While safeguarding uniformity and reliability
by Bill DeGrandis
Should electric service be less reliable in California than in Maine? Should residents of certain states be concerned that reliability of electric service in their area may be compromised, without them knowing it?
Such questions could arise if you saw brief newspaper or magazine accounts about the new electric reliability standards that are currently being considered by the Federal Energy Regulatory Commission. Will some areas of the country have more stringent standards and more reliable service than others?
The new mandatory electric reliability standards stem from FERC’s new authority under the Energy Policy Act of 2005. After the August 2003 blackout impacted more than 50 million people in the Midwest and Northeast, Congress again reexamined whether new legislation would be needed to help protect electricity infrastructure in the U.S. Through EPAct 2005, Congress added a new Section 215 to the Federal Power Act, requiring FERC to develop appropriate criteria and certify an organization as the electric reliability organization (ERO), making the previous volunteer reliability organization structure mandatory. The ERO would then propose and enforce reliability standards for the bulk power system in the U.S., subject to FERC approval. Enforcement will be by the ERO, FERC and designated regional entities.
Through a series of Orders, FERC has implemented the reliability program and certified the North American Electric Reliability Corporation as the ERO, as of July 20, 2006. NERC, in its capacity as the ERO, has proposed more than 100 reliability standards, 83 of which FERC approved. Fifty-six of those 83 reliability standards have been sent back to the ERO by FERC for significant improvements. In addition, FERC, through its March 2007 Order, approved six of the eight proposed regional variances in the reliability standards.
But are regional variances necessary? Will they undermine Congress’ intent to strengthen the electricity infrastructure?
FERC: Two types of regional differences
Electric delivery systems in different regions can be subject to very different constraints. Transmission lines running through heavily forested areas in the Northeast, for example, require extensive tree trimming inspections and related work, while transmission lines in treeless desert areas of the Southwest would not.
During the rulemaking process, some industry groups expressed concern that there would be overlapping and internally inconsistent provisions if too many regional differences were accepted. This would undercut congressional intent, they contended, and would not result in a uniform system of reliability standards.
After considering the various comments, FERC stated it would consider two types of regional differences, as long as they are otherwise just, reasonable, not unduly discriminatory or preferential and in the public interest, as required by the statute:
- Regional differences that are more stringent than the continent-wide reliability standards, including a regional difference that addresses matters that the continent-wide reliability standard does not
- A regional reliability standard that is necessitated by a physical difference in the bulk power system.
Those concerned that regional variances could undercut uniformity or reliability can take solace in the fact that the regional standards have to be more stringent than the reliability standards proposed by the ERO. Click here to enlarge image
As FERC noted in an earlier Order, No. 672, it will examine whether a regional difference is necessary or appropriate to maintain reliability and whether such a regional difference would affect reliable operation in another region. The regional variances would be reviewed on a case by case basis, and the regional entity’s ability to have regional variances “to meet the reliability needs of that region does not justify the weakening of continent-wide reliability standards.” In addition, certain reliability standards require regional entities to develop specific criteria for use by users, owners or operators within each region. These are known as “fill-in-the-blank” standards.
Besides the “fill-in-the-blank” standards, FERC also approved certain regional standards that were proposed due to physical differences unique to a particular system. For example, in its March 2007 Order, FERC approved a regional variance for the Electric Reliability Council of Texas due to ERCOT’s inability to achieve a 90 percent compliance level as a balancing authority. ERCOT noted that it is a single control area, is not synchronized with the Eastern interconnection, and cannot create inadvertent flows or time errors in other areas.
FERC also approved a regional variance for the Midwest ISO, PJM and Southwest Power Pool in connection with their congestion management process, noting that seams agreements had been reached with these entities and neighboring systems. Other changes dealt with differences in how balancing authorities operate in particular systems.
Thus, the reliability standards being reviewed and finalized by the ERO and the regional entities are the subject of an ongoing process. However, those concerned that regional variances or standards may undercut uniformity or reliability can take solace in the fact that the regional standards have to be more stringent than the reliability standards proposed by the ERO. In situations where the standard is not applicable for some reason, the regional entity needs to justify the regional variance, which will be subject to the ERO’s and FERC’s review and approval, with opportunity for public review and comment.
William DeGrandis is a partner in the corporate department of Paul Hastings Janofsky & Walker LLP, in the Washington, D.C. office, and is a member of the firm’s global projects group. He has more than 25 years of experience in the energy regulatory and transactions area, specializing in power supply, transmission, interconnection and electric reliability matters. He wishes to thank Karen Mallan in the Washington office of Paul Hastings for her great help with this article.