Mandatory Reliability Standards for the Calculation of Available Transfer Capability, Capacity Benefit Margins, Transmission Reliability Margins, Total Transfer Capability, and Existing Transmission Commitments and Mandatory Reliability Standards for the Bulk-Power System, 12747-12769 [E9-6505]

Agencies

• DEPARTMENT OF ENERGY
• Federal Energy Regulatory Commission

[Federal Register Volume 74, Number 56 (Wednesday, March 25, 2009)]
[Proposed Rules]
[Pages 12747-12769]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-6505]


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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 40

[Docket Nos. RM08-19-000, RM08-19-001, RM09-5-000, RM06-16-005]


Mandatory Reliability Standards for the Calculation of Available 
Transfer Capability, Capacity Benefit Margins, Transmission Reliability 
Margins, Total Transfer Capability, and Existing Transmission 
Commitments and Mandatory Reliability Standards for the Bulk-Power 
System

Issued March 19, 2009.
AGENCY: Federal Energy Regulatory Commission.

ACTION: Notice of Proposed Rulemaking.

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SUMMARY: Pursuant to section 215 of the Federal Power Act, the 
Commission proposes to approve six Modeling, Data, and Analysis 
Reliability Standards submitted to the Commission for approval by the 
North American Electric Reliability Corporation, the Electric 
Reliability Organization certified by the Commission. The proposed 
Reliability Standards require certain users, owners, and operators of 
the Bulk-Power System to develop consistent methodologies for the 
calculation of available transfer capability or available flowgate 
capability.

DATES: Comments are due May 26, 2009.

ADDRESSES: You may submit comments, identified by docket number by any 
of the following methods:
     Agency Web site: https://ferc.gov. Documents created 
electronically using word processing software should be filed in native 
applications or print-to-PDF format and not in a scanned format.
     Mail/Hand Delivery: Commenters unable to file comments 
electronically must mail or hand deliver an original and 14 copies of 
their comments to: Federal Energy Regulatory Commission, Secretary of 
the Commission, 888 First Street, NE., Washington, DC 20426.

FOR FURTHER INFORMATION CONTACT: Mason Emnett (Legal Information), 
Office of the General Counsel, Federal Energy Regulatory Commission, 
888 First Street, NE., Washington, DC 20426, (202) 502-6540, Cory 
Lankford (Legal Information), Office of the General Counsel, Federal 
Energy Regulatory Commission, 888 First Street, NE., Washington, DC 
20426, (202) 502-6711, Keith O'Neal (Technical Information), Office of 
Electric Reliability, Federal Energy Regulatory Commission, 888 First 
Street, NE., Washington, DC 20426, (202) 502-6339, Christopher Young 
(Technical Information), Office of Electric Reliability, Federal Energy 
Regulatory Commission, 888 First Street, NE., Washington, DC 20426, 
(202) 502-6403.

SUPPLEMENTARY INFORMATION:

Table of Contents

 
 
                                                              Paragraph
                                                               numbers
 
I. Background..............................................            4
    A. Order Nos. 888 and 889..............................            4
    B. Order Nos. 890 and 693..............................            8
II. Proposed Reliability Standards.........................           12
    A. Coordination with Business Practice Standards.......           17
    B. Available Transmission System Capability, MOD-001-1.           19
    C. Capacity Benefit Margin Methodology, MOD-004-1......           26
    D. Transmission Reliability Margin Methodology, MOD-008-          41
     1.....................................................

[[Page 12748]]

 
    E. Three Methodologies for Calculating Available                  51
     Transfer Capability...................................
        1. Area Interchange Methodology, MOD-028-1.........           53
        2. Rated System Path Methodology, MOD-029-1........           61
        3. Flowgate Methodology, MOD-030-2.................           65
    F. Implementation Plan.................................           72
III. Discussion............................................           75
    A. Implementation of the Reliability Standards.........           80
        1. Available Transfer Capability Implementation               87
         Documents.........................................
        2. Capacity Benefit Margin Implementation Documents           95
        3. Transmission Reliability Margin Implementation             98
         Documents.........................................
    B. Proposed Modifications of the Reliability Standards.          102
        1. Availability of Implementation Documents........          103
        2. Consistent Treatment of Assumptions.............          106
        3. Capacity Benefit Margin (MOD-004-1).............          109
        4. Calculation of Total Transfer Capability under            112
         the Rated System Path Methodology (MOD-029-1).....
        5. Treatment of Network Resource Designations......          116
    C. Violation Risk Factors and Violation Severity Levels          121
    D. Disposition of Other Reliability Standards..........          130
        1. MOD-010-1 through MOD-025-1.....................          130
        2. Reliability Standards Proposed to be Retired or           133
         Withdrawn.........................................
    E. Definitions.........................................          139
IV. Information Collection Statement.......................          143
V. Environmental Analysis..................................          148
VI. Regulatory Flexibility Act Certification...............          149
VII. Comment Procedures....................................          151
VIII. Document Availability................................          155
 

    1. Pursuant to section 215 of the Federal Power Act (FPA),\1\ the 
Federal Energy Regulatory Commission (Commission) proposes to approve, 
and direct modifications to, six Modeling, Data and Analysis (MOD) 
Reliability Standards submitted to the Commission by the North American 
Electric Reliability Corporation (NERC), which has been certified by 
the Commission as the Electric Reliability Organization (ERO) for the 
United States.\2\ The proposed Reliability Standards pertain to 
methodologies for the consistent and transparent calculation of 
available transfer capability or available flowgate capability. The 
Commission also proposes to retire the existing MOD Reliability 
Standards replaced by the versions proposed here. The retirement of 
these Reliability Standards would be effective upon the effective date 
of the proposed MOD Reliability Standards.
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    \1\ 16 U.S.C. 824o.
    \2\ North American Electric Reliability Corp., 116 FERC ] 61,062 
(ERO Certification Order), order on reh'g & compliance, 117 FERC ] 
61,126 (ERO Rehearing Order) (2006), appeal docketed sub nom. Alcoa, 
Inc. v. FERC, No. 06-1426 (DC Cir. Dec. 29, 2006).
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    2. In Order No. 890, the Commission found that the lack of a 
consistent and transparent methodology for calculating available 
transfer capability is a significant problem because the calculation of 
available transfer capability, which varies greatly depending on the 
criteria and assumptions used, may allow the transmission service 
provider to discriminate in subtle ways against its competitors.\3\ The 
calculation of available transfer capability is one of the most 
critical functions under the open access transmission tariff (OATT) 
because it determines whether transmission customers can access 
alternative power supplies. Improving transparency and consistency of 
available transfer capability calculation methodologies will eliminate 
transmission service providers' wide discretion in calculating 
available transfer capability and ensure that customers are treated 
fairly in seeking alternative power supplies. The Commission believes 
that the Reliability Standards proposed here address the potential for 
undue discrimination by requiring industry-wide transparency and 
increased consistency regarding all components of the available 
transfer capability calculation methodology and certain definitions, 
data, and modeling assumptions.
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    \3\ Preventing Undue Discrimination and Preference in 
Transmission Service, Order No. 890, 72 FR 12266 (Mar. 15, 2007), 
FERC Stats. & Regs. ] 31,241 (2007), order on reh'g, Order No. 890-
A, 73 FR 2984 (Jan. 16, 2008), FERC Stats & Regs. ] 31,261 (2007), 
order on reh'g, Order No. 890-B, 73 FR 39092 (July 8, 2008), 123 
FERC ] 61,299 (2008), order on reh'g, Order No. 890-C, 126 FERC ] 
61,228 (2009).
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    3. The Commission proposes to approve the Reliability Standards 
filed by NERC in this proceeding as just, reasonable, not unduly 
discriminatory or preferential, and in the public interest. These 
Reliability Standards represent a step forward in eliminating the broad 
discretion previously afforded transmission service providers in the 
calculation of available transfer capability. The proposed Reliability 
Standards will enhance transparency in the calculation of available 
transfer capability, requiring transmission operators and transmission 
service providers to calculate available transfer capability using a 
specific methodology that is both explicitly documented and available 
to reliability entities who request it.\4\ The proposed Reliability 
Standards also require documentation of the detailed representations of 
the various components that comprise the available transfer capability 
equation, including the specification of modeling and risk assumptions 
and the disclosure of outage processing rules to other reliability 
entities. These actions will make the processes to calculate available 
transfer capability and its various components more transparent,

[[Page 12749]]

which in turn will allow the Commission and others to ensure 
consistency in their application.
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    \4\ Reliability entities include: transmission service 
providers, planning coordinators, reliability coordinators, and 
transmission operators as those entities are defined in the NERC 
Glossary. Standards adopted by the North American Energy Standards 
Board (NAESB) govern disclosure of this information to other 
entities. The Commission addresses the proposed NAESB business 
practices in a Notice of Proposed Rulemaking issued concurrently in 
Docket No. RM05-5-013. See Standards for Business Practices and 
Communication Protocols for Public Utilities, 126 FERC ] 61,248 
(2009).
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I. Background

A. Order Nos. 888 and 889

    4. In April 1996, as part of its statutory obligation under 
sections 205 and 206 of the FPA \5\ to remedy undue discrimination, the 
Commission adopted Order No. 888 prohibiting public utilities from 
using their monopoly power over transmission to unduly discriminate 
against others.\6\ In that order, the Commission required all public 
utilities that own, control or operate facilities used for transmitting 
electric energy in interstate commerce to file open access non-
discriminatory transmission tariffs that contained minimum terms and 
conditions of non-discriminatory service. It also obligated such public 
utilities to ``functionally unbundle'' their generation and 
transmission services. This meant that public utilities had to take 
transmission service (including ancillary services) for their own new 
wholesale sales and purchases of electric energy under the open access 
tariffs, and to separately state their rates for wholesale generation, 
transmission and ancillary services.\7\ Each public utility was 
required to file the pro forma OATT included in Order No. 888 without 
any deviation (except a limited number of terms and conditions that 
reflect regional practices).\8\ After their OATTs became effective, 
public utilities were allowed to file, pursuant to section 205 of the 
FPA, deviations that were consistent with or superior to the pro forma 
OATT's terms and conditions.
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    \5\ 16 U.S.C. 824d, 824e.
    \6\ Promoting Wholesale Competition Through Open Access Non-
discriminatory Transmission Services by Public Utilities; Recovery 
of Stranded Costs by Public Utilities and Transmitting Utilities, 
Order No. 888, 61 FR 21540 (May 10, 1996), FERC Stats. & Regs. ] 
31,036 (1996), order on reh'g, Order No. 888-A, 62 FR 12274 (Mar. 
14, 1997), FERC Stats. & Regs. ] 31,048 (1997), order on reh'g, 
Order No. 888-B, 81 FERC ] 61,248 (1997), order on reh'g, Order No. 
888-C, 82 FERC ] 61,046 (1998), aff'd in relevant part sub nom. 
Transmission Access Policy Study Group v. FERC, 225 F.3d 667 (DC 
Cir. 2000), aff'd sub nom. New York v. FERC, 535 U.S. 1 (2002).
    \7\ This is known as ``functional unbundling'' because the 
transmission element of a wholesale sale is separated or unbundled 
from the generation element of that sale, although the public 
utility may provide both functions.
    \8\ See Order No. 888, FERC Stats. & Regs. ] 31,036 at 31,769-70 
(noting that the pro forma OATT expressly identified certain non-
rate terms and conditions, such as the time deadlines for 
determining available transfer capability in section 18.4 or 
scheduling changes in sections 13.8 and 14.6, that may be modified 
to account for regional practices if such practices are reasonable, 
generally accepted in the region, and consistently adhered to by the 
transmission service provider).
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    5. The same day it issued Order No. 888, the Commission issued a 
companion order, Order No. 889,\9\ addressing the separation of 
vertically integrated utilities' transmission and merchant functions, 
the information transmission service providers were required to make 
public, and the electronic means they were required to use to do so. 
Order No. 889 imposed Standards of Conduct governing the separation of, 
and communications between, the utility's transmission and wholesale 
power functions, to prevent the utility from giving its merchant arm 
preferential access to transmission information. All public utilities 
that owned, controlled or operated facilities used in the transmission 
of electric energy in interstate commerce were required to create or 
participate in an Open Access Same-Time Information System (OASIS) that 
was to provide existing and potential transmission customers the same 
access to transmission information.
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    \9\ Open Access Same-Time Information System (Formerly Real-Time 
Information Networks) and Standards of Conduct, Order No. 889, 61 FR 
21737 (May 10, 1996), FERC Stats. & Regs. ] 31,035 (1996), order on 
reh'g, Order No. 889-A, FERC Stats. & Regs. ] 31,049 (1997), order 
on reh'g, Order No. 889-B, 81 FERC ] 61,253 (1997).
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    6. Among the information public utilities were required to post on 
their OASIS was the transmission service provider's calculation of 
available transfer capability. Though the Commission acknowledged that 
before-the-fact measurement of the availability of transmission service 
is ``difficult,'' the Commission concluded that it was important to 
give potential transmission customers ``an easy-to-understand indicator 
of service availability.'' \10\ Because formal methods did not then 
exist to calculate available transfer capability and total transfer 
capability, the Commission encouraged industry efforts to develop 
consistent methods for calculating available transfer capability and 
total transfer capability.\11\ Order No. 889 ultimately required 
transmission service providers to base their calculations on ``current 
industry practices, standards and criteria'' and to describe their 
methodology in an Attachment C to their tariffs.\12\ The Commission 
noted that the requirement that transmission service providers purchase 
only available transfer capability that is posted as available ``should 
create an adequate incentive for them to calculate available transfer 
capability and total transfer capability as accurately and as uniformly 
as possible.'' \13\
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    \10\ Order No. 889, FERC Stats. & Regs. ] 31,035 at 21749.
    \11\ Id. at 21750.
    \12\ Id.
    \13\ Id.
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    7. Although Order No. 888 obligated each public utility to 
calculate the amount of transfer capability on its system available for 
sale to third parties, the Commission did not standardize the 
methodology for calculating available transfer capability, nor did it 
impose any specific requirements regarding the disclosure of the 
methodologies used by each transmission service provider.\14\ As a 
result, a variety of available transfer capability calculation 
methodologies have been used with very few clear rules governing their 
use. Moreover, there was often very little transparency about the 
nature of these calculations, given that many transmission service 
providers historically filed only summary explanations of their 
available transfer capability methodologies in Attachment C to their 
OATTs.
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    \14\ Order No. 888, FERC Stats. & Regs. ] 31,036 n.610.
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B. Order Nos. 890 and 693

    8. Section 215 of the FPA requires a Commission-certified ERO to 
develop mandatory and enforceable Reliability Standards, which are 
subject to Commission review and approval. If approved, the Reliability 
Standards are enforced by the ERO, subject to Commission oversight, or 
by the Commission independently. As the ERO, NERC worked with industry 
to develop Reliability Standards improving consistency and transparency 
of available transfer capability calculation methodologies. On April 4, 
2006, as modified on August 28, 2006, NERC submitted to the Commission 
a petition seeking approval of 107 proposed Reliability Standards, 
including 23 Reliability Standards pertaining to Modeling, Data and 
Analysis (MOD). The MOD group of Reliability Standards is intended to 
standardize methodologies and system data needed for traditional 
transmission system operation and expansion planning, reliability 
assessment and the calculation of available transfer capability in an 
open access environment.
    9. On February 16, 2007, the Commission issued Order No. 890, which 
addressed and remedied opportunities for undue discrimination under the 
pro forma OATT adopted in Order No. 888. Among other things, the 
Commission required industry-wide consistency and transparency of all 
components of available transfer

[[Page 12750]]

capability calculation and certain definitions, data and modeling 
assumptions. The Commission concluded that the lack of industry-wide 
standards for the consistent calculation of available transfer 
capability poses a threat to the reliable operation of the Bulk-Power 
System, particularly with respect to the inability of one transmission 
service provider to know with certainty its neighbors' system 
conditions affecting its own available transfer capability values. As a 
result of this reliability concern, the Commission asserted that the 
proposed available transfer capability reforms were also supported by 
FPA section 215, through which the Commission has the authority to 
direct the ERO to submit a Reliability Standard that addresses a 
specific matter.\15\ Thus, the Commission in Order No. 890 directed 
industry to develop Reliability Standards, using the ERO's Reliability 
Standards development procedures, that provide for consistency and 
transparency in the methodologies used by transmission owners to 
calculate available transfer capability.
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    \15\ FPA section 215(d)(5). 16 U.S.C. 824o(d)(5).
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    10. The Commission stated in Order No. 890 that the available 
transfer capability-related Reliability Standards should, at a minimum, 
provide a framework for available transfer capability, total transfer 
capability and existing transmission commitments calculations. The 
Commission did not require a single computational process for 
calculating available transfer capability because, among other things, 
it found that the potential for discrimination and decline in 
reliability level does not lie primarily in the choice of an available 
transfer capability calculation methodology, but rather in the 
consistent application of its components, input and exchange data, and 
modeling assumptions.\16\ The Commission found that, if all of the 
available transfer capability components, and certain data inputs and 
assumptions are consistent, the three available transfer capability 
calculation methodologies would produce predictable and sufficiently 
accurate, consistent, equivalent and replicable results.\17\
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    \16\ Order No. 890, FERC Stats. & Regs. ] 31,241 at P 1029.
    \17\ Id. P 1030.
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    11. On March 16, 2007, the Commission issued Order No. 693, 
approving 83 of the 107 Reliability Standards filed by NERC in April 
2006.\18\ Of the 83 approved Reliability Standards, the Commission 
approved ten MOD Reliability Standards.\19\ However, the Commission 
directed NERC to prospectively modify nine of the ten approved MOD 
Reliability Standards to be consistent with the requirements of Order 
No. 890.\20\ The Commission reiterated the requirement from Order No. 
890 that all available transfer capability components (i.e., total 
transfer capability, existing transmission commitments, capacity 
benefit margin, and transmission reliability margin) and certain data 
input, data exchange, and assumptions be consistent and that the number 
of industry-wide available transfer capability calculation formulas be 
few in number, transparent and produce equivalent results.\21\ The 
Commission directed public utilities, working through the NERC 
Reliability Standards and NAESB business practices development 
processes, to produce workable solutions to implement the available 
transfer capability-related reforms adopted by the Commission. The 
Commission also deferred action on 24 proposed Reliability Standards, 
which did not contain sufficient information to enable the Commission 
to propose a disposition.\22\
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    \18\ Mandatory Reliability Standards for the Bulk-Power System, 
Order No. 693, 72 FR 16416 (Apr. 4, 2007), FERC Stats. & Regs. ] 
31,242, order on reh'g, Order No. 693-A, 120 FERC ] 61,053 (2007).
    \19\ Id. P 1010.
    \20\ Id.
    \21\ Id. P 1029-30; see also Order No. 890, FERC Stats. & Regs. 
] 31,241 at P 207.
    \22\ Order No. 693, FERC Stats. & Regs. ] 31,242 at P 287-303. 
Some of these Reliability Standards required the regional 
reliability organizations to develop criteria for use by users, 
owners or operators within each region. The Commission set aside 
such Reliability Standards and directed NERC to provide additional 
details prior to considering them for approval. Id. P 287-303.
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II. Proposed Reliability Standards

    12. In response to the requirements of Order No. 890 and related 
directives of Order No. 693,\23\ on August 29, 2008, NERC submitted for 
Commission approval five MOD Reliability Standards: MOD-001-1--
Available Transmission System Capability, MOD-008-1--TRM Calculation 
Methodology (hereinafter Transmission Reliability Margin Methodology), 
MOD-028-1 Area Interchange Methodology, MOD-029-1--Rated System Path 
Methodology, and MOD-030-1--Flowgate Methodology.\24\ On November 21, 
2008, NERC submitted for Commission approval a sixth MOD Reliability 
Standard: MOD-004-1--Capacity Benefit Margin (hereinafter Capacity 
Benefit Margin Methodology). On March 6, 2009, NERC submitted for 
Commission approval: MOD-030-2--a revised Flowgate Methodology 
Reliability Standard and withdrew its request for approval of MOD-030-
1.
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    \23\ The Reliability Standards were originally due on December 
10, 2007. See Order No. 890, FERC Stats. & Regs. ] 31,241 at P 223. 
NERC requested additional time to develop the Reliability Standards 
in order to address concerns raised in its stakeholder process. See 
NERC November 21, 2007 Request for Extension of Time, Docket Nos. 
RM05-17-000, et al, at 7. The Commission ultimately granted three 
requests for extension of time, extending NERC's deadline by over 
seven months, so that NERC could develop the Reliability Standards 
proposed here.
    \24\ NERC designates the version number of a Reliability 
Standard as the last digit of the Reliability Standard number. 
Therefore, version zero Reliability Standards end with ``-0'' and 
version one Reliability Standards end with ``-1.''
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    13. The Available Transmission System Capability Reliability 
Standard (MOD-001-1) serves as an ``umbrella'' Reliability Standard 
that requires each applicable entity to select and implement one or 
more of the three available transfer capability methodologies found in 
MOD-028-1, MOD-029-1, or MOD-030-2. MOD-004-1 and MOD-008-1 provide for 
the calculation of capacity benefit margin and transmission reliability 
margin, which are inputs into the available transfer capability 
calculation. If approved, NERC states that its filing wholly addresses 
eight of the 24 Reliability Standards that the Commission did not 
approve in Order No. 693 because further information was needed.
    14. NERC contends that the proposed Reliability Standards will have 
no undue negative effect on competition, nor will they unreasonably 
restrict available transfer capability on the Bulk-Power System beyond 
any restriction necessary for reliability and do not limit use of the 
Bulk-Power System in an unduly preferential manner. NERC contends that 
the increased rigor and transparency introduced in the development of 
available transfer capability and available flowgate capability 
calculations serve to mitigate the potential for undue advantages of 
one competitor over another. Under the proposed Reliability Standards, 
applicable entities are prohibited from making transmission capability 
available on a more conservative basis for commercial purposes than for 
either planning for native load or use in actual operations, thereby 
mitigating the potential for differing treatment of native load 
customers and transmission service customers. NERC states that data 
exchange, which has been heretofore voluntary, is now mandatory and it 
is required that the data be used in the available transfer capability/
available flowgate capability calculations. None of these requirements 
exist in the

[[Page 12751]]

current available transfer capability-related Reliability Standards. 
NERC contends that these improvements help the Commission achieve many 
of the primary objectives of Order No. 890 regarding transparency, 
standardization and consistency in available transfer capability 
calculations.
    15. NERC states that all three methodology Reliability Standards 
(MOD-028-1, MOD-029-1, and MOD-030-2) share fundamental equations that, 
while mathematically equivalent, are written in slightly different 
forms. As a result, the manner of determining the components varies 
between methodologies. The employment of any two methodologies, given 
the same inputs, may produce similar, but not identical, results. As 
noted by NERC there are fundamental differences in the proposed 
methodologies that can keep them from producing identical results. For 
example, the rated system path methodology does not use the same 
frequent simulations of power flow used by the other two methodologies. 
NERC states that the rated system path methodology therefore will 
rarely generate numbers that identically match those determined by an 
entity using the other two methodologies.
    16. NERC proposes to make the MOD Reliability Standards proposed 
here applicable to transmission operators and transmission service 
providers. NERC states that the drafting team considered applying the 
Reliability Standards to the transmission operator instead of the 
transmission service provider. According to NERC, the Reliability 
Standard drafting team believes that the NERC Functional Model supports 
a determination that responsibility for several of the requirements 
lies with the transmission operator.\25\ NERC also states that a number 
of entities argued in the NERC drafting process that the transmission 
service provider actually undertakes efforts to meet those 
requirements. NERC states that the drafting team believes this points 
to a delegation of tasks to a larger entity that is the byproduct of a 
regional transmission organization and its regional transmission 
tariff. Accordingly, NERC states that the MOD Reliability Standards 
retain the use of transmission operators in the Reliability Standards, 
and explained to entities how delegation or joint registration 
organizations address the compliance implications of the assignment.
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    \25\ NERC has developed a ``Functional Model'' that defines the 
set of functions that must be performed to ensure the reliability of 
the Bulk-Power System. The Functional Model identifies 14 functions 
and the name of a corresponding entity responsible for fulfilling 
each function. NERC's functional model can be found at https://www.nerc.com/page.php?cid=2/247/108.
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A. Coordination With Business Practice Standards

    17. NERC states that it has worked closely and collaboratively with 
NAESB, conducting numerous joint meetings and conference calls, to 
develop the Reliability Standards proposed here and related NAESB 
business-practice standards.\26\ NERC states that the focus of the 
proposed Reliability Standards is to address only the reliability 
aspects of available transfer capability and available flowgate 
capability and not to address the commercial aspects of available 
transfer capability, except to the extent that commercial system 
availability closely matches actual remaining system capability. The 
associated NAESB business practice standards are intended to focus on 
the competitive aspects of these processes. Through implementation of 
these Reliability Standards, access to the grid may indirectly be 
restricted, but NERC states that NAESB business practices and 
Commission orders related to these Reliability Standards ensure that 
any limitation will be applied in a manner that ensures open access and 
promotes competition.
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    \26\ As noted above, the Commission addresses the proposed NAESB 
business practices in a Notice of Proposed Rulemaking issued 
concurrently in Docket No. RM05-5-013.
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    18. According to NERC, it and NAESB have coordinated the 
development of these business practices and the Reliability Standards 
to ensure that there are no duplications or double counting between the 
business practice standards and the Reliability Standards, and they 
will continue to coordinate as necessary so that the available transfer 
capability-related Reliability Standards are compatible and consistent.

B. Available Transmission System Capability, MOD-001-1

    19. NERC proposes the Available Transmission System Capability 
Reliability Standard (MOD-001-1) as part of a set of Reliability 
Standards which are designed to work together to support a common 
reliability goal: to ensure that transmission service providers 
maintain awareness of available system capability and future flows on 
their own systems as well as those of their neighbors. NERC states 
that, historically, differences in implementation of available transfer 
capability methodologies and a lack of coordination between 
transmission service providers have resulted in cases where available 
transfer capability has been overestimated. As a result, systems have 
been oversold, resulting in potential or actual system operating limits 
and interconnection reliability operating limits being exceeded. NERC 
states that MOD-001-1 is the foundational Reliability Standard that 
obliges entities to select a methodology and then calculate available 
transfer capability or available flowgate capability using that 
methodology, thereby ensuring that the determination of available 
transfer capability is accurate and consistent across North America and 
that the transmission system is neither oversubscribed nor 
underutilized.
    20. NERC states that, unlike the current set of voluntary available 
transfer capability standards, MOD-001-1 requires adherence to a 
specific documented and transparent methodology. NERC states that it 
requires applicable entities to calculate available transfer capability 
on a consistent schedule and for specific timeframes. According to 
NERC, MOD-001-1 requires users, owners and operators to disclose 
counterflow assumptions and outage processing rules to other 
reliability entities. NERC states that this Reliability Standard 
prohibits applicable entities from making transmission capability 
available on a more conservative basis for commercial purposes than the 
system's capability in actual operations. NERC's MOD-001-1 also 
requires entities, for the first time, to exchange and use available 
transfer capability data. NERC states that the Reliability Standard 
reflects industry's consensus best practices for determining available 
transfer capability.
    21. As proposed, this Reliability Standard includes nine 
requirements, which would be applicable to all transmission service 
providers and transmission operators. To ensure consistency of 
enforcement, NERC states that each requirement is supported by a 
measure that identifies what is required and how the requirement will 
be enforced.
    22. Under NERC's proposed Requirement R1, a transmission operator 
must select one of three methodologies for calculating available 
transfer capability or available flowgate capability for each available 
transfer capability path for each time frame (hourly, daily or monthly) 
for the facilities in its area. As stated above, the three proposed 
methodologies are: The area interchange methodology, the rated system 
path methodology, and the flowgate methodology.
    23. Several proposed requirements within this Reliability Standard 
address

[[Page 12752]]

the calculation of available transfer capability or available flowgate 
capability. Requirement R2 requires each transmission service provider 
to calculate available transfer capability or available flowgate 
capability values hourly for the next 48 hours, daily for the next 31 
calendar days and monthly for the next 12 months. Requirement R6 
requires each transmission operator in its calculation of total 
transfer capability or total flowgate capability to use assumptions no 
more limiting than those used in its planning of operations. NERC 
contends that, consistent with the requirements of Order No. 890 and 
related directives of Order No. 693, Requirement R6 will minimize the 
differences between total transfer capability and total flowgate 
capability for transmission and transfer capability used in native load 
and reliability assessment studies.\27\ Similarly, Requirement R7 
requires each transmission service provider, in its calculation of 
available transfer capability or available flowgate capability, to use 
assumptions no more limiting than those used in its planning of 
operations. NERC contends that this requirement addresses the 
Commission's directive in Order No. 693 for the ERO to modify the 
available transfer capability Reliability Standards to include a 
requirement that the assumptions used in available transfer capability 
and available flowgate capability calculations be consistent with those 
used for planning the expansion or operation of the Bulk-Power System 
to the maximum extent possible.\28\ Requirement R8 requires each 
transmission service provider to recalculate available transfer 
capability at a certain specified interval (hourly, daily, monthly) 
unless the input values specified in the available transfer capability 
calculation have not changed. NERC contends that Requirement R8 
satisfies the Commission's directive to calculate available transfer 
capability on a consistent time interval.\29\
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    \27\ See Order No. 890, FERC Stats. & Regs. ] 31,241 at P 237; 
Order No. 693, FERC Stats. & Regs. ] 31,242 at P 1051.
    \28\ Order No. 693, FERC Stats. & Regs. ] 31,242 at P 1057; see 
also Order No. 890, FERC Stats. & Regs. ] 31,241 at P 292.
    \29\ See Order No. 890, FERC Stats. & Regs. ] 31,241 at P 301; 
Order No. 693, FERC Stats. & Regs. ] 31,242 at P 1057.
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    24. MOD-001-1 also proposes several record keeping and information 
sharing requirements for transmission service providers. Requirement R3 
requires each transmission service provider to keep an available 
transfer capability implementation document that explains the 
implementation of its chosen methodology(ies), its use of counterflows, 
the identities of entities with which it exchanges information for 
coordination purposes, any capacity allocation processes, and the 
manner in which it considers outages. Requirement R4 requires 
transmission service providers to keep specific reliability entities 
advised regarding changes to the available transfer capability 
implementation document.\30\ Requirement R5 requires the transmission 
service provider to make the available transfer capability 
implementation document available to those same reliability 
entities.\31\ Finally, proposed Requirement R9 allows a transmission 
service provider thirty calendar days to begin to respond to a request 
from any other transmission service provider, planning coordinator, 
reliability coordinator or transmission operator for certain data to be 
used in the requestor's available transfer capability or available 
flowgate capability calculations.
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    \30\ These include: Each planning coordinator, reliability 
coordinator, and transmission operator associated with the 
transmission service provider's area; and each planning coordinator, 
reliability coordinator, and transmission service provider adjacent 
to the transmission service provider's area.
    \31\ Although the Reliability Standards only require the 
transmission service provider to make the available transfer 
capability implementation document available to certain reliability 
entities, the NAESB standard on OASIS posting requirements (Standard 
001-13.1.5) requires transmission service providers to provide a 
link to the document on OASIS.
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    25. In Order No. 693, the Commission directed the ERO to develop 
modifications to the available transfer capability Reliability 
Standards to include a requirement that applicable entities make 
available assumptions and contingencies underlying available transfer 
capability and total transfer capability calculations. NERC contends 
that this Reliability Standard addresses this issue by requiring 
disclosure in the available transfer capability implementation document 
under Requirement R3.1 and part of the data exchange required by 
Requirement R9. NERC states that it has agreed with NAESB that 
requirements for posting information are more appropriately addressed 
through the NAESB process. Accordingly, NERC states that NAESB will be 
addressing the requirements associated with posting this information, 
instead of NERC.

C. Capacity Benefit Margin Methodology, MOD-004-1

    26. As proposed, the Capacity Benefit Margin Methodology 
Reliability Standard (MOD-004-1) provides for the calculation of 
capacity benefit margin, which is defined by NERC as the amount of firm 
transmission capability preserved by the transmission service provider 
for load-serving entities, whose loads are located on that transmission 
service provider's system, to enable access by the load-serving 
entities to generation from interconnected systems to meet generation 
reliability requirements.\32\ The purpose of this Reliability Standard 
is to promote the consistent and reliable calculation, verification, 
preservation, and use of capacity benefit margin to support analysis 
and system operations. NERC states that preservation of capacity 
benefit margin for a load-serving entity allows that entity to reduce 
its installed generating capacity below that which may otherwise have 
been necessary without interconnections to meet its generation 
reliability requirements. NERC states that the transmission transfer 
capability preserved as capacity benefit margin is intended to be used 
by the load-serving entities only in times of emergency generation 
deficiencies.
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    \32\ See North American Electric Reliability Council, Glossary 
of Terms Used in Reliability Standards (Effective February 12, 
2008), available at: https://www.nerc.com/docs/standards/rs/Glossary_12Feb08.pdf.
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    27. NERC proposes to apply MOD-004-1 to transmission service 
providers, transmission planners, load-serving entities, resource 
planners and balancing authorities. As discussed more fully below, NERC 
states that it does not specify a particular methodology for 
calculating capacity benefit margin, but rather improves transparency 
by requiring adherence to specific documented and transparent 
methodology to ensure consistent and reliable calculation, 
verification, preservation and use of capacity benefit margin.
    28. To improve consistency and transparency in the calculation of 
capacity benefit margin, the proposed Reliability Standard imposes 
twelve requirements on entities electing to use a capacity benefit 
margin. Requirement R1 requires the transmission service provider that 
maintains capacity benefit margin to prepare and keep current a 
capacity benefit margin implementation document that includes at a 
minimum: (1) The process through which a load-serving entity within a 
balancing authority associated with the transmission service provider, 
or the resource planner associated with that balancing authority area, 
may ensure that its need for transmission capacity to be set aside as 
capacity benefit margin will be reviewed and accommodated by the 
transmission service provider to the extent transmission capacity is

[[Page 12753]]

available; (2) the procedure and assumptions for establishing capacity 
benefit margin for each available transfer capability path or flowgate; 
and (3) the procedure for a load-serving entity or balancing authority 
to use transmission capacity set aside as capacity benefit margin, 
including the manner in which the transmission service provider will 
manage situations where the requested use of capacity benefit margin 
exceeds the amount of capacity benefit margin available.
    29. Requirement R2 requires the transmission service provider to 
make its current capacity benefit margin implementation document 
available to the transmission operators, transmission service 
providers, reliability coordinators, transmission planners, resource 
planners, and planning coordinators that are within or adjacent to the 
transmission service provider's area, and to the load-serving entities 
and balancing authorities within the transmission service providers 
area, and notify those entities of any changes to the capacity benefit 
margin implementation document prior to the effective date of the 
change.
    30. Requirements R3 and R4 require each load-serving entity and 
resource planner determining the need for transmission capacity to be 
set aside as capacity benefit margin for imports into a balancing 
authority to develop that need by using one or more of the following to 
determine the generation capability import requirement: \33\ loss of 
load expectation studies, loss of load probability studies, 
deterministic risk-analysis studies, and reserve margin or resource 
adequacy requirements established by other entities, such as 
municipalities, state commissions, regional transmission organizations, 
independent system operators, regional reliability organizations, or 
regional entities.
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    \33\ NERC defines the generation capability import requirement 
as the amount of generation capability from external sources 
identified by a load-serving entity or resource planner to meet its 
generation reliability or resource adequacy requirement as an 
alternative to internal resources.
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    31. Requirement R5 requires the transmission service provider to 
establish at least every 13 months a capacity benefit margin value for 
each available transfer capability path or flowgate to be used for 
available transfer capability or available flowgate capability during 
the 13 full calendar months (months 2-14) following the current month 
(the month in which the transmission service provider is establishing 
the capacity benefit margin values). Similarly, Requirement R6 requires 
the transmission planner to establish a capacity benefit margin value 
for each available transfer capability path or flowgate to be used in 
planning during each of the full calendar years two through ten 
following the current year (the year in which the transmission planner 
is establishing the capacity benefit margin values). All values must 
reflect consideration of each of the following, if available: (1) Any 
studies performed by load-serving entities or resource planners 
pursuant to Requirement R3 for loads within the transmission service 
provider's area; or (2) any reserve margin or resource adequacy 
requirements for loads within the transmission service provider's area 
established by other entities, such as municipalities, state 
commissions, regional transmission organizations, independent system 
operators, regional reliability organizations, or regional entities. 
Once determined, the capacity benefit margin values will be allocated 
along available transfer capability paths based on the expected import 
paths or source regions provided by load-serving entities or resource 
planners. Capacity Benefit Margin values for flowgates will be 
allocated based on the expected import paths or source regions provided 
by load-serving entities or resource planners and the distribution 
factors associated with those paths or regions, as determined by the 
transmission service provider.
    32. Requirements R7 and R8 require the transmission service 
provider and the transmission planner to notify, within 31 calendar 
days after the establishment of capacity benefit margin, all load-
serving entities and resource planners that determined they had a need 
for capacity benefit margin of the amount, or the amount planned, of 
capacity benefit margin set aside.
    33. Requirement R9 requires the transmission service provider that 
maintains capacity benefit margin and the transmission planner to 
provide, subject to confidentiality and security requirements, copies 
of the applicable supporting data, including any models, used for 
determining capacity benefit margin or allocating capacity benefit 
margin over each available transfer capability path or flowgate to each 
of the associated transmission operators and to any transmission 
service provider, reliability coordinator, transmission planner, 
resource planner, or planning coordinator within 30 calendar days of 
their making a request for the data.
    34. Requirement R10 requires the load-serving entity or balancing 
authority to request to import energy over firm transfer capability set 
aside as capacity benefit margin only when experiencing a declared 
level 2 or higher NERC energy emergency alert.
    35. When reviewing an arranged interchange using capacity benefit 
margin, Requirement R11 requires all balancing authorities and 
transmission service providers to waive, within the bounds of reliable 
operation, any real-time timing and ramping requirements.
    36. Requirement R12 requires all transmission service providers 
maintaining capacity benefit margin to approve, within the bounds of 
reliable operation, any arranged interchange using capacity benefit 
margin that is submitted by an ``energy deficient entity'' \34\ under 
an energy emergency alert level 2 if the capacity benefit margin is 
available, the emergency is declared within the balancing authority 
area of the energy deficient entity, and the load of the energy 
deficient entity is located within the transmission service provider's 
area.
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    \34\ Energy deficient entities are defined by NERC in the 
Capacity and Energy Emergencies Reliability Standard. See EOP-002-2, 
Attachment 1.
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    37. NERC states that the proposed Reliability Standard complies 
with the requirements of Order No. 890 and related directives of Order 
No. 693 because it sets standards that allow load-serving entities to 
request transfer capability to be set aside in the form of capacity 
benefit margin in a consistent and transparent manner. Consistent with 
the Commission's direction, the Reliability Standard provides an 
approach for determining capacity benefit margin that is flexible and 
does not mandate a particular methodology.\35\ NERC contends that this 
is appropriate because various parts of the country have already 
developed robust methodologies for determining capacity benefit margin. 
NERC states that Requirements R3 and R4 allow load-serving entities or 
resource planners to perform specific studies to determine their need 
for capacity benefit margin. By specifying the types of studies load-
serving entities or resource planners must perform, NERC contends that 
MOD-004-1 ensures that capacity benefit margin and transmission 
reliability margin are not used for the same purpose.\36\ In response 
to the Commission's transparency requirement,\37\ NERC states that 
Requirement R9 ensures that capacity benefit margin studies are made 
available to the appropriate reliability entities for their review and

[[Page 12754]]

analysis. With regard to public disclosure, NERC states that it has 
agreed with NAESB that requirements for posting information are more 
appropriately addressed through the NAESB process.
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    \35\ Citing Order No. 693, FERC Stats. & Regs. ] 31,242 at P 
1078; see also Order No. 890, FERC Stats. & Regs. ] 31,241 at P 257.
    \36\ Citing Order No. 693, FERC Stats. & Regs. ] 31,242 at P 
1105.
    \37\ Citing id. P 1077.
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    38. Requirements R5 and R6 require that the transmission service 
provider and transmission planner utilize the information contained in 
the studies if it has been provided to them when establishing capacity 
benefit margin values and mandate the re-evaluation of capacity benefit 
margin at least once every thirteen months.\38\ NERC states that, 
consistent with Order Nos. 890 and 693, Requirements R5 and R6 also 
require allocation of capacity benefit margin based on the available 
transfer methodology chosen under MOD-001-1.\39\ NERC states that 
Requirements R10, R11 and R12 specify the manner in which capacity 
benefit margin is to be used.\40\ NERC states that any additional 
requirements specified by the transmission service provider must be 
identified in the capacity benefit margin implementation document, as 
mandated in Requirement R1.3.
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    \38\ Citing Order No. 890, FERC Stats. & Regs. ] 31,241 at P 
358. NERC states that it chose thirteen months to ensure enough 
flexibility for a yearly update without being so prescriptive as to 
require it on a specific day.
    \39\ Citing id. at P 257; Order No. 693, FERC Stats. & Regs. ] 
31,242 at P 1082.
    \40\ Citing Order No. 890, FERC Stats. & Regs. ] 31,241 at P 
256-7.
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    39. In response to the requirement that capacity benefit margins be 
verifiable,\41\ NERC states that Requirements R5, R6 and R9 ensure that 
the studies used to establish a need for capacity benefit margin are 
made available to any of the reliability entities specified in 
Requirement R9 that request them. NERC explains that the Reliability 
Standard does not mandate the verification of requested amounts of 
capacity benefit margin because it would place a functional entity 
(either the transmission service provider or transmission planner) in 
the position of having to judge the quality of each request, which 
could create conflicts of interest or potentially result in liability 
for that entity. Rather than mandate any particular approach for 
validation, NERC states that Requirements R3 and R4 mandate the 
specific kinds of studies to be performed and supporting information 
that is to be maintained when determining the underlying need for 
capacity benefit margin. To the extent that entities do not use these 
methods or maintain this supporting information, NERC states that they 
will be in violation of the Reliability Standard.
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    \41\ Order No. 693, FERC Stats. & Regs. ] 31,242 at P 1077.
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    40. In response to the Commission's call for clarity in the process 
for requesting capacity benefit margin,\42\ NERC states that 
Requirement R1.1 requires the transmission service provider explain the 
process by which load-serving entities and resource planners may ensure 
that their need for transmission capacity to be set aside as capacity 
benefit margin is reviewed and accommodated by the transmission service 
provider to the extent transmission capacity is available. Requirement 
R1.3 requires the transmission service provider to describe the 
procedure for load-serving entities and resource planners to use 
transmission capacity that has been set aside as capacity benefit 
margin. If the requested use of capacity benefit margin exceeds the 
amount of capacity benefit margin available, Requirement R1.3 also 
requires a description of how the transmission service provider will 
manage such situations. In addition, NERC states that Requirements R7 
and R8 mandate that the transmission service provider notify load-
serving entities and resource planners that determined they had a need 
for capacity benefit margin of the amount of capacity benefit margin 
set aside, so that they may make informed decisions about how to 
proceed if their full request for capacity benefit margin could not be 
accommodated.
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    \42\ Id. P 1081.
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D. Transmission Reliability Margin Methodology, MOD-008-1

    41. As proposed, the Transmission Reliability Margin Methodology 
Reliability Standard (MOD-008-1) provides for the calculation of 
transmission reliability margin, which describes the reliability 
aspects of determining and maintaining a transmission reliability 
margin and the components of uncertainty that may be considered when 
making that determination. The purpose of this Reliability Standard is 
to promote the consistent and reliable calculation, verification, 
preservation, and use of transmission reliability margin to support 
analysis and system operations. Transmission reliability margin is 
transmission transfer capability set aside to mitigate risks to 
operations, such as deviations in dispatch, load forecast, outages, and 
similar such conditions. It is distinctly different from capacity 
benefit margin, which is transmission transfer capability set aside to 
allow for the import of generation upon the occurrence of a generation 
capacity deficiency.
    42. NERC proposes to apply MOD-008-1 only to transmission operators 
that have elected to keep a transmission reliability margin. As 
discussed more fully in the discussion section below, NERC states that 
the Reliability Standard does not specify one approach for calculating 
transmission reliability margin, but rather improves transparency by 
providing the key requirements and items that must be contained in any 
transmission reliability margin methodology.\43\
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    \43\ NERC August 29, 2008 Filing, Docket No. RM08-19-000 at 38 
(NERC Filing).
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    43. To improve the transparency of transmission reliability margin 
calculations, the proposed Reliability Standard imposes five 
requirements on transmission service providers electing to keep a 
transmission reliability margin. Requirement R1 provides that a 
transmission operator must keep a transmission reliability margin 
implementation document that explains how specific risks such as 
aggregate load forecast uncertainty, load distribution uncertainty, and 
forecast uncertainty in transmission system topology \44\ are accounted 
for in the transmission reliability margin, how transmission 
reliability margin is allocated, and how transmission reliability 
margin is determined for various time frames.
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    \44\ This includes, but is not limited to, forced or unplanned 
outages and maintenance outages; allowances for parallel path (loop 
flow) impacts; allowances for simultaneous path interactions; 
variations in generation dispatch (including, but not limited to, 
forced or unplanned outages, maintenance outages and location of 
future generation); short-term system operator response (operating 
reserve actions); reserve sharing requirements; and inertial 
response and frequency bias.
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    44. Requirement R2 allows a transmission operator to account only 
for the risks identified in Requirement R1 in transmission reliability 
margin, and prohibits the transmission operator from incorporating 
risks that are addressed in capacity benefit margin.\45\ It allows 
reserve sharing to be included in transmission reliability margin.
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    \45\ The capacity benefit margin Reliability Standard, MOD-004-
1, was filed on November 21, 2008 in Docket No. RM09-5-000.
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    45. Requirement R3 requires each applicable entity to make the 
transmission reliability margin implementation document and associated 
information available to the following reliability entities if 
requested: Transmission service provider, reliability coordinator, 
planning coordinator, transmission planner, and transmission operator.

[[Page 12755]]

    46. Requirement R4 provides that each applicable transmission 
operator must determine the transmission reliability margin value per 
the methods described in the transmission reliability margin 
implementation document at least once every thirteen months. Finally, 
Requirement R5 states that each applicable transmission operator must 
provide that transmission reliability margin value to its transmission 
service providers and transmission planners no more than seven days 
after it has been determined.
    47. NERC states that MOD-008-1 complies with Order No. 890 by 
specifying the critical areas of analysis required for transmission 
reliability margin.\46\ Further, it states that it has specified the 
appropriate uses of transmission reliability margin in Requirement R1 
and prohibited the use of other values and double counting in 
Requirement R1. In addition, it maintains that MOD-008-1 complies with 
Order No. 693 by imposing clear requirements for making documents 
supporting the transmission reliability margin determination available 
through Requirements R1 and R3.
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    \46\ NERC Filing at 32 (citing Order No. 890, FERC Stats. & 
Regs. ] 31,241 at P 273).
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    48. In response to the requirement to expand the applicability of 
the transmission reliability margin Reliability Standard to planning 
authorities and reliability coordinators,\47\ NERC states that the 
drafting team was not able to identify any requirements for these 
entities, based on the current drafting of the Reliability Standard. 
Therefore, these entities are not included in the proposed Reliability 
Standard. NERC states that, until such time as the transmission 
reliability margin methodology becomes more detailed, there does not 
seem to be any measurable action that can be imposed on the planning 
coordinator \48\ or reliability coordinator.
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    \47\ Order No. 693, FERC Stats. & Regs. ] 31,242 at P 1126.
    \48\ The Commission notes that NERC uses the terms planning 
coordinator and planning authority interchangeably in its standards, 
as indicated in the proposed additions to the glossary of terms, 
addressed below. The interchangeable use of these terms may lack the 
clarity generally preferred, but the Commission understands that 
NERC is currently working on modifications to address this issue.
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    49. In response to the Commission's statement that it would not 
require transfer capability that is set aside as transmission 
reliability margin to be sold on a non-firm basis,\49\ NERC states that 
it has included this requirement in each of the three methodologies as 
a part of firm and non-firm equations. NERC states that, because some 
of the uncertainties included in the transmission reliability margin 
may reduce or be eliminated as one approaches real time, the non-firm 
equations allow for the partial release of transmission reliability 
margin. In the Area Interchange Methodology (MOD-028-1), this is 
addressed in Requirement R11; in the Rated System Path Methodology 
(MOD-029-1), this is addressed in Requirement R8; and in the Flowgate 
Methodology (MOD-030-2), this is addressed in Requirement R9.
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    \49\ See Order No. 890, FERC Stats. & Regs. ] 31,241 at P 273.
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    50. NERC contends that choosing a ``best'' approach to transmission 
reliability margin calculation would require a much more thorough 
technical effort. NERC therefore requests that the Commission provide 
additional guidance on this topic regarding its priority and a 
determination whether or not such an effort should be included in 
NERC's annual planning process.

E. Three Methodolog