines should be reviewed with NERC’s General Counsel before being discussed.

III. Activities That Are Permitted From time to time decisions or actions of NERC (including those of its committees and subgroups) may have a negative impact on particular entities and thus in that sense adversely impact competition. Decisions and actions by NERC (including its committees and subgroups) should only be undertaken for the purpose of promoting and maintaining the reliability and adequacy of the bulk power system. If you do not have a legitimate purpose consistent with this objective for discussing a matter, please refrain from discussing the matter during NERC meetings and in other NERC-related communications. You should also ensure that NERC procedures, including those set forth in NERC’s Certificate of Incorporation, Bylaws, and Rules of Procedure are followed in conducting NERC business. In addition, all discussions in NERC meetings and other NERC-related communications should be within the scope of the mandate for or assignment to the particular NERC committee or subgroup, as well as within the scope of the published agenda for the meeting. No decisions should be made nor any actions taken in NERC activities for the purpose of giving an industry participant or group of participants a competitive advantage over other participants. In particular, decisions with respect to setting, revising, or assessing compliance with NERC reliability standards should not be influenced by anti-competitive motivations. Subject to the foregoing restrictions, participants in NERC activities may discuss:

• Reliability matters relating to the bulk power system, including operation and planning matters such as establishing or revising reliability standards, special operating procedures, operating transfer capabilities, and plans for new facilities.

• Matters relating to the impact of reliability standards for the bulk power system on electricity markets, and the impact of electricity market operations on the reliability of the bulk power system.

• Proposed filings or other communications with state or federal regulatory authorities or other governmental entities.

Matters relating to the internal governance, management and operation of NERC, such as nominations for vacant committee positions, budgeting and assessments, and employment matters; and procedural matters such as planning and scheduling meetings.

DRAFT Minutes Compliance and Certification Committee June 13, 2012 | 1:00–5:00 p.m. PDT June 14, 2012 | 8:00 a.m.–Noon PDT Day 1 Introductions and Chair’s Remarks Compliance and Certification Committee (CCC) Chair Clay Smith called to order and duly noted the meeting of the CCC March 14, 2012 at 1:02 PDT, welcomed those who were attending and made opening remarks. The meeting agenda and attendance list are affixed as Exhibit A and B. Chair Smith made mention that this was his last meeting as chair and thanked the members of the committee for their work during his tenure. NERC Antitrust Compliance Guidelines and Public Announcement Ryan Stewart, NERC staff, announced that a quorum was present, read the NERC Antitrust Compliance Guidelines and the Public Announcement (Exhibit C). Roster Update Chair Smith requested the CCC to review the roster and CCC/CCC_Plus distribution list. A question was raised as to who needs to be on the CCC_Plus list. Action Item: Mr. Stewart will send an email to the CCC_Plus distribution list to see if those who are on the list wish to remain on the list. As part of the transition of chair, Chair Smith then handed over control of the meeting to CCC Vice Chair Terry Bilke. Vice Chair Bilke requested that each member supply Mr. Stewart with their areas of expertise to allow Kevin Conway, the CCC Compliance Application Notice (CAN) representative, with appropriate CCC contacts when CANs are out for industry comment. Action Item: Each CCC member to solicit their areas of expertise as well as any updates of their information to Mr. Stewart to update the roster. Establish Quorum and Set Expectations Quorum was confirmed and administrative comments were provided. Vice Chair Bilke spoke of expectations of CCC members, how proxies are handled, and how to obtain input from CCC member’s respective segments. Action Item: Mr. Stewart to check with NERC staff who work with the Registered Ballot Body to see if there are lyris lists based on segment representation.

DRAFT CCC Meeting Minutes – June 2012 2

Review and approve CCC March 2012 Meeting Minutes The Committee reviewed the CCC March 2012 Meeting Minutes (Exhibit D). Greg Pierce motioned to approve the minutes and James Spearman seconded the motion, and then unanimously approved. Report of May 2012 Members Representative Committee (MRC) and Board of Trustees (BOT) Meeting Vice Chair Bilke gave an update on the most recent MRC and BOT meetings (Exhibit E). Rules of Procedure (ROP) Changes Patti Metro gave an update to the changes to the ROP and to the timeline of changes to ROP Section 500 and Appendix 5A. The Organization Registration and Certification Subcommittee (ORCS) endorsed the posting of the documents. The Board will seek agreement from the CCC on changes to these documents. The CCC then discussed, a motion was made, Greg Pierce seconded the motion, and the motion was unanimously approved. Subcommittee Updates The subcommittee chairs gave updates on the subcommittee meetings and current projects being worked on. ERO Monitoring Subcommittee (EROMS) Ted Hobson, chair of EROMS gave a presentation regarding the 2012 stakeholder survey that was given at the EROMS meeting conducted by Jelena Crawford of TalentQuest (Exhibit F). There was a general consensus that the CCC endorsed the direction. Action Item: EROMS will draft a letter within the next few weeks for Chair Smith to send to NERC President and CEO, Gerry Cauley. Action Item: Mr. Stewart to let appropriate NERC management know that the self-certification requests will be coming shortly from Chair Smith. Action Item: Chair Smith asked each of the CCC members to provide suggestions to the CCC Executive Committee for a third party organization to conduct the audit. Standards Interface Subcommittee (SIS) Jim Stanton, chair of SIS provided an update on the SIS’s action items and initiatives. Mr. Stanton announced the committee was lacking a vice chair and Bob Hoopes was recommended by Mr. Stanton to be approved. Chair Smith approved appointment of Bob Hoopes to act as vice chair of the SIS and the CCC endorsed the appointment. Action Items: The SIS will review the cost evaluation of new/existing standards; the Entity Impact Evaluation (EIE) and internal controls; help with the Reliability Standards Audit Workseet (RSAW) development with the Standards Committee (SC); and contribute to candidates for elimination of standards/requirements. Organization Registration and Certification Subcommittee (ORCS) Patti Metro, chair of ORCS discussed that since she will be assuming the role of vice chair of the CCC, that new ORCS leadership needed to be appointed. Chair Smith approved the appointment of Howard Rulf to act as chair and Jennifer Flandermeyer to act as vice chair for the ORCS. The CCC endorsed the


appointment. The ORCS recommended endorsement by the CCC of the ORCS modifications to the appropriate areas of the ROP. The Multi-Regional Registered Entity initiative was discussed. Action Item: ORCS to review the southwest outage report for any registration or certification implications or issues and present to the CCC at the September 2012 meeting. Procedures Subcommittee (PROCS) Matt Goldberg, chair of PROCS provided an update on the subcommittees action items and initiatives. The PROCS reviewed the ROP and the procedural obligations of commenting without specified deadlines. Action Item: The PROCS will review current “actionable items” with regard to the ROP to see if any of them do not have “actionable timelines”. Action Item: Matt Goldberg to send the Trades filing to the CCC for review as well as NERC’s response regarding the ROP changes procedure. Nominating Subcommittee Martin Huang provided an update on the recent approved nominations from the May Board meeting (Exhibit G). New CCC officers were presented to the BOT as Agenda Item 2b on the May 9, 2012 agenda. There are no other membership spots being vacated for the remained of 2012. Action Item: NERC to send out nomination form to industry by Wednesday, July 11, 2012. Member Round Table - Initial Per request of the CCC Executive Committee, a member round table was conducted early on in the meeting to provide members time to address certain issues. Members were asked if they had any issues they would like to bring to the table to the committee. Issues were captured in the action items list. CCC Hearing Officer Training Chair Smith gave an update to the Hearing Officer Training conducted at NERC on May 23, 2012 by Robert Wax. Chair Smith stated that the CCC plans to conduct this training every two years for new CCC members or those who have not attended the training. Mr. Stewart stated that those who attended the training would receive certificates for their participation. Action Item: Mr. Stewart to send all of the CCC members the training materials in a PDF package. VRF/VSL Update There was a discussion on the history of this project and its final disposition (Exhibit H). It was discussed that the SC’s Process Subcommittee had since started a project for a different approach for determining sanctions in place of VRFs and VSLs. This is being done in response to the Standards Process Improvement Group (SPIG) report. In order to bring the issue to resolution, the CCC referred the issue to the SIS, with direction to reach out to the SC and request the opportunity for the CCC to comment on the alternative approach to sanctioning being developed by the SC prior to reaching out to the industry. The SIS was to coordinate comments if given the opportunity or report back on the effort no later than the next CCC meeting.


Day 2 CAN commenting process Vice Chair Bilke discussed the process Kevin Conway is following to develop CCC comments on proposed CANs. CCC members will all be asked to identify standard families for which they can act as subject matter experts (SMEs). Staff will populate the CCC roster with this information. When a new CAN is proposed, Kevin Conway will reach out to the possible SMEs to identify volunteers to make a first draft of possible CCC comments. The volunteer SMEs will then reach out to the full committee with the draft comments and give a deadline for additional comments. Kevin Conway will work with the SMEs to submit the CCC’s comments to meet NERC’s deadline. Action Item: Ryan Stewart will be sending a request in the near term to CCC members to identify the standard families for which they have expertise. Confidentiality Discussion NERC began establishing “Embargoed” in the title of emails relating to CAN commenting. Val Agnew explained that CCC members are free to share within the CCC and the subcommittees and volunteers, with the understanding that the information is to be kept within those and not disseminated further. Any disagreement with the position of the CAN should be communicated directly back to NERC and not expanded further. The CCC was comfortable with the discussion. Audit Cycles for Secondary Functions Vice Chair Bilke discussed a summary write-up on audit cycles for secondary functions (Exhibit I). There is a difference in auditing cycles among the Regional Entities (RE) for balancing authorities (Bas), reliability coordinators (RCs) and transmission operators (TOPs) for their secondary functions (IA, TP, PA, etc.). Some REs audit these secondary functions each time the primary functions are audited. Other Regions audit the secondary functions every other cycle. The topic will be discussed at the next CCC meeting. Standards Driven Index Concept and Assessment Greg Pierce discussed the Standards Driven Index concept (Exhibit J). Greg Pierce discussed the status update and the next steps. The future is to use the probabilistic cause & effect model to quantitatively measure reliability, focus on improving top initiating event performance, and focus industry on relevant reliability risks to improve reliability. Risk-Based Compliance Monitoring and Entity Assessment Val Agnew gave an introduction to the entity assessment. The project will take three to five years to roll out. NERC will look for good controls to create a library for learning. Val Agnew mentioned that there is a spreadsheet on the MRO web site which will be distributed to the CCC for their review and comment in the next few weeks. Auditor training will be heavily involved with this topic. NERC plans to have a weekly status bar so industry knows where the Electric Reliability Organization (ERO) is in appropriately scoping compliance monitoring. Stan Kopman gave a presentation on the topic (Exhibit K). Stan discussed the next steps and the timeline. Action Item: Leaders of the Risk-Based Reliability


Compliance Working Group and the CCC Executive Committee to check the scope of the working group to see if there needs to be retirement of the group. Update on Risk Management and Internal Controls Subcommittee (RMICS) and NERC’s internal audit efforts Val Agnew stated that an internal controls auditor has been hired at NERC and will begin in mid-July. The chair and vice chair of the CCC will be attending the RMICS meetings and the CCC Executive Committee will meet once a year with signed confidentiality agreements to discuss the topic. Action Item: Ask the RMICS for approval on what the chair and vice Ccair can share with the CCC. Enforcement Statistics Val Agnew gave a presentation on the latest enforcement statistics that were discussed at the most recent BOT call (Exhibit L). There were 194 new violations received in May. Of the 194, 60 percent were Critical Infrastructure Protection (CIP) violations. There were 155 violations filed or dismissed in May. As for inflow versus outflow, nine of the previous 12 months the outflow exceeded the inflow of possible violations. There were new charts which included the Caseload Index. There was a NERC Caseload Index and Regional Caseload Index. As for the future of metrics, there will be a continuing project to work on development of more consistent metrics with the Regions input. Action Item: Greg Pierce to provide input on the indices and provide feedback to make them clearer. The CCC also stated that they would like to add a metric of the aging overtime of possible violations. RSAWs and Internal Controls Val Agnew spoke of the updates to the RSAWs and how there were three groups: RSAWs existing, standards that are changing, and standards under development. To avoid confusion with other projects, these are referenced to as “avenues”. The Compliance Monitoring Program Working Group of NERC and the Regional Entities are working on the existing RSAWs. The internal controls that will be referenced in the RSAWs will not be compliance related, but strictly informational. The document on internal controls policy will be guidance and go to all committees prior to public posting and will act as a companion document to RSAWs. The CCC can assist in: RSAW development for standards changing, standard development teams, and pulling together good examples of internal controls. EOP-005-1 KRSSC Status Update Clay Smith spoke to the KRSCCP for EOP-005-1 and stated the program was professional and very well done in identifying Regional inconsistencies and best practices. Clay said the program should continue since it was very thorough and occur once or twice a year. NERC Cause Analysis and Data Workshop Val Agnew discussed that the data workshop is a one-time event while the cause analysis training occurs four to six times a year. The event is in Atlanta at the end of July and is posted on the official NERC calendar for those who are interested.


Member Round Table - Conclusion Terry Bilke asked the group if there were any needs from the initial member round table that needed to be addressed. Action Item: Ryan Stewart and Patti Metro to assemble a single list. Shortly after the list has been developed, a conference call with NERC and the CCC Executive Team will be scheduled to assign owners to each item Future Meetings and Schedules

• NERC Cause Analysis and Data Workshop, July 31 – August 2, Atlanta, GA

• September 12-13, 2012, Atlanta, GA* - Finalized (Registration already set-up)

• December 5-6, 2012, Phoenix, AZ (APS)* - Finalized (Registration already set-up)

• March 13-14, 2013, Atlanta or Member/RE Site

• June 12-13, 2013, Chicago or Canada

• September 18-19, 2013, Atlanta or Member/RE Site

• December 4-5, 2013, Salt Lake City or Member/RE Site Timeline for August BOT Meeting

• July 11, 2012 – Background materials due to NERC

• July 25, 2012 – Presentations due to NERC

• TBD, 2012 – Agenda packets will be posted Adjournment Terry Bilke adjourned the meeting at 11:30am PDT.

CCC June 2012 Meeting Minutes Package

Compliance and Certification Committee (CCC) Agenda June 13, 2012 | 01:00 p.m. – 5:00 p.m. EST June 14, 2012 | 08:00 a.m. – 12:00 p.m. EST Hyatt Regency La Jolla 3777 La Jolla Village Drive San Diego, CA 858.552.1234 Introductions and Chair’s Remarks NERC Antitrust Compliance Guidelines and Public Announcement Agenda

1. Roster Update Ryan Stewart

2. Committee Business Terry Bilke

a. Establish Quorum and Set Expectations

b. Review and approve CCC March 2011 Meeting Minutes

c. Report of May 2012 MRC and Board of Trustees Meeting

3. Subcommittee Updates

a. EROMS Ted Hobson

b. SIS Jim Stanton

c. PROCS Matt Goldberg

d. ORCS Patti Metro

e. Nominating Subcommittee Martin Huang

4. Member Round Table - Initial Terry

5. Committee Business

a. CCC Hearing Officer Training Clay Smith

b. VRF/VSL Update Terry

i. Report on outcome of NERC/FERC/Regional Entity review

c. CAN commenting process Terry

CCC Agenda June 2012 Meeting

2

i. Confidentiality Agreement Discussion NERC Staff

ii. Roster update

d. Audit cycles for secondary functions Terry

e. Standards Driven Index Concept and Assessment Greg Pierce

6. NERC Staff Update

a. Risk Based Compliance Monitoring and Entity Assessment Val/Stan Kopman

i. 2013 CMEP

b. Rules of Procedure Changes Val/Patti

c. Update on RMICS and NERC’s internal audit efforts Val/Clay

d. Enforcement Statistics Ryan

e. RSAWs and Internal Controls Val

i. Where can the CCC assist?

ii. PER-005, COM-002 & FAC-003 RSAWs

7. EOP-005-1 KRSSC Status Update Val

a. Update on the MRC standard prioritization initiative Clay/Val

b. NERC Cause Analysis and Data Workshop Val

8. Member Round Table - Conclusion Terry

9. Action Item Review Terry

10. Future Meetings and Schedules Terry

NERC Cause Analysis and Data Workshop, July 18-20, Atlanta, GA

September 12-13, 2012, Atlanta, GA* - Finalized (Registration already set-up)

December 5-6, 2012, Phoenix, AZ (APS)* - Finalized (Registration already set-up)

March 13-14, 2013, Atlanta or Member/RE Site

June 12-13, 2013, Chicago or Canada

September 18-19, 2013, Atlanta or Member/RE Site

December 4-5, 2013, Salt Lake City or Member/RE Site

11. Timeline for August BOT Meeting Terry

July 11, 2012 – Background materials due to NERC

CCC Agenda June 2012 Meeting

3

July 25, 2012 – Presentations due to NERC

TBD, 2012 – Agenda packets will be posted

12. Adjournment Terry

Name Sector / Office Address Phone / Fax / E-Mail Observe Auditor Hearing

Start End Vote Audits of REs Training Panels1 Terry Bilke Chair (2yr) Midwest ISO, Inc. (317) 249-5463 7/1/12 6/30/14 1/4th Yes Yes Yes SIS Yes Yes

Consulting Auditor RE-MRO 701 City Center Drive (317) 249-5994 FxP.O. Box 402 [email protected], Indiana 46082-4202

2 Patricia E Metro Vice Chair (2yr) National Rural Electric Cooperative Association (703) 907-5817 7/1/12 6/30/14 Full Yes-MRO Yes Yes ORCS Yes YesManager, Transmission and Transmission 4301 Wilson Blvd. (703) 907-5517 FxReliability Standards Dependent Utility Mail Code EP11-253 [email protected]

Arlington, VA 22203

3 Chuck B Manning RE-TRE Electric Reliability Council of Texas, Inc. (512) 248-3036 5/10/12 5/9/15 1/4th Yes SIS Yes YesVP Human Resources and Chief 2705 West Lake drive (512) 248-3992 Fx NominatingCompliance Officer Taylor, Texas 76574 [email protected]

4 Ted E. Hobson RE-FRCC JEA (904) 665-7126 6/1/10 5/31/13 1/4th Yes-NPCC Yes EROMS YesVP, Fuels, Purchased Power 21 W. Church Street (904) 665-7105 Fx& Compliance Jacksonville, Florida 32202-3139 [email protected]

5 William J. Temple RE-NPCC Northeast Utilities 860-665-3908 3/16/11 3/17/14 1/4th Yes-SERC Yes Yes EROMS YesManager, Reliability 107 Seldon St [email protected] Berlin, CT 06037

6 Robert Hoopes RE-RFC Sr. Director-FERC/NERC Compliance 610-774-6913 6/1/10 5/31/13 1/4th SIS Yes YesSr. Director-FERC/NERC Compliance PPL Corporation [email protected] Corporation

7 Gregory D. Pierce RE-SERC Entergy Corporation (504) 576-4993 6/10/12 6/9/15 1/4th YesDirector, Transmission 639 Loyola Avenue (504) 576-5123Compliance LENT 24A [email protected]

New Orleans, Louisiana 70113

8 Jennifer Flandermeyer RE-SPP KCP&L (816)-654-1308 3/16/11 3/17/14 1/4th Yes ORCS YesSenior Manager P.O. Box 418679 816-377-1168 cellCompliance Programs Kansas City, MO 64141 [email protected]

9 Jana Van Ness RE-WECC Arizona Public Service Co. 602-250-2310 2/9/12 2/8/15 1/4th EROMS YesDirector, Regulatory Compliance 400 North 5 Street (602)-250-2783 Fx

Phoenix, AZ 85004 [email protected]

10 W. Clay Smith Cooperative Georgia Systems Operations Corporation (770) 270-7660 6/15/12 6/14/15 Full Yes-RFC Yes Yes All Yes YesVice President - Chief Legal 2100 East Exchange Place (770) 270-7938 Fxand Compliance Officer Tucker, Georgia 30084-5336 [email protected]

11 Thomas A. Smith Cooperative Tri-State G & T Association Inc. (303) 254-3547 6/1/10 5/31/13 Full Yes Yes EROMS YesSenior Manager of System P.O. Box 33695 (303) 254-6030 FxOperations Denver, Colorado 80233 [email protected]

12 Richard Comeaux (Keith) Electricity Marketer NRG Energy, Inc. (225) 663-0043 2/9/12 2/8/15 Full Yes ORCS YesDirector, Regulatory Compliance 112 Telly Street (225) 618-3334 Fx

New Roads, Louisiana 70760 [email protected]

13 Jason Marshall Electricity Marketer ACES Power Marketing (317) 344-7204 2/9/12 2/8/15 Full Yes-SERC Yes Yes SIS Yes YesDirector, Reliability Compliance 4140 West 99th St [email protected]

Carmel, IN 46032

CCC Membership Records

CCC Membership

Volunteer

Sub CommitteeConfidentiality

AgreementQuality Review

Training

mailto:[email protected]�














Start End Vote Audits of REs Training Panels


CCC Membership

Volunteer



Training

14 John Hairston Federal/Provincial Bonneville Power Administration (503) 230-5262 6/17/11 6/16/14 Full Yes PROCS YesChief Compiance Officer Utility/Power P.O. Box 3621 (503) 230-3003 faxAgency Compliance and Governance Authority Portland, OR 97208-3621 [email protected]

15 Ajay Garg Federal/Provincial Hydro One Networks, Inc. (416) 345-5420 6/1/10 5/31/13 Full SIS Yes YesManager, Policy and Utility/Power 483 Bay Street, TCT15N-D14 (416) 345-6029 FxApprovals Authority Toronto, Ontario M5G 2P5 [email protected]

16 Martin Huang Federal/Provincial British Columbia Hydro (604) 455-1800 6/1/10 5/31/13 Full PROCS YesVice President, Grid Operations Utility/Power 1100 Four Bentall Centre (604) 455-1911 Fx Nominating

Authority 1055 Dunsmuir Street [email protected]. Box 49260Vancouver, British Columbia V7X 1V5

17 Helen Nalley Investor Owned Southern Company (250) 257-2055 2/9/12 2/8/15 Full Yes SISCompliance Director Utility [email protected] Nominating

18 Howard F. Rulf Investor Owned WE Engergies (262) 574-6046 6/10/12 6/9/15 Full Yes Yes ORCS Yes YesManager, Compliance and Utility W237 N1500 Busse Road (262) 544-7099 Fx NominatingTraining Waukesha, Wisconsin 53188-1124 [email protected]

19 Gregory Campoli ISO/RTO New York Independent System Operator (518) 356-6159 6/1/10 5/31/13 Full Yes ORCS YesSupervisor, Reliability 3890 Carman Road (518) 356-6119 FxCompliance and Assessment Schenectady, NY 12303 [email protected]

20 Matthew F. Goldberg ISO/RTO ISO New England, Inc. (413) 535-4029 2/9/12 2/8/15 Full PROCS Yes YesDirector, Reliability & One Sullivan Road (413) 535-4050 FxOperations Compliance Holyoke, MA 01040-2841 [email protected]

21 VACANT Merchant Electricity FullGenerator

22 Silvia Mitchell-Parada Merchant Electricity Florida Power & Light Co. (561) 694-4414 12/1/2010 11/30/2013 Full Yes SIS Yes YesDirector, NERC Reliability Standards Generator 700 Universe Blvd [email protected] Compliance Juno Beach, FL 33408

Yes23 Kevin Conway Small End-Use Intellibind (509) 937-2211 6/10/11 6/9/14 Full ORCS Yes

VP, Operations Electricity Customer 1312 N. Monroe Street (509) 750-5441 cellSpokane, WA 99201 [email protected]

24 Daniel Herring Transmission The Detroit Edison Company (313) 235-5365 2/9/12 2/8/15 FullManager, NERC Training Dependent Utility 2000 2nd Ave [email protected]

Detroit, MI 48226

25 Stuart Nelson State/Municipal Lower Colorado River Authority (512) 369-4526 6/1/10 5/31/13 Full Yes Yes PROCS Yes YesManager, Asset Development P.O. Box 220 (512) 369-4413 Fx Nominating

Austin, TX 78767 [email protected]















CCC Membership

Volunteer



Training

26 Shawn T. Abrams (Tom) State/Municipal South Carolina Public Service Authority (843) 761-8000 Ext.5200 7/1/10 6/30/13 Full Yes-SPP Yes Yes EROMS YesVice President of Planning 1 Riverwood Drive (843) 761-7038 Fxand Power Supply P.O. Box 2946101 [email protected]

Moncks Corner, SC 29461-6101

27 VACANT U.S. State Full

28 James Spearman U.S. State Public Service Commission of South Carolina (803) 896-5142 6/1/10 5/31/13 Full EROMS YesExecutive Assistant & Senior 101 Executive Center Drive (803) 896-5231 FxTechnical Advisor Columbia, SC 29210 [email protected]

29 Jim Stanton Small End-Use Quanta Technology 713-444-9998 4/1/11 5/31/13 Full SIS YesPrincipal Advisor Electricity Customer 1707 Brill Drive [email protected]

Friendswood, TX 77546

30 VACANT Large End-Use FullCustomer

31 VACANT Large End-Use FullCustomer

32 VACANT Canada Federal None

33 VACANT Canada Provincial None

34 Darrell Piatt U.S. Federal FERC 205-332-3792 NoneOER/DRS 888 1st St NE 205-914-1845Electric Engineer Washington, DC 20426 [email protected]

35 VACANT U.S. Federal None

Michael Moon Secretary/NERC North American Electric Reliability (404) 446-2560 NA NA NoneDirector Staff Coordinator Corporation (609) 452-9550 Compliance Operations 3353 Peachtree Road NE, Suite 600 [email protected]

Atlanta, GA 30326

Number of Voting MembersQuorum (2/3rds of Voting Members)Actions (2/3rds of Votes Present)Actions w/o a Meeting (2/3rds ofVotes of All Voting Members)

Patrick Brown Essential Power, LLC (732)623-8801 NA NA None NA SIS YesDirector of Compliance [email protected]

Virginia Cook Florida Power & Light Co. (561) 694-3179 NA NA None Yes Yes NA EROMS Yes YesManager, Reliability Standards 700 Universe Blvd

Juno Beach, FL 33408 [email protected]

Ken McIntyre Electric Reliability Council of Texas, Inc. (512) 248-3969 NA NA None Yes NA EROMS Yes YesManager Operation and Planning 2705 West Lake DriveStandards Compliance Taylor, TX 76574 [email protected]

Rebecca Moore-Darrah Midwest ISO (317) 249-5630 NA NA None NA EROMS YesPO Box 4202Carmel, IN 46082-4202 [email protected]













CCC Membership

Volunteer



Training

Tracy Sliman Tri-State G&T (303) 254-3939 NA NA None NA EROMS Yes1100 W. 116th Ave.Westminster, CO 80234 [email protected]

Matt Morais Electric Reliability Council of Texas, Inc. (617) 727-4732 x132 NA NA None NA ORCS YesAssistant General Counsel 70 Franklin Street, 7th Floor

Boston, MA 02110 [email protected]

Michael Gammon KCP&L (816) 654-1327 NA NA None PROCSSenior Operations Engineer P.O. Box 418679 (816) 719-9724 ©

Kansas City, MO 64141 [email protected]

Martyn Turner Lower Colorado River Authority (512) 482-6281 NA NA None PROCSTransmission Compliance Manager P.O. Box 220 (512) 567-1008

Austin, TX 78767 [email protected]

Michael Kuhl Duke Energy (513) 419-1502 NA NA None ORCSProgram Manager 424 Gest St. [email protected]

Mail Code: EF357Cincinnati, OH 45203

Tony Shiekhi Texas Reliability Entity (512)-583-4991 NA NA None ORCSManager, Registration and Certification 805 Las Cimas Suite 200 [email protected]

Austin, Texas 78746

Christina Bigelow MISO (317) 249-5132 NA NA NoneCompliance Counsel 720 City Center Drive [email protected]

Carmel, IN 46062







Compliance and Certification Committee (CCC) DRAFT Meeting Minutes March 14, 2012 | Noon – 5:00 p.m. EST March 15, 2012 | 8:00 a.m. – Noon EST NERC Atlanta Headquarters 3353 Peachtree Road NE North Tower, Suite 600 Atlanta, GA 404-446-2560 Day One Introductions and Chair’s Remarks Clay Smith called to order and duly noticed the meeting of the CCC March 14, 2012 at 12:40pm EST and welcomed those who were attending. Round table introductions were made. The agenda and list of attendees is attached (Exhibit A and Exhibit B). NERC Antitrust Compliance Guidelines and Public Announcement Ryan Stewart read through the NERC Antitrust Compliance Guidelines and the Public Announcement as required. Action Item Update Clay Smith spoke to the action items and that the CCC would best be efficient by updating the action items. Ryan Stewart will act as the owner of updating the action item list and sending out to the CCC for review and comment. Roster Update Ryan Stewart solicited to all CCC subcommittee chairs to provide updated information during their subcommittee meetings and send back to NERC. Ryan will combine all comments into the latest CCC Roster and send to the CCC prior to posting on the NERC Web site (Exhibit C). Review and approve CCC December 2011 Meeting Minutes Clay Smith asked the committee to quickly review the posted CCC December 2011 Meeting Minutes (Exhibit D) to see if there were any comments. Ted Hobson mentioned that an addition was needed under the EROMS subcommittee update to include that Mark Ringhausen presented on the CCC spot-check of the Standards Applicable to NERC and the results of the 2011 Stakeholder Survey, and that Bill Temple provided the presentation on the CCC spot-check of the CMEP. Upon these edits being made,

CCC DRAFT Meeting Minutes March 2012

2

there was a motion to approve the minutes, the motion was seconded, and then unanimously approved. Report of February 2012 Members Representative Committee (MRC) and Board of Trustees (BOT) Meeting Terry Bilke provided an update from the February 2012 MRC and BOT meeting for those areas that were important to the CCC (Exhibit E). Those areas were around the use of a third party to conduct the annual CCC survey, the Find, Fix, Track and Report (FFT) initiative, the acceptance of the CCC 2012 Work Plan, and an update to the Risk Management and Internal Compliance Subcommittee (RMICS) activity. Subcommittee Updates The subcommittee chairs, or their proxies, gave updates on the subcommittee meetings and current projects being worked on. ERO Monitoring Subcommittee (EROMS) Ted Hobson provided an update on the subcommittee business. Per the Board recommendation for the CCC to solicit the services of a third party for its 2012 stakeholder survey, two representatives from TalentQuest were present during much of the EROMS meeting. The third party will give more insight into the development and overall deployment of the survey. Robert Rentfrow from GSOC gave a presentation on analyzing the 2011 stakeholder survey results. The next EROMS conference call is scheduled for March 30th and will discuss preparing for submitted information for the next Board meeting. The EROMS is also working on the criteria for the self-certifications for 2011, and will look to send NERC the self-certification letters after the March 30th conference call. Standards Interface Subcommittee (SIS) Terry Bilke, acting as chair for Jim Stanton, provided an update on the subcommittee business. Terry spoke of the prioritization of Compliance Application Notices (CANs) initiative, and would like one member of the CCC to be project manager that would provide monthly updates to the CCC. Kevin Conway stated he would be willing to assume that role. There was some concern over the amount of work that one person would have, but Clay Smith reassured the group it was simply a point of contact with the CCC and the CAN team. Also, the Quality Review template for CANs was discussed. Mike Moon stated that NERC has never denied a request for an extension for a Quality Review for a CAN, so there should not be any concerns. Mike stated NERC is more than amenable to get industry insight on the issues. CAN-0016 High Level Review Clay Smith discussed the CAN-0016 high level review. The CAN went to the CEO and Clay discussed how the CAN was remanded. A question came up about how on the NERC Web site it states that the


3

auditors are still supposed to use the remanded CAN. NERC stated that once NERC staff remands the CAN, it is considered gone. Procedures Subcommittee (PROCS) Stuart Nelson, acting as chair for Matt Goldberg, provided an update on the subcommittee business. The PROCS discussed the stakeholder/trades comments to the Rules of Procedure (ROP). There was a question as to how the CCC PROCS could provide better support to future ROP changes prior to them going to the industry for comment. Organization Registration and Certification (ORCS) Patti Metro provided an update on the subcommittee business. Patti spoke about the ORCS discussion regarding the Multi-Regional Registered Entity (MRRE) program being reinstated. NERC will share any processes and procedures with the ORCS. At the present time NERC has received strong interest from six entities. Until NERC determines a better sense of the broader industry’s desire to participate in a program that would allow one Region to exercise all of the Compliance Monitoring activities in regard to an Entity that is registered in more than one Region, the program can be characterized as being in the ‘Information Gathering’ stage. Also, one member and one observer of the CCC joined the ORCS; Kevin Conway and Michael Kuhl, respectively. The ORCS has their next meeting in early April. Nominating Subcommittee Martin Huang provided an update on the subcommittee business. Martin provided the CCC with the new members recently approved by the Board and of members that were re-appointed. At this time, there are currently four voting member vacancies, as Darrell Piatt from FERC was approved by the CCC to represent the non-voting US Government sector. A vacancy announcement will be sent out shortly after the CCC meeting in late March. There are five members of the CCC whose terms are ending in 2012, and the Nominating Subcommittee will need feedback from each person on if they want to renew their membership. Chuck Manning has been approved for re-appointment to the CCC for another three-year term. The Nominating Committee will continue, and asked the group for any interested from another CCC member. New member Helen Nalley of Southern Company offered to join the Nominating Subcommittee, and the appointment was unanimously approved by the CCC. Also, Michael Kuhl was approved by the CCC to become an observer and be a member of the ORCS. SIS progress on development of a Quality Review model for CANs This topic on the agenda was discussed during the SIS update by Terry Bilke. Proposed Functional Model Changes Patti Metro gave an update on the Functional Model Working Group regarding demand response. Patti updated the group to say the next step is to wait and see what the approach is. The ORCS reviewed the topic and there is no real action for the CCC. There was a question asked to see if


4

Demand Response becomes a function, whether new standards would be developed. The answer from Patti was that it is possible, and the PC will discuss recommendation at their next meeting. Risk-Based Reliability Compliance Working Group (RBRCWG's) Update on Developing an Entity Impact Evaluation Template Bob Hoopes gave a presentation on the Entity Impact Evaluation template (Exhibit F). The next steps for the RBRCWG are to establish technical impact profile relationship with the NERC functions; establish operational metrics to be used to determine the operational impact profile; refine the enforcement history profile inputs and analysis; group functions to support evaluation of entities registered for multiple diverse functions; finalize the RBRCWG project and submit to the CCC for concurrence; and forward the entity impact evaluation template to NERC. While on the subject, Val Agnew discussed the entity assessment and the next steps. Currently, the RBRCWG has bi-weekly meeting calls and that ERO focus groups are being developed. Registered Entities and Regional Entities are providing comments. For the remainder of the year, by late 2nd quarter of early 3rd quarter, a post draft template will be made public for comments. The final template will be posted by the end of 2012. Details on Perception Survey with Regard the Extremely Negative Comments Ted Hobson spoke to this issue during the EROMS update. Day Two NERC Staff Update NERC Staff gave several presentations in the areas of Event Analysis (EA), Audit Assurance, and Compliance Enforcement. Update on Events Analysis Program Earl Shockley gave a presentation on the Reliability Risk Management Group and system event numbers and trends (Exhibit G). Earl went over events by category code, qualified events by quarter, system event case studies, and overall results from the Events Analysis field trial. Compliance Monitoring for COM-002 Mike Moon gave an update on compliance monitoring for COM-002. 2013 Business Plan and Budget Timeline Mike Moon discussed the 2013 Business Plan and Budget Preparation Schedule (Exhibit H). Risk Management and Internal Control Subcommittee (RMICS) Mike Moon gave an update on the RMICS.


5

Key Reliability Standard Spot Check Program (KRSSCP): EOP-005-1 Ryan Mauldin gave a presentation on the KRSCCP (Exhibit I). The Compliance and Certification Committee (CCC) as well as FERC staff were invited to participate as observers to the EOP-005-1 KRSSC. Ryan gave pertinent information on the KRSCCP logistics, the spot check scope, reporting, and a detailed review update. Audit Assurance Program Procedure Craig Struck gave a presentation on the Audit Assurance Program Procedure (Exhibit J). The procedure includes sections of the accountabilities, related documentation, the audit assurance schedule, CIP and O&P coordination and communication, NERC and RE coordination and communication, and audit assurance reports. Compliance Enforcement Initiative (CEI) Update Rebecca Michael gave an update on the CEI (Exhibit K). The update contained evaluation guidance and representative FFTs, data and trends, benefits, implementation and transition issues, six-month filing with FERC, next steps, and examples of FFTs. Latest Statistics and Trends Rebecca Michael gave the latest compliance enforcement statistics and trends (Exhibit L). Update on Rules of Procedure (ROP) Changes Rebecca Michael gave an update to the ROP Changes (Exhibit M). The proposed amendments were of Sections 300, 400, 500, 600, 800, 1000 and 1400. The proposed amendments to the Appendices were Appendix 2, 4B, 4C, 5A and 5b, with the deletion of Appendices 3C and 6. There was a request that NERC consider reaching out to the CCC in advance to posting changes to sections 400 and 500. Next Steps for Standards Driven Index (SDI) Bill Adams from Georgia Power, and the chair of the Performance Analysis Subcommittee (PAS) of joint Planning Committee (PC) and Operating Committee (OC), gave a presentation on the SDI (Exhibit N). The goal of the presentation was for CCC endorsement. There was a motion to endorse the presentation and the motion was unanimously approved to endorse the presentation. RSAW Development in Conjunction with Standards Development Laura Lee from the Standards Committee (SC) gave a presentation on the RSAW development in conjunction with the Standard Development Process (Exhibit O). Linda Campbell dialed in, while NERC Staff, Laura Hussey, was present for the presentation. There was a handout of an example PRC-005 RSAW that served as a guide for the presentation. Laura stated that the SC would like CCC endorsement on if the development is going in the right direction. There was a motion to endorse the presentation and the motion was unanimously approved to endorse the presentation.


6

Member Round Table Clay Smith provided an opportunity for a member round table. Ted Hobson, as the FRCC RE representative, brought up the issue of protections system maintenance timing for generators that are in extended storage or on long outages. Action Item Review Due to time, the action items will be updated concurrently with the agenda and sent to the CCC for review. Future Meetings & Schedules

• Hearing Officer Training May 23, 2012 - 11:00am-3:00pm, Atlanta NERC Offices

• June 13-14, 2012, San Diego, CA

• September 12-13, 2012, Atlanta, GA

• December 5-6, 2012, Phoenix, AZ (APS)

• March 2013, Atlanta or Member/RE Site

• June 2013, Chicago or Canada

• September 2013, Atlanta or Member/RE Site

• December 2013, Salt Lake City or Member/RE Site

• Upcoming forecasted training events Timeline for Next BOT Meeting The timeline for the next BOT meeting was discussed. Background Material is due to NERC Friday, April 6th in Microsoft Word. Presentations are due to NERC Monday, April 16th, while the Agenda Packets will be posted Wednesday, April 25th. Adjourn The meeting adjourned at 11:52am.

Report of May 2012 MRC and Board of Trustees Meeting These are rough notes taken by Terry Bilke. There may be inaccuracies. Items most applicable to the CCC are highlighted. The agenda items can be found at: http://www.nerc.com/filez/bot_agenda_items.html

Board Finance and Audit Committee (FAC) Meeting The external audit report went well and no points of issue.

The FAC will use a questionnaire to track the progress of the external auditor in the future.

NERC running about 11% under budget.

The Risk Management and Internal Control Subcommittee (RMICS) mandate (charter) will be presented to the BOT for approval.

Board Technology and Standards Oversight Committee Meeting

Need for Relief from Interpretation Policy* – BAL-002 (NWPP Interpretation) — Herb Schrayshuen provided a brief discussion on why an exception to the Board’s policy on

interpretations was needed (NERC staff thought that compliance information in the standard could not be used to make an interpretation).

The underlying issue is whether the Disturbance Control Standard intended sanctions for failure to recover ACE for events > most severe single contingency. The compliance information section of the standard implies no, but staff thought the Board Policy did not allow looking at anything but requirements when making an interpretation.

The committee didn’t come up with a resolution, but the sense was that the interpretation could be done without getting a waiver from the BOT.

Board Compliance Committee Meeting Compliance Enforcement Initiative (CEI)* Ken Lotterhos Reviewed FERC Order

o NERC is working on their first 6 month report (due May 14). There is another report at 1 year (March 2016).

o NERC will be seeking comments on the improvements on reliability and compliance programs.

o 61% of FFTs are self reports, 67% of spreadsheet NOPs are self-reports. o Reporting of violations are up 65 per month. o Processing time is down from 14 months to about 4 months. o Only minimal risk violations are eligible for FFT, ongoing violations are not. o FFTs publicly identified as possible violations. o Violations are final 60 days on filing if no review. o NERC received guidance on risk assessment.

Just because there is no impact, does not mean it’s eligible for FFT. Decision is based on facts. FERC will do an annually random sampling of FFTs (not to reopen the

actions, but to see if the case was properly handled). Paragraph 81 of the FERC Order invited the opportunity on means to

remove requirements that don’t contribute to reliability.

http://www.nerc.com/filez/bot_agenda_items.html

Ken L expects the regional variation to decline over time.

The outliers (many self reports, no cases of impact) are possible candidates for

retirement.

There was an extended discussion on taking FFT to the next steps. The themes most often mentioned were:

o Giving authority to compliance monitoring (auditors). o Consistency among regions.

Risk-Based Compliance Monitoring and Entity Assessments ― Information-Mike Moon Greater emphasis on annual plan and Actively Monitored List.

Looking to focus on the big issues.

Working on a template for assessing risk of the Registered Entity. o CCC’s effort on a high level assessment. o Focus groups working on details for specific functions.

Wanting to look at controls to assess the entity’s risk. 2011 Annual Compliance Monitoring Enforcement Program Report ― Information

Industry self-identified 67 percent of PVs in 2011

Events analysis reports contributing to reliability and identifying material PVs.

CIP audits are burdensome, particularly TFEs. NERC looking to address this. CIP-005 Compliance Analysis Report ― Information This is one of the most violated standards, most self-reported.

Critical cyber assets determine the Electronic Security Perimeter (ESP) o Common error ― Draw the ESP and then identify critical cyber assets o Remedy ― Identify cyber assets, then draw the ESP

Non-routable data crossing ESP boundary requires an electronic access point somewhere o Common error ― Presume that an electronic access point is only required for

routable networks. o Remedy ― Consider modem or protocol converter devices as likely candidates for

the electronic access point

4. Regional Entity Items - Reliability Standards Audit Worksheet (RSAW) Development ― Information-Linda Campbell The Standards Committee has been working with NERC compliance staff on letting drafting

teams develop RSAWs.

The RSAW would be posted when the standard is balloted.

A question was raised as to what is be done if the RSAW is modified later (who approves?).

MRC Meeting

Remarks from Gerry Cauley, NERC President and CEO Gerry made brief comments about the FERC audit report.

He highlighted the 2011 Southwest event report. o Good report on the part of NERC and FERC.

o Given the similarities between this event and 2003, what should be done better so these things don’t recur?

He welcomed the SPIG report.

He noted the FERC Order on FFT was an important strategic step on where NERC needs to be with regard to compliance.

Gerry provided comments on the Business Plan and Budget.

Focus is developing effective standards and enforcement.

He wants to follow through following events with standards and other tools.

Gerry spoke favorably about the industry participation and cooperating in the events analysis process. Would like to work further into cause coding so we can focus on true risks based on hard data.

Wants to start tracking progress on alert recommendations.

Wants more work on human factors and human performance. We’re in a learning mode right now.

NERC will be making substantial investment in technology. 2013 NERC Business Plan and Budget – Information

NERC’s budget is now down to the department level.

Consulting project budgets are now included.

There will be a detailed capital project budget.

NERC meeting expenses will be presented.

Budget up $933K (1.8% over 2012), which includes budget reductions for offloading IDC. Additional Discussion of MRC Informational Session Items, May 1* – Discussion The MRC is providing input on filling NERC BOT vacancies.

The MRC executives and 3 others will work with Jan Schori to fill BOT vacancies.

c. Risk-Based Compliance Monitoring and Entity Assessments- Mike Moon He hopes to have a scope document out in June.

He believes the assessments are a tool for the registered entity and its Region.

a. Status of Regional Standards Development Programs* Tim Gallagher There are 7 regional standards in the pipeline.

There are no new Regional standards envisioned.

Tim noted that the fill in the blank standards were the drivers for most of the regional standards and that NERC should look for solutions to the fill in the blank issue.

b. Status of Underfrequency Load Shedding (UFLS) Activities* FERC just approved the filed standard with directives for changes.

The Planning Coordinator is the defined primary responsible entity. Not all regions are the same with regard to number of PCs.

c. Status of Operating Communications Protocols* Herb outlined the differing efforts under way.

NERC has held the COM-002 interpretation.

The NERC OC has a guideline document.

There is a revised RSAW to go along with the interpretation.

COM-003 was posted for ballot.

9. Recommendations from the 2011 Southwest Outage* – Information

Dave Nevius gave the overview of the joint NERC-FERC report. The report calls for improved planning

7M customers were outaged.

A single contingency (IROL) triggered the outage, but it wasn’t correctly modeled.

Demand was high at the time of the event even though it was a shoulder period of the year.

The report points to: o Inaccurate next day studies.

o Lack of data sharing for situational awareness of neighboring areas. o Lack of studying and monitoring facilities below 100kV. o Failure to monitor IROLs o A Remedial Action Scheme exacerbated the problem and should be studied for

proper application. o “Operator situational awareness”

This was the most complicated event since 2003.

Dave Nevius noted the importance of PMUs and disturbance recorders in reconstructing the event.

Operators need phase angle difference information to be able to re-energize transmission lines following outages.

The news release is at:

http://www.nerc.com/fileUploads/File/News/PR_AZOutage01MAY12.pdf The report is at: http://www.nerc.com/fileUploads/File/News/AZOutage_Report_01MAY12.pdf 10. Culture of Reliability Excellence* – Tom Bowe, PJM – Discussion

Tom related he experience at PJM and things he learned in the military that help PJM, its compliance and reliability.

12. Recommendations of the Standards Process Input Group (SPIG)* –

Recommendations that came out of the effort:

Retain ANSI accreditation.

Provide a steering committee that will triage suggested reliability issues to make recommendations on disposition (priority, something other than a standard if a standard isn’t warranted).

Interface more with regulatory authorities.

Standards products issues (results based, cost effective, align with RSAWs, retire standards not needed).

Standards development process and resource issues.

NERC Board of Trustees (BOT) Meeting

Introductions and Chair’s Remarks Commissioner La Fleur

She acknowledged NERC’s audit. She’s posted comments on it.

She thought the MRC meeting went well, particularly with the review of the SW outage as well as the SPIG report.

o Quality of standards is important. o Timeliness of the standards is important as well.

She’s happy with FFT as a mechanism to prioritize our compliance efforts, but wants to be sure that mitigation occurs so that this fosters future improvements in the compliance process.

She mentioned the solar storm conference. Still needs to be resolution of the science. She was encouraged by commonality of some key items (training, manufacturing standards).

Commissioner Norris

He was pleased with the work of the SPIG and would like to see if unnecessary steps in the standards process can be streamlined.

He was pleased with the presentation on the SW outage as it showed teamwork between NERC and FERC.

He mentioned the NERC audit and that it was a staff audit. He expressed his support for the leadership of NERC.

Election/Membership Appointments and Changes* . Compliance and Certification Committee Terry Bilke and Patti Metro were appointed chair and vice chair respectively.

http://www.nerc.com/fileUploads/File/News/PR_AZOutage01MAY12.pdf

http://www.nerc.com/fileUploads/File/News/AZOutage_Report_01MAY12.pdf

New membership appointments for three-year terms: o Mr. David Roth of Vandolah Power Company representing the Merchant Electricity

Generator Sector o Mr. Darrell Piatt of FERC representing US Federal Government (non-voting)

Membership re-appointments for three-year terms effective on the date of NERC Board of Trustees approval:

o Mr. Clay Smith of Georgia Systems Operations Corporation representing the Cooperative Sector

o Mr. Terry Bilke of Midwest ISO, Inc. representing RE-MRO o Mr. Chuck Manning of Electric Reliability Council of Texas, Inc. representing RE-TRE o Mr. Gregory Pierce of Entergy Corporation representing RE-SERC o Mr. Howard Rulf of WE Energies representing the Investor Owned Utility Sector

President’s Report Gerry praised the SW outage report. He wants this to provide a holistic set of

recommendations. If there are commonalities with other outages, are we auditing and checking for the underlying problems that lead to events?.

NERC is reaching three important milestones: o The SPIG report will lead better accountability, timeliness and quality in the

standards o The “State of Reliability Report” is a culmination of NERC’s data collection tools

and efforts, combined with events analysis. The goal is to identify the trends and key issues. The report is the beginning.

o The two Cyber related reports on the Board’s agenda 9. MRC Standards Process Input Group Recommendations* — Discussion and Accepted There were 5 primary recommendations; eliminating standards process steps not required by ANSI, a triage process/group for reliability need and cost effectiveness, consider retiring some standards, more interaction with regulators, better more focused standards aligned with RSAWs, better project management and drafting team configuration. The Board took the following action:

Accepted the report.

Ask the MRC to draft a scope document for the steering committee.

Direct the Standards Committee to implement the items under their purview.

Staff would address the regulatory recommendations.

2012 State of Reliability Report* — Reviewed and Accepted

Among the 18 metrics that address the characteristics of an adequate level of reliability (ALR), trends indicate the bulk power system has been performing consistently well. There are no significant upward or downward trends from 2008 to 2011. Based on the data and its analysis, the following six key findings were identified:

1. Bulk power system reliability remains adequate. 2. Frequency response performance appears flat with no deterioration. 3. Protection system misoperations are a significant reliability issue. 4. Equipment failure appears to be a significant reliability issue. 5. Wind generation and demand response growth call for performance assessment. 6. More data, time and research is needed to produce deeper understanding of root causes for significant reliability issues and develop effective action steps.

The Board accepted the report and approved its release. Electricity Sector Information Sharing and Analysis Center (ES-ISAC) Update: Enhancing Capability* — Information

The ES-ISAC is signing up authorized members for a portal that will share sensitive information and provide tools. 14. Legislative and External Affairs Update* — Information - Janet Sena NERC is regularly contacted for opinions from regulatory bodies and the media.

Cyber Security is the primary discussion item in Congress related to the grid.

The Senate is considering a bill to give DHS authority over cyber security.

Media inquiries on SMDs, the Southwest outage, Cyber security, EPA regulations. Corporate Governance and Human Resources Report Approved Amendments to Savings and Investment Plan

Risk Management and Internal Controls Subcommittee Mandate was approved

NERC CCC STAKEHOLDER SURVEY 6.8.2012

2 | Presentation Title © TalentQuest

RATING SCALE

The 2011 rating scale ranged from “Extremely Negative” to “Extremely Positive”

Proposed 2012 Rating Scale: − Strongly Disagree

− Disagree

− Neither Disagree nor Agree

− Agree

− Strongly Agree

− Not Applicable


DEMOGRAPHICS

Recommended retention of 2011 demographics:

− Region

− Function

− Audit Cycle


SURVEY IMPLEMENTATION

Participants: − Primary Compliance Contacts

Advance Communication: − Memo sent to participants: outlining outputs/formal recommendations of 2011 survey,

setting expectations for upcoming electronic invitation to complete 2012 survey

Administration: − Electronically-delivered to all respondents

− PDF version available for any who would like to compile internal feedback prior to completing their survey

− Reminders sent to respondents who have not completed at halfway point and prior to deadline

− Status updates provided at halfway point and in TBD timeframe prior to deadline


SURVEY CONTENT

2012 Proposed Survey covers 6 topic areas and 25 rated items

− Open-ended questions by Topic Area

− Two additional open-ended questions

2012 Survey Topic Areas:

− Compliance Monitoring

− Enforcement Actions

− Organization Registration

− Organization Certification

− Compliance & Reliability Impact

− Other


2012 PROPOSED SURVEY ITEMS

Compliance Monitoring 1. Our most recent audit process (including pre- and post- audit activities) was conducted

in a timely manner.

2. The audit team conducts themselves in a professional and credible manner.

3. The audit team is prepared and organized to conduct the audit process.

4. The audit team adheres to established rules and processes.

5. The spot check process is well-defined, organized and timely.

6. The self-reporting process is well-defined, organized and timely.

7. The self-certification process is well-defined, organized and timely.

Open-Ended: Please provide any recommendations regarding Compliance Monitoring.


2012 PROPOSED SURVEY ITEMS, CON’T

Enforcement Actions 8. The audit report identifies clear, definitive, and actionable items to address.

9. All communication of violations clearly and specifically describe the manner in which a requirement was violated.

10. All communication of violations clearly and specifically describe the risk of the PV both actual and potential.

11. The mitigation plan submission and approval process is efficient and effective.

12. The settlement process is transparent, consistently applied, and clearly communicated.

13. The penalty process and penalties are transparent, consistently applied, and clearly communicated.

Open-Ended: Please provide any recommendations regarding Enforcement Actions.



Organization Registration 14. The functional model is clear and minimizes overlaps and gaps.

15. The Organization Registration process minimizes overlaps and gaps.

16. The Organization Registration process is well-defined and efficient.

17. The rules for assigning registered functions to entities are clear and accurately applied.

18. The Joint Registration Organization and Coordinated Functional Registration (JRO/CFR) process is clear and consistently implemented.

19. Inquiries about the registration process are responded to in a timely and effective manner.

20. There is a timely and effective response during the Registry Appeals Process.

Open-Ended: Please provide any recommendations regarding Organization Registration.



Organization Certification 21. Organization Certification rules and procedures are clear and consistent.

Open-Ended: Please provide any recommendations regarding Organization Certification.

Compliance & Reliability Impact 22. NERC Compliance programs and corresponding industry efforts have enhanced

reliability of the bulk power system.

23. The Standards Driven Index (SDI) which includes the Compliance Index (CI) coupled with the Adequate Level of Reliability (ALR) demonstrates enhanced reliability for the industry.

24. The reliability benefits experienced are worth the degree of compliance effort (time and resources) our entity has expended.

Open-Ended: Please provide any recommendations regarding Compliance & Reliability Impact.



Other 25. The Compliance Monitoring and Enforcement processes are applied consistently across

NERC and the regions.

Open-Ended: If applicable, please provide specific examples of inconsistencies across regions and/or NERC.

Open-Ended: Please provide any recommendations regarding the ERO CMEP.

Open-Ended: Please provide any recommendations regarding the Regional Entities.


SURVEY ELEMENTS - TIMELINE

DATE ELEMENT

6/13 – 6/14 CCC Survey Content Review & Approval

6/8 – 6/29 Gathering of Participant Data & Survey Configuration

6/27 – 7/9 Advance Communication to Participants

7/11 – 8/1 Survey Open

8/2 – 8/30 Data Analysis

9/5 – 9/6 EROMS Review & Presentation, CCC Meeting

9/11 – 11/15 Finalization of Report & Recommendations

12/5 – 12/6 CCC Results Review & Presentation, CCC Meeting

Post Dec CCC Mtg Recommendations to NERC BoT

CCC Nominating Subcommittee Summary

Jun 13, 2012

2 RELIABILITY | ACCOUNTABILITY

New CCC Officers

• Agenda Item 2b, Board of Trustees Meeting, May 9, 2012

• Approved the NERC Compliance and Certification Committee (CCC) Nominating Subcommittee request to the NERC Board of Trustees of the following Committee Officer appointments, membership appointments and re-appointments:

• CCC Officers for a two-year term starting July 1, 2012

• For the position of CCC Chair: Mr. Terry Bilke of Midwest ISO, Inc.

• For the position of CCC Vice-Chair: Ms. Patricia Metro of National Rural Electric Cooperative Association


New Members & Re-appointments

• New membership appointments for three-year terms effective on the date of NERC Board of Trustees approval:

Mr. David Roth of Vandolah Power Company representing the Merchant Electricity Generator Sector

Mr. Darrell Piatt of FERC representing US Federal Government (non-voting)

• Membership re-appointments for three-year terms effective on the date of NERC Board of Trustees approval:

Mr. Clay Smith of Georgia Systems Operations Corporation representing the Cooperative Sector

Mr. Terry Bilke of Midwest ISO, Inc. representing RE-MRO

Mr. Chuck Manning of Electric Reliability Council of Texas, Inc. representing RE-TRE

Mr. Gregory Pierce of Entergy Corporation representing RE-SERC

Mr. Howard Rulf of WE Energies representing the Investor Owned Utility Sector


Current Membership Vacancies

Voting Positions (3):

• Large End-use Electricity Customer Sector (two positions)

• Government Sector – US State (one position)

Non-Voting Positions (3):

• Government Sector – US Federal (one position)

• Government Sector – Canadian Provincial (one position)

• Government Sector – Canadian Federal (one position)


Members with Terms Ending in 2012

• None

1

VRF-VSL CCC Agenda Item

Background

The Compliance and Certification Committee’s (CCC) Standards Interface Subcommittee (SIS)

and the Standard Committee’s (SC) Process Subcommittee worked on two proposals for

approximately four years:

More granular and objective assignment of Violation Risk Factors (VRF).

A pro forma set of Violation Severity Levels.

Feedback from the CCC and SC had been favorable over the period, but the projects underwent

continual tweaking each time the committees reviewed the recommendations.

At the December, 2011 joint SC-CCC meeting, the committees recommended getting input from

Regional staff and bring the information back to committees for final approval. If consensus

could not be reached on the VSL proposal, it was suggested NERC should retire VSLs altogether.

VSL Proposal

The proposal was to simplify the development of Violation Severity Levels by developing and

using a common set of pro forma VSL s by drafting teams. The common VSLs were intended to

reduce administrative overhead and provide useful compliance-related metrics. While VSLs

were intended to set a starting point for the sanctions process, analysis of the data shows no

correlation between VSLs and the assigned penalties.

The pro forma approach assigned a lesser VSL for no-impact self-reported violations as opposed

to those violations that caused system problems. Regional and NERC staff did not support the

concept for two primary reasons:

1. Giving lesser sanctions for self-reported no-impact violations rewards entities for “being

lucky.”

2. Having the VSL as high as possible encourages quick settlements.

Recommendation: Defer to the Standards Committee on whether to continue developing VSLs

or retire them.

See the agenda package for the original VSL proposal.

VRF Proposal

This proposal was to add two additional tiers of VRFs. The team that supported this effort also developed a tool to walk drafting teams though a common set of questions to more objectively set VRFs. The concept and tool were presented to the industry for comment and received overwhelming support.

http://www.nerc.com/docs/standards/sc/SC-CCC_joint_draft_meeting_minutes.pdf

2

More granular VRFs would support the concept of risk-based enforcement and give better signals to Registered Entities on which requirements are more impactful to reliability.

The NERC Compliance and Certification Committee (CCC) approved posting proposed changes to the NERC Rules of Procedure in 2010 to accommodate the additional VRF levels as well as a revised matrix to address binary requirements. NERC staff requested additional work before moving this forward (creation of a justification document and Regional staff input).

The outreach to Regional staff suggested at the December 2011 joint SC-CCC meeting was intended to be the final step before posting of the proposed changes to the RoP for comment.

Regional staff approved the VRF proposal and provided a better mapping and conversion of the existing 3-tier VRFs to 5-tiers.

The NERC Bylaws note that a standing committee may submit proposed changes to the Rules of

Procedure. The CCC requests that the proposed changes be posted.

See the agenda package for the final VRF proposal, as amended by NERC and Regional staff.

1 February 16, 2012

Pro Forma Violation Severity Levels Proposal

Table of Contents

Executive Summary ............................................................................................ 2

Background ......................................................................................................... 2

Problems Developing the Present VSLs ............................................................... 3

Effort ................................................................................................................................................ 3

Measurability and Scalability ........................................................................................................... 4

Pro Forma Proposal ............................................................................................ 5

Pro Forma VSL Option 1 .................................................................... Error! Bookmark not defined.

Pro Forma VSL Option 2 .................................................................... Error! Bookmark not defined.

Consistent with FERC Guidelines ......................................................................... 7

Guideline 1: “Not Lowering the Bar” .................................................................................. 7

Guideline 2: “Uniformity and Consistency” ........................................................................ 7

Guideline 3: VSL not to expand the requirement ............................................................... 7

Guideline 4: Single violation basis ...................................................................................... 7

Pro Forma Advantages ........................................................................................ 8

Enables a Lessons-Learned Knowledge Base and Improved Metrics .............................................. 8

Further Enables a Risk Based Approach to Compliance Monitoring and Enforcement .................. 8

Advantages Summary ...................................................................................................................... 8

Implementation Effort ........................................................................................ 9

Conclusion .......................................................................................................... 9

Appendix (Survey Results) ................................................................................ 10

UNFINISHED

DRAFT. THE VSL

PROPOSAL WAS

NOT SUPPORTED

BY STAFF

Pro Forma VSL Proposal

2 February 16, 2012

Executive Summary

The NERC Standards Committee’s Process Subcommittee developed this proposal to simplify the

development of Violation Severity Levels (VSLs). The proposal recommends the use of pro forma VSL s

by drafting teams for new and revised Reliability Standards.

The primary use of VSLs to date is as starting point for sanctions discussions following an alleged

violation of a Reliability Standard. VSLs are intended to be a post-violation measurement of the degree

(“Lower,” “Moderate,” “High,” or “Severe”) to which a requirement was violated.

It takes significantly more effort to generate VSLs than the parent requirement the VSL supports. In

practice, VSLs seldom mirror actual violations as it is nearly impossible to predict the various forms a

violation can take. This means the present approach contributes marginal value for the effort involved.

The proposed pro forma VSLs would not only reduce administrative overhead, they would cut standard

development time and enable other benefits.

No change is needed to NERC’s Rules of Procedure to enact this change. As VSLs are defined in guidance

documents under the purview of the NERC Standards Committee (SC), the SC could enact this change

with the Industry’s support.

Both the SC and the Compliance and Certification Committee (CCC) have approved the pro forma

approach in concept. This proposal is intended to explain the concepts such that pro forma VSLs will be

accepted and approved by the Industry.

This proposal does not preclude a drafting team from creating traditional VSLs in cases where they

believe the team could create a superior set.

Finally, this proposal also recommends an assessment of the effectiveness and value of the pro forma

VSLs after two year’s experience.

Background

Given the time available, NERC and the Industry did a good job establishing the ERO’s Rules of

Procedure and the Version 0 and subsequent standards. Now that the ERO processes are stabilized, it is

useful to look for improvement opportunities.

The NERC Standards Committee’s Process Subcommittee is proposing the use of a pro forma set of

Violation Severity Levels (VSL) intended to be applicable to any requirement in the Reliability Standards.

This document outlines the issues with current VSLs and the benefits of a rethought approach.

To date, the primary use of a VSL is as starting point for sanctions discussions following an alleged

violation of a Reliability Standard. VSLs are intended to be a post-violation measurement of the degree

(“Lower,” “Moderate,” “High,” or “Severe”) to which a requirement was violated.1 NERC or the Regional

Entity determines an initial value range for proposed sanction by considering both the Violation Risk

1 June 19, 2008 Order, 123 FERC ¶ 61,284 at P 3.


3 February 16, 2012

Factor (VRF) of the requirement and the Violation Severity Level (VSL) assessed for the violation. This is

done using the table provided in Appendix A (Figure 1) in the NERC Sanction Guidelines, Appendix 4B2.

Figure 1: Base Penalty Amount Table

If Violation Risk Factors (VRF)s and VSLs were perfectly assigned, the Sanctions Matrix above would

yield rational results for alleged violations, and the Industry could focus on those things that truly impact

reliability. In practice, the present VRF/VSL combination for an alleged violation seldom corresponds to

what one would expect. A related challenge is that many of the requirements in the NERC Standards are

binary (i.e., yes/no). In general, NERC has used the Severe VSL for binary requirements3. While this

simplifies the standards development process, it causes problems in compliance implementation.

Problems Developing the Present VSLs

Effort

The focus of a Reliability Standard requirement is to achieve a specific reliability goal. Developing a set

of requirements to achieve the goal is a difficult and time-intensive task, involving multiple weekly

meetings and other interactions. Requirements must be specific and measurable, yet expansive enough

to ensure implementation across various Functional Entities, Regions and the entire continent. It is even

more difficult to draft high quality VSLs than it is to draft the requirements that drive them. VSL

development involves:

Creating 4 VSLs for each requirement, which encompass all possible types of violations.

The draft VSLs must go through a quality review and be revised based on the reviewer’s

comments on either the VSL or the parent requirement.

2 NERC Rules of Procedure, Appendix 4B,

(http://www.nerc.com/files/Appendix4B_Sanction_Guidelines_20110101.pdf)

3 NERC Drafting Team Guidelines

http://www.nerc.com/files/Appendix4B_Sanction_Guidelines_20110101.pdf

http://www.nerc.com/files/NERC_Drafting_Team_Guidelines_Endorsed_by_SC_April2009.pdf


4 February 16, 2012

The VSLs are posted for industry review and revised based on comments to either the VSL or

changes to the parent requirement.4

NERC Standards staff conducts straw-polls of VSLs to determine acceptance.

NERC Compliance staff evaluates VSL enforceability.

NERC Legal staff prepares the review and filing.

FERC staff reviews filed VSLs.

NERC revises and re-files any VSLs returned by FERC.

In general, there is on the order of 4 times the effort creating VSLs than the parent requirements the

VSLs support.

Measurability and Scalability

Many things in the standards, particularly those created during Version 0, are not directly measurable.

This creates a significant challenge for Reliability Standards Drafting Teams (RSDT) to create four unique

VSLs for each and every requirement.

Many requirements have multiple parts, most typically in the form of sub-requirements or bullets.

Drafting traditional VSLs to address the failure to meet different combinations of sub-elements is not a

simple task.

A related challenge is that many requirements in the NERC Standards are binary (i.e., yes/no). NERC VSL

Guidelines5 require setting the VSL to Severe for binary requirements6. While this is the simplest VSL to

determine in the standards development process, it causes problems in compliance implementation and

is not entirely consistent with FERC guidance on VSLs. With all binary requirements falling on the right

side of the sanctions matrix, Regional staff is in a difficult position during the compliance enforcement

process when they must unwind the maximum default penalties associated with Severe VSLs for

infractions with minimal impact on the BES.

A common problem with traditional VSLs relates to scalability based on entity size; for example, a fixed

% of bad observations when trying to evaluate the maintenance practices of a single generator vs. a

large Transmission Operator may not yield rational results. Similarly, what is the impact on reliability if a

large Balancing Authority that processes tens of thousands of transactions annually misses a single

interchange schedule?

4 NERC Standards Development Process Manual, September 3, 2010,

(http://www.nerc.com/files/Appendix_3A_Standard_Processes_Manual_20100903%20_2_.pdf)

5 NERC Drafting Team Guidelines, Revised April, 2009, Page 48, Guideline 2,

(http://www.nerc.com/files/NERC_Drafting_Team_Guidelines_Endorsed_by_SC_April2009.pdf)

6 NERC Violation Severity Level Guideline, (http://www.nerc.com/files/VSL_Guidelines_20090817.pdf)



http://www.nerc.com/files/VSL_Guidelines_20090817.pdf


5 February 16, 2012

Pro Forma Proposal

The Standards Committee proposes the use of a common set of “pro forma” VSLs for requirements in

Reliability Standards. The pro forma VSLs will speed standard development and still provide flexibility to

Regional Entities in the enforcement process. Beyond simplifying development of VSLs, the pro forma

approach could offer additional benefits.

Two approaches to pro forma VSLs are presented below. Results of a survey on the two approaches are

found in the Appendix.

Note: This proposal does not preclude a drafting team from creating traditional VSLs in cases where they

believe the team could create a superior set.

VSL Assignment by Violation Risk Factor

At the December 2011 joint meeting of the Standards Committee (SC) and Compliance and Certification

Committee (CCC) the committees directed outreach to Regional Entity (RE), NERC and FERC staff to get

their input the pro forma approach to VSLs. The primary recommendation that came from this outreach

was to tailor the crafting of VSLs based on the Violation Risk Factor of the requirement. In short, the

most time and effort should be expended crafting VSLs for High Risk requirements. On the other hand,

since Low Risk requirements are not expected to cause problems, less effort is justified.

Lower and Medium VRFs

Initially some RE staff felt that no VSLs needed to be assigned to Lower VRFs as it was likely that

violations of Lower VRFs would follow the “Find, Fix, Track” path to resolution. Further discussion on

this option led to the conclusion that drafting teams might bias their VRF assignment if the task to assign

VSLs were eliminated.

The expanded team analyzed spreadsheet NOP data to determine the correlation of VSLs to assessed

sanctions. A close linkage would imply the present approach to assigning VSLs is working as designed.

The “r value” of the correlation (size of the sanction vs. the VSL) was 0.035 with a P value = 0.800. An r

value close to -1 or +1 implies a strong relationship, while an r value close to zero implies little or no

observed correlation between the variables. A P value on the order of 0.05 to 0.1 is generally accepted

as reasonable confidence that there is a relationship between the two variables.

Figure 1 below is a scatter plot of the spreadsheet NOPs for the two months. The blue line is the

regression trend between the four VSLs. There is no discernible difference in the assigned VSL and the

associated sanction.


6 February 16, 2012

Figure 1: December 2011-January 2012 Spreadsheet NOP Violations vs. VSL

If there were a close relationship between VSLs and sanctions, it implies there is value i to bpThe vast

majority of Lower and Medium VSLs are processed either through spreadsheet NOPs or FFT.

Lower Moderate High Severe

There was no

discernible impact on

reliability. AND

The Violation was self-

reported

There was no

discernible impact on

reliability. AND

The Violation was

found during a

compliance activity

(audit, spot check, CVI).

The Violation was a

secondary contributor

to a System Event.

The Violation was a

direct contributor to a

System Event.

Figure 3: Pro Forma Violation Severity Levels (Option 2)

http://www.nerc.com/files/Phase2-Appendix-B.doc

http://www.nerc.com/files/Phase2-Appendix-B.doc


7 February 16, 2012

Consistent with FERC Guidelines

In its June 19, 2008 Order on Violation Severity Levels7, FERC indicated it would use four guidelines for

determining whether to approve VSLs. This section outlines how the pro forma approach is consistent

with - FERC’s guidance on VSLs.

Guideline 1: “Not Lowering the Bar”

Guideline 1 (paraphrased): Violation Severity Level Assignments Should Not Have the

Unintended Consequence of Lowering the Current Level of Compliance (Compare the

VSLs to any prior Levels of Non-compliance and avoid significant changes that may

encourage a lower level of compliance than was required when Levels of Non-

compliance were used.)

The pro forma solution will eliminate the need to determine all the permutations of non-compliance and

are generally consistent with the assessments done by NERC and Regional enforcement staff during the

enforcement process. Given the fact that many of the still-existing Levels of Non-Compliance are blank,

the pro forma VSLs provide a rational assessment of the magnitude of the violation.

Guideline 2: “Uniformity and Consistency”

Guideline 2 (paraphrased): Violation Severity Level Assignments Should Ensure

Uniformity and Consistency in the Determination of Penalties:

1. As a general rule gradated VSLs are preferable to binary VSLs

2. Ambiguity in the Violation Severity Level assignments should be reduced to the extent that it can be

Approximately 1/3 of all present VSLs are binary. Binary VSLs are eliminated with the pro forma

approach and since the same set of criteria is applied to all standards, consistency is achieved by

definition.

Guideline 3: VSL not to expand the requirement

Guideline 3 (paraphrased): Violation Severity Level Assignment Should Be Consistent

with the Corresponding Requirement (VSLs should not expand on what is required in the

requirement.)

The pro forma VSL proposal does not use any language specific to a requirement; therefore, will

not expand on any requirement.

Guideline 4: Single violation basis

Guideline 4 (paraphrased): Violation Severity Level Assignment Should Be Based on A

Single Violation, Not on A Cumulative Number of Violations (. . . unless otherwise stated

7 June 19, 2008 Order, 123 FERC ¶ 61,284

http://www.nerc.com/files/VSLOrder-06192008.pdf


8 February 16, 2012

in the requirement, each instance of non-compliance with a requirement is a separate

violation. Section 4 of the Sanction Guidelines states that assessing penalties on a per

violation per day basis is the “default” for penalty calculations.)

The pro forma proposal language is independent of the number of violations and only considers

a single violation of a given requirement.

Pro Forma Advantages

Most of the advantages with the pro forma approach to VSLs deal with a significant reduction in

administrative effort in creating and approving standards. Additional possible benefits are described in

more detail below.

Enables a Lessons-Learned Knowledge Base and Improved Metrics

If NERC were to publish a table or database of assessed violations by VSL for each requirement, it would

provide a set of case files to foster learning within the Industry. In other words, events could be linked

to particular requirements in the standards. Registered Entities could get early warnings of problems

they could experience if they don’t implement the standards correctly. The knowledge base would

eventually serve as a root-cause tool that would help identify primary and secondary contributors to

system events.

Further Enables a Risk Based Approach to Compliance Monitoring and Enforcement

NERC is pursuing a risk-based approach to compliance enforcement. Under this approach, NERC has

proposed different paths a violation could follow:

1. Full Notice of Penalty (NOP) is used for violations that pose a serious or substantial risk to the

bulk power system (BPS).

2. Abbreviated NOPs require less paperwork and are used when there are one or more violations

that pose a moderate risk to the BPS.

3. Administrative Citation, which is intended to allow an expedited handling administrative and

low/no impact violations.

4. Find, Fix, Track are self-reported, quickly-mitigated low/no impact violations.

The pro forma VSLs generally align with the different paths above and could facilitate a front end triage

of alleged violations and provide clarity on the disposition process appropriate for the situation.

Advantages Summary

Significantly reduces workload for Standard Drafting Teams, the Industry and FERC, with regard to

drafting, reviewing, and approving VSLs.

Shortens Reliability Standard development time.

Frees RSDTs and Industry resources to concentrate on developing requirements that support

reliability and not the ability to have a perfect VSL.


9 February 16, 2012

There is no need to handle binary (yes/no) requirements differently than scalable requirements.

Does not require a change to the NERC Rules of Procedure.

Reduces the likelihood of negative ballots on a standard due to problematic VSLs connected with

the standard being balloted.

Provides a clear approach to address FERC’s desire to ensure uniformity and consistency among all

Reliability Standards in the determination of penalties.

Addresses FERC’s desire to avoid ambiguity in VSLs and lowering impact on reliability by using the

sound judgment of Regional Enforcement staff.

The pro forma VSLs could enable:

Improved risk-based compliance monitoring and enforcement by providing a first-cut triage on

the disposition path of the violation (FFT, citation, abbreviated NOP, Full NOP).

Improved metrics associated with the state of compliance.

Better assessment of a given standard’s or requirement’s impact on reliability.

Implementation Effort

There will be no substantial impact on the NERC in changing to pro forma VSLs. The only primary change

is to modify a few of the resource documents for drafting teams (e.g. VSL Guidelines, Drafting Team

Guidelines, etc.). Updates to these documents are approved by the NERC Standards Committee.

Conclusion

Presently VSLs only set the starting point for the sanctions process. Other factors are used as mitigating

or escalating factors. Level does not consider any adjustment factors, such as whether the violation is a

repeat violation or whether there are extenuating or aggravating circumstances regarding the violation.

The team recommends using the following set of pro forma VSLs. The VSLs are in line with FERC’s

guidance on VSLs. Using a single set of VSLs frees the Industry and the ERO of low value work to focus on

things that contribute to reliability.

Option 1 or Option 2 VSLs will be inserted here based on survey results

http://www.nerc.com/commondocs.php?cd=2


10 February 16, 2012

Appendix (Survey Results)

Survey Summary Results will be published here.

Pearson correlation of Penalty and VSL Scale = 0.035

P-Value = 0.800

Violation Severity Level

Pe

na

lty

($

)

SevereHighMediumLower

70000

60000

50000

40000

30000

20000

10000

0

Scatterplot of Penalty vs VSL

Improved Violation Risk Factors Proposal April 2, 2012 (v10.2)

Table of Contents

Executive Summary ...................................................................................................................... 2

Background .................................................................................................................................... 3

Problem .......................................................................................................................................... 4

Proposal.......................................................................................................................................... 5

5-Tier Approach ............................................................................................................................ 6

VRF Tool ......................................................................................................................................... 7

Summary of Industry Comments ............................................................................................... 8

Recommendations ........................................................................................................................ 9

References – Commission Orders regarding VRFs ................................................................ 10

Appendix A ................................................................................................................................... 12

Appendix B ................................................................................................................................... 16

Appendix C ................................................................................................................................... 18

Revision History (To be removed upon Final) ........................................................................ 19

Improved VRF Proposal [DRAFT] March 30, 2012 (v10.2) 2

Executive Summary This proposal offers a solution to problems with the current Violation Risk Factor (VRF) definitions that were never vetted, created numerous FERC-directed changes, and a confusion between risk and importance.

This document outlines improved definitions for assigning VRFs, recommending the addition of two levels of VRF and the field test of a VRF Tool. The approach received strong industry support during a public commenting period in 2010.1 Improved assignment of VRFs and additional granularity of VRFs will support NERC’s efforts to follow a risk-based approach to compliance monitoring and enforcement. This should benefit NERC, the industry and reliability.

In support of this effort and consistent with the NERC Bylaws, the NERC Compliance and Certification Committee (CCC) approved posting proposed changes to the NERC Rules of Procedure in 2010 to accommodate the additional VRF levels. See Appendix B for the modifications and adjusted penalty sanctions matrix.

Given that FERC gave NERC the discretion to add to the levels of VRF in Order No. 693,2 the proposed changes to the Sanctions Guidelines of the ERO’s Rules of Procedure to accommodate the 5-tier VRFs should be posted for industry comment at the next opportunity.

The issue is described in paragraphs 241-247 of 693. Commenters raised questions on VRFs and the commission was still speaking in terms of “Levels of Non-Compliance”. The combination of VSLs and VRFs supplanted Levels of Non-Compliance.

In paragraph 246 the FERC noted that NERC should have flexibility in determining the Levels of Non-Compliance. In paragraph 247, the Commission agreed there should be objective criteria in assigning Levels of Non Compliance. In this paragraph they also left it to NERC to determine if there were merit for additional levels. The example they used was an administrative infraction category.

As the VRF tool can simultaneously create both 3-tier and 5-tier VRFs, it is recommended that the Standards Committee direct drafting teams to use the tool to gain experience and create a public record of tool performance. Cases where the drafting team believes the tool gave incorrect answers should be used by the Process Subcommittee to periodically improve future versions of the VRF Tool.

1 Additional information can be found at: www.nerc.com/filez/standards/VRF_Criteria_Tool.html 2 FERC Order No. 693, Mandatory Reliability Standards for the Bulk-Power System, March 16, 2007, P241-247,

(http://www.ferc.gov/whats-new/comm-meet/2007/031507/e-13.pdf)

http://www.ferc.gov/whats-new/comm-meet/2007/031507/e-13.pdf

http://www.nerc.com/filez/standards/VRF_Criteria_Tool.html



Background Violation Risk Factors (VRF) are assigned to standards’ requirements as indicators of the expected risk or harm to the bulk power system caused by the violation of a requirement by a typical entity that is required to comply. The VRF, along with the Violation Severity Level (VSL) are jointly used by Regional Entities (RE) to determine a base penalty amount for enforcement discussions. The suggested sanction, found in Appendix A of the NERC Sanction Guidelines, is adjusted by the Regional Entity based on escalating or mitigating factors.3

Each requirement set out within NERC’s reliability standards has been assigned a Violation Risk Factor (VRF) during the NERC reliability standards development process. Under the present approach, one of three defined levels of risk is assigned to each standard’s requirements: Lower Risk Factor, Medium Risk Factor or High Risk Factor. Definitions of the factors can be found in the NERC Violation Risk Factor documentation.4

As a simple example, a High-risk item puts the Interconnection one credible contingency away from cascading. A Medium-risk item measurably burdens others or risks damage to major facilities, while Lower-risk items currently include everything else, including documentation and administrative requirements. This does not mean a Lower-risk item is not important, just that it is not likely to lead directly to an Adverse Reliability Impact5 or other immediately harmful outcomes. It takes repetitive or many violations of Lower-risk requirements to increase the chance of a significant event. To further illustrate, an important administrative requirement such as reviewing a plan or document by a specific date would not likely lead to reliability problems unless many other violations took place at the same time or the delay was excessive.

Merriam-Webster's Dictionary defines risk6 as the possibility of loss or injury and also the degree of probability of such loss. Risk, as it applies to the Bulk Electric System (BES) is the likelihood that an operating situation or event will reduce the reliability of the Interconnection to the point that the consequences are unacceptable.7 Risk, as it applies to the NERC Reliability Standards, should include both the magnitude of the potential impact of not complying with individual standards’ requirements and the probability of occurrence of the potential impact.

3 NERC Rules of Procedure, Appendix 4B, NERC Sanction Guidelines, Appendix A,

(http://www.nerc.com/files/NERC_Rules_of_Procedure_EFFECTIVE_20110825.pdf)

4 (http://www.nerc.com/files/Violation_Risk_Factors.pdf)

5 Defined in the NERC Glossary as the impact of an event that results in frequency-related instability; unplanned

tripping of load or generation; or uncontrolled separation or cascading outages that affects a widespread area of

the Interconnection. (http://www.nerc.com/files/Glossary_12Feb08.pdf)

6 http://www.merriam-webster.com/dictionary/risk

7 NERC Reliability Criteria and Operating Limits Concepts, Version 1.0.2 − December 19, 2007

(http://www.nerc.com/files/concepts_v1.0.2.pdf)

http://www.nerc.com/files/Violation_Risk_Factors.pdf

http://www.nerc.com/files/Glossary_12Feb08.pdf

http://www.merriam-webster.com/dictionary/risk

http://www.nerc.com/files/NERC_Rules_of_Procedure_EFFECTIVE_20110825.pdf


http://www.nerc.com/files/Glossary_12Feb08.pdf

http://www.merriam-webster.com/dictionary/risk

http://www.nerc.com/files/concepts_v1.0.2.pdf

http://www.nerc.com/files/concepts_v1.0.2.pdf


Problem The present VRF associated definitions were never vetted through the NERC Standards Process, primarily due to time constraints during the ERO startup. While the definitions were a useful start, it led to a series of problems, which include:

Lack of clear divisions between risk levels led to inconsistency the in their application and potential misallocation of resources

A small number of levels (lack of granularity) led to assigning the same VRF to requirements with significantly different risk

VRF definitions did not consider requirements in the later Order No. 706

Number of FERC-directed changes point to an underlying lack of clarity, consistency and transparency in the assignment of VRFs

Reliability risk is confused with importance

There are many requirements in the standards that are important, but implementing them incorrectly or late does not necessarily lead to an Adverse Reliability Impact. Risk, as it applies to the Reliability Standards, includes both the magnitude of the potential impact of a violation and the probability of an adverse event occurring as a result of the violation.

The factors above have led to an inconsistent approach in the assignment of VRFs in the standards development and approval process that tends to inflate assigned risk. While this may seem to enhance reliability, it actually draws attention and resources away from true priorities that impact reliability.


Proposal The Standards Committee (SC) and Compliance and Certification Committee propose the following substantive improvements to the current VRF criteria.

1. Expand the current Lower, Medium and High VRF levels, or 3-Tier, to include two new tiers for added granularity. The additional new tiers are “Severe” and “Administrative”, or 5-Tier VRFs found in Appendix A.

2. Modify the current NERC Violation Risk Factors8 document from 3-Tier VRF definitions to the 5-Tier definitions.

3. Incorporate additional language in the VRF definitions to support Critical Infrastructure Protection requirements.

4. Develop and use an analytical tool as a first step to objectively assigning VRFs for new and revised standards.

The following sections outline how the improvements are achieved.

8 NERC Violation Risk Factors, http://www.nerc.com/files/Violation_Risk_Factors.pdf



5-Tier Approach FERC gave NERC the discretion to increase the number of VRFs in Order No. 693.9 Expanding VRFs to five tiers provides more differentiation among requirements and their associated risk. Adding additional levels will allow enhanced ability to categorize violations. Entities must comply with all requirements; however, having two additional tiers provides more granularity to guide the industry based on risk in managing its performance.

The current 3-tier definition utilizes three general qualifications for determining a VRF. The qualifications with the most impact include those conditions that directly contribute to instability, separation or cascading sequence of failures, or hinder restoration. The other qualifications with a lesser impact include those conditions directly affect the electrical state, capability, or ability to effectively monitor and control the bulk electric system. Last, the qualification with little or no impact are those conditions where the requirement is administrative in nature or are not likely to affect the electrical state, capability, or ability to effectively monitor and control the bulk electric system.

The goal of the 5-Tier approach is to better qualify the risk a given requirement will have on reliability. As noted earlier, risk combines the “magnitude of loss” and the “probability of such loss” as a result of a violation. Since the 3-Tier definitions are based only on the “magnitude” of the impact, they need to be modified to take into account the “probability” of a negative outcome. The 5-Tier approach continues to use the magnitude (i.e. instability, electrical state, restoration, etc.) of impact for definition consistency. However, the probability of a negative outcome has been added into the qualification of a VRF. Appendix A maps the proposed changes from the three tier to the five tier definitions.

As noted earlier, Violation Risk Factors (VRFs) are intended to be a measure of the impact that a violation of a requirement has on BES reliability and are used by Compliance when determining sanctions. VRFs are developed based on a combination of three factors: Risk Outcomes, Risk Probabilities, and Time Horizons.

9 Mandatory Reliability Standards for the Bulk-Power System (Issued March 16, 2007), Docket No. RM06-16-000;

Order No. 693, p 78 (http://www.ferc.gov/whats-new/comm-meet/2007/031507/e-13.pdf)



Consistency with Current Guidance

This proposal for 5-Tier VRF structure is consistent with Commission VRF guidance. The

expansion to the existing three-tier structure to include the addition of two new tiers (i.e.,

Severe and Administrative) and the revision to the existing definitions improves the ability of

standards drafting teams to remain consistent with the current guidance.

The Severe level is differentiated by a requirement that if violated, could directly cause

(omitting “contribute to”) one of the three most impactful events (i.e., instability, separation, or

cascading failures). High is adjusted accordingly by removing the “directly cause”; however, is

augmented with the phrase, “or could contribute to impeding restoration, damaging

equipment, or result in Non-Consequential Load Loss.”

Administrative requirements that do not have a reliability impact and are considered

documentation or reporting only fall into the new Administrative VRF. Low remains the same

for potential reliability impactful requirements where nothing adverse is expected to happen;

however, the change is with requirements that are administrative in nature.

The Medium level essentially remains the same with a few additional words added to clarify

that risk occurs because the event is adverse, not just affected by the violation.

VRF Tool NERC and a group of Industry volunteers developed and field-tested a tool that leads drafting team members through a series of questions directly related to reliability. The responses to the questions generate one of five possible VRFs based on impact to the BES. The use of a common tool helps achieve the FERC guidelines to establish consistency of VRFs among standards, and consistency of VRFs within standards.

The tool generates both a 3-tier and a 5-tier VRF. The tool also creates a permanent, transparent record of the drafting team’s response to the questions. Creating both 3-tier and 5-tier VRFs allows the tool to be “test driven” by drafting teams until NERC’s Rules of Procedure can be modified to allow 5-tier VRFs. In short, using the tool enables relatively objective and repeatable assignment of VRFs.

In addition to the set of questions related directly to reliability, the tool also had three other provisions that factor into the final Risk score and VRF:

1. Time Horizon of the requirement. In general a violation in real-time leaves no opportunity for correction or mitigation. All things being equal, an activity conducted in real-time (disturbance response for example) carries more risk than equivalent similar activity conducted in the planning horizon.


2. Contributing Risk. FERC has directed that if a Violation Risk Factor has been established based on a Contributing Risk Probability, and a violation would directly cause the violation of another requirement with a higher VRF, the VRF of the contributing requirement should be raised. The VRF tool includes a question that addresses this.

3. Critical Infrastructure Protection. The 5-Tier VRF definitions include language specific to CIP requirements because some underlying assumptions are different for cyber security concerns as compared to planning and operating. To accommodate stakeholder feedback, the tool treats CIP requirements differently by applying an escalation factor.

During field tests of the VRF Tool, the outcome resulted in a more consistent application of the VRF designations when compared to the assignment of VRFs solely based on the participant’s personal judgment. Test participants also found the tool generally easy to use and noted that a primary value was that it focused the team on a consistent approach to assignment of VRFs. The tool is available on the NERC website.10

It should be noted that the VRF Tool is a starting point and that the drafting team will evaluate the output of the tool is not locked in to using the output of the tool. If the drafting team has reasons why they believe the answer is incorrect, the tool allows the team to document and save their reasoning as part of the permanent record.

This paper recommends the NERC Standards Committee conduct a field test by directing drafting teams to begin using the new VRF tool on a trial basis for a minimum of one year. The feedback collected where the drafting team chooses differently from the VRF generated by the tool will be analyzed and used to enhance future revisions of the tool.

Summary of Industry Comments The Industry was asked to comment on the tool and supporting background document. A summary of the key questions is outlined below. The full summary and additional information can be found on the NERC Standards Under Development website.11

In general, there was extremely strong support for a more objective assignment of VRFs and in increasing the number of levels of VRFs.

Among those that disagreed with using 5 levels of VRFs, some felt that 4 levels were sufficient, while others that voted no said that those requirements flagged at the lowest tier should not even be in the standards.

Those that disagreed with the some of the questions in the tool felt that loss of load events were not as consequential as cascading events.

10 http://www.nerc.com/filez/standards/VRF_Criteria_Tool.html

11 http://www.nerc.com/filez/standards/VRF_Criteria_Tool.html





Table 2. Summary of Comments

Questions Total Votes

Percent “Yes”

Total “Yes” Votes

Total “No” Votes

1. Do you agree with the need to improve the VRF definitions?

32 97% 31 1

2. Do you agree with having a more objective, transparent, approach to assigning VRFs?

100% 0

3. Does the definition of “Adequate Level of Reliability” (ALR) as approved by the NERC Operating and Planning Committees provide a sound framework for defining VRFs?12

29 83% 24 5

4. Do you agree with the proposals to have 5 levels of VRF? If not, what is the proper # and why?13

31 74% 23 8

Recommendations The team recommends the Standards Committee Process Subcommittee review the proposed 5-Tier definitions for consistency with the expansion from 3-Tier to 5-Tier. Review should consider that no gaps are created or identified in the review process. As the proposed VRF Tool can simultaneously create both 3-tier and 5-tier VRFs, it is recommended that the Standards Committee Process Subcommittee review the tool for consistency with the definitions. Additionally, to recommend the Standards Committee to direct drafting teams use the tool to gain experience using 3-Tier or both the 3-Tier and 5-Tier, if accepted, and create a public record of tool performance. Cases where the drafting team believes the tool gave incorrect answers should be used by the Process Subcommittee to periodically improve future versions of the VRF Tool.

Consistent with NERC’s bylaws, the proposed changes to the Sanctions Guidelines of the ERO’s Rules of Procedure to accommodate the 5-tier VRFs should be posted for Industry comment.

12 In general, the negative comments were not related to using the ALR questions in the tool, but a disagreement

with the ALR definition itself.

13 Some commenters felt that four levels of VRFs were appropriate; others that were against the 5-tier approach

felt that administrative requirements should not be in the standards at all.


References – Commission Orders regarding VRFs

(Not an exhaustive list)

Foundational VRF Orders, non-CIP

May 18, 2007: Order on Violation Risk Factors (“The VRF Order”).

FERC’s first VRF order.

Establishes 5 VRF Guidelines for evaluating/designating VRFs, in conjunction with NERC definitions of VRF levels.

Addresses over 700 VRFs proposed for standards approved by Order 693 (but not including CIP cyber security standards);

Directs modifications to 28 proposed VRFs and requires a report from NERC explaining the rationale for 75 others.

Aug 9, 2007: Order on Rehearing and Compliance Filing [to the VRF Order].

FERC explains why it can direct specific changes to VRFs, unlike to the standards, and speaks to the role of Sanction Guidelines.

FERC also explains why certain some VRFs are “more than administrative in nature” and therefore changed from Low to Medium.

Nov 16, 2007: Order on Compliance Filing, [regarding the report on VRF rationales required by

the VRF Order].

FERC reapproves 43 of 74 VRFs, based on rationales provided by the ERO and directs modification of remaining 31.

FERC provides more discussion regarding the need for clarity in definitions, and what constitutes “administrative,” the evaluation of risk in relation to real-time impact, explanation of when the “how” something must be done is “inextricably linked to effectiveness of standard,” etc.

Follow-up FERC discussion as to rationales for VRF designations

Dec. 27, 2007: FAC-010,-011,-014 Order – Additional Commission discussion of the rationales for designation of VRFs. P 129 – 177.

Rules on general VRF issues, including that NERC may use RSDP to develop VRFs as long as it meets FERC-imposed deadlines; NERC must address FERC concerns and also follow the 5 VRF guidelines for evaluating VRF assignments; Regions may develop VRFs applicable to regional differences; examples of Requirements that are not administrative in nature.

Disagrees that planning horizon requirements will not cause or contribute to BPS instability, separation in real-time.

Time horizons are irrelevant in the determination of an appropriate VRF.

Communication protocols can rate High VRF (supported by Blackout Report).


Nov 20, 2008: WECC Regional Reliability Standard Regarding Automatic Time Error Correction

NOPR – RM08-12-000. P 43-50. [Affirmed in Final Rule, Order No.723, May 21, 2009.]

Explains basis/rationale needed for designations among subject VRFs.

Begins discussion/ruling that ERO must submit one VSL for every Requirement or Subrequirement that has been assigned a VRF. [Eventually leads to ‘comprehensive VSL proceeding’ and later ‘roll-up’ procedure.]

May 2011: Order on compliance filing re ‘comprehensive VSL filing’ and approving NERC’s “roll up” procedure filing (RR08-4-000. -001, -002)

CIP VRF Development

July 2007: CIP NOPR to Order 706 – VRF discussion section to approve 68 CIP VRFs and

Appendix chart showing prescribed modifications to 43 VRFs. [The NOPR was issued

two months after the original VRF Order, and strived to apply the new VRF Guidelines to

the CIP Requirements]

January 2008: Order 706 (CIP Final Rule), VRF discussion section explains rationale for

modifying 43 CIP VRFs, as shown in NOPR Appendix; directs submission of 9 missing

VRFs; allows for staggered filing of CIP VRFs. [This is where we defended our 43

modifications shown in NOPR chart and told them also to submit the 9 missing VRFs. We

also allowed for staggered filing of proposed VRFs, as long as they were before a given

Reqt became effective for Implementation Plan Table 1 entities.]

CIP VRF Approval

The 3 orders which together completed approval of CIP Version 1 VRFs: Jan 27, 2009: Order on Compliance Filing; approves 12 revised and 9 new VRFs, with

modifications to 4 of the new VRFs. Feb 2, 2009: Delegated Letter Order, revising 31 of the 43 VRFs identified for revision

by Order 706. August 20 2009: Delegated Letter Order, accepting NERC’s revision of remaining 4 our

VRFs directed for revision by Jan 27, 2009 order. March 23, 2010: Order on Compliance Filing; approves versions 2 and 3 VRFs of the CIP

standards. September 15, 2011: Notice of Proposed Rulemaking. The Commission proposed to accept the

CIP version 4 VRFs. Pending.


Appendix A The following illustrates the mapping of current 3-Tier VRF to the proposed 5-Tier VRF.

3-Tier VRF (Existing) 5-Tier VRF (Proposed)

SEV

ERE

(See current HIGH VRF)

(Proposed SEVERE VRF) A requirement that, if violated, could directly cause Bulk Electric System

instability, separation, or a cascading sequence of failures; or,

a requirement in a planning timeframe that, if violated under normal,

abnormal, emergency, or restorative conditions anticipated by the

preparations, could directly cause Bulk Electric System instability, separation,

or a cascading sequence of failures; or,

a Critical Infrastructure Protection (CIP) requirement that, if violated, could

directly expose the Bulk Electric System to instability, separation, or a

cascading sequence of failures.



HIG

H

(Current HIGH VRF) A requirement that, if violated, could directly cause or contribute to bulk electric system instability, separation, or a cascading sequence of failures, or could place the bulk electric system at an unacceptable risk of instability, separation, or cascading failures; or, a requirement in a planning time frame that, if violated, could, under emergency, abnormal, or restorative conditions anticipated by the preparations, directly cause or contribute to bulk electric system instability, separation, or a cascading sequence of failures, or could place the bulk electric system at an unacceptable risk of instability, separation, or cascading failures, or could hinder restoration to a normal condition.

(Proposed HIGH VRF) A requirement that, if violated, could contribute to Bulk Electric System instability, separation, or a cascading sequence of failures; or could contribute to impeding restoration, damaging equipment, or result in Non-Consequential Load Loss; or, a requirement in a planning timeframe that, if violated under normal, abnormal, emergency, or restorative conditions anticipated by the preparations, could contribute to Bulk Electric System instability, separation or a cascading sequence of failures; or could impede restoration, damage equipment, or result in Non-Consequential Load Loss, or a Critical Infrastructure Protection (CIP) requirement that, if violated, could contribute to exposing the Bulk Electric System to instability, separation, or a cascading sequence of failures; or could impede restoration, damage equipment, or result in Non-Consequential Load Loss.



MED

IUM

(Current MEDIUM VRF) A requirement that, if violated, could directly affect the electrical state or the capability of the bulk electric system, or the ability to effectively monitor and control the bulk electric system. However, violation of a medium risk requirement is unlikely to lead to bulk electric system instability, separation, or cascading failures; or, a requirement in a planning time frame that, if violated, could, under emergency, abnormal, or restorative conditions anticipated by the preparations, directly and adversely affect the electrical state or capability of the bulk electric system, or the ability to effectively monitor, control, or restore the bulk electric system. However, violation of a medium risk requirement is unlikely, under emergency, abnormal, or restoration conditions anticipated by the preparations, to lead to bulk electric system instability, separation, or cascading failures, nor to hinder restoration to a normal condition.

(Proposed MEDIUM VRF) A requirement that, if violated, could directly and adversely affect the electrical state or the capability of the Bulk Electric System, or the ability to effectively monitor and control the Bulk Electric System. A violation of the requirement is unlikely to contribute to Bulk Electric System instability, separation, or cascading failures; or a requirement in a planning timeframe that, if violated under normal, abnormal, emergency, or restorative conditions anticipated by the preparations, could directly and adversely affect the electrical state or capability of the Bulk Electric System, or the ability to effectively monitor, control, or restore the Bulk Electric System. A violation of the requirement under normal, abnormal, emergency, or restoration conditions anticipated by the preparations, is unlikely to contribute to Bulk Electric System instability, separation, or cascading failures, nor to hinder restoration to a normal condition; or, a Critical Infrastructure Protection (CIP) requirement that, if violated, could directly and adversely expose the electrical state or the capability of the Bulk Electric System; or the ability to effectively monitor and control the Bulk Electric System. A violation of the requirement is unlikely to lead to Bulk Electric System instability, separation, or cascading failures.



LOW

(Current LOW VRF) A requirement that is administrative in nature and a requirement that, if violated, would not be expected to adversely affect the electrical state or capability of the bulk electric system, or the ability to effectively monitor and control the bulk electric system; or, a requirement that is administrative in nature and a requirement in a planning time frame that, if violated, would not, under the emergency, abnormal, or restorative conditions anticipated by the preparations, be expected to adversely affect the electrical state or capability of the bulk electric system, or the ability to effectively monitor, control, or restore the bulk electric system. A planning requirement that is administrative in nature.

(Proposed LOW VRF) A requirement that, if violated, would not be expected to adversely affect the electrical state or capability of the Bulk Electric System, or the ability to effectively monitor and control the Bulk Electric System; or, a requirement in a planning timeframe that, if violated under normal, abnormal, emergency, or restorative conditions anticipated by the preparations, would not be expected to adversely affect the electrical state or capability of the Bulk Electric System, or the ability to effectively monitor, control, or restore the Bulk Electric System; or,

a Critical Infrastructure Protection (CIP) requirement that, if violated, would not be expected to adversely affect CIP capabilities; or expose the electrical state or the capability of the Bulk Electric System; or the ability to effectively monitor and control the Bulk Electric System.

AD

MIN

ISTR

ATI

VE

(See current LOW VRF)

(Proposed ADMINISTRATIVE VRF) A requirement that, if violated, delays or omits reporting information or documentation that does not adversely affect reliable operations of the Bulk Electric System or CIP capabilities.

Improved VRF Proposal [DRAFT]

March 30, 2012 (v10.2) 16

Appendix B Section 4.1.1., Violation Risk Factor requires a modification in the NERC Rules of Procedure, Appendix 4B. The modifications are provided below where the underlined text in blue is a proposed addition and the text having a strike through in red will be removed. In October 2010, the NERC Compliance and Certification Committee (CCC) approved posting for comment two changes to Appendix 4B of NERC’s Rules of Procedure. The primary change was to expand the current sanctions matrix to 5-tiers. An administrative layer was added to the existing table. The proposed Lower and Severe VRFs are identical to the present Lower and High VRFs. The 5-tier Medium and High VRF rows are interpolations between the Lower and Severe levels. This maintains the sanction matrix’s center of mass. The other CCC approved change to Appendix 4B was to create a separate table for binary requirements. Registered Entities have the same sanctioning authority as they do today, but are given more discretion for lesser violations.

4.1.1. Violation Risk Factor

Each requirement set out within NERC's reliability standards has been assigned a Violation Risk Factor

(VRF) through the NERC reliability standards development process. The factors have been defined and

approved through the standards development process and are assigned to requirements to provide clear,

concise and comparative association between the violation of a requirement and the expected or

potential impact of the violation to the reliability of the bulk power system. One of threefive defined

levels of risk is assigned to each standards requirement: Administrative Risk Factor, or; Lower Risk

Factor; or; Medium Risk Factor, or; High Risk Factor; or Severe Risk Factor. Definitions of the factors

can be found in appropriate standards development process documentation.

Appendix A: Base Penalty Amount Table requires a modification in the NERC Rules of Procedure, Appendix 4B. The modifications are provided below where the underlined text is a proposed addition and the text having a strike through will be removed.

Appendix A: Base Penalty Amount Table

The following tables lists the Base Penalty amounts corresponding to combinations of violation risk factor and

violation severity factor. Table 1 corresponds with requirements that are scalable and measured on a range,

while Table 2 is used with binary (yes/no) requirements. Table 3 is an interim table to be use with 3-tier

violation risk factors until all standards are converted to 5 tier violation risk factors.


March 30, 2012 (v10.2) 17

Table 1. Sanctions Matrix for Scalable Requirements

Table 2. Sanctions Matrix for Binary Requirements

Table 3. Sanctions Matrix for Three-Tier Violation Risk Factors

NOTE: TheseThis tables describes the amount of penalty that could be applied for each day that a violation continues,

subject to the considerations of Section 3.21 regarding frequency and duration of violations.

Violation Violation Severity LevelRisk Lower Moderate High Severe

Factor Range Limits Range Limits Range Limits Range LimitsLow High Low High Low High Low High

Administrative $0 $1,000 $1,000 $2,000 $2,000 $3,000 $3,000 $5,000Lower $1,000 $3,000 $2,000 $7,500 $3,000 $15,000 $5,000 $25,000

Medium $2,000 $15,000 $3,000 $50,000 $6,000 $100,000 $7,500 $175,000High $3,000 $75,000 $5,000 $200,000 $9,000 $350,000 $15,000 $650,000

Severe $4,000 $125,000 $8,000 $300,000 $12,000 $625,000 $20,000 $1,000,000

Violation Risk Range Limits

Factor Low HighAdministrative $0 $5,000

Lower $1,000 $25,000Medium $2,000 $175,000

High $3,000 $650,000Severe $4,000 $1,000,000

Low High Low High Low High Low High

Lower $1,000 $3,000 $2,000 $7,500 $3,000 $15,000 $5,000 $25,000

Medium $2,000 $30,000 $4,000 $100,000 $6,000 $200,000 $10,000 $335,000

High $4,000 $125,000 $8,000 $300,000 $12,000 $625,000 $20,000 $1,000,000

Violation

Risk

Factor

High Severe

Violation Severity Level

Range Limits Range Limits Range Limits Range Limits

Lower Moderate


March 30, 2012 (v10.2) 18

Appendix C The tool underwent several sets of tests and improvements beginning in 2008. The original team members

ran the tool independently and found they came to similar results. This test included a mixture of operating

and planning standards.

At the request of the Standards Committee, the team conducted an expanded field test in November 2009.

One of the goals of the test was to include additional planning standards. A control group of 13 standards was

selected. In addition, the 9 participants could test other standards of their own choosing. The tool was

modified (v6) based on comments.

In April, 2010, the tool was modified (v7) to automatically produce a Severe 5 Tier VRF if the answer to any

question said the violation could likely lead to cascading.

The proposal and tool was posted in March 2010. Commenters were able to test and evaluate the tool. Minor

changes were made to the tool (v8) based on comment. Changes were to differentiate between Operations

Assessment and Operations Planning Time Horizons in addition to differentiate between cascading and loss of

load. See the Consideration of Comments14 for additional detail.

There was additional feedback from NERC and FERC staff that the tool might not adequately address CIP

standards. An additional question and logic was added to the tool that asks whether violating the

requirement could expose multiple facilities to cyber threat. Versioning of the tool went to a date format.

Based on further feedback from the Standards Committee an additional CIP-related and planning standards

test was conducted in July 2011. This test was conducted using this latest version of the tool (v8).

14 (http://www.nerc.com/filez/standards/VRF_Criteria_Tool.html)




March 30, 2012 (v10.2) 19

Revision History (To be removed upon Final)

Version Date Description

1.0 1/4/2012 Initial proposal to team.

2.0 2/1/2012 Name Appendix to “A” and added Appendix B to include the penalty sanction tables. Updated text to reflect that change.

3.0 2/3/2012 Revised formatting and style

4.0 3/5/2012 Version issued to team to work on 5-Tier definitions (no change from 3.0, versioned to align with SharePoint).

5.0 3/9/2012 Definitions modified at the 3/9/2012 team meeting.

6.0 3/15/2012 Edits submitted by team members.

7.0 3/16/2012 Final draft definitions – next to work on body of proposal

8.0 3/19/2012 Final draft definitions – Review body of proposal – Needs re-read.

9.0 3/23/2012 Team results. Executive Summary and Problem Statement revisions and addition of Consistency with Guidance section.

9.1 3/24/2012 Clean up and formatting.

9.2 3/24/2012 Added additional text in Exec Sum regarding Order No. 693.

9.3 3/29/2012 Added Commission Order references

10 3/30/2012 Team results from 3/30 meeting. Pending additions regarding tool updates and references to CIP v2, 3 and 4 orders.

10.1 4/1/2012 Added Tool history as Appendix C and CIP orders for version 2, 3 and 4.

10.2 4/2/2012 Replaced load forecasting with disturbance response in item 1: Time-Horizon of the requirement.

CCC Agenda Item: Audit Cycles for Secondary Functions

There is a difference in auditing cycles among the Regional Entities for BAs, RCs and TOPs for their

secondary functions (IA, TP, PA, etc.). Some REs audit these secondary functions each time the primary

functions are audited. Other Regions audit the secondary functions every other cycle.

The CCC will have a short discussion on the two approaches. In particular, we would like to hear from RE

staff on the underlying reasons for the approach they have chosen.

Under some of the approaches for Entity Risk Assessments, it is proposed that a Registered Entity will be

evaluated based on all past violations and the worst risk assessment assigned to any of the functions for

which it is registered.

If a Registered Entity is audited twice as often, all things being equal, auditors will find twice as many

deficiencies. If a low “score” is received for a secondary function, that Registered Entity will be subject

to more in-depth audits of all its functions. This tends to create a spiral of increasing scrutiny (more

frequent audits, more findings, more in-depth and more frequent audits, even more findings).

Can we get the Regions to articulate the reasons for the present audit cycle approach for these

secondary functions? This will be useful input for the Entity Risk Assessment process. A common

approach will prevent escalation problems as described above.

Update – Standard Driven Index (SDI) Greg Pierce, CCC Liaison, Performance Analysis Subcommittee Director, Transmission Compliance, Entergy Corporation CCC Meeting, June 13-14, 2012


Topics

•Status Update

•Next Steps


Status Update

• March 14-15, 2012, the CCC endorsed the Standards Driven Index (SDI) metric proposal and the following review process:

Collaborate with PAS to validate standard requirements which have been designated as bell-weather reliability indicators

Collaborate with PAS to validate quarterly SDI performance results and provide contextual trend information

Advise on composition of SDI bell-weather metrics as standard requirements evolve


NERC/PAS/CCC Collaborative Review Process

99.70

99.75

99.80

99.85

99.90

99.95

100.00

Sta

nd

ard

s D

riv

en

Ind

ex

(%)

NERC/PAS calculates recent performance

Performance is prepared in summary view with key

performance information prepared

CCC Reviews Performance and identifies issues with trends,

calculations, or included standard requirements

NERC/PAS incorporates guidance given by CCC

DRAFT For Review Purposes

Only

99.70

99.75

99.80

99.85

99.90

99.95

100.00

Sta

nd

ard

s D

riv

en

Ind

ex

(%)

Final performance is produced Reliability Indicators Website is

Updated with Final Results


Future Steps

Present

• Severity Risk Index

• Adequate Level of Reliability metrics

• TADS • GADS • Event Analysis

Database • Event Driven

Index (EDI) • Standards

Driven Index (SDI) proposal

• CDI proposal

Work Plan

• Statistically link reliability reduction cause & effect

• Link event, precursor indicators, and outage datasets to explore initiating events

• Find top initiating events

• Develop reliability index framework

Future

• Use the probabilistic cause & effect model to quantitatively measure reliability

• Focus on improving top initiating event performance

• Help focus industry on relevant reliability risks to improve reliability


Questions and Answers


Background Materials


Tiered Risk Measures

Event Driven Index (EDI)

Condition Driven Index (CDI)

Standards Driven Index (SDI)

26 High Risk Standard Requirements

ALR 1-3ALR 1-4ALR 1-5ALR 1-12ALR 2-3ALR 2-4ALR 2-5ALR 3-5ALR 4-1ALR 6-1ALR 6-2ALR 6-3ALR 6-11ALR 6-12ALR 6-13ALR 6-14ALR 6-15ALR 6-16

Transmission Outages

Generation Outages

Load Loss (MW and Duration)

Risk Elements

Risk Grouping


SDI - Definition/Calculation

• Average standards compliance rate for 26 high risk requirements – Stable indication of daily compliance over a

specific time period of interest

• SDI = (Total Compliance - ∑(wV*NV/NR))/(Total Compliance) – Range from 0 to 100

– Total Compliance = 1.0* Number of Days in a specific period

– wV = weighting of a particular high risk req. violation

– NV = number of violations for the selected high risk req.

– NR = number of registered entities required to comply with the req.


• Uses High Violation Risk Factor (VRF) (Approved standard requirements only) • Severe Reliability Impact Statement (RIS)

– RIS indicates significance of impact on BPS • Considers Violation Severity Level (VSL) • Validated against almost 4 year history of violations for most significant standards risks to reliability

Violation Risk Factor

Violation Severity

Level

High Medium Lower

Severe 198 256 162

High 96 112 92

Moderate 77 109 90

Lower 59 96 80

Proposed Approach for Standards/Statute Driven Index (SDI)


Violation Severity

Level Violation

Risk Factor Risk Impact Statement Value?

Severe High Moderate Lower

High Severe

25 16 2 6

High Non-Severe

312 161 86 384

Medium Severe

22 5 2 4

Medium Non-Severe

397 106 105 373

Lower Severe

11 3 3 2

Lower Non-Severe

218 61 67 306

• Severe Reliability Impact Statement (RIS) – RIS indicates significance of impact on BPS

• Uses Violation Risk Factor (VRF) • Demonstrates Violation Severity Level (VSL) • Similar to daily SRI calculation • Almost 4 year history violation history of 4,410 confirmed violations

Proposed Approach for Standards/Statute Driven Index (SDI)


* All 26 requirements have high Violation Risk Factor (VRF) and Severe Risk Impact Statements

Standard Req. Standard Req. Standard Req. Standard Req. Standard Req.

EOP-001-0 R1. FAC-009-1 R1. PER-002-0 R3. PRC-005-1 R2. TOP-004-2 R1.

EOP-003-1 R7. IRO-005-2 R17. PER-002-0 R4. TOP-001-1 R3. TOP-004-2 R2.

EOP-005-1 R6. PER-001-0 R1. PRC-004-1 R1. TOP-001-1 R6. TOP-006-1 R6.

EOP-008-0 R1. PER-002-0 R1. PRC-004-1 R2. TOP-001-1 R7. TOP-008-1 R2.

FAC-003-1 R1. PER-002-0 R2. PRC-005-1 R1. TOP-002-2 R17. VAR-001-1 R1.

FAC-003-1 R2.

Proposed 26 High Risk Requirements


SDI - Application

• SDI increases if the accumulation of non-compliance is reduced over a trending period

• At a high level, stakeholders can use the tool to measure the compliance and associated reliability risk changes of these days


Preliminary SDI Trend by Quarter

99.70

99.75

99.80

99.85

99.90

99.95

100.00

Sta

nd

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s D

riv

en

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ex

(%)


SDI - Limitations

• Historical measure useful for trending and does not address real-time, nor forward-looking compliance performance

• All 26 requirements have same weighting factors As experience with the SDI increases there may be opportunity to transition into a impact-

based view

Working with CIPC to consider CIP related risk in a separate measure

• As standard requirements change performance and calculation compliance results will need to be vetted and bootstrapped Determination must be made of new requirements versus legacy

requirements Performance calculations will have to link old and new performance to create a

sustainable long-term view of compliance performance

Entity Impact Evaluation

Risk-based Reliability Compliance Working Group (RBRCWG)

Compliance and Certification Committee Meeting June 13-14, 2012

1

Stanley E. Kopman Member RBRCWG and

Assistant Vice President, Compliance Registration and Enforcement

NPCC, Inc.

Presentation Overview

• Risk-based Compliance Monitoring

• Entity Impact Evaluation (EIE) Initiative

• RBRCWG Deliverables

2

3

Risk-based Compliance Monitoring

RBRCWG Deliverables

5

EIET-09, Draft EIEs

EIET-12, Draft EIE Template

RBRCWG Deliverables EIET-09, Draft Entity Impact Evaluations

• Provides Draft Guideline

• Proposes Two Methods for Evaluation

• Introduces EIE Template

6

RBRCWG Deliverables EIET-09, Draft Entity Impact Evaluations

Evaluation Options

• Outlines the assumptions used and the overall EIE impact determination process

• Proposes 2 evaluation methods:

– Use of a four-part alpha-numeric option

– Use of a spreadsheet-based calculation option

• Was discussed at March 2012 CCC meeting

• Note: Focus Group participants discussed using a more subjective roll-up of results

7

RBRCWG Deliverables EIET-12, Draft Entity Impact Evaluation Template

• Outlines EIE Template Process and overall EIE process administration

• Proposes Set of Elements to be Measured

• Identifies Specific Attributes Based on Functional Model Definitions

8


EIE Process Overview

9

• Step 1

• RE initiates EIE on a regular basis

RE Initiation

• Step 2

• RE pre-populates EIE Template with compliance history

Template Distribution • Step 3

• Registered Entity completes template

Registered Entity Response



10

• Step 4

• RE completes Template (if necessary).

RE Completes Template

• Step 5

• RE returns Completed Template to Registered Entity for review and comment

RE Returns Completed Template • Step 6

• Registered Entity reviews and comments on completed Template

Registered Entity Review/Comment



11

• Step 7

• RE Evaluates Template; and utilizes information to determine the final EIE; Information is kept Confidential

RE Evaluation

• Step 8

• RE Utilizes Template Information to determine final EIE Results and appropriate CMEP Scope/Frequency

RE Utilizes Results • Steps 9 and 10

• NERC Provides Oversight to Assure Consistent Application

• Registered Entity Can Use NERC Appeal Process to appeal results

NERC Oversight/Appeal

RBRCWG Deliverables - Observations

• Quality Work Provided by Dedicated Working Group Members

• Consensus Not Achieved on All Aspects of EIE

– Areas of concern include:

• Appropriate information for evaluation of entity impact

• EIE results/objectives – is it categorization of entities (good, better, best) or is it limited to compliance monitoring scoping?

• Process/Application for multi-regional registered entities

• Overall Process documentation/administration

12


• Provides Stakeholder Input into Integrated EIE Initiative

• Consistent Application and Process Across Regions Imperative For Success

• Final Draft Product Completes NERC/CCC Assignment to Develop an Entity Assessment “Template”

13


• NERC Action is required for completion:

– Integrate RBRCWG Template, Focus Group Results and Regional Entity Input

– Seek Industry Review of Consolidated Product

– Conduct Trial Field Test of EIE Process on a Voluntary Sample of Registered Entities

– Make Adjustments and Implement Industry-wide

14

Key Compliance Trends


Overall Trends

194 new violations received in May

114 FERC filings in May

55 FFT violations

59 violations (47 via spreadsheet NOPs and 12 via full NOPs)

• Violation monthly receipt average

Last six months— 232 violations per month

145 new violations received in April

125 FERC filings in April

66 FFT violations

59 violations (40 via spreadsheet NOPs and 19 via full NOPs)


Violations Approved by BOTCC

0

50

100

150

200

250

Num

ber o

f Vio

latio

ns

Month

Violations 2009

Violations 2010

Violations 2011

Violations 2012 Includes Omnibus II

Includes Omnibus I


CEI Processing Statistics

Total Filed with FERC

Full NOPs SNOPs FFTs Total Filed

January 21 51 57 129

February 29 63 46 138

March 30 99 21 150

April 19 40 66 125

May 12 47 55 114


Violation Processing in 2011 and 2012

121

-65

27 60

388

-74 -3

-77 -35

-5 -24

1

386

-276 -188

-19

39

-300

-200

-100

0

100

200

300

400

500

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb March Apr May Nu

mb

er o

f vi

uo

lati

on

s/m

on

th


Caseload Index Description

NERC Caseload Index--Total number of Active Violations divided by the sum of the 6-month average of number of violations filed with FERC plus the 6-month average number of dismissals

Regional Caseload Index-- Total number of Active Violations divided by the sum of the 6-month average of number of violations filed with NERC plus the 6-month average number of dismissals

Active violations include all violations as of May 31, 2012 that are not closed or dismissed. This includes violations that are being processed by NERC or have been sent to FERC and are awaiting closing actions


NERC Caseload Index

NERC Caseload Index –as of May 31, 2012 (months)

Active Violations Violations Filed with FERC

(December 1, 2011 to May 31, 2012)

Total # of Dismissals

(December 1, 2011 to May 31, 2012)

Caseload Index

(Months)

NERC 3644 801 645 15.1


Regional Caseload Index

Regional Caseload Index –as of May 31, 2012 (months)

Active Violations Violations Filed with NERC

(December 1, 2011 to May 31, 2012)

Total # of Dismissals

(December 1, 2011 to May 31, 2012)

Caseload Index

(Months)

FRCC 140 44 7 16.5

MRO 158 57 43 9.5

NPCC 170 54 5 17.3

RFC 743 276 75 12.7

SERC 547 63 65 25.6

SPP RE 380 104 34 16.6

TRE 332 55 28 24.0

WECC

746 197 ‘On-hold’

violations excluded

322 473 5.6


Violations In/Out Trend

194

120

41

159

0

100

200

300

400

500

600

Nu

mb

er o

f V

iola

tio

ns

Month and Year

Violations Received BOT Approved Dismissed Closed


NERC Work CIP and Non-CIP Violations- Based on Discovery Dates from June 2007 to

May 2012

0

20

40

60

80

100

120

140

160

Jun-

07

Jul-0

7 Au

g-07

Se

p-07

O

ct-0

7 N

ov-0

7 D

ec-0

7 Ja

n-08

Fe

b-08

M

ar-0

8 Ap

r-08

M

ay-0

8 Ju

n-08

Ju

l-08

Aug-

08

Sep-

08

Oct

-08

Nov

-08

Dec

-08

Jan-

09

Feb-

09

Mar

-09

Apr-

09

May

-09

Jun-

09

Jul-0

9 Au

g-09

Se

p-09

O

ct-0

9 N

ov-0

9 D

ec-0

9 Ja

n-10

Fe

b-10

M

ar-1

0 Ap

r-10

M

ay-1

0 Ju

n-10

Ju

l-10

Aug-

10

Sep-

10

Oct

-10

Nov

-10

Dec

-10

Jan-

11

Feb-

11

Mar

-11

Apr-

11

May

-11

Jun-

11

Jul-1

1 Au

g-11

Se

p-11

O

ct-1

1 N

ov-1

1 D

ec-1

1 Ja

n-12

Fe

b-12

M

ar-1

2 Ap

r-12

M

ay-1

2

CIP NON-CIP

NERC Work Violations - 3040 total violations

1895 CIP

1145 NON-CIP


NERC Work CIP and Non-CIP Violations by Region

0

50

100

150

200

250

300

350

07 08 09 10 11 12 07 08 09 10 11 12 07 08 09 10 11 12 07 08 09 10 11 12 07 08 09 10 11 12 07 08 09 10 11 12 07 08 09 10 11 12 07 08 09 10 11 12

FRCC MRO NPCC RFC SERC SPP TRE WECC

CIP NON-CIP

NERC Work Violations - for CIP and NON-CIP

from 2007 to May 2012


Top 12 Enforceable Standards – Violated Active and Closed from June 1, 2011 to May 31, 2012

412

223 198 192

145 109 96

75 50 40 40 31

0

50

100

150

200

250

300

350

400

450

Num

ber o

f Vio

latio

ns

Standards


Top 20 Enforceable Standards – Violated Active and Closed Violations thru May 31, 2012

934 889

572

484 450 448

275 254 222 219

179 146 139 127 123 109 107 99 91 72

0

100

200

300

400

500

600

700

800

900

1000

Num

ber o

f Vio

latio

ns

Standards

Agenda Item 3.b CCC Meeting

September 12-13, 2012 Overview of MRC, BOT and BOTCC August 2012 Meetings

The following are notes provided by Patti Metro, CCC vice-chair. These notes are not provided to accurately represent all agenda topics. Items most applicable to the CCC are highlighted.

Compliance Committee ― Open Session August 15, 2012

1. Compliance Enforcement Initiative (CEI) a. Find, Fix, Track and Report (FFT) Progress to Date

i. Issue of not all Regional Entities using FFT is resolved. All Regional Entities are now participating in the CEI.

ii. Presently, FFT processing takes six (6) months to process. NERC and the Regional Entities are looking at efficiencies to reduce processing to four and a half (4 ½) months.

iii. For FFT, if a violation is one that qualifies for FFT, mitigation should be completed quickly which will help reduce time for FFT processing.

iv. FFT violation data: CIP-007 - 15 ½ % PRC-005 - 7 % Internally Identified – 63 % Externally Identified – 37 %

v. Ongoing Implementation Plan Second and Third Quarter 2012 Develop specific training materials Third Quarter 2012

o Online webinar courses for CEA staff o September CEA staff workshop and training course o Begin random sampling

Fourth Quarter 2012 Online webinar courses for CEA staff o All CEA compliance monitoring staff complete required training course and qualification

First Quarter 2013 Implement CEA compliance monitoring staff role b. Pathway for Compliance Enforcement Initiative (CEI)

i. March 2013 CEI Compliance Filing process will be inclusive in developing a whitepaper that will explain improvements to the compliance program and provide a comprehensive plan to roll-out improvements. Expect to see draft of whitepaper for review in late September/early October 2012.

c. Preparation for the 12-Month Report i. The report should discuss the improvement in recognizing and mitigating violations. It should include

next steps. ii. Two important aspects of the filing will include

How the FFT mechanism can be improved Results of audits, spot checks or FFT random samplings

iii. NERC will work with registered entities to gather information from the filing. NERC is interested in any efficiency metrics that can be used in the filing. An example provided is original processing of violations took 12 to 18 months and are now taking 6 months using FFT. NERC will work with the Trades and Forums to solicit any data that have been collected by the groups. NERC anticipates collecting information in OCT/NOV 2012 to develop draft of filing and plans to share draft with select groups in FEB 2013. Comments can be submitted to NERC at [email protected]



September 12-13, 2012

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2. Compliance Operations a. Compliance Bulletin CIP-002 , Option for Transitioning Version 3 to 4

i. Draft Compliance Bulletin to transition from Version 3 to 4 will be developed by the end of 2012. The report will include four scenarios to provide guidance. Scenario D - in regards to CIP Version 3 to 4 big question is how a 3rd party that is not a registered entity be held responsible for compliance to reliability standards.

b. Risk-Based Compliance Monitoring Update i. Entity Impact Evaluation Template – NERC is willing to consider other template criteria if it

provides the necessary subjectivity. NERC will utilize NERC staff, the industry, trades and regional entities to review comments submitted to the template posting.

c. 2013 Annual Implementation Plan and Actively Monitored List i. Compliance assessments are very important aspects of the Annual Implementation plans

as described in the presentation material Registered entities: Encouraged to conduct assessments after events and

disturbances; Cat 2 and higher Compliance assessments not mandatory but a positive sign of compliance culture Compliance assessments may receive credit in enforcement space Self-reports continue to receive credit in enforcement space

3. Regional Entity Topic

a. Reliability Standards Audit Worksheet (RSAW) improvement i. Material presented by Linda Campbell.

ii. Standards Committee Process Subcommittee (SCPS) is reviewing comments to develop responses and corresponding changes. Still not sure whether to post Standard Processes Manual (SPM) for another comment period or go to ballot.

iii. Gerry Cauley commented that if this new RSAW process is successful, the approach will help with all other issues; disparity in compliance enforcement, limit need for CANs and Compliance Bulletins. He explained that the collaborative approach to RSAW development is a positive improvement to the process.

iv. Several BOT members commented that this is approval provides a quality improvement to standards by developing the RSAW with each standard.

v. There is a concern that once a standard has been approved by the BOT with an RSAW included the RSAW can be revised without approval of the BOT or industry.

vi. RSAW will not be included in the standard filing to FERC.

Member Representatives Committee ― August 15, 2012

1. Elections and Nominations a. Member Representatives Committee (MRC) Officer and Sector Elections - MRC election of

officers will take place on Nov 6. At the Feb 2013, meeting the new officers and new members will begin terms. Carol Chin is leaving ATC, but will remain on the MRC until the end of her term unless an issue arises that will not allow here to do so.

b. Update from the Board of Trustees Nominating Committee - Russell Reynolds recruitment firm handling the filling of two positions that are term limited. Committee will re-nominate



3

Dave Goulding to remain on the BOT. Vicky Bailey will not stand for re-nomination. With her deciding not to remain on the BOT, the Committee is asking whether the MRC wants to exercise the option to reduce the BOT size by one member. Janice Case explained the reasoning behind this request. The MRC will discuss over the next few weeks to determine action to take. Nominations open 9/4 thru 10/1.

2. Remarks from Gerry Cauley, NERC President and CEO

a. Two strategic challenges facing i. Impact of compliance on overall effectiveness of the ERO. Proposing March 2013

FFT filing needs to be a more comprehensive end game on compliance. Need to say where we are going in compliance. Model well founded in other regulatory arenas. Need to articulate the end state of compliance. Good procedures and good controls. Want to incentivize internal controls and good compliance programs. Want to move away from zero defect approach to compliance. Compliance assurance role is to determine where there is risk. Standards are another area of risk. Do fact based, evidence based prioritizing to determine whether solution is a standard or other mechanism to address risk. There needs to be some breakthrough on standards development to come up with the right answer not to just get a standard developed.

b. 215 Authority – There needs to be a broad structure to ensure reliability. Intent is to keep bad things from happening. Need to develop a process on how we decide determine priority, tools and processes to get 215 done.

c. Gerry is deeply convicted that NERC does not have to do everything. If NERC can identify the risk, then there is willingness to allow others to resolve the problem. Effort to develop criteria by the end of the year that will be used as a decision tool to determine when will be in NERC’s scope for 2014.

d. John Anderson (ELCON) – there is a bigger concern relevant to a culture of compliance and a way to get over the compliance issues to transition to a Culture of Reliability.

3. ERO Business Plan and Budget Process

a. Mike Walker presented overview of budget process and timelines. b. Praise from MRC of the leveling off of budget needs. Recognized the efforts of NERC and

the REs to work together. c. Carol Chin will lead MRC work with NERC staff on 215 authority issue Gerry mentioned and

budget process efforts in 2013. d. MRC decided to form a second group to work on the FFT filing in March.

4. Standards Process Input Group (SPIG) Recommendations

a. Reliability Issues Steering Committee (RISC) Charter and Initial Slate to the RISC (Recommendation 2) - Reviewed the 5 recommendations made at the last meeting.

i. Mike Smith expressed concern on how the nominees to put forth as a slate of candidates were selected. He believes that all sectors should have been represented on the RISC.

ii. MRC – Agreed to add Mike Smith to the at-large member slate to be considered by the BOT.

iii. Canadian Electricity Association – Expressed concern that there is no Canadian



4

representation on the RISC and will work with NERC staff to determine how to get this representation included.

b. Status of Other Recommendations – Allen Mosher and Herb provided overview of activities

i. Standards Committee Report (Recommendations 1, 4, and 5) ii. Management Report (Recommendation 3)

5. Status and Policy Input for Standards Projects

a. Bulk Electric System (BES) Definition – Phase 2 Report - Pete Heidrich provided overview of project. A phase 1 carryover is the being addressed by the Regional Entities Certification and Registration Working Group is how to calculate “Net Capacity” methodology (E2 – Behind-the-Meter Generation). Phase 2 on schedule and doesn’t anticipate the need to adjust the schedule as posted. Pleased with NOPR and provided overview of the questions of clarification included in the NOPR. Three critical areas; Whether regional subjectivity is eliminated, Differentiation between BES and local distribution and Bright-line and whether there is enough ability to assess facilities below 100kV, plus the role of the Commission to sub 100kV designations.

b. Adequate Level of Reliability Task Force (ALRTF) Status Report - Provided by Allen Mosher – 30 day comment period opened on 8/15/2012

c. Status of Communications Standards - Herb provided update and discussed committee engagement in process and the push to internal controls for COM-003. Zero defect one issue, but other issue is with internal controls and how these types of standards will be audited.

6. Additional Discussion of MRC Informational Session Items, August 8 a. Entity Impact Evaluation Template b. Compliance Enforcement Initiative - No schedule yet for when field determinations will

be allowed for FFT. Nothing yet, but working on a white paper with this and lots of other priority items.

c. Find, Fix, Track and Report (FFT) Order Paragraph 81- Lower Level Facilitating Requirements - overview CCC will have a presentation at September meeting

d. NERC Compliance Process Bulletin #2012-001: Applicability of PRC-023 for Generators - Review for CCC meeting

e. Emerging issues – First time requesting a survey of the MRC

i. Was the survey helpful in prioritizing initiatives? ii. Does MRC feel that the results of the survey reflect the high priority issues?

Board of Trustees ― Open Session August 16, 2012

1. Remarks by Commissioner Norris a. Discussed report on the outage in AZ and CA. Explained that report is a great example of

cooperation. Stressed importance of taking appropriate actions from lessons learned from the report. Everyone needs to look at own facilities including sub-100kV.



5

b. Encourages working toward a more efficient process for reaching decisions. Think about ways to make the standards development process more efficient. Standards need to be developed more quickly.

c. Dance going on about CIP standards. Not doing enough. Encourages moving forward with the CIP standards. An attack may take away the ability to self-regulate.

2. Remarks by Commissioner LaFleur a. She supports the proposal to annually discuss priorities. Continuous cycle of

improvement when something happens. Regular meetings to discuss what are we doing right. What vulnerabilities are present?

b. Applaud Gerry for his initiative to move from zero defect standards to more process oriented compliance. Strongly believe in the safety pyramid as a concept to be used for reliability. Being successful on the all the little things makes the big never happen. Premise for March 2013 filing should be about how to make Reliability better not just about what is wrong with the existing process.

3. President’s Report a. Inflection point because we have the framework and we need to make it better. We

know what we are good at and where we need to make improvements. Time to make big changes. Clear we need to make improvements to the Standards Development Process. What we are doing in standards is not working for the ERO.

b. Compliance process is based on documentation and it has taken away from reliability. How do you compliance that is a framework for compliance. ERO job is to monitor the effectiveness of systems to ensure that an entity is compliant. Programs should not be where 1/3 of an entities SMEs are working on proving how the entity is compliant.

4. Standards a. VAR-002-2b — Generator Operation for Maintaining Network Voltage Schedules ―

Adopted

b. IRO-001-3 — Reliability Coordination — Responsibilities and Authorities ― Adopted

c. Section 1600 Data Request in Response to Order No. 754 ― Approved d. Retirement of the BAL-004-1 — Time Error Correction ― Rescinded Approval – Set

a precedence that staff can ask that the BOT rescind an industry approved standard. This standard was not retired before it was rescinded by the BOT.

5. NERC and Regional Entity Proposed 2013 Business Plans and Budgets and

Associated Assessments ― Approved

6. Report on Rules of Procedure Process Improvements — Approved

7. Standards Process Input Group (SPIG) Recommendations a. Reliability Issues Steering Committee (RISC) Charter and Initial Slate to the RISC

(Recommendation 2) ― approved the Charter as proposed with a one-year sunset for the RISC to review and propose a final charter. Also, the BOT approved the initial slate



6

with the caveat that the committee should include a Canadian representative. Christine Schwab from Dominion was approved as the initial Chairman of the RISC.

b. Status of Other Recommendations ― Discussion – No additional discussion from material provided to the MRC.

i. Standards Committee Report (Recommendations 1, 4, and 5) ii. Management Report (Recommendation 3)

8. Follow-up on Southwest Outage Actions (NERC and WECC) — Information No additional discussion from material provided to the MRC

9. Critical Infrastructure Update — Information provided a. Cyber Security Risk Maturity Model b. Electricity Sector Information Sharing and Analysis Center (ES-ISAC) c. Electricity Sub-Sector Cyber Security Risk Management Process Guideline d. High-Impact, Low-Frequency (HILF) – Coordinated Action Plan – Phase II

10. External Affairs Update: Canadian Affairs — Information provided to explain Canadian regulatory process

11. Committee Reports - Provided a. Operating Committee b. Planning Committee c. Critical Infrastructure Protection Committee d. Member Representatives Committee e. Personnel Certification Governance Committee f. Standards Committee g. Compliance and Certification Committee h. Electricity Sub-Sector Coordinating Council

12. Forum and Group Reports - Provided a. North American Energy Standards Board b. Regional Entity Management Group c. North American Transmission Forum d. North American Generator Forum

13. Board Committee Reports

a. Corporate Governance and Human Resources - approved reducing of BOT membership from 12 to 11

Agenda Item 4.d.i CCC Meeting


1

Southwest Outage Report

Background

Patti Metro, CCC Vice Chair, represented the CCC on a Standing Committee Leadership Call on August 3, 2012 to discuss the Southwest Outage Report and role of the Standing Committees to address report recommendations. She committed to Dave Nevius that she would follow-up with Mike Moon to offer the expertise of the CCC to help determine whether there is something in the existing processes that need to be modified to address the concerns expressed in the questions highlighted below that are included the July 26, 2012 letter to WECC. From the discussion on the call, there is concern that some of the entities sited in the report may not capable of performing the functions for which the entity is registered and possibly certified to perform.

The goal of this review by the NERC Committees per Dave Nevius is “what can be learned from this event and shared with the industry to prevent this from happening again?”. 6. Roles and Responsibilities of Reliability Coordinator (RC), Balancing Authorities, and TOPs

• Evaluate and clarify roles and responsibilities of all entities, including small, local entities.

• Ensure transmission operators, including small ones, have adequate situational awareness and system visibility and are conducting same-day real-time contingency analysis.

• De-register entities not capable of performing functions for which registered and transfer their responsibilities or require joint registration organizations.

8. ERO/Regional Entity (RE) Processes

• In collaboration with NERC, review the history of ERO and WECC RE reliability oversight to understand why underlying conditions were not identified and addressed; to include regional studies and modeling; compliance monitoring activities and what actions should be taken going forward.

Possible NERC Lead Discussion Items Provided in email from Mike Moon August 6, 2012

The review of ORCS processes and procedures are part of the introspection exercise and we welcome CCC involvement in this review. Some specific areas for consideration:

1. Materiality of sub 100kV facilities – IIDs parallel 92 kV lines a. How do NERC and the Regions deal with this? b. What are the industries (BA, RC, TOP, TP, RC) responsibilities to identify materiality? c. What are the regional study groups responsibilities?

2. Certification being more than a review of standards and requirements – certifications provide a great opportunity to talk to an entity about the “what ifs”.

a. How do we add emphasis on the intent and purpose of the standard – get to the reliability efforts?

b. How can we integrate the use of recent reports to talk reliability? I.e. the SW blackout? 3. Registration writ large – are the right entities registered for the right functions?

Agenda Item 4.d.i CCC Meeting


2

a. How well is the functional Model understood? b. Do all entities know their TP, RC,…? c. How can we refine registration to focus on the critical functions?

July 26, 2012 Mr. Mark Maher Western Electricity Coordinating Council 155 North 400 West, Suite 200 Salt Lake City, UT 84103 Dear Mark, On May 1, 2012, the Federal Energy Regulatory Commission (FERC) and NERC released a joint report summarizing the causes and findings of our eight-month review of the September 8, 2011 Southwest event affecting nearly three million customers in Southern California, Arizona, and Baja California, Mexico. The report identified 27 recommendations for preventing similar future events in the West. I appreciate your responsive leadership since the issuance of the report to initiate quick remediation of many of the most urgent issues needed to ensure a reliable Western Interconnection through the peak summer period. The weekly calls to review progress have also been helpful. I understand also that you are working on longer term plans to address all of the recommendations in the report. Additionally, I want to thank you for the timely response to the June 5, 2012 letter issued by David Nevius, NERC’s executive director of the event review, requesting a status report on follow-up actions by registered entities and WECC itself. To date there appears to be substantive and responsive actions to remediate a number of the specific causes of the September 8 event. I have also had a number of follow-up meetings with senior executives from the West, including with the WECC board in late June and the Western Electric Industry Leaders group in July, and I am pleased with the level of acknowledgement of a need for substantive changes and improvements to the management of reliability in the Western Interconnection. I believe, however, that many of the findings of the report point to underlying systemic or institutional issues with the management of reliable interconnected operations and planning, and with the culture of reliability in the Western Interconnection. These concerns are reinforced by some of the initial gaps identified in your July 20 white paper outlining aggregated responses to a survey conducted by WECC. The responses indicate broad gaps involving entities beyond the parties involved in the September 8 event with regard to situational awareness, reliability information sharing, system reliability analysis and planning, and system protection coordination, to name a few. The purpose of this letter is to request that you provide to NERC, no later than August 31, 2012, a detailed report outlining near-term remediation actions completed or in progress to date, and plans for additional actions going forward. The forward-looking portion of the report should provide a description of the objectives and deliverables planned to address the 27 recommendations from the FERC-NERC report, as well as the eight broader systemic issues I have outlined below. I understand that by August 31, some of the longer-term actions may only have a plan of action, but may not yet

2

have been initiated. For each recommendation and issue below, the report should provide a summary of actions planned and a timetable of milestones by which we can track progress with you. Although there may be other specific remediation plans with individual entities directly involved in the September 8 event, I think there is a great opportunity for WECC, under your leadership, to pull together the comprehensive, Interconnection-wide response to address the recommendations and issues from this event. The systemic or institutional concerns that I have identified are summarized below. Some of these issues are related to one or more of the recommendations from the FERC-NERC report, while others address broader underlying concerns:

1. WECC Reliability Coordinator Tools, Authorities, Capabilities and Support

Ensure sufficient staff resources, tools, and training.

Ensure that registered entities understand and expect reliability coordinator authority will be exercised when needed, and with the appropriate degree of urgency in cases of potential cascading situations.

Ensure the reliability coordinator is willing to assert authority when a reliability issue is identified.

Ensure reliability coordinator has situational awareness of the entire bulk electric system in the Western Interconnection.

Benchmark reliability coordinator capabilities and performance compared to other reliability coordinators.

2. WECC Organization, Governance and Conflict of Interest

Consider separating governance of functions delegated by NERC from registered entity functions.

Consider establishing a smaller, more effective board for the regional entity functions; consider what is an effective balance of independent directors and stakeholder directors.

Ensure additional roles for the region (e.g. reliability coordinator, planning coordinator, energy imbalance market, etc.) are separated from NERC delegated functions; NERC has no opinion on the governance of these other functions.

3. WECC Path Ratings and Interconnection Reliability Operating Limits (IROLs)

Ensure all IROLs are identified and updated dynamically based on changing system configuration.

Ensure path limits are updated; not depending solely on long-term or seasonal studies.

Resolve path operator responsibilities – who has Transmission Operator (TOP)/Transmission Owner (TO) responsibilities for all facilities that comprise each rated path.

3

4. System Protection, Remedial Action Schemes, and Special Protection Systems

Evaluate any potential risks introduced by a proliferation of remedial and special protection schemes and safety nets; ensure all schemes are coordinated with each other and general system protection.

Ensure awareness, recognition, and communication of operating limits created by relay settings.

5. Data Sharing, Non-Disclosure and Data Confidentiality Agreements

Establish a culture of trust in reliability data sharing; overcome current barriers to data sharing.

All reliability coordinators, transmission operators, and balancing authorities should have access to all reliability data necessary to perform their next-day and real-time reliability assessments; includes neighboring systems and in some cases interconnection-wide data.

Complete the execution of the universal NDA to allow data sharing for next-day studies among all transmission operators, balancing authorities and reliability coordinators.

6. Roles and Responsibilities of Reliability Coordinator (RC), Balancing Authorities, and TOPs

Evaluate and clarify roles and responsibilities of all entities, including small, local entities.

Ensure transmission operators, including small ones, have adequate situational awareness and system visibility and are conducting same-day real-time contingency analysis.

De-register entities not capable of performing functions for which registered and transfer their responsibilities or require joint registration organizations.

7. Awareness and Recognition of Impacts of Sub-100 kV Systems on Bulk Power System Reliability

Evaluate the entire system to identify any sub-100 kV facilities that could potentially lead to cascading outages.

Ensure active monitoring and alarming of all such facilities by the WECC RC.

8. ERO/Regional Entity (RE) Processes

In collaboration with NERC, review the history of ERO and WECC RE reliability oversight to understand why underlying conditions were not identified and addressed; to include regional studies and modeling; compliance monitoring activities and what actions should be taken going forward.

4

Once again, thank you for your responsive leadership at this critical time in addressing the issues outlined in the report and in this letter. I also want to thank the executive leadership within the Western Interconnection for stepping up at this critical time to help you lead these efforts, particularly the Western Electric Industry Leaders group, whom I have copied on this letter. Sincerely,

Gerry Cauley President and CEO cc: Western Electric Industry Leaders

Chairman Jon Wellinghoff, Federal Energy Regulatory Commission Honorable Phillip D. Moeller, Federal Energy Regulatory Commission Honorable John R. Norris, Federal Energy Regulatory Commission Honorable Cheryl A. LaFleur, Federal Energy Regulatory Commission Honorable Tony Clark, Federal Energy Regulatory Commission Mr. Jim Pederson, Federal Energy Regulatory Commission Mr. Norman Bay, Federal Energy Regulatory Commission Mr. Mike Bardee, Federal Energy Regulatory Commission Mr. Joseph McClelland, Federal Energy Regulatory Commission NERC Board of Trustees NERC Executive Management Group

Follow-Up Activities from the Southwest OutageMelanie Frye, Vice President, Operations and Planning, WECCDave Nevius, Senior Vice President, NERCMember Representatives Committee MeetingAugust 15, 2012


Key Dates/Activities

May 1 FERC/NERC Inquiry Report

May 7 NERC/WECC Staff Discussion

May 25 NERC meeting with FERC

May 31 WECC meeting with SW Executives

June 5 Letter to Regional Entities

June 6-7 Meeting of Western CEOs (EEI CEO meeting)

June 25-27 WECC Membership and Board Meetings

July 12 WECC meeting with FERC

July 13 WEIL meeting in Seattle

July 20 WECC Summary of Survey Responses

July 25 NERC meeting with FERC

July 26 NERC letter to WECC

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Communications with FERC

� WECC/NERC weekly calls with FERC on progress of WECC, WECC committees, and WECC member efforts and initiatives to address report recommendations

� Effective vehicle for information sharing and coordinating questions/answers between FERC and WECC/NERC

� Several meetings with FERC by WECC and NERC staff to discuss progress of follow-up activities and next steps


NERC Request to Regions

� June 5 letter to Regional Entity Executives � Summary of preliminary actions to address Next-Day and Real-

Time Operating Issues included in agenda background

� Report on Longer-Term and Seasonal Planning Issues to follow by August 31

� Summary of responses as of July 23, 2012 � All Regions fully committed and engaged in reviews

� Various approaches: surveys, technical committee reviews, etc.

� No major reliability issues found to-date outside of WECC; reviews continuing

� NERC PC and OC also engaged in review of recommendations to determine any actions needed on overall NERC basis


WECC Survey

WECC initiated detailed survey on:

� Next-Day Studies

� Seasonal Planning

� Near- and Long-Term Planning

� Situational Awareness

� Consideration of BPS Equipment

� Protection Systems

� Angular Separation

Survey results being analyzed; gaps and best practices identified


Next-Day Planning

� Gaps � Number of TOPs do not perform studies themselves

� External system conditions not included in all studies

� Not all TOPs study effects of sub-100 kV facilities

� Best Practices � TOPs that model external system conditions in next-day

studies have better situational awareness

� Existence of outage coordination groups and sharing information on daily calls

� WECC RC now shares next-day study inputs in addition to previously shared results with entities that have signed the universal NDA


Seasonal Planning

� Gaps � Failure to communicate and model planned outages

� No prescriptive criteria for including sub-100 kV facilities

� Shoulder load period studies do not consider planned outages

� Failure to explicitly communicate relay settings

� Lack of universal participation in sub-regional seasonal studies

� Lack of study comprehensiveness

� Best Practices � Complete system representation, including sub-100 kV

facilities

� Inclusion of scheduled outages in shoulder period studies


Near- and Long-Term Planning

� Gaps � Inconsistent preparation of cases; lack of consideration of

sub-100 kV facilities

� Limited communications regarding protection systems

� Examination of Remedial Action Schemes limited to internal studies

� Best Practices � Implement relays in dynamic simulations

� Better modeling of generator and generator controls to capture dynamic response

� Implement RAS into dynamic simulations


Situational Awareness

� Gaps � Lack of RTCA among half of TOPs � Limited procedures for notifying RC/neighbors of loss of SA tools � Failure to consider timing of mitigation measure implementation � Lack of consistency between planning and operating models � Lack of awareness of RTTBPTF recommendations

� Best Practices � TOP visibility extended 6 buses into neighboring systems � Procedure for notifying all impacted entities for loss of tools � SOLs set to allow at least 20 min for operator action � Use of WECC base case to ensure consistency between models


BPS Equipment

� Gaps � Lack of consistent mechanism for identifying sub-100 kV

elements to include in studies

� Best Practices � Studying sub-100 kV elements to identify those that would be

impacted or would impact BPS reliability


Protection Systems

� Gaps � Only review settings on relays applied 200 kV and above � Most RAS owners have no internal review process � Most GOs/GOPs do not evaluate generator performance under

severe system conditions for ride-through capability

� Best Practices � Some RAS owners review schemes twice per year


Angular Separation

� Gaps � Most TOPs cannot estimate standing angles following outages � Many TOPs have not installed PMUs or digital relays � Some operators lack access to PMU data � Lack of TOPs advance plans to reduce standing angles

� Best Practices � One entity has visibility of PMU data on EMS displays and ability

to remote synchronize electrical islands following an event � PMU data will be made available to dispatchers in real time � One entity has plan for phase angle closing during major

outages, with specific measures to reduce angles � RC making certain TOPs aware of post-contingency phase angles

when angles exceed allowable closure limits


Key Accomplishments

� WECC board approved additional RC staff resources � Next-day studies posted on RC secure website � RC five-year plan to address gaps and set vision � SOL/IROL methodology enhanced to address IROL

identification process � Relay setting changes on Coachella Valley

transformers and third bank added; new relays on El Centro transformers

� S-Line RAS scheme modified; further review underway � New “smart” RAS scheme for SONGS separation being

developed; implemented when SONGS unit returns


Next Steps - WECC

� Strengthen RC staff, tools, and training � Clarify and strengthen RC role, responsibilities and

authorities � Expand reliability data sharing and communication � Resolve WECC organization/governance issues � Clarify Path Operator responsibilities, authorities, and

procedures � Evaluate impacts of sub-100 kV elements � Address reliability risks posed by RAS schemes

Formal report in response to July 26 NERC request

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Next Steps - NERC

� Release and evaluate WECC report on progress in addressing issues in response to NERC July 26 request and timeline for completing remaining remediation efforts

� Address any reliability issues identified by other Regional Entities as a result of their reviews

� Develop overall NERC lessons learned, guidelines, procedures, training and education materials, standards, etc. as necessary to address identified reliability issues

� Review history of WECC/NERC reliability oversight to understand how issues were not previously identified, and determine what actions are needed going forward

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