Mandatory Reliability Standards for the Bulk-Power System, 64770-64879 [06-8927]

Agencies

• DEPARTMENT OF ENERGY
• Federal Energy Regulatory Commission

[Federal Register Volume 71, Number 213 (Friday, November 3, 2006)]
[Proposed Rules]
[Pages 64770-64879]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 06-8927]



[[Page 64769]]

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Part II





Department of Energy





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Federal Energy Regulatory Commission



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18 CFR Part 40



Mandatory Reliability Standards for the Bulk-Power System; Proposed 
Rule

Federal Register / Vol. 71, No. 213 / Friday, November 3, 2006 / 
Proposed Rules

[[Page 64770]]


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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 40

Docket No. RM06-16-000]


Mandatory Reliability Standards for the Bulk-Power System

October 20, 2006.
AGENCY: Federal Energy Regulatory Commission, DOE.

ACTION: Notice of proposed rulemaking.

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SUMMARY: Pursuant to section 215 of the Federal Power Act (FPA), the 
Commission is proposing to approve 83 of 107 proposed Reliability 
Standards, including six of the eight regional differences, and the 
Glossary of Terms Used in Reliability Standards developed by the North 
American Electric Reliability Council, on behalf of its wholly-owned 
subsidiary, the North American Electric Reliability Corporation (NERC), 
which the Commission has certified as the Electric Reliability 
Organization (ERO) responsible for developing and enforcing mandatory 
Reliability Standards. Those Reliability Standards meet the 
requirements of section 215 of the FPA and Part 39 of the Commission's 
regulations. However, although we believe it is in the public interest 
to make these Reliability Standards mandatory and enforceable by June 
2007, we also find that much work remains to be done. Specifically, we 
believe that many of these Reliability Standards require significant 
improvement to address, among other things, the recommendations of the 
Blackout Report. We therefore propose, pursuant to section 215(d)(5), 
to require the ERO to make significant improvements to many of the 83 
Reliability Standards that are being approved as mandatory and 
enforceable. Appendix D provides a list of the Reliability Standards 
that should be given the highest priority when the ERO undertakes to 
make these improvements. With respect to the remaining 24 Reliability 
Standards, the Commission proposes that they remain pending at the 
Commission until further information is provided. The Commission is not 
proposing to remand any Reliability Standards.
    The Commission proposes to amend the text of its regulation to 
require that each Reliability Standard identify the subset of users, 
owners and operators to which that particular Reliability Standard 
applies. The Commission also is proposing to amend its regulations to 
require that each Reliability Standard that is approved by the 
Commission will be maintained in the Commission's Public Reference Room 
and on the ERO's Internet Web site for public inspection.

DATES: Comments are due January 2, 2007.

ADDRESSES: You may submit comments, identified by Docket No. RM06-16-
000, by one of the following methods:
     Agency Web site: https://ferc.gov. Follow the instructions 
for submitting comments via the eFiling link found in the Comment 
Procedures section of the Preamble.
     Mail: Commenters unable to file comments electronically 
must mail or hand deliver an original and 14 copies of their comments 
to: Federal Energy Regulatory Commission, Office of the Secretary, 888 
First Street. NE., Washington, DC 20426. Refer to the Comment 
Procedures section of the preamble for additional information on how to 
file paper comments.

FOR FURTHER INFORMATION CONTACT: 
Jonathan First (Legal Information), Office of the General Counsel, 
Federal Energy Regulatory Commission, 888 First Street, NE., 
Washington, DC 20426, (202) 502-8529.
Paul Silverman (Legal Information), Office of the General Counsel, 
Federal Energy Regulatory Commission, 888 First Street, NE., 
Washington, DC 20426, (202) 502-8683.
Robert Snow (Technical Information), Office of Energy Markets and 
Reliability, Division of Reliability, Federal Energy Regulatory 
Commission, 888 First Street, NE., Washington, DC 20426, (202) 502-
6716.
Kumar Agarwal (Technical Information), Office of Energy Market and 
Reliability, Division of Policy Analysis and Rulemaking, Federal Energy 
Regulatory Commission, 888 First Street, NE., Washington, DC 20426, 
(202) 502-8923.

SUPPLEMENTARY INFORMATION:

 
                                                               Paragraph
                                                               Numbers
 
I. Introduction............................................            1
II. Background.............................................           12
    A. Voluntary Reliability Standards.....................           12
    B. EPAct 2005 and Order No. 672........................           15
    C. The Electric Reliability Organization...............           21
    D. NERC Petition for Approval of Reliability Standards.           24
    E. Staff Preliminary Assessment........................           29
III. Discussion............................................           33
    A. The Commission's Reliability Standards Proposal.....           33
        1. Applicability...................................           35
        2. Mandatory Reliability Standards.................           37
        3. Availability of Reliability Standards...........           39
    B. Applicability Issues................................           42
        1. Definition of User of the Bulk-Power System.....           42
        2. Use of the NERC Functional Model................           44
        3. Applicability to Small Entities.................           49
        4. Regional Reliability Organizations..............           54
        5. Bulk-Power System v. Bulk Electric System.......           60
    C. Mandatory Reliability Standards.....................           72
        1. Legal Standard for Approval of Reliability                 72
         Standards.........................................
        2. Commission Options When Acting on a Reliability            76
         Standard..........................................
        3. Prioritizing Modifications to Reliability                  83
         Standards.........................................
        4. Trial Period....................................           90
        5. International Coordination of Remands...........           94
    D. Common Issues Pertaining to Reliability Standards...           96
        1. Blackout Report Recommendations.................           97

[[Page 64771]]

 
        2. Measures and Levels of Non-Compliance...........          103
        3. Ambiguities and Potential Multiple                        108
         Interpretations...................................
        4. Technical Adequacy..............................          113
        5. Fill-in-the-Blank Standards.....................          116
    E. Discussion of Each Individual Reliability Standard..          124
        1. BAL: Resource and Demand Balancing..............          125
        2. CIP: Critical Infrastructure Protection.........          217
        3. COM: Communications.............................          232
        4. EOP: Emergency Preparedness and Operations......          263
        5. FAC: Facilities Design, Connections,                      343
         Maintenance, and Transfer Capabilities............
        6. INT: Interchange Scheduling and Coordination....          427
        7. IRO: Interconnection Reliability Operations and           497
         Coordination......................................
        8. MOD: Modeling, Data, and Analysis...............          588
        9. PER: Personnel Performance, Training and                  749
         Qualifications....................................
        10. PRC: Protection and Control....................          802
        11. TOP: Transmission Operations...................          951
        12. TPL: Transmission Planning.....................         1037
        13. VAR: Voltage and Reactive Control..............         1129
        14. Glossary of Terms Used in Reliability Standards         1151
IV. Information Collection Statement.......................         1157
V. Environmental Analysis..................................         1171
VI. Regulatory Flexibility Act Certification...............         1172
VII. Comment Procedures....................................         1177
VIII. Document Availability................................         1179
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Appendix A: Proposed Disposition of Standards, Glossary and Regional
 Differences
Appendix B: Commenters on Staff Preliminary Assessment
Appendix C: Abbreviations in this Document
Appendix D: High Priority List
 

I. Introduction

    1. Pursuant to section 215 of the Federal Power Act (FPA), the 
Commission is proposing to approve 83 of 107 proposed Reliability 
Standards, including six of the eight regional differences, and the 
Glossary of Terms Used in Reliability Standards (glossary) developed by 
the North American Electric Reliability Council, on behalf of its 
wholly-owned subsidiary, the North American Electric Reliability 
Corporation (NERC), which the Commission has certified as the Electric 
Reliability Organization (ERO) responsible for developing and enforcing 
mandatory Reliability Standards. Those Reliability Standards meet the 
requirements of section 215 of the FPA and Part 39 of the Commission's 
regulations. However, although we believe it is in the public interest 
to make these Reliability Standards mandatory and enforceable by June 
2007, we also find that much work remains to be done. Specifically, we 
believe that many of these Reliability Standards require significant 
improvement to address, among other things, the recommendations of the 
Blackout Report. We therefore propose, pursuant to section 215(d)(5), 
to require the ERO to make significant improvements to many of the 83 
Reliability Standards that are being approved as mandatory and 
enforceable. Appendix D provides a list of the Reliability Standards 
that should be given the highest priority when the ERO undertakes to 
make these improvements. With respect to the remaining 24 Reliability 
Standards, the Commission proposes that they remain pending at the 
Commission until further information is provided. The Commission is not 
proposing to remand any Reliability Standards.
    2. The Commission proposes to amend the text of its regulations to 
require that each Reliability Standard identify the subset of users, 
owners, and operators to which that particular Reliability Standard 
applies. The Commission also is proposing to amend its regulations to 
require that each Reliability Standard that is approved by the 
Commission will be maintained in the Commission's Public Reference Room 
and on the ERO's Internet Web site for public inspection.
    3. On August 8, 2005, The Electricity Modernization Act of 2005, 
which is Title XII of the Energy Policy Act of 2005 (EPAct 2005), was 
enacted into law.\1\ EPAct 2005 adds a new section 215 to the FPA, 
which requires a Commission-certified ERO to develop mandatory and 
enforceable Reliability Standards, which are subject to Commission 
review and approval. Once approved, the Reliability Standards may be 
enforced by the ERO, subject to Commission oversight.
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    \1\ The Energy Policy Act of 2005, Pub. L. No. 109-58, Title 
XII, Subtitle A, 119 Stat. 594, 941 (2005), to be codified at 16 
U.S.C. 824o (2000).
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    4. On February 3, 2006, the Commission issued Order No. 672, which 
implements section 215 of the FPA and provides specific processes for 
the certification of one entity as the ERO, the development and 
approval of mandatory Reliability Standards, and the compliance with 
and enforcement of approved Reliability Standards.\2\ On April 4, 2006, 
NERC made two filings: (1) An application for certification of NERC 
Corporation as the ERO and (2) a petition for Commission approval of 
102 Reliability Standards, as well as eight regional differences and a 
glossary of terms.\3\ On July 20, 2006, the Commission issued an order 
certifying NERC Corporation as the ERO.\4\ This rulemaking proceeding 
addresses NERC's submission of Reliability Standards and represents the 
next

[[Page 64772]]

significant step toward achieving the statutory goal of mandatory and 
enforceable Reliability Standards.
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    \2\ Rules Concerning Certification of the Electric Reliability 
Organization; Procedures for the Establishment, Approval and 
Enforcement of Electric Reliability Standards, Order No. 672, 71 FR 
8662 (February 17, 2006), FERC Stats. & Regs. ] 31,204 (2006), order 
on reh'g, Order No. 672-A, 71 FR 19814 (April 18, 2006), FERC Stats. 
& Regs. ] 31,212 (2006).
    \3\ The April 4, 2006 filing contained 102 Reliability 
Standards, a Glossary of Terms Used in Reliability Standards and 
eight regional differences. On August 28, 2006, NERC filed an 
additional 19 Reliability Standards and withdrew three of the 102 
Reliability Standards. Eleven of the nineteen reliability Standards 
replace those filed on April 4, 2006.
    \4\ ERO Certification Order, 116 FERC ] 61,062.
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    5. The ERO's filing is comprehensive, and represents a significant 
effort by NERC, the industry representatives who serve on NERC's 
standards development teams, and the entities that participate in 
NERC's Reliability Standards development process. After the August 2003 
cascading blackout that affected large portions of the central and 
eastern United States and Canada, NERC revised many of the then-
existing NERC operating policies and planning standards to provide 
greater clarity and compliance guidance. These revised standards 
(referred to as ``Version 0'' and ``Version 1'') were developed using 
NERC's American National Standards Institute (ANSI)-accredited 
Reliability Standards development process and are what has been filed 
with the Commission for approval.
    6. The Commission believes that these Reliability Standards will 
form a solid foundation on which to develop and maintain the 
reliability of the North American Bulk-Power System. At the same time, 
the Commission recognizes, as does NERC,\5\ that the Version 0 and 
Version 1 standards were developed as an initial step in the transition 
to clear, enforceable Reliability Standards. As such, some technical, 
enforceability and policy aspects of the 107 proposed Reliability 
Standards submitted by the ERO can, and should, be improved.
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    \5\ See NERC Petition at 69.
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    7. Therefore, in evaluating NERC's proposal, the Commission 
recognizes that the Reliability Standards are in a state of transition 
and that NERC has ongoing plans to improve them. Thus, at this 
juncture, we will approve a proposed Reliability Standard that needs 
clarification, improvement, or strengthening, provided that we are 
confident that it satisfies the statutory requirement that a 
Reliability Standard must be ``just, reasonable, not unduly 
discriminatory or preferential, and in the public interest.'' \6\ 
Rather than remanding an imperfect Reliability Standard, the NOPR 
generally proposes to approve such a Reliability Standard. In addition, 
as a distinct action under the statute, the Commission proposes to 
direct that the ERO modify such a Reliability Standard, pursuant to 
section 215(d)(5) of the FPA, to address the identified issues or 
concerns. This approach would allow the proposed Reliability Standard 
to be enforceable while the ERO develops any required modifications.
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    \6\ 16 U.S.C. 824o(d)(2).
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    8. The Commission believes that, for this period of transition from 
a voluntary to a mandatory system of compliance, the above course of 
action is appropriate when reviewing the ERO's first set of proposed 
Reliability Standards. This action provides the benefit that mandatory 
and enforceable Reliability Standards will be in effect prior to the 
summer of 2007, the next anticipated peak season for the nation's Bulk-
Power System. Critical to our decision to propose to approve such 
Reliability Standards is NERC's representation to the Commission that 
approval of the existing Reliability Standards ``will reinforce the 
importance of these standards and will have an immediate positive 
benefit with regard to the reliability performance of all bulk power 
system owners, operator and users * * *.'' \7\
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    \7\ NERC Petition at 25.
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    9. Accordingly, the Commission proposes to approve the Reliability 
Standards based on recognizing this period of transition, the 
importance of making them mandatory before the summer of 2007, and by 
giving due weight to the technical expertise of the ERO with the 
expectation that the Reliability Standards will accomplish the purpose 
represented to the Commission by the ERO; and that they will improve 
the reliability of the Bulk-Power System by proactively preventing 
situations that can lead to blackouts. By taking this approach, we 
believe that the responsibility for the technical adequacy of the 
proposed Reliability Standards falls squarely on the ERO, and we expect 
the ERO to monitor the effectiveness of the proposed Reliability 
Standards and inform us if any Reliability Standard proves, in 
practice, to be inadequate in protecting and improving Bulk-Power 
System reliability.
    10. Further, the Commission proposes to request additional 
information with regard to 24 proposed Reliability Standards. These 
proposed Reliability Standards would not be approved or remanded by the 
Commission until further action is taken by the ERO. This group of 
Reliability Standards includes NERC's so-called ``fill-in-the-blank'' 
standards that require regional reliability organizations to develop--
and users, owners, or operators to comply with--regional criteria.\8\ 
Until the Commission receives this supplemental information to fill in 
the ``blanks'' \9\ and assurances that the processes to fill in the 
blanks satisfy our procedural requirements, the Commission is not in a 
position to approve or remand such Reliability Standards. Second, a 
proposed Reliability Standard that would apply only to regional 
reliability organizations will not be approved or remanded until the 
ERO identifies a user, owner or operator of the Bulk-Power System as 
the applicable entity.\10\
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    \8\ See id. at 87-90.
    \9\ The ERO is reminded when filling in these blanks that a 
regional difference is generally permitted when it is more stringent 
or when there is a geographical/physical reason for the difference. 
Consolidation of regional standards into a single continent-wide 
standard should not result in a lowest common denominator. Order No. 
672 at P 291.
    \10\ In addition, some of the proposed Reliability Standards 
overlap with other Commission regulatory initiatives. For example, 
in a recent Notice of Proposed Rulemaking, the Commission has 
proposed to direct public utilities, in conjunction with NERC and 
the North American Energy Standards Board to provide for greater 
consistency in Available Transmission Capacity (ATC) calculation. 
See Preventing Undue Discrimination and Preference in Transmission 
Service, 71 FR 32636 (June 6, 2006), 71 FR 39251 (July 12, 2006), 
FERC Stats. & Regs. ] 39,602 (May 19, 2006) (OATT Reform NOPR).
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    11. Although the proposed Reliability Standards for which the 
Commission is requesting additional information will not be enforceable 
under section 215, this does not mean that no standards governing a 
particular matter are in place. Rather, in the interim, though not 
enforceable under section 215, compliance with these Reliability 
Standards would be expected as a matter of good utility practice.

II. Background

A. Voluntary Reliability Standards

    12. In the aftermath of the 1965 blackout in the northeast United 
States, the electric utility industry established NERC, a voluntary 
reliability organization. Since its inception, NERC has developed 
Operating Policies and Planning Standards that provide voluntary 
guidelines for operating and planning the North American Bulk-Power 
System.
    13. A common cause of the past three major regional blackouts was 
violation of NERC's then existing Operating Policies and Planning 
Standards. During July and August 1996, the west coast of the United 
States experienced two cascading blackouts caused by violations of 
voluntary Operating Policies.\11\ In response to the outages, the 
Secretary of Energy convened a task force to advise the U.S. Department 
of

[[Page 64773]]

Energy (DOE) on issues needed to be addressed to maintain the 
reliability of the Bulk-Power System. In a September 1998 report, the 
task force recommended, among other things, that federal legislation 
should grant more explicit authority for the Commission to approve and 
oversee an organization having responsibility for bulk-power 
reliability standards.\12\ Further, the task force recommended that 
such legislation provide for Commission jurisdiction over reliability 
of the Bulk-Power System and Commission implementation of mandatory, 
enforceable reliability standards.
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    \11\ The Electric Power Outages in the Western United States, 
July 2-3, 1996, at 76 (ftp://www.nerc.com/pub/sys/all_updl/docs/
pubs/doerept.pdf) and WSCC Disturbance Report, for the Power System 
Outage that Occurred on the Western Interconnection August 10, 1996, 
at 4 (ftp://www.nerc.com/pub/sys/all_updl/docs/pubs/AUG10FIN.pdf).
    \12\ Maintaining Reliability in a Competitive U.S. Electricity 
Industry, Final Report of the Task Force on Electric System 
Reliability, Secretary of Energy Advisory Board, U.S. Department of 
Energy (September 1998), at 25-27, 65-67.
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    14. On August 14, 2003, a blackout affected significant portions of 
the Midwest and Northeast United States, and Ontario, Canada. This 
blackout affected an estimated 50 million people and 61,800 megawatts 
of electric load. A joint U.S.-Canada task force studied the causes of 
the August 14, 2003 blackout and determined that several entities 
violated NERC's then-effective Operating Policies and Planning 
Standards, and that several of the standards contained ambiguities that 
rendered the standards ineffective. Those violations and ambiguities 
directly contributed to the blackout.\13\ The joint task force, in its 
recommendations to prevent or minimize the scope of future blackouts, 
identified the need for legislation to make reliability standards 
mandatory and enforceable, with penalties for non-compliance and 
identified specific ambiguities within the standards that should be 
corrected to make the standards effective.\14\
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    \13\ The joint team, known as the U.S.-Canada Power System 
Outage Task Force, issued a Final Report on the August 14, 2003 
Blackout in the United States and Canada: Causes and Recommendations 
(Blackout Report) on April 5, 2004, which presented an in-depth 
analysis of the causes of the blackout and recommendations for 
avoiding future blackouts.
    \14\ See id. at 140-42.
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B. EPAct 2005 and Order No. 672

    15. EPAct 2005 adds a new section 215 to the FPA, which provides 
for a system of mandatory and enforceable Reliability Standards. On 
February 3, 2006, the Commission issued Order No. 672, implementing 
section 215 of the FPA.\15\ Pursuant to Order No. 672, the Commission 
certified one organization, NERC, as the ERO. The ERO is required to 
develop Reliability Standards, which are subject to Commission review 
and approval.\16\ Once approved, the Reliability Standards may be 
enforced by the ERO, subject to Commission oversight.\17\ The 
Reliability Standards will apply to users, owners and operators of the 
Bulk-Power System. The ERO must submit each proposed Reliability 
Standard to the Commission for approval.
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    \15\ Order No. 672, 71 FR 8662 (Feb. 17, 2006), FERC Stats. & 
Regs. ] 31,204 (2006), order on reh'g, Order No. 672-A, 71 FR 19814 
(Apr. 18, 2006), FERC Stats. & Regs. ] 31,212 (2006). Terms defined 
in Order No. 672 are capitalized in this order.
    \16\ Section 215(a)(3) of the FPA defines the term Reliability 
Standard to mean ``a requirement, approved by the Commission under 
this section, to provide for reliable operation of the bulk-power 
system. This term includes requirements for the operation of 
existing bulk-power system facilities, including cybersecurity 
protection, and the design of planned additions or modifications to 
such facilities to the extent necessary to provide for the reliable 
operation of the bulk-power system, but the term does not include 
any requirement to enlarge such facilities or to construct new 
transmission capacity or generation capacity.'' 16 U.S.C. 
824o(a)(3).
    Section 215(a)(4) of the FPA defines the term ``reliable 
operation'' broadly to mean, ``* * * operating the elements of the 
bulk-power system within equipment and electric system thermal, 
voltage, and stability limits so that instability, uncontrolled 
separation, or cascading failures of such system will not occur as a 
result of a sudden disturbance, including a cybersecurity incident, 
or unanticipated failure of system elements.'' 16 U.S.C. 824o(a)(4).
    \17\ The Commission can independently enforce Reliability 
Standards. 16 U.S.C. 824o(e)(3).
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    16. Section 215(d)(2) of the FPA and the Commission's regulations 
provide that the Commission may approve a proposed Reliability Standard 
if it determines that the proposal is just, reasonable, not unduly 
discriminatory or preferential, and in the public interest. The 
Commission specified in Order No. 672 certain general factors it would 
consider when assessing whether a particular Reliability Standard is 
just and reasonable.\18\ According to this guidance, a proposed 
Reliability Standard must provide for the Reliable Operation of Bulk-
Power System facilities and may impose a requirement on any user, 
owner, or operator of such facilities. It must be designed to achieve a 
specified reliability goal and must contain a technically sound means 
to achieve this goal. The proposed Reliability Standard should be clear 
and unambiguous regarding what is required and who is required to 
comply. The possible consequences for violating a proposed Reliability 
Standard should be clear and understandable to those who must comply. 
There should be a clear criterion or measure of whether an entity is in 
compliance with a proposed Reliability Standard. While a proposed 
Reliability Standard does not necessarily need to reflect the optimal 
method for achieving its reliability goal, a proposed Reliability 
Standard should achieve its reliability goal effectively and 
efficiently. A proposed Reliability Standard must do more than simply 
reflect stakeholder agreement or consensus around the ``lowest common 
denominator.'' It is important that the Reliability Standards developed 
through any consensus process be sufficient to adequately protect Bulk-
Power System reliability.\19\
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    \18\ Order No. 672 at P 262, 321-337.
    \19\ Order No. 672 at P 329.
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    17. A proposed Reliability Standard may take into account the size 
of the entity that must comply and the costs of implementation. 
However, the ERO should not propose standards that would achieve less 
than operational excellence or otherwise be inadequate to support Bulk-
Power System reliability. A proposed Reliability Standard should be a 
single standard that applies across the North American Bulk-Power 
System to the maximum extent this is achievable taking into account 
geographic variations in grid characteristics, terrain, weather, and 
other factors. It should also account for regional variations in the 
organizational and corporate structures of transmission owners and 
operators, variations in generation fuel type and ownership patterns, 
and regional variations in market design if these affect the proposed 
Reliability Standard. Finally, a proposed Reliability Standard should 
have no undue negative effect on competition.\20\ Order No. 672 directs 
the ERO to explain how the proposal satisfies the factors the 
Commission identified and how the ERO balances any conflicting factors 
when seeking approval of a proposed Reliability Standard.\21\
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    \20\ Order No. 672 at P 332.
    \21\ Id. at P 337.
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    18. Pursuant to section 215(d)(2) of the FPA and section 39.5(c) of 
the Commission's regulations, the Commission is required to give due 
weight to the technical expertise of the ERO with respect to the 
content of a Reliability Standard or to a Regional Entity organized on 
an Interconnection-wide basis with respect to a proposed Reliability 
Standard or a proposed modification to a Reliability Standard to be 
applicable within that Interconnection. However, the Commission is not 
required to defer to the ERO or a Regional Entity with respect to the 
effect of a proposed Reliability Standard or proposed modification to a 
Reliability Standard on competition.\22\
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    \22\ 18 CFR 39.5(c)(1), (3).
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    19. The Commission's regulations require the ERO to file with the

[[Page 64774]]

Commission each new or modified Reliability Standard that it proposes 
to be made effective under section 215 of the FPA. The filing must 
include a concise statement of the basis and purpose of the proposed 
Reliability Standard, a summary of the Reliability Standard development 
proceedings conducted by either the ERO or Regional Entity, together 
with a summary of the ERO's Reliability Standard review proceedings, 
and a demonstration that the proposed Reliability Standard is just, 
reasonable, not unduly discriminatory or preferential, and in the 
public interest.\23\
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    \23\ 18 CFR 39.5(a).
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    20. The Commission will remand to the ERO for further consideration 
a proposed new or modified Reliability Standard that the Commission 
disapproves in whole or in part.\24\ When remanding a Reliability 
Standard to the ERO, the Commission may order a deadline by which the 
ERO must submit a proposed or modified Reliability Standard.
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    \24\ 18 CFR 39.5(e).
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C. The Electric Reliability Organization

    21. NERC is a New Jersey nonprofit corporation with a membership 
comprised of the eight regional reliability councils covering the 
contiguous 48 States, several provinces in Canada and a portion of Baja 
California Norte, Mexico. NERC has operated as a voluntary, industry-
sponsored reliability organization formed to ensure the reliability of 
the North American Bulk-Power System.
    22. NERC filed an application with the Commission on April, 4, 2006 
seeking certification as the ERO. NERC stated that it expects NERC 
Council and NERC Corp. to merge upon being certified as the ERO by the 
Commission. NERC Corp. will be the surviving entity and will assume the 
assets and liabilities of NERC Council.
    23. In its July 20, 2006 order certifying NERC as the ERO, the 
Commission directed NERC to submit a compliance filing incorporating 
various clarifications and revisions to its bylaws and rules of 
procedure. Among the improvements the Commission has directed NERC to 
undertake as the ERO are changes to expedite the existing process for 
developing new Reliability Standards in response to a Commission 
deadline to deal with an urgent situation. The order also directs NERC 
to modify its proposed pro forma delegation agreement for delegating 
enforcement authority to a Regional Entity.\25\
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    \25\ Although the ERO Certification Order directs NERC to modify 
the pro forma delegation agreement, the pro forma agreement will not 
be re-filed with the Commission before negotiating the individual 
delegation agreements. The pro forma agreement will form the basis 
for the individual Regional Entity delegation agreements that will 
be filed with the Commission. ERO Certification Order, 116 FERC ] 
61,062 at P 518.
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D. NERC Petition for Approval of Reliability Standards

    24. On April 4, 2006, as modified on August 28, 2006 NERC submitted 
to the Commission a petition seeking approval of the 107 proposed 
Reliability Standards that are the subject of this NOPR (NERC 
Petition).\26\ NERC states that 90 of these Reliability Standards, 
known as ``Version 0'' standards, became effective on a voluntary basis 
on April 1, 2005. It explains that the Version 0 standards ``are a 
translation, with certain improvements, of NERC's operating policies 
that were developed over several decades and its planning standards, 
which were approved in September 1997.'' \27\ In addition, the April 4, 
2006 filing includes 12 new Reliability Standards that were approved by 
the NERC board of trustees for implementation in February 2006. 
According to NERC, the 107 proposed Reliability Standards collectively 
define overall acceptable performance with regard to operation, 
planning and design of the North American Bulk-Power System. Seven of 
these Reliability Standards specifically incorporate one or more 
``regional differences'' (which can include an exemption from a 
Reliability Standard) for a particular region or subregion, resulting 
in eight regional differences. NERC requests that the Reliability 
Standards become effective on January 1, 2007, or an alternative date 
determined by the Commission. NERC also states that it simultaneously 
filed the proposed Reliability Standards with governmental authorities 
in Canada.
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    \26\ The filed proposed Reliability Standards are not attached 
to this NOPR but are available on the Commission's eLibrary document 
retrieval system in Docket No. RM06-16-000 and are available on the 
ERO's Web site, https://www.nerc.com/~filez/nerc_filings_ferc.html.
    \27\ See NERC Petition at 28.
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    25. Each proposed Reliability Standard follows a common format that 
includes five organizational elements:
a. Introduction
    1. Title: a phrase that describes the topic of the Reliability 
Standard.
    2. Number: A unique identification number that starts with three 
letters to identify the group followed by a dash and a three digit 
number, followed by a dash and the version number e.g., PRC-014-0.
    3. Purpose: One or more sentences that explicitly states the 
outcome to be achieved by the adoption of the Reliability Standard.
    4. Applicability:
    4.1 Each entity, as defined by the NERC Functional Model, that must 
comply with the Reliability Standard, such as Transmission Owner.
b. Requirements
    R1. A listing of explicitly stated technical, performance and 
preparedness requirements and who is responsible for achieving them.
c. Measures
    M1. A listing of the factors and the process NERC will use to 
assess performance and outcomes in order to determine non-compliance, 
and who is responsible for achieving the measures. Measures are ``the 
evidence that must be presented to show compliance'' with a standard 
and ``are not intended to contain the quantitative metrics for 
determining satisfactory performance.'' \28\
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    \28\ NERC Comments at 104. NERC clarified its position that 
Measures did not include metrics after the Staff Preliminary 
Assessment interpreted the Measures section as including metrics.
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d. Compliance
    1. Compliance Monitoring Process
    1.1 Compliance Monitoring Responsibility: NERC's explanation of who 
is responsible for assessing performance or outcomes.
    1.2 Compliance Monitoring Period and Reset Timeframe: The timeframe 
for each compliance monitoring period before it is reset for the next 
period.
    1.3 Data Retention: How long compliance documentation needs to 
remain on file.
    1.4 Additional Compliance Information: Any other information 
relating to compliance.
    2. Levels of Non-Compliance: Usually four levels of non-compliance 
are identified, with level 1 being used for the least severe non-
compliance and level 4 for the most severe non-compliance.
e. Regional Differences
    Identification of any regional differences that have been approved 
by the applicable NERC Committee (including Regions that are exempt).
    Version History: The chronological history of changes to the 
standard.
    26. In its April 4, 2006 petition, NERC requested ``unconditional'' 
approval of 77 proposed Reliability Standards and the glossary of 
terms. Further, NERC

[[Page 64775]]

requested ``conditional'' approval of 25 proposed Reliability 
Standards.
    27. In a June 26 filing, NERC revised its recommended action on the 
proposed Reliability Standards: (1) Unconditional approval of 51 
proposed Reliability Standards, to become enforceable in the U.S. on a 
date in 2007 to be determined by the Commission; (2) conditional 
approval of 26 proposed `fill-in-the-blank' Reliability Standards, to 
become enforceable in the U.S. on a date in 2007 to be determined by 
the Commission. NERC recommends that ``conditional approval'' shall 
mean ``that any limitation of the standard caused by the presence of a 
regional `fill-in-the-blank' requirement * * * would be considered as a 
factor in the evaluation of circumstances surrounding an alleged 
violation of the standard and the determination of a violation and 
setting of an appropriate penalty;'' and (3) conditional approval of 
another 25 proposed Reliability Standards lacking Measures or Levels of 
Non-Compliance, to become enforceable in the U.S. on a date in 2007 to 
be determined by the Commission. In addition, NERC plans to file 
modified Reliability Standards in early November 2006 that will add 
missing Measures and Levels of Non-compliance elements as well as risk 
factors. NERC recommends that the Commission act on the proposed 
modifications to Reliability Standards that are currently before the 
Commission in the same proceeding to achieve an initial set of 
Reliability Standards.
    28. On August 28, 2006, NERC submitted 27 new and revised 
standards. The Commission will address these proposed new and revised 
Reliability Standards in this rulemaking proceeding, except for eight 
proposed Reliability Standards that relate to cyber security. 
Reliability Standards CIP-002 through CIP-009 will be addressed in a 
separate rulemaking proceeding in Docket No. RM06-22-000.

E. Staff Preliminary Assessment

    29. On May 11, 2006, Commission staff issued a ``Staff Preliminary 
Assessment of the North American Electric Reliability Council's 
Proposed Mandatory Reliability Standards'' (Staff Preliminary 
Assessment). The Staff Preliminary Assessment identified staff's 
preliminary observations and concerns regarding NERC's then-current 
voluntary reliability standards. The Staff Preliminary Assessment 
describes issues common to a number of proposed Reliability Standards. 
It reviewed and identified issues regarding each individual Reliability 
Standard but did not make specific recommendations regarding the 
appropriate action on a particular proposal.
    30. The Staff Preliminary Assessment provided a basis for 
soliciting input regarding which of the proposed Reliability Standards 
should be approved, approved on an interim basis, or remanded to the 
ERO; established a platform from which to identify and prioritize 
potential problems with the proposed Reliability Standards; and 
provided a comprehensive and objective assessment of NERC's then-
current 102 Reliability Standards.
    31. Comments on the Staff Preliminary Assessment were due by June 
26, 2006. Entities that filed comments are listed in Appendix A to this 
NOPR. Approximately 50 persons filed comments in response to the Staff 
Preliminary Assessment. In addition, on July 6, 2006, the Commission 
held a technical conference to discuss NERC's proposed Reliability 
Standards, the Staff Preliminary Assessment and other related issues. 
The technical conference was transcribed, and is a part of the record 
in this docket.
    32. The written comments as well as the panel discussions at the 
technical conference have been very informative, and reference to the 
public comments is mentioned throughout the NOPR. Moreover, our 
proposed disposition of the Reliability Standards reflects our 
consideration of all comments that were submitted.

III. Discussion

A. The Commission's Reliability Standards Proposal

    33. The Commission's proposed reliability regulation is entitled 
Mandatory Reliability Standards for the Bulk-Power System. Section 
215(b) of the FPA obligates all users, owners and operators of the 
Bulk-Power System to comply with Reliability Standards that become 
effective pursuant to the processes set forth in the statute and in 
Part 39 of the Commission's regulations. The complete text of the 
proposed rule is provided in the Attachment to this notice of proposed 
rulemaking.
    34. The proposed regulation is organized into three sections:
    40.1--Applicability;
    40.2--Mandatory Reliability Standards; and
    40.3--Availability of Reliability Standards.
1. Applicability
    35. Section 40.1(a) of the proposed regulations provides that this 
Part applies to all users, owners and operators of the Bulk-Power 
System within the United States (other than Alaska and Hawaii) 
including, but not limited to, the entities described in section 201(f) 
of the FPA. This statement is consistent with Sec.  215(b) of the FPA 
and section 39.2 of the Commission's regulations.
    36. Section 40.1(b) requires each Reliability Standard made 
effective under this Part to identify the subset of users, owners and 
operators to whom that particular Reliability Standard applies.
2. Mandatory Reliability Standards
    37. Section 40.2 (a) of the proposed regulations requires that each 
applicable user, owner or operator of the Bulk-Power System comply with 
Commission-approved Reliability Standards developed by the ERO, and 
provides that the Commission-approved Reliability Standards can be 
obtained from the Commission's Public Reference Room at 888 First 
Street, NE., Room 2A, Washington, DC 20426.
    38. Section 40.2(b) of the proposed regulations provides that a 
proposed modification to a Reliability Standard proposed to become 
effective pursuant to Sec.  39.5 shall not be effective until approved 
by the Commission.
3. Availability of Reliability Standards
    39. Section 40.3 of the proposed regulations would require that the 
ERO maintain in electronic format that is accessible from the Internet 
the complete set of effective Reliability Standards that have been 
developed by the ERO and approved by the Commission. The Commission 
believes that ready access to an electronic version of the effective 
Reliability Standards will enhance transparency and help avoid 
confusion as to which Reliability Standards are mandatory and 
enforceable. We note that NERC currently maintains the existing, 
voluntary reliability standards on the NERC Web site.
    40. While the NOPR discusses each proposed Reliability Standard and 
identifies the Commission's proposed disposition for each Reliability 
Standard, neither the text nor the title of an approved Reliability 
Standard would be codified in the Commission's regulations. Rather, as 
indicated above, each applicable user, owner or operator of the Bulk-
Power System would be required to comply with Commission-approved 
Reliability Standards that are available in the Commission's Public 
Reference Room and on the Internet at the ERO's Web site.
    41. This approach would preserve the statutory options of approving 
a proposed Reliability Standard or modification to a Reliability 
Standard

[[Page 64776]]

``by rule or order.'' \29\ While we anticipate that the Commission 
would address through the rulemaking process most, if not all, new 
Reliability Standards proposed by NERC, certain modifications may be 
appropriately addressed by order.
---------------------------------------------------------------------------

    \29\ See 16 U.S.C. 824o(d)(2).
---------------------------------------------------------------------------

B. Applicability Issues

1. Definition of User of the Bulk-Power System
    42. In Order No. 672, the Commission acknowledged that, generally, 
a person directly connected to the Bulk-Power System selling, 
purchasing or transmitting electric energy over the Bulk-Power System 
is a ``User of the Bulk-Power System.'' However, the Commission 
declined to adopt a formal definition, explaining that, ``until we have 
proposed Reliability Standards before us, we will reserve further 
judgment on whether a definition of `User of the Bulk-Power System' is 
appropriate or whether the decision of who is a `User of the Bulk-Power 
System' should be made on a case-by-case basis.'' \30\
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    \30\ Order No. 672 at P 99.
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    43. We do not propose a generic definition of the term ``User of 
the Bulk-Power System.'' Rather, the Commission will determine 
applicability on a standard-by-standard basis.\31\ The phrase ``user, 
owner or operator of the Bulk-Power System'' as used in section 215(b) 
of the FPA indicates the scope of the Commission's authority with 
regard to compliance with Reliability Standards. The proposed 
regulations would require that the ERO identify in each proposed 
Reliability Standard the specific subset of users, owners and operators 
of the Bulk-Power System to which the proposed Reliability Standard 
would apply. In fact, this is NERC's current practice, and each of the 
107 proposed Reliability Standards submitted by NERC includes an 
``applicability'' provision that identifies the specific categories of 
applicable entities based on NERC's Functional Model.\32\ Parties 
concerned that a proposed Reliability Standard would apply more broadly 
than the statute allows may raise their concern in the context of the 
specific Reliability Standard. We believe that this approach provides 
sufficient notice regarding which entities are ``users of the Bulk-
Power System'' that must comply with a specific Reliability Standard.
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    \31\ Many of the proposed Reliability Standards apply to 
reliability coordinators and balancing authorities and other clearly 
appropriate entities. We believe that such Reliability Standards do 
not raise applicability issues. Thus, in our standard-by-standard 
analysis, the Commission's silence as to applicability issues means 
that it agrees with the ERO's proposed applicability of a 
Reliability Standard.
    \32\ See NERC Petition at 80-81. For information regarding the 
Functional Model, see NERC Reliability Functional Model, Function 
Definitions and Responsibility Entities, Version 2, February 10, 
2004. NERC is currently developing revisions to the Functional Model 
(referred to as ``Version 3'') that, among other things, changes the 
name of the reliability authority to ``reliability coordinator'' and 
explains its role in ``wide area'' reliability oversight. Both 
versions of the Functional Model are available on NERC's Web site 
at: https://www.nerc.com/~filez/functionalmodel.html.
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2. Use of the NERC Functional Model
    44. As mentioned above, each Reliability Standard proposed by the 
ERO identifies entities to which the Reliability Standard applies based 
on the NERC Functional Model.\33\ The Staff Preliminary Assessment 
observed that the Functional Model omits the categories of ``users, 
owners and operators,'' and includes other categories of entities that 
are not users, owners or operators of the Bulk-Power System.\34\
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    \33\ The functional categories include: (1) Reliability 
coordinator, (2) balancing authority, (3) planning authority, (4) 
transmission planner, (5) transmission operator, (6) transmission 
service provider, (7) transmission owner, (8) resource planner, (9) 
distribution provider, (10) generator owner, (11) generator 
operator, (12) load-serving entity, (13) purchasing-selling entity, 
(14) compliance monitor. ERO Certification Order, 116 FERC ] 61,062, 
at n.247.
    \34\ Staff Preliminary Assessment at 24.
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    45. NERC states that, while the term ``users, owners and 
operators'' defines the statutory applicability of the Reliability 
Standards, the Functional Model adds descriptive detail to reliability 
functions so the applicability of each Reliability Standard can be 
clearly defined. NERC explains that ``every entity class described in 
the Reliability Functional Model performs functions that are essential 
to the reliability of the bulk power system.'' \35\ Several commenters 
concur with NERC and suggest that the Commission approve the Functional 
Model so that future modifications would require Commission approval. 
MISO and Allegheny point to specific examples of what they consider 
ambiguities in the NERC Functional Model, primarily in the context of 
applicability to RTO or ISO functions.
---------------------------------------------------------------------------

    \35\ NERC Comments at 96. In addition to its April 4, 2006, 
Petition, NERC filed comments in response to the Staff Preliminary 
Assessment on June 26, 2006 (NERC Comments).
---------------------------------------------------------------------------

    46. The objective here is to make sure that each Reliability 
Standard is sufficiently clear with respect to applicability and 
specifically identifies each category of entities to which it applies. 
The NERC Functional Model represents a reasonable and practical 
approach to determining the applicability of a particular Reliability 
Standard. This approach is consistent with the ERO Certification Order, 
in which the Commission, in the context of addressing NERC's proposed 
compliance registry, found that ``NERC's functional approach provides a 
reasonable means to ensure that the proper entities are registered and 
that each knows which Commission-approved Reliability Standard(s) are 
applicable to it.'' \36\ Thus, we agree with NERC that identifying 
specific functional categories of entities that comprise users, owners 
and operators of the Bulk-Power System provides a useful level of 
detail and appears to be more practical than simply identifying an 
applicable entity as a user, owner or operator. Accordingly, we propose 
to use the NERC functional model to identify the applicable entities to 
which each Reliability Standard applies.
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    \36\ ERO Certification Order, 116 FERC ] 61,062, at P 689.
---------------------------------------------------------------------------

    47. We are mindful of the concerns of certain commenters that the 
Functional Model may contain ambiguities and add or omit certain 
entities or functions. Elsewhere in the NOPR we are proposing to 
require NERC to specifically address these concerns.\37\ Further we 
note that NERC's Rules of Procedure pertaining to the NERC compliance 
registry provide that NERC will notify an entity before it is formally 
registered and allow an opportunity for an entity to challenge its 
inclusion on the compliance registry.\38\ This process should resolve 
any specific disputes that may arise.
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    \37\ For example, commenters' concerns regarding applicability 
to ISOs and RTOs are discussed in detail in the chapter on proposed 
communications Reliability Standards.
    \38\ See NERC Rule of Procedure section 501.1.3.
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    48. Some commenters suggest that any future modification to the 
Functional Model could affect the categories of entities that must 
comply with a particular Reliability Standard, without the benefit of 
the open, stakeholder process required when the ERO develops a 
modification to a Reliability Standard. Because the Functional Model is 
so closely linked with applicability of the Reliability Standards, the 
Commission proposes to require the ERO to submit any future 
modifications to the Functional Model that may affect the applicability 
of the Reliability Standards for Commission approval.
3. Applicability to Small Entities
    49. NERC indicates that a Reliability Standard may identify 
limitations on

[[Page 64777]]

applicability based on electric facility characteristics ``such as 
generators with a nameplate rating of 20 MW or greater, or transmission 
facilities energized at 200 kV or greater.'' \39\ It explains that, 
``to ensure that the standards are applied in a cost effective manner 
and the applicability of the standards is focused on entities having a 
material impact on reliability of the bulk power system, it is 
necessary in the future to begin providing greater specificity in the 
applicability section of the standards.'' \40\ NERC, as the ERO, 
indicates that it plans to develop a set of guidelines on such 
limitations for the standard drafting teams and to require that a new 
Reliability Standard or a modification to an existing Reliability 
Standard, going forward, include this degree of specificity.
---------------------------------------------------------------------------

    \39\ NERC Petition at 9.
    \40\ Id. at 82.
---------------------------------------------------------------------------

    50. A number of commenters advocate that a mandatory Reliability 
Standard should not apply to entities that have no ``material impact'' 
on the Bulk-Power System.\41\ These commenters also ask that the 
Commission encourage and facilitate contractual arrangements for the 
delegation of compliance obligations faced by small entities to Joint 
Action Agencies (JAAs) and other organizations that have ongoing 
relationships with NERC.
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    \41\ See, e.g., Alcoa, APPA, BPA and TAPS.
---------------------------------------------------------------------------

    51. While NERC has yet to submit a specific proposal, the 
Commission agrees that it is important to examine the impact a 
particular entity may have on the Bulk-Power System in determining the 
applicability of a specific Reliability Standard. However, we do not 
believe that a ``blanket waiver'' approach that would exempt entities 
below a threshold level from compliance with all Reliability Standards 
would be appropriate because there may be instances where a small 
entity's compliance is critical to reliability. For instance, the 
reporting of a sabotage event required by CIP-001-0 may be important 
regardless of the size of the entity since such reporting helps others 
by putting them on notice of potential attacks to their own systems. 
For purposes of assessing compliance with a particular Reliability 
Standard, it may be appropriate to differentiate among certain subsets 
of users, owners, and operators. For example, the requirement to have 
adequate communications capabilities to address real-time emergency 
conditions (COM-001-0 and COM- 002-1) may be necessary for all 
applicable entities regardless of size or role, although we understand 
that the implementation of these requirements for applicable entities 
may vary based on size or role.\42\ Therefore, we propose to direct 
NERC to take such factors into account in determining applicability, as 
well as compliance requirements, for a particular Reliability Standard.
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    \42\ For example, a dedicated phone line that would remain 
operative during a power failure may suffice for a small cooperative 
with minimal Bulk-Power System facilities, while a large investor-
owned utility may need a sophisticated communication system with 
redundancy and diverse routing requirements.
---------------------------------------------------------------------------

    52. In addition, the Commission solicits comment on whether, 
despite the existence of a threshold in a particular standard (e.g., 
generators with a nameplate rating of 20 MW or over), the ERO or a 
Regional Entity should be permitted to include an otherwise exempt 
facility, e.g., a 15 MW generator, on a facility-by-facility basis, if 
it determines that the facility is needed for Bulk-Power System 
reliability. If so, what if any process should the ERO or Regional 
Entity provide when making such a determination?
    53. NERC has proposed registration of joint action agencies or 
similar organizations that would register on behalf of their members. 
APPA asks that NERC permit a joint action agency or similar 
organization to accept compliance responsibilities on a standard-by-
standard basis. We propose to direct NERC to develop procedures which 
permit a joint action agency or similar organization to accept 
compliance responsibility on behalf of their members.
4. Regional Reliability Organizations
    54. NERC has proposed 28 Reliability Standards that would apply, in 
whole or in part, to a regional reliability organization.\43\ Many of 
the 28 Reliability Standards concern such matters as data gathering, 
data base maintenance, preparation of assessments and other ``process'' 
related responsibilities. Others are what have been referred to as 
``fill-in-the-blank'' Reliability Standards. Many of the proposed 
Reliability Standards that have compliance measures refer to the 
regional reliability organization as a compliance monitor.
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    \43\ NERC states that the regional reliability organizations are 
the same as the existing eight regional reliability councils and 
that ``a regional reliability organization may or may not be the 
same organization that is providing statutory functions delegated by 
agreement with a regional entity.'' NERC Comments at 101. In the 
order certifying NERC as the ERO, the Commission asked that NERC 
provide additional information regarding the possible ongoing role 
of the regional reliability organizations and their relationship 
with Regional Entities. ERO Certification Order, 116 FERC ] 61,062, 
at P 76.
---------------------------------------------------------------------------

    55. The Staff Preliminary Assessment expressed concern as to 
whether a Reliability Standard that applies to a regional reliability 
organization is enforceable pursuant to section 215(e) of the FPA, 
since it is not clear whether a regional reliability organization is a 
user, owner or operator of the Bulk-Power System. NERC contends that 
such Reliability Standards are enforceable, and identifies several 
legal theories to support its position. Specifically, NERC contends 
that such Reliability Standards are enforceable because: (1) Each 
regional reliability organization will voluntarily register as a member 
of NERC and thereby be bound to comply; \44\ (2) a regional reliability 
organization performs functions on behalf of its members that are 
users, owners and operators of the Bulk-Power System; and (3) NERC is 
in the process of updating its functional model to provide a functional 
description of a regional reliability organization that includes 
functions that NERC believes are consistent with a system operator. EEI 
and other commenters question whether a Reliability Standard can be 
enforced against a regional reliability organization.
---------------------------------------------------------------------------

    \44\ Pursuant to NERC's ERO application, a member ``accepts the 
responsibility to promote, support, and comply with the Bylaws, 
Rules of Procedure, and Reliability Standards * * *.''
---------------------------------------------------------------------------

    56. The Commission is not persuaded that a regional reliability 
organization's compliance with a Reliability Standard can be enforced 
as proposed by NERC. Section 215 of the FPA does not appear to 
recognize a regional reliability organization as a user, owner or 
operator of the Bulk-Power System. Moreover, NERC's arguments assume 
that each regional reliability organization will voluntarily join as a 
member of NERC and be legally bound as a member to comply. Further, 
NERC's claim that a regional reliability organization will perform 
functions on behalf of its members that are users, owners and operators 
of the Bulk-Power System does not establish a binding agency 
relationship that would create a legal basis for requiring regional 
reliability organization compliance with Reliability Standards. While 
it is important that the existing regional reliability organizations 
continue to fulfill their current roles during the transition to a 
regime where Reliability Standards are mandatory and enforceable, we do 
not understand why, once the transition is complete, a regional 
reliability organization should play a role separate from a Regional 
Entity whose function and

[[Page 64778]]

responsibility is explicitly recognized by section 215 of the FPA. We 
seek comment on whether there is any need to maintain separate roles 
for regional reliability organizations with regard to establishing and 
enforcing Reliability Standards under section 215.
    57. At present, 28 of the proposed Reliability Standards are 
written to apply solely or partially to regional reliability 
organizations.\45\ We do not believe it is necessary or useful to 
remand those Reliability Standards simply because they refer to the 
regional reliability organization. For the five standards that apply 
partially to regional reliability organizations, the Commiss