FRCC Fall Workshop 2011 - NERC Presentation

Florida Reliability Coordinating Council - FRCC 

NERC Compliance 

Transparency of the Compliance Process 

October 10-14, 2011 

Jim Hughes 

Manager, Registration and Certification

Agenda 

• Transparency Initiatives 

• Risk Based Compliance and Enforcement 

• Compliance Analysis Reports (CARs) 

• Compliance Application Notices (CANs) 

• Registration and Certification 

2 RELIABILITY | ACCOUNTABILITY

Risk Based Compliance & 

Enforcement 

• Discretionary Enforcement 

• Phase One 

• Find, Fix, Track 

• 2012 AML 

• Forced Registration 

• Certification Process 

• Entity Assessment 

• Internal Compliance Program 


ICP Elements 

Culture of 

Compliance 

Performance 

Measures 

Self 

Assessment 

ICP 

Corrective 

Action 

Program 

Event Analysis 

Benchmarking 


ICP Attributes 

• Leadership and Senior 

Management Involvement 

Culture of 

Compliance 

• Written standards, 

policies and procedures 

• Education, training and 

communication 

• Monitoring/audits 

• Mechanism to report 


ICP Examples 

• Corrective Action 

• Event Analysis 

Culture of 

Compliance 

• Gap Analysis 

• Self Assessment 

• Benchmarking 


FERC Orders 

• Policy Statement on Enforcement (13 questions) 

– Docket No. PL06-1-000, 113 FERC 61,068 (October 20, 2005) 

• Revised Policy Statement on Enforcement 

– Docket No. PL08-3-000, 123 FERC 61,156 (May 18, 2008) 

• Policy Statement on Compliance (4 Hallmarks) 

– Docket No. PL09-1-000,125 FERC 61,058 (October 16, 2008) 

• Policy Statement on Penalty Guidelines 

– Docket No. PL10-4-000, 130 FERC 61,220 (March 18, 2010) 

– suspended on April 15, 2010 

• Revised Policy Statement on Penalty Guidelines (Additional 

criteria during a FERC 1.b investigation) 

– Docket No. PL10-4-000,132 FERC 61,216 (September 17, 2010) 



Compliance Analysis Reports

Compliance Analysis Reports 

• Purpose: 

• To provide transparency to industry on historical violation 

and compliance information 

• To provide in depth Regional violation analysis 

• Give recommendations to the industry on a Requirement 

basis for compliance 

• Process: 

• Draft is reviewed by Regional Working Groups 

• Final approval is by the NERC BOT 

• NERC welcomes industry feedback for report topics 


CARs in Queue 

• Three CARs approved by BOTCC 

• TOP-002 

• Registration and Registration Appeals 

• Certification 

• CIP-005 is currently being developed 

• Web link on the NERC Compliance site: 

http://www.nerc.com/page.php?cid=3|329 


Compliance Analysis Reports 


Top 20 Violations All-Time 

All-Time Violations Through July 31, 2011 

800 

743 

700 

600 

597 

Number of Violations 

500 

400 

300 

468 467 

299 

276 

200 

100 

204 194 187 

173 

146 136 130 

116 115 110 102 

87 86 

71 

0 

Standards 

Analysis Complete: PRC-005, CIP-004, FAC-008, FAC-009, CIP-001 

VAR-002, PER-002, CIP-006, CIP-007, EOP-005 


Top 20 Violations thru July 31 

Previous 12 Months Violations Through July 31, 2011 

500 

450 

458 

400 

350 

Number of Violations 

300 

250 

200 

235 

223 

213 

203 

150 

100 

132 

112 

93 89 

62 

50 

42 39 36 31 28 25 21 19 17 17 

0 

Standards 

Analysis Complete: PRC-005, CIP-004, FAC-008, FAC-009, CIP-001, 

VAR-002, PER-002, CIP-006, CIP-007, EOP-005 


Certifications 

30 

Certifications Completed by Year 

25 

Certifications 

20 

15 

10 

17 

5 

0 

1 

2 

1 

7 

1 

3 

4 

2007 2008 2009 2010 

Year 

Balancing Authority Reliability Coordinator Transmission Operator 


Registration Appeals 

Total Registration Appeals by Year 

90 

83 

80 

70 


60 

50 

40 

30 

20 

10 

0 

6 

2 3 

2007 2008 2009 2010 

Year 



Registration Appeals Settled at the Regions 

65 Total Appeals Were Settled at the Regions 

25 


20 

15 

10 

5 

0 

6 

1 

1 

16 

1 

11 

7 

7 

6 

6 

1 

2 

FRCC MRO NPCC RFC SERC SPP TRE WECC 

Region 

Entity Removed from NCR 

Entity Remained on the NCR 


Feedback 

• NERC is open for suggestions to better improve the 

reports as well as which standards should be included 

as the subject of a report 

• If you have any questions regarding Compliance 

Analysis Reports please contact Ryan Stewart at 

Ryan.Stewart@nerc.net 



Compliance Application Notice (CAN) Process Update

Background 

• Compliance Application Notices (CANs) have been a 

major topic of discussion in the industry. 

• The Chairman of the NERC Board requested policy 

input from the NERC Member Representatives 

Committee (MRC). 

• CANs were discussed at the August MRC meeting, 

with the NERC Board in attendance. 

• At the NERC Board meeting the next day, guidance 

was provided. 


NERC Board Guidance 

• Review and revise the CAN Process Document 

• CAN Purpose: 

o To establish consistency in the application of compliance 

criteria across all CEAs; and 

o To provide transparency to industry on how a CEA will 

apply compliance with a NERC Reliability Standard. 



• CAN Scope 

• A CAN provides instructions to CEAs regarding the 

boundaries within which to assess compliance with 

standards and requirements. 

• A CAN cannot expand a standard. 

• A CAN cannot add new requirements to a standard. 

• NERC is responsible for issues that impact the reliability of 

the BPS. 



• To contest a CAN, a Registered Entity or its representatives may 

(in order of hierarchy): 

• Submit technical evidence to have a CAN changed or removed; 

• Propose a change to the standard through a request for a formal 

interpretation or a Standard Authorization Request (SAR); or 

• Request a higher-level review of the CAN 

o First level of review by NERC’s Chief Executive Officer 

o Second level of review by NERC Board of Trustees Compliance Committee 

(BOTCC) 

• In accordance with the NERC Rules of Procedure, a Registered 

Entity may contest a violation that was assessed due to the 

application of a CAN. 


Initial Industry Feedback 

• CAN Process was posted for industry comment 

• Initial feedback includes requests for: 

• More detail on the CAN development process, to include 

vetting 

• Posting all industry comments with the analysis for 

transparency 

• Detail on feedback mechanism to Standards for issues not 

dealt with in the CAN 

• Specification regarding the higher level review process, 

format and timelines 

• Detail regarding the higher level review options 


Retired CANs 

• CANs Retired on August 31, 2011 

• CAN-0001 INT-004-2 R1: Correction to VRF Matrix 

• CAN-0002 TOP-003-0 R1.3: Correction to VRF Matrix and 

2010 Actively Monitored List (AML) 

• CAN-0003 IRO-006-4.1 R2: Correction to 2010 AML 

• CAN-0004 IRO-004-1 R3: Correction to VRF Matrix and 

2010 AML 

• CAN Website 

• http://www.nerc.com/page.php?cid=3|22|354 


CANs in Effect 



Registration and Certification

• Purpose and Background 

• Organization Certification 

– New Entity 

– Provisional Certification 

– Change/Expanding Footprint 

• Registration Options 

– Individual Registration 

– Joint Registration Organization (JRO) 

– Coordinated Functional Registration (CFR) 

– Concurrent 

Topics 


Purpose and Background 

• Purpose: To provide an update on 

Registration and Certification processes, 

procedures, and responsibilities 

– RoP Section 500 and Appendices 5A & 5B 

• Background - Industry Feedback requesting 

– Additional guidance regarding certification 

processes for BA, RC & TOP 

– Additional guidance regarding registration options 

(JRO/CFR/Individual/Concurrent Registrations) 

• Recent changes to the NERC Rules of Procedure 

Section 500 and Appendices 5A & 5B address these 

issues 


Organization Certification – 

New entity 

• Scope is for BA, RC, and TOP 

• New entity must certify before going 

operational per RoP 500 and Appendix 5A 

– Entity must submit application to the Region(s) 

– No compliance issues because the entity is not 

operating 

– Process takes 1- 9 months to complete 

– Entity must go operational within 1 year 

after being certified 


Provisional Certifications 

• The Organization Registration & Certification 

Subcommittee (ORCS) established a process 

– Already operating RC, BA, or TOP; 

– Has completed a compliance audit in the 

applicable function(s); and 

– Has completed a readiness assessment in the 

applicable function(s) 

• Readiness assessments are no longer being 

performed by the ERO 

• If the entity has not completed both the 

above, a certification review will be 

completed by the Regional Entity with NERC 



Change/Expansion 

• Entity is already certified as an RC, BA, or 

TOP 

• Per RoP Appendix 5A, items to consider 

when this entity may need to certify: 

– Changes to an entity’s footprint or operational 

challenges (i.e., TLRs) due to the changes 

– Organizational restructuring that could impact 

the BPS reliability 

– Relocation of the control center(s) 

– Changes to entity ownership requiring major 

operating procedure changes 



Change/Expansion 

• Items to consider (continued) 

– Significant changes to JRO/CFR 

assignments or agreements 

• Such as addition or removal of a member to a 

CFR 

– Complete replacement of a SCADA/EMS 

• The decision to certify this entity is a 

collaborative decision between NERC 

and the Regional Entity 

– It could be an aggregate of the above 

– Focus will be on the changes 



Registration Options

Individual Registration 

• “Organizations will be responsible to register 

and to comply with approved reliability 

standards to the extent that they are 

owners, operators, and users of the bulk 

power system(…)” 

• That entity must fully comply with the 

applicable NERC Reliability Standards 

– Delegated Reliability Tasks 

– NERC Bulletin 2010-004 provides guidance… 

“Guidance for Entities that Delegate Reliability 

Tasks to a Third Party Entity ” 


Guidance Recommendations 

• Ensure that non-registered entities 

performing reliability tasks on its behalf 

comply with the applicable NERC Reliability 

Standard requirements; 

• Ensure that non-registered entities provide 

evidence of such compliance; and 

• Registered entity must ensure that NERC 

and the Regional Entity are aware of 3 rd 

party performing reliability tasks in its behalf 

– Compliance Responsibilities cannot be delegated 


Joint Registration Organization (JRO) 

• Identified in RoP 507 

– Entity may register for itself and one or more of its 

members for one or more functions 

– Takes full compliance responsibility for itself and it’s 

member(s) 

– Application made to the Regional Entity(s) 

– The JRO must have an agreement with its member(s) 

– JROs posted on NERC Web (Formerly Type I JRO) 

– The JRO is responsible for all CMEP activities 

• Typically a Coop, G&T, or JAA 


• Identified in RoP 508 

Coordinated Functional Registration 

(CFR) 

– Entity may register with one or more entities for a single 

function 

– Allocating or assigning compliance responsibility 

amongst entities 

– Application made to the applicable Regional Entity(s) 

– Application must identify the CFR’s Point of Contact 

(POC) 

– Agreement clearly articulating compliance 

responsibilities (typically a list) 

– List (matrix) must be kept up to date by a single POC 



(CFR) 

• Identified in RoP 508 (continued) 

– CFRs posted on NERC Web (Formerly Type II 

JRO) 

– CFR does not change compliance 

responsibilities for other function(s) for which 

each entity in the CFR may be registered 

– Region is to ensure no unnecessary duplication 

or areas lacking in the CFR 

• Work closely with the Regional registration manager 



(CFR) 

Entity A 

(POC) 

Balancing Authority 

Example CFR 

Entity B, C, 

& D 

Owns ACE 

-BA 

CFR 

Agreement 

Own Meters 

-TO/TOP 

POC is the BA for Entity B, C, & D 

• BAL-001-0 R1 POC Only (Area Control Error-ACE) 

• BAL-005-0.1b R13 Split (POC owns ACE & Members own Meters) 

• After CFR is approved by the region and posted on the NERC Compliance 

Registry, all will be registered as a BA under the CFR 


Concurrent Registration 

• Multiple registered entities will register for a BES 

component (i.e., generator) or common area 

(i.e., control area) 

– Should have agreements in place 

• There may be legacy agreements involved 

– Registered entities should provide a list to the 

Regional Entity that clearly articulates which 

requirements are divided amongst all those 

that are concurrently registered 

• Each Registered Entity should be able to point to sections of 

their agreement(s) that support their position(s) 

• Manage compliance risk/Exposure 


Compliance Registry Criteria 

• Provides the criteria for registration of a 

user, owner, or operator of the bulk power 

system 

• That entity may appeal its registration per 

the NERC Rules of Procedure Section 500 

and Appendices 5A 

– Work closely with the Regional registration 

manager if you think you should be 

deregistered 


References 

• FERC Order #672, #693, and #706 

– http://www.nerc.com/files/final_rule_reliability_Order_672.pdf 

– http://www.nerc.com/files/order_693.pdf 

– http://www.nerc.com/files/FERC_Order_706.pdf 

• NERC Bulletin #2010-004 

– http://www.nerc.com/files/2010-004%20v1%200.pdf 


References 

• NERC Rules of Procedure 

– Section 500 “Organization Registration and 

Certification” 

– Appendix 5A “Organization Registration and 

Certification Manual” 

– Appendix 5B “Statement of Compliance 

Registry Criteria” 

http://www.nerc.com/page.php?cid=1|8|169 


• There are various options regarding 

registration 

– Single registration 

– JRO – RoP 507 

– CFR – RoP 508 

– Concurrent registration 

Conclusions 

• Fully understand your compliance risks and 

accountability for each! 

– NERC Guidance under Bulletin 2010-004 

– Work with the Regional Entity registration 

contact 


Contacts 

• Jim Hughes 

– Jim.Hughes@nerc.net 

• Ryan Stewart 

– Ryan.Stewart@nerc.net 

• Regional Entity Website (FRCC RE) 

– https://www.frcc.com/Compliance/Shared%20D 

ocuments/Forms/AllItems.aspx 


Questions?

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