Revision to Electric Reliability Organization Definition of Bulk Electric System, 72910-72933 [2010-29570]
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Federal Register / Vol. 75, No. 227 / Friday, November 26, 2010 / Rules and Regulations
DEPARTMENT OF ENERGY
Federal Energy Regulatory
Commission
18 CFR Part 40
[Docket No. RM09–18–000; Order No. 743]
Revision to Electric Reliability
Organization Definition of Bulk Electric
System
Issued November 18, 2010.
Federal Energy Regulatory
Commission.
ACTION: Final rule.
AGENCY:
In this Final Rule, pursuant to
section 215 of the Federal Power Act
(FPA),1 the Federal Energy Regulatory
Commission (Commission) adopts, with
modifications, the proposal outlined in
its March 18, 2010 Notice of Proposed
Rulemaking to require the Electric
Reliability Organization (ERO) to revise
its definition of the term ‘‘bulk electric
system.’’ 2 The Commission directs the
ERO, through the ERO’s Reliability
Standards Development Process, to
SUMMARY:
revise the definition to address the
Commission’s technical concerns, as
discussed fully below, and ensure that
the definition encompasses all facilities
necessary for operating an
interconnected electric transmission
network. The Commission believes that
the best way to accomplish these goals
is to eliminate the regional discretion in
the current definition, maintain a brightline threshold that includes all facilities
operated at or above 100 kV except
defined radial facilities, and establish an
exemption process and criteria for
excluding facilities that are not
necessary for operating the
interconnected transmission network.
However, this Final Rule allows the
ERO, in accordance with Order No. 693,
to develop an alternative proposal for
addressing the Commission’s concerns
with the present definition with the
understanding that any such alternative
must be as effective as, or more effective
than, the Commission’s proposed
approach in addressing the identified
technical and other concerns, and may
not result in a reduction in reliability.
Effective Date: This Final Rule
will become effective January 25, 2011.
FOR FURTHER INFORMATION CONTACT:
Robert V. Snow (Technical Information),
Office of Electric Reliability, Division
of Reliability Standards, Federal
Energy Regulatory Commission, 888
First Street, NE., Washington, DC
20426, Telephone: (202) 502–6716.
Patrick A. Boughan (Technical
Information), Office of Electric
Reliability, Division of Reliability and
Engineering Services, Federal Energy
Regulatory Commission, 888 First
Street, NE., Washington, DC 20426,
Telephone: (202) 502–8071.
Jonathan E. First (Legal Information),
Office of the General Counsel, Federal
Energy Regulatory Commission, 888
First Street, NE., Washington, DC
20426, Telephone: (202) 502–8529.
Mindi Sauter (Legal Information), Office
of the General Counsel, Federal
Energy Regulatory Commission, 888
First Street, NE., Washington, DC
20426, Telephone: (202) 502–6830.
SUPPLEMENTARY INFORMATION:
DATES:
Table of Contents
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Paragraph
No.
I. Background ............................................................................................................................................................................................
A. Section 215 of the FPA ....................................................................................................................................................................
B. Order No. 693 ...................................................................................................................................................................................
C. NERC’s June 14, 2007 Filing ...........................................................................................................................................................
D. NPCC’s Identification of Bulk Electric System Facilities ..............................................................................................................
E. Notice of Proposed Rulemaking ......................................................................................................................................................
II. Discussion ............................................................................................................................................................................................
A. Overview ..........................................................................................................................................................................................
1. Definition of Bulk Electric System ...............................................................................................................................................
(a) Commission Authority .............................................................................................................................................................
(1) Comments .............................................................................................................................................................................
(i) NERC Standards Development Process and Deference to NERC and the Regional Entities ........................................
(ii) Bulk-Power System ..........................................................................................................................................................
(iii) Distribution Facilities ......................................................................................................................................................
(2) Commission Determination ..................................................................................................................................................
(i) Overview ............................................................................................................................................................................
(ii) NERC Standards Development Process and Deference to NERC and the Regional Entities .......................................
(iii) Bulk-Power System .........................................................................................................................................................
(iv) Distribution Facilities ......................................................................................................................................................
(b) Scope of the Definitional Change of ‘‘Bulk Electric System’’ ................................................................................................
(1) NOPR Proposal .....................................................................................................................................................................
(2) Comments .............................................................................................................................................................................
(3) Commission Determination ..................................................................................................................................................
(c) Technical and Historical Justification for Modification ........................................................................................................
(1) NOPR Proposal .....................................................................................................................................................................
(2) Comments .............................................................................................................................................................................
(3) Commission Determination ..................................................................................................................................................
(i) Impact-Based Methodology and Regional Variation .......................................................................................................
(ii) FRCC Event .......................................................................................................................................................................
(iii) ReliabilityFirst Event .......................................................................................................................................................
(iv) Astoria West Event ..........................................................................................................................................................
(v) Relevance of TLR ..............................................................................................................................................................
(vi) International Concerns ....................................................................................................................................................
(4) Summary ...............................................................................................................................................................................
(d) Usage and Definition of ‘‘Bulk-Power System’’ ......................................................................................................................
(1) Comments .............................................................................................................................................................................
(2) Commission Determination ..................................................................................................................................................
1 16
U.S.C. 824o.
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Proposed Rulemaking, 75 FR 14097 (Mar. 24, 2010),
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2. Exemption Process ........................................................................................................................................................................
(a) Comments .................................................................................................................................................................................
(b) Commission Determination .....................................................................................................................................................
3. Transition Process .........................................................................................................................................................................
(a) Comments .................................................................................................................................................................................
(b) Commission Determination .....................................................................................................................................................
4. Cost Recovery ................................................................................................................................................................................
(a) Comments .................................................................................................................................................................................
(b) Commission Determination .....................................................................................................................................................
5. Issues Regarding the Western Interconnection ...........................................................................................................................
(a) Comments .................................................................................................................................................................................
(b) Commission Determination .....................................................................................................................................................
6. Impact on Generation Owners and Operators .............................................................................................................................
(a) Comments .................................................................................................................................................................................
(b) Commission Determination .....................................................................................................................................................
7. Clarifying Terms ............................................................................................................................................................................
(a) Comments .................................................................................................................................................................................
(b) Commission Determination .....................................................................................................................................................
III. Information Collection Statement ......................................................................................................................................................
IV. Environmental Analysis .....................................................................................................................................................................
V. Regulatory Flexibility Act Analysis ....................................................................................................................................................
A. NOPR Proposal .................................................................................................................................................................................
B. Comments .........................................................................................................................................................................................
C. Commission Determination .............................................................................................................................................................
VI. Document Availability .......................................................................................................................................................................
VII. Effective Date and Congressional Notification ................................................................................................................................
Before Commissioners: Jon Wellinghoff,
Chairman; Marc Spitzer, Philip D.
Moeller, John R. Norris, and Cheryl
A. LaFleur.
1. In this Final Rule, pursuant to
section 215 of the FPA,3 the
Commission adopts, with modifications
described below, the proposal set forth
in its March 18, 2010 Notice of
Proposed Rulemaking (NOPR) requiring
the Electric Reliability Organization
(ERO) to revise its definition of the term
‘‘bulk electric system.’’ 4 The
Commission directs the ERO, through
the ERO’s Reliability Standards
Development Process, to revise the
definition to address the Commission’s
technical concerns, as discussed fully
below, and ensure that the definition
encompasses all facilities necessary for
operating an interconnected electric
transmission network. The Commission
believes that the best way to accomplish
these goals is to eliminate the regional
discretion in the current definition,
maintain a bright-line threshold that
includes all facilities operated at or
above 100 kV except defined radial
facilities, and establish an exemption
process and criteria for excluding
facilities that are not necessary for
operating the interconnected
transmission network. However, this
Final Rule allows the ERO, in
accordance with Order No. 693, to
3 16
U.S.C. 824o.
to Electric Reliability Organization
Definition of Bulk Electric System, Notice of
Proposed Rulemaking, 75 FR 14097 (Mar. 24, 2010),
FERC Stats. & Regs. ¶ 32,654 (2010).
4 Revision
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develop an alternative proposal for
addressing the Commission’s concerns
with the present definition with the
understanding that any such alternative
must be as effective as, or more effective
than,5 the Commission’s proposed
approach in addressing the identified
technical and other concerns, and may
not result in a reduction in reliability.6
2. In Order No. 693, the Commission
noted its concern that the current ‘‘bulk
electric system’’ definition has the
potential for gaps in coverage of
facilities, and indicated that it would
revisit the issue. This Final Rule is the
next step towards addressing the
Commission’s concerns. The approved
changes will help ensure reliability and
consistency in the bulk electric system
classification throughout the
interconnected United States. The
Commission takes this action as a
continuation of Order No. 693’s efforts
to ensure that the mandatory Reliability
Standards fulfill the intent of Congress
in enacting section 215 of the FPA to
protect reliability of the nation’s BulkPower System. The aim of the Final
Rule is to eliminate inconsistencies
across regions, eliminate the ambiguity
created by the current discretion in
NERC’s definition of bulk electric
system, provide a backstop review to
ensure that any variations do not
compromise reliability, and ensure that
facilities that could significantly affect
reliability are subject to mandatory
rules. The Commission is not adding
any new or modified text to its
regulations.
5 Mandatory Reliability Standards for the BulkPower System, Order No. 693, FERC Stats. & Regs.
¶ 31,242, at P 31 (2007), order on reh’g, Order No.
693–A, 120 FERC ¶ 61,053 (2007).
6 See, e.g., Version One Regional Reliability
Standard for Resource and Demand Balancing, 133
FERC ¶ 61,063, at P 14 (2010) (Noting the
Commission’s concern that approving a proposed
Reliability Standard may result in reduced
reliability). In addition, as a general matter, any
proposed regional difference must be: (1) More
stringent than the continent-wide definition,
including a regional difference that addresses
matters that the continent-wide Reliability Standard
does not, or (2) necessitated by a physical difference
in the Bulk-Power System. See Rules Concerning
Certification of the Electric Reliability Organization;
and Procedures for the Establishment, Approval,
and Enforcement of Electric Reliability Standards,
Order No. 672, FERC Stats. & Regs. ¶ 31,204, at P
291 (2006), order on reh’g, Order No. 672–A, FERC
Stats. & Regs. ¶ 31,212 (2006).
3. On August 8, 2005, the Energy
Policy Act of 2005 (EPAct 2005) was
enacted into law. Title XII of EPAct
2005 added a new section 215 to the
FPA,7 which requires a Commissioncertified ERO to develop mandatory and
enforceable Reliability Standards,
subject to Commission review and
approval. Once approved, the Reliability
Standards may be enforced by the ERO,
subject to Commission oversight, or by
the Commission independently.8
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I. Background
A. Section 215 of the FPA
7 Public Law 109–58, Title XII, Subtitle A, 119
Stat. 594, 941 (2005) (codified at 16 U.S.C. 824o).
8 See 16 U.S.C. 824o(e)(3).
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4. In February 2006, the Commission
issued Order No. 672 9 in which the
Commission certified one organization,
the North American Electric Reliability
Corporation (NERC), as the ERO.10
B. Order No. 693
5. On March 16, 2007, in Order No.
693, pursuant to section 215(d) of the
FPA,11 the Commission approved 83 of
107 proposed Reliability Standards, six
of the eight proposed regional
differences, and the Glossary of Terms
Used in Reliability Standards developed
by NERC, the Commission-certified
ERO. In addition, Order No. 693
addressed the applicability of
mandatory Reliability Standards to the
statutorily defined Bulk-Power System.
6. In Order No. 693, the Commission
explained that section 215(a) of the FPA
broadly defines the Bulk-Power System
as:
Facilities and control systems necessary for
operating an interconnected electric energy
transmission network (or any portion thereof)
[and] electric energy from generating
facilities needed to maintain transmission
system reliability.12
The Commission also approved
NERC’s definition of ‘‘bulk electric
system,’’ which is an integral part of the
NERC Reliability Standards and is
included in the NERC Glossary of Terms
Used in Reliability Standards (NERC
Glossary):
As defined by the Regional Reliability
Organization, the electrical generation
resources, transmission lines,
interconnections with neighboring systems,
and associated equipment, generally operated
at voltages of 100 kV or higher. Radial
transmission facilities serving only load with
one transmission source are generally not
included in this definition.13
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7. The Commission approved NERC’s
definition of ‘‘bulk electric system’’ with
reservations. The Commission stated in
Order No. 693 that, ‘‘at least for an
initial period, the Commission will rely
on the NERC definition of ‘bulk electric
9 Order No. 672, FERC Stats. & Regs. ¶ 31,204,
order on reh’g, Order No. 672–A, FERC Stats. &
Regs. ¶ 31,212.
10 North American Electric Reliability Corp., 116
FERC ¶ 61,062, order on reh’g and compliance, 117
FERC ¶ 61,126 (2006) (certifying NERC as the ERO
responsible for the development and enforcement of
mandatory Reliability Standards), aff’d sub nom.
Alcoa Inc. v. FERC, 564 F.3d 1342 (D.C. Cir. 2009).
11 See Order No. 693, FERC Stats. & Regs.
¶ 31,242 (directing improvements to 56 of the 83
approved Reliability Standards and leaving 24
Reliability Standards as pending until further
information is provided), order on reh’g, Order No.
693–A, 120 FERC ¶ 61,053 (2007).
12 Order No. 693, FERC Stats. & Regs. ¶ 31,242 at
P 76.
13 Order No. 693, FERC Stats. & Regs. ¶ 31,242 at
P 75 n.47 (quoting NERC’s definition of ‘‘bulk
electric system’’).
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system’ and NERC’s registration process
to provide as much certainty as possible
regarding the applicability to and the
responsibility of specific entities to
comply with the Reliability
Standards.’’ 14 In approving the use of
NERC’s definition of ‘‘bulk electric
system,’’ the Commission stated that ‘‘[it]
remains concerned about the need to
address the potential for gaps in
coverage of facilities.’’ 15
C. NERC’s June 14, 2007 Filing
8. In a June 14, 2007 filing, NERC
submitted the regional definitions of
‘‘bulk electric system.’’ 16 NERC
represented that ‘‘[e]ach Regional Entity
utilizes the definition of bulk electric
system in the [NERC Glossary of Terms
Used in Reliability Standards]; however,
as permitted by that definition * * *
several Regional Entities define specific
characteristics or criteria that the
Regional Entity uses to identify the bulk
electric system facilities for its
members.[17] In addition, the Reliability
Standards apply to load shedding and
special protection relay facilities below
100 kV, which are monitored by
14 Id. P 75; see also Order No. 693–A, 120 FERC
¶ 61,053 at P 19 (‘‘the Commission will continue to
rely on NERC’s definition of bulk electric system,
with the appropriate regional differences, and the
registration process until the Commission
determines in future proceedings the extent of the
Bulk-Power System’’).
15 Order No. 693, FERC Stats. & Regs. ¶ 31,242 at
P 77 (footnotes omitted). For example, the
Commission noted that some regional definitions of
bulk electric system exclude facilities below 230 kV
and transmission lines that serve Washington, DC
and New York City and the Commission stated its
intent to address this matter in a future proceeding.
Id.
16 NERC Informational Filing in Response to
Paragraph 77 of Order No. 693, Docket No. RM06–
16–000 (Jun. 14, 2007) (June 2007 Filing).
17 Id. at 7. NERC also noted that the Texas
Regional Entity, Florida Reliability Coordinating
Council (FRCC), Midwest Reliability Organization,
and SERC Reliability Corporation use the NERC
definition of bulk electric system without
modification. In a supplemental filing, NERC
informed the Commission that Western Electricity
Coordinating Council (WECC) uses the NERC
definition alone in its implementation of Regional
Entity activities. See NERC Supplemental
Informational Compliance Filing, Docket No.
RM06–16–000 (Mar. 6, 2009). Three other Regional
Entities, ReliabilityFirst Corporation
(ReliabilityFirst), Southwest Power Pool (SPP
Regional Entity), and Northeast Power Coordinating
Council, Inc. (NPCC), stated that they use the NERC
definition supplemented with additional criteria.
For example, SPP Regional Entity indicated that it
uses the criteria specified in the NERC Statement
of Registry Criteria (with one exception).
ReliabilityFirst supplemented the NERC definition
with specific voltage-based inclusions and
exclusions. For example, ReliabilityFirst includes
‘‘lines operated at voltage of 100 kV or higher.’’ June
2007 Filing at 10. ReliabilityFirst excludes certain
radial facilities, balance of generating plant control
and operation functions, and ‘‘all other facilities
operated at voltages below 100 kV.’’
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Regional Entities, in compliance with
NERC’s Reliability Standards.’’ 18
9. As noted in the NOPR, NERC’s June
2007 Filing indicated that NPCC uses
the NERC definition of ‘‘bulk electric
system’’ supplemented by additional
criteria. Unlike the supplemental
criteria of other Regional Entities,
however, NPCC utilizes a significantly
different approach to identifying bulk
electric system elements. According to
NERC, NPCC identifies elements of the
bulk electric system using an impactbased methodology, as opposed to a
voltage-based methodology. Further, as
part of its approach to defining the ‘‘bulk
electric system,’’ NPCC includes its own
definition of ‘‘bulk power system.’’ 19
10. According to NERC, NPCC
analyzes all system elements within its
footprint regardless of size (voltage) to
determine their impact based on its
‘‘bulk electric system’’ definition. NPCC
also utilizes a guidance document,
which provides further information on
the NPCC definition of ‘‘bulk power
system’’ and how it is applied.20
D. NPCC’s Identification of Bulk Electric
System Facilities
11. In a December 2008 Order, the
Commission directed NERC and NPCC
to submit to the Commission a
comprehensive list of bulk electric
system facilities located within the
United States portion of the NPCC
region.21 The Commission explained
that there appeared to be conflicting
lists of bulk electric system elements
developed by one of the balancing
authorities in the United States portion
of the NPCC region and it was not clear
which, if any, of the lists were
submitted to NPCC or approved by
NPCC’s Task Force on System Studies.
In a compliance filing, NERC and NPCC
indicated that the ‘‘NPCC Approved
Bulk Electric System List’’ of June 2007
was the only listing of bulk electric
system facilities approved by NPCC and
is the current list of facilities within the
U.S. portion of NPCC to which the
NERC Reliability Standards apply.22
18 June
2007 Filing at 7.
interconnected electrical systems within
northeastern North America comprised of system
elements on which faults or disturbances can have
a significant adverse impact outside of the local
area.’’ Id., Attachment 1 (NPCC Document A–10,
Classification of Bulk Power System Elements (Apr.
28, 2007)).
20 Id.
21 North American Electric Reliability Corp., 125
FERC ¶ 61,295 (2008) (December 2008 Order).
22 NERC and NPCC Compliance Filing at 5,
Docket No. RC09–3–000 (Feb. 20, 2009). The
February 20 Compliance Filing also indicated that
the NPCC approved list of bulk electric system
elements was not developed pursuant to NPCC’s
Document A–10, Classification of Bulk Power
System Elements, identified in the June 2007 Filing.
19 ‘‘The
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The filing indicated that a majority of
the 115 kV and 138 kV transmission
facilities in the NYISO Balancing
Authority Area of the NPCC region are
excluded from the NPCC list of bulk
electric system facilities, including
those associated with nuclear power
plants, and thus are excluded from
compliance with mandatory Reliability
Standards.23 The information provided
by NPCC also indicated that numerous
transmission lines at 100 kV or above
that interconnect with registered
generation facilities are excluded from
NPCC’s list of bulk electric system
facilities.
12. In September 2009, NERC and
NPCC submitted a compliance filing in
which NPCC evaluated the impact and
usefulness of a 100 kV ‘‘bright-line’’
‘‘bulk electric system’’ definition as well
as another optional method, which
utilizes Transmission Distribution
Factor calculations to determine
reliability impacts. The NPCC definition
would exclude radial network portions
of the transmission system, as opposed
to radial lines.24 However, NPCC stated
that it continues to believe that its
current impact-based approach provides
an adequate level of reliability and,
therefore, intends to continue to apply
the impact-based approach in
classifying its bulk electric system
elements.25
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E. Notice of Proposed Rulemaking
13. On March 18, 2010, the
Commission issued a NOPR proposing
to direct NERC to revise the definition
of ‘‘bulk electric system’’ in the NERC
Glossary. The current ‘‘bulk electric
system’’ definition provides Regional
Rather, the approved NPCC list was developed
pursuant to an earlier version of the NPCC impactbased methodology.
23 In addition, NPCC excludes approximately
seven higher voltage (e.g., 230 kV, 345 kV and 500
kV) transmission facilities, some connecting to
nuclear power plants.
24 NERC and NPCC Compliance Filing and
Assessment of Bulk Electric System Report, Docket
No. RC09–3–000 (Sep. 21, 2009). NPCC would
define ‘‘radial portions of the transmission system
to include (1) an area serving load that is connected
to the rest of the network at a single transmission
substation at a single transmission voltage by one
or more transmission circuits; (2) tap lines and
associated facilities which are required to serve
local load only; (3) transmission lines that are
operated open for normal operation; or (4)
additionally as an option, those portions of the
NPCC transmission system operated at 100 kV or
higher not explicitly designated as a bulk electric
system path for generation which have a one
percent or less participation in area, regional or
inter regional power transfers. Id. at 11.
25 Id. at 7–8; see also id. at 14 (‘‘If directed by the
Commission to adopt the developed [bulk electric
system] definition for U.S. Registered Entities
within the NPCC footprint, NPCC would need
additional time to carefully consider and develop
a more extensive and detailed implementation
plan.’’).
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Entities discretion to define ‘‘bulk
electric system,’’ including the ability to
exclude facilities 100 kV or above,
without ERO or Commission oversight.
The Commission’s proposed revised
definition would continue to include all
facilities rated above 100 kV and
eliminate regional variations, providing
a consistent identification of bulk
electric system facilities across the
nation’s reliability regions. The proposal
called for Commission and NERC
approval for exempting facilities that
would otherwise qualify as part of the
bulk electric system on a facility-byfacility basis.
14. The NOPR identified
inconsistencies between regions that
resulted from the existing definition,
such as NPCC not including two 115 kV
transmission lines as part of the bulk
electric system in its region even though
the sections of these same lines that
connect to PJM’s balancing authority
area are considered bulk electric system
elements within the ReliabilityFirst
footprint. As an additional example,
seven higher voltage (e.g., 230 kV, 345
kV, and 500 kV) transmission facilities
(some connecting to nuclear power
plants) excluded from the list of bulk
electric system facilities in NPCC would
be included in other regions. Further,
the NOPR provided several examples of
disturbances that either began on or
were propagated by 100–200 kV
facilities including a February 26, 2008
event in FRCC originating at a 138 kV
facility that resulted in the loss of 24
transmission lines and 4,300 MW of
generation.
15. The Commission issued the NOPR
on March 18, 2010, and required that
comments be filed within 45 days after
publication in the Federal Register.26
More than eighty comments and reply
comments to the NOPR proposal were
submitted to the Commission.27 Upon
consideration of the comments, the
Commission modifies certain proposals
from the NOPR in this Final Rule, as
described below.
II. Discussion
A. Overview
16. After consideration of the
comments submitted, the Commission
adopts the NOPR’s proposal with some
modifications. The Commission directs
the ERO to revise the definition of ‘‘bulk
electric system’’ through the NERC
Standards Development Process to
address the Commission’s concerns
discussed herein. The Commission
believes the best way to address these
26 See
27 A
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list of commenters appears in Appendix A.
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concerns is to eliminate the Regional
Entities’ discretion to define ‘‘bulk
electric system’’ without ERO or
Commission review, maintain a brightline threshold that includes all facilities
operated at or above 100 kV except
defined radial facilities, and adopt an
exemption process and criteria for
excluding facilities that are not
necessary to operate an interconnected
electric transmission network. However,
NERC may propose a different solution
that is as effective as, or superior to, the
Commission’s proposed approach in
addressing the Commission’s technical
and other concerns so as to ensure that
all necessary facilities are included
within the scope of the definition.
1. Definition of Bulk Electric System
(a) Commission Authority
17. In the NOPR, the Commission
proposed, pursuant to section 215(d)(5)
of the FPA and § 39.5(f) of our
regulations, to require NERC to submit
a revised NERC definition of ‘‘bulk
electric system’’ that provides a 100 kV
threshold for facilities that are included
in the bulk electric system and
eliminates the currently-allowed
discretion of a Regional Entity to define
‘‘bulk electric system’’ within its system
without NERC or Commission oversight.
(1) Comments
18. Several commenters argue that the
Commission’s proposal exceeds its
statutory authority.28 Other commenters
contend that the Commission’s proposal
is inconsistent with the statutory regime
envisioned in section 215 of the FPA,
requiring the Commission to defer to the
ERO on technical issues and for the ERO
to have primary responsibility for
developing specific Reliability
Standards.
(i) NERC Standards Development
Process and Deference to NERC and the
Regional Entities
19. NERC supports the Commission’s
objectives of ensuring a common
understanding and consistent
application of ‘‘bulk electric system’’
across the regions, while allowing
variations to the definition based on
reliability. However, NERC objects to
the Commission making unilateral
decisions with respect to the definition,
as it did in the NOPR, rather than
allowing this issue to be addressed
through the NERC Reliability Standards
28 See, e.g., APPA/NRECA, NYPSC, NYSRC, EEI,
Joint Western Commenters, NERC, Snohomish,
Tacoma Power, and PGE. Note that although the
parties we have identified as the ‘‘Joint Western
Commenters’’ submitted separate comments, the
comments were virtually identical. Consequently,
we cite their comments as a single group.
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Federal Register / Vol. 75, No. 227 / Friday, November 26, 2010 / Rules and Regulations
Development Process.29 NERC states
that the NERC Glossary of Terms is partand-parcel of the Reliability Standards
and therefore falls under the same
section 215 process. NERC argues that
the Commission may order the ERO,
pursuant to section 215(d)(5) of the
FPA, to submit a proposed Reliability
Standard or modification to a Reliability
Standard to the Commission. Following
this submission, NERC continues, the
Commission may then approve the
proposal or remand it to the NERC
Reliability Standards Development
Process for further consideration.
20. NERC states that by directing this
change, the Commission is bypassing
the NERC Reliability Standards
Development Process, and the
Commission will not have the
opportunity to consider NERC’s
guidance in developing an equally
effective and perhaps superior
alternative. NERC states that the
approach in the Commission’s NOPR
would accomplish indirectly that which
it is prohibited from doing directly, in
contravention of well-established
judicial precedent. NERC notes that the
Commission refrained from taking
similar unilateral action in Order No.
693. NERC requests the Commission
clarify in the Final Rule that any
modification to the definition of bulk
electric system be accomplished
through the NERC Reliability Standards
Development Process.
21. Similarly, EEI, Duke Energy,
APPA/NRECA, and other commenters
assert that the Commission should defer
to the NERC Reliability Standards
Development Process, and allege that
the proposal unreasonably departs from
the Commission’s precedent in Order
No. 693.
22. Snohomish also asserts that the
proposed rule fails to defer to the
technical expertise of the regional
reliability organizations and
inappropriately interferes in the local
work of Snohomish’s Board regarding
decisions on levels of service.
23. TAPS states that Congress did not
intend for the Commission to undertake
a facility-by-facility review of all
facilities above 100 kV, and that the
proposed rule is contrary to section
215’s apportionment of primary
responsibility for reliability
administration to the ERO.30
Additionally, TAPS states that the
Commission’s proposed facility-by
facility review would not satisfy section
215’s goal of effective and efficient
reliability administration.
29 NERC
30 TAPS
at 8–11.
at 4; see also Snohomish at 22–28.
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(ii) Bulk-Power System
24. NYSRC argues that section 215
does not provide a ‘‘bright-line’’ test for
Bulk-Power System facilities and states
that the statutory intent of section 215
limits the Commission’s jurisdiction to
facilities that are necessary for the
reliable operation of the Bulk-Power
System.31 Several commenters state that
the Commission’s proposal exceeds its
statutory authority as described in the
definition of ‘‘Bulk-Power System’’
because the proposed definition of bulk
electric system would likely encompass
facilities not necessary for operating the
interconnected network,32 and that the
statutory definitions of ‘‘Reliability
Standard’’ and ‘‘Reliable Operation’’ refer
to protecting the system from instability,
uncontrolled separation, or cascading
failures, not local-area outages.33 The
commenters contend that a functional
test, such as NPCC’s current material
impact assessment would be more
appropriate since it is tailored to
include facilities that are necessary for
operation of an interconnected electric
energy transmission network.
25. GTC/GSOC add that the proposed
change would make the definition of
‘‘bulk electric system’’ broader than the
statutory definition of ‘‘Bulk-Power
System,’’ and therefore would exceed
the Commission’s authority.
(iii) Distribution Facilities
26. Several other parties assert that
the proposed rule will inappropriately
include distribution facilities as part of
the bulk electric system, and argue that
the Commission’s proposal is contrary
to Congress’s definition of ‘‘Bulk-Power
System’’ and the Commission’s own
precedent regarding transmission versus
local distribution.34 Several parties state
that FPA section 215 specifically
excludes distribution facilities and that
they therefore should be excluded from
the definition of ‘‘bulk electric system.’’
Constellation/CENG argues that the
Commission’s proposal to exclude from
the definition of ‘‘bulk electric system’’
‘‘[r]adial transmission facilities serving
only load with one transmission source’’
is too limiting. Constellation/CENG
believes that this approach will include
31 NYSRC
at 7–8.
e.g., NYPSC, NYSRC, Duke Energy,
Indicated New York Transmission Owners,
Snohomish and Joint Western Commenters.
33 NYSRC at 7.
34 See, e.g., Constellation/CENG, Dow, Duke
´
Energy, GTC/GSOC, Hydro-Quebec, Indicated New
York Transmission Owners, Joint Western
Commenters, NARUC, NV Energy, NYSRC, PGE,
Public Power Council, Snohomish Tacoma Power,
TIEC.
32 See,
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local distribution facilities in a manner
contrary to section 215 of the FPA.
27. The NYPSC contends that the
Commission’s proposal exceeds its
jurisdiction by encompassing local
distribution facilities that are not
necessary for operating the
interconnected transmission network. It
states that 138 kV facilities in New York
City operate above 100 kV but do not
serve a bulk system function due to the
high concentration of load served by
these lines. It asserts that transmission
facilities such as these that move power
between Bulk-Power System and
distribution facilities do not affect the
reliable operation of the bulk system.
The New York Transmission Owners
contend that the Long Island Power
Authority’s (LIPA) system east of the
Northport system is composed of 138 kV
lines with limited connections to other
areas that is not affected by other
regional flows, but instead mirrors a
radial system feeding local load.
28. Snohomish, Consumers Energy,
PGE, Tacoma Power and other
commenters argue that the
Commission’s proposal, unless clarified
to exclude distribution facilities, is
contrary to statute because section 215
directs that distribution facilities should
be excluded on a functional basis
regardless of voltage.35 Snohomish
argues that the Commission’s proposal
departs from its previous
determinations in Order No. 693
regarding the difference between
transmission and distribution systems.36
Further, it states that section 215
emphasizes how facilities are used
rather than their voltage level, and
asserts that the NOPR’s definition runs
counter to the statutory definition.
(2) Commission Determination
(i) Overview
29. We disagree that the Commission
exceeded its statutory authority by
directing the ERO to revise the
definition of bulk electric system in its
Glossary of Terms. We agree with NERC
that the NERC Glossary is part of the
Reliability Standards and therefore falls
under the same section 215 process.
Pursuant to section 215(d)(5), the
Commission may order the ERO to
submit a proposed Reliability Standard
or a modification to a Reliability
Standard that addresses a specific
matter. Here, by directing a revision to
the definition of bulk electric system,
the Commission orders a modification
to a definition of a term contained in a
35 See, e.g., Snohomish at 20–22; PGE at 3–6;
Tacoma Power at 2–3.
36 Snohomish at 20–21 (citing Order No. 693,
FERC Stats. and Regs. ¶ 31,242 at P 23 n.20).
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srobinson on DSKHWCL6B1PROD with RULES3
number of Commission-approved
Reliability Standards.37 Because this
term is contained within Commissionapproved Reliability Standards, the
Commission has the authority to direct
the ERO to develop a modification of
the definition of a defined term
contained in the Reliability Standards
under the process delineated in section
215 of the FPA.
30. For the reasons discussed more
fully below, the Commission finds that
the current definition of bulk electric
system is insufficient to ensure that all
facilities necessary for operating an
interconnected electric energy
transmission network are included
under the ‘‘bulk electric system’’ rubric.
Therefore, pursuant to section 215(d)(5)
of the FPA,38 the Commission directs
the ERO to modify, through the
Standards Development Process, the
definition of ‘‘bulk electric system’’ to
address the Commission’s technical and
policy concerns described more fully
herein. The Commission believes the
best way to address these concerns is to
eliminate the regional discretion in the
ERO’s current definition, maintain the
bright-line threshold that includes all
facilities operated at or above 100 kV
except defined radial facilities, and
establish an exemption process and
criteria for excluding facilities the ERO
determines are not necessary for
operating the interconnected
transmission network. It is important to
note that the Commission is not
proposing to change the threshold value
already contained in the definition, but
rather seeks to eliminate the ambiguity
created by the current characterization
of that threshold as a general
guideline.39
31. In accordance with Order No. 693,
the ERO may develop an alternative
proposal for addressing the
Commission’s concerns with the present
definition with the understanding that
any such alternative must be as effective
as, or more effective than, the
Commission’s proposed approach in
addressing the identified technical and
other concerns,40 and may not result in
37 See, e.g., CIP–002–2, COM–001–1.1, EOP–004–
1, EOP–005–1, FAC–008–1, FAC–009–1, FAC–010–
2, FAC–011–2, FAC–013–1, FAC–014–2, IRO–001–
1.1, IRO–002–1, IRO–003–2, IRO–004–1, IRO–005–
2, IRO–006–4.1, NUC–001–2, PER–001–0.1, PER–
002–0, PER–003–0, PRC–004–1, PRC–005–1, PRC–
021–1, PRC–022–1, PRC–023–1, TOP–001–1, TOP–
002–2, TOP–008–1, TPL–002–0, TPL–003–0, TPL–
004–0.
38 16 U.S.C. 824o(d)(5).
39 We note that all regions except NPCC currently
utilize 100 kV as a general threshold.
40 Order No. 693, FERC Stats. & Regs. 31,242 at
P 31.
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a reduction in reliability.41 If the ERO
decides to propose an alternative
approach, it must explain in detail, and
with a technical record sufficient
enough for the Commission to make an
informed decision, how its alternative
addresses each of the Commission’s
concerns in a manner that is as effective
as, or more effective than, the
Commission’s identified solution.42
Additionally, the ERO would need to
address the factors the Commission will
consider in determining whether a
proposed Reliability Standard is just
and reasonable, as outlined in Order No.
672. In particular, Order No. 672 states
that proposed Reliability Standards
‘‘should be clear and unambiguous
regarding what is required and who is
required to comply.’’ 43 Another factor
indicates that a ‘‘proposed Reliability
Standard should be designed to apply
throughout the interconnected North
American Bulk-Power System, to the
maximum extent this is achievable with
a single Reliability Standard.’’ 44 As
Order No. 672 further requires, any
proposed regional difference must be:
(1) More stringent than the continentwide definition, including a regional
difference that addresses matters that
the continent-wide definition does not;
or (2) necessitated by a physical
difference in the Bulk-Power System.45
32. The Commission further finds that
revising the definition to address the
identified concerns is a significant step
toward improving the reliability of the
Bulk-Power System in North America
because it protects the reliability of the
bulk electric system and provides clarity
and consistency across the nation’s
reliability regions in identifying bulk
electric system facilities.
33. The Commission directs the ERO
to submit these modifications no later
than one year from the effective date of
this Final Rule. We will address each
proposal and the specific comments
received on each proposal in the
remainder of this Final Rule.
(ii) NERC Standards Development
Process and Deference to NERC and the
Regional Entities
34. With regard to the concerns raised
by some commenters about the
41 See, e.g., Version One Regional Reliability
Standard for Resource and Demand Balancing, 133
FERC ¶ 61,063, at P 14 (2010); North American
Electric Reliability Corporation Reliability
Standards Development and NERC and Regional
Entity Enforcement, 132 FERC ¶ 61,217, at P 112
(2010).
42 Order No. 693 FERC Stats. & Regs. 31,242 at P
31.
43 See Order No. 672, FERC Stats. & Regs. 31,204
at P 325.
44 See id. P 331.
45 Id. P 291.
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72915
prescriptive nature of the Commission’s
proposed modifications, we agree that,
consistent with Order No. 693, a
direction for modification should not be
so overly prescriptive as to preclude the
consideration of viable alternatives that
may produce an equally effective or
efficient solution. However, some
guidance is necessary, as the
Commission explained in Order No.
693:
[I]n identifying a specific matter to be
addressed in a modification * * * it is
important that the Commission provide
sufficient guidance so that the ERO has an
understanding of the Commission’s concerns
and an appropriate, but not necessarily
exclusive, outcome to address those
concerns. Without such direction and
guidance, a Commission proposal to modify
a Reliability Standard might be so vague that
the ERO would not know how to adequately
respond.46
35. Thus, due to the importance of the
bulk electric system definition to our
overall ability to carry out the mandates
of section 215, and the problems we
have identified with the current
definition, we provide specific details
regarding the Commission’s
expectations. We intend by doing so to
provide useful direction to assist in the
Reliability Standards Development
Process, not to impede it. As we
explained in Order No. 693, we find that
this is consistent with statutory
language that authorizes the
Commission to direct the ERO to submit
a modification ‘‘that addresses a specific
matter’’ if the Commission considers it
appropriate to carry out section 215 of
the FPA.47 Although some commenters’
contend that we should ‘‘defer to
regional expertise,’’ we note that the
statute specifies that we should ‘‘give
due weight’’ to the ERO’s technical
expertise.48 The Commission’s action
here does not conflict with that
statutory requirement. In this Final
Rule, we have considered commenters’
concerns and, although we have
identified a proposed approach, the
Commission provides flexibility by
directing the ERO to address the
underlying issue through the Reliability
Standards Development Process.49
Consequently, consistent with Order
No. 693, we clarify that where the Final
46 Order No. 693, FERC Stats. & Regs. ¶ 31,242 at
P 185.
47 Id. P 186 (citing 16 U.S.C. 824o(d)(5)).
48 16 U.S.C. 824o(d)(2); see also Order No. 672,
FERC Stats. & Regs. ¶ 31,204 at P 345 (‘‘We do not
agree that giving due weight means a rebuttable
presumption that the Reliability Standard meets the
statutory requirement of being just, reasonable, not
unduly discriminatory or preferential, and in the
public interest.’’).
49 Order No. 693, FERC Stats. & Regs. ¶ 31,242 at
P 186.
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Rule identifies a concern and offers a
specific approach to address that
concern, we will consider an equivalent
alternative approach provided that the
ERO demonstrates that the alternative
will adequately address the
Commission’s underlying concern or
goal as efficiently and effectively as the
Commission’s proposal.50
(iii) Bulk-Power System
36. With regard to the alleged conflict
between ‘‘bulk electric system’’ and
‘‘Bulk-Power System,’’ the Commission
noted in Order No. 693 that Congress
chose to create a new term, ‘‘Bulk-Power
System,’’ with a definition that is
distinct from the term of art (‘‘bulk
electric system’’) used by industry, and
thus there is an intentional distinction
between the Bulk-Power System and the
bulk electric system.51 The Commission
further noted that the statutory term
‘‘Bulk-Power System’’ has not been
definitively defined but does not
establish a voltage threshold limit of
applicability or configuration as does
the NERC definition of ‘‘bulk electric
system,’’ and therefore may reach more
facilities than NERC’s definition of
‘‘bulk electric system.’’ 52
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(iv) Distribution Facilities
37. The Commission has stated that
the statutory term ‘‘Bulk-Power System’’
defines the jurisdiction of the
Commission.53 The Commission noted
that it has not defined the extent of the
facilities covered by the Bulk-Power
System, but that Congress specifically
exempted ‘‘facilities used in the local
distribution of electric energy’’ from the
definition. FPA section 215 defines the
term ‘‘Bulk-Power System’’ as
encompassing the ‘‘facilities and control
systems necessary for operating an
interconnected electric energy
transmission network (or any portion
thereof).’’ 54 In ascertaining the extent of
the facilities included in the ‘‘BulkPower System’’ definition, the
Commission’s prior discussion
regarding the inclusion of generation
facilities as part of the Bulk-Power
System is instructive. In the discussion,
the Commission stated that, ‘‘if electric
energy from a generating facility is
needed to maintain a reliable
transmission system, that facility is part
of the Bulk-Power System with respect
to the energy it generates that is needed
50 Id.
51 Id.
P 76.
id. P 76; Order No. 693–A, 120 FERC
¶ 61,053 at P 17–18.
53 Order No. 693–A, 120 FERC ¶ 61,053 at P 19.
54 16 U.S.C. 824o(a)(1).
52 See
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to maintain reliability.’’ 55 Similarly,
several 115 and 138 kV facilities that
some entities term as ‘‘distribution’’ may
be needed to reliably operate the
interconnected transmission system.
Determining where the line between
‘‘transmission’’ and ‘‘local distribution’’
lies, which includes an inquiry into
which lower voltage ‘‘transmission’’
facilities are necessary to operate the
interconnected transmission system,
should be part of the exemption process
the ERO develops.
38. The Commission disagrees with
comments that appear to assert that the
Commission’s jurisdiction extends only
to facilities that could, if improperly
operated, singularly cause cascading
outages, uncontrolled separation or
instability. By this narrow metric, the
facilities that caused the 2003 Blackout
would not be viewed as critical since
not one of the individual facilities
caused the outage. In defining
jurisdictional facilities, section 215(a)(1)
focuses on whether facilities are
necessary to operate the interconnected
transmission system, not solely on the
consequences of unreliable operation of
those facilities. Lower voltage facilities
needed to reliably operate the grid tend
to operate in parallel with other high
voltage and extra high voltage facilities,
interconnect significant amounts of
generation sources and may operate as
part of a defined flow gate. These
parallel facilities operated at 100–200
kV will experience similar loading as
higher voltage facilities at any given
time. Additionally, the lower voltage
facilities will be relied upon during
contingency scenarios.
39. For example, we are not
persuaded by the NYPSC’s argument
that the 138 kV system in New York,
and specifically the 138 kV system
including those facilities in the Astoria
area, are all distribution facilities. We
do not believe that most of these
facilities are local distribution because:
the facilities are not primarily radial in
character, as they are connected to the
345 kV network in the Astoria area at
over six different points; the 138 kV
system is networked amongst itself;
power flows both in and out of the
system into both NYISO and PJM
facilities depending on time of day and
loading; and the system is not
constrained to a comparatively
restricted geographical area due to
multiple interconnections. The 138 kV
system in the Astoria area includes six
major substations that are
interconnected at 345 kV to both NYISO
and PJM facilities that are integral parts
55 Order No. 672, FERC Stats. & Regs. ¶ 31,204 at
P 71.
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of the Eastern Interconnection. There
are ten 138 kV phase angle regulators
connecting the 345 kV stations to the
138 kV network, which are necessary to
control the appropriate distribution of
power flows between the 345 kV and
138 kV systems to accommodate power
transfers from upstate New York and
PJM into southeastern New York. In
addition, there are approximately 9,000
MW of capacity resources directly
connected to the 138 kV network in the
New York City area at different points,
2,000 MW of which is connected in the
Astoria area. Similarly over 10,000 MW
of customer firm demand in the area is
supplied from the 138 kV to lower
voltage levels via step-down
transformers. None of these
characteristics is consistent with any
reasonable definition of local
distribution.56 To the extent that any
individual line would be considered to
be local distribution, that line would not
be considered part of the bulk electric
system.
40. Nor are we persuaded by the
Indicated New York Transmission
Owners’ statement that LIPA’s service
territory—which includes a majority of
Long Island, identified as Zone K by
NYISO and, as reported in the NYISO
‘‘Load & Capacity Data,’’ had a 2010
summer peak load of 5,300 MW—
‘‘mirrors a radial system feeding local load.’’
As with the 138 kV network in New York
City discussed above, the LIPA system
contains significant capacity resources (5,700
MW), is interconnected with other portions of
NYISO, ISO–NE, and PJM, and its
operations affect and depend on operations in
other portions of New York, as well as New
Jersey and Connecticut.57
41. Some commenters allege that the
proposal is an unexpected departure
from the Commission’s previous actions
regarding the bulk electric system in
Order No. 693. To the contrary, the
Commission was very clear about its
reservations in accepting the NERC bulk
electric system definition in Order No.
693 and expressly accepted the
definition for an ‘‘initial period’’ 58
subject to subsequent review.59 The
56 This example illustrates one of the deficiencies
of the NPCC impact-based approach for identifying
bulk electric system facilities, discussed more fully
below.
57 See https://www.nyiso.com/public/webdocs/
services/planning/reliability_assessments/AppxE.
pdf and https://www.nyiso.com/public/webdocs/
services/planning/planning_data_reference_
documents/2010_GoldBook_Public_Final_
033110.pdf.
58 Order No. 693, FERC Stats. & Regs. ¶ 31,242 at
P 75.
59 In accepting NERC’s definition of ‘‘bulk electric
system,’’ the Commission explained: ‘‘Although we
are accepting the NERC definition of bulk electric
system and NERC’s registration process for now, the
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Commission’s action here will ensure
that all facilities necessary to maintain
a reliable transmission system are
included as part of the bulk electric
system and thus will be subject to ERO
and Commission oversight.60
(b) Scope of the Definitional Change of
‘‘Bulk Electric System’’
(1) NOPR Proposal
42. In the NOPR, the Commission
proposed to direct the ERO to revise its
definition of the term ‘‘bulk electric
system’’ to include all electric
transmission facilities with a rating of
100 kV or above.61 The Commission’s
proposal further states that a Regional
Entity must seek ERO and Commission
approval before exempting any facility
rated at 100 kV or above from
compliance with mandatory Reliability
Standards.
(2) Comments
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43. NERC argues that the proposed
definitional change would have a much
broader impact than acknowledged by
the Commission. Among other things,
NERC states that the proposed change to
‘‘rated at’’ from the current ‘‘operated at’’
will dramatically expand the scope of
facilities and entities affected by the
change. NERC states that the proposal
will unnecessarily include some
facilities that entities built at higher
voltage levels (i.e., 138 kV) to
accommodate future load growth while
presently operating the facilities at
lower voltages (i.e., 69 kV).
44. Several commenters seek
clarification that the definition of ‘‘bulk
electric system’’ is not intended to
supersede voltage thresholds specified
in specific Reliability Standards.62 For
example, Reliability Standard FAC–003
Commission remains concerned about the need to
address the potential for gaps in coverage of
facilities. For example, some current regional
definitions of bulk electric system exclude facilities
below 230 kV and transmission lines that serve
major load centers such as Washington, DC and
New York City. The Commission intends to address
this matter in a future proceeding.’’
Id. P 77 (footnotes omitted).
60 While the Commission seeks to ensure that the
definition of ‘‘bulk electric system’’ includes all
facilities 100 kV or above that are necessary for
reliable operation, our action here is not intended
to determine the extent of the facilities included in
the Bulk-Power System. As stated in Order No.
693–A, the Commission believes that the BulkPower System reaches farther than those facilities
that are included in NERC’s definition of the bulk
electric system, but we have not definitively
defined the extent of the facilities covered by the
Bulk-Power System, and we are not doing so here.
See Order No. 693–A at P 17–18.
61 NOPR, FERC Stats. & Regs. ¶ 32,654 at P 1.
62 See, e.g., EEI, Dominion Power, National Grid,
and Southern Company.
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generally applies to transmission lines
200 kV and above.
45. Joint Western Commenters and
Bay Area Municipal argue that the
definition of ‘‘bulk electric system’’ that
the Commission ultimately accepts
should clarify that if an element is
determined to be part of the bulk
electric system, such an element is not
necessarily a transmission asset.
46. Joint Western Commenters state
that an entity should be able to deregister as a Distribution Provider and
Load-Serving Entity if it does not own
any bulk electric system elements.63
They state that an entity with no
elements in the bulk electric system
cannot be considered an owner or
operator of the bulk electric system, and
because operation of that entity’s
distribution assets has no material
impact on the bulk electric system, it
should be exempt from regulation as
transmission and the need to register
and participate in the regulatory
framework for transmission facilities.
These commenters also state that
requiring an entity with no bulk electric
system elements to comply with the
mandatory Reliability Standards would
be an unnecessary burden on the entity,
and a diversion of resources by the
Regional Entity, NERC, and the
Commission.64
47. Although EEI supports the
Commission’s proposal not to change
the ERO treatment of radials under the
ERO definition of bulk electric system,
several commenters raise concerns
about the scope of the exemption going
forward.
48. Several commenters believe that
the statement in the NOPR that radial
lines would not be part of the bulk
electric system is not enough to remove
ambiguity.65 APPA/NRECA notes that
the NOPR leaves a question open as to
whether radial lines would be
automatically exempt under the bulk
electric system definition or whether
entities would have to go through the
multi-tiered exemption process.66 Other
commenters point out that certain
Regional Entities currently provide a
clearer and more valid approach to
determining whether facilities should be
classified as exempt radial facilities.
They state for example that the WECC
process includes additional detail
regarding demarcation points and
system characteristics that are important
in defining ‘‘radial.’’ Commenters also
state that the WECC transmission
system includes radial lines, where a
63 Joint
Western Commenters at section IV.B.
64 Id.
65 See,
e.g., id. at section III.C.
at 19–23.
66 APPA/NRECA
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72917
backup feed is possible, but is normally
open, and a utility should not be
penalized for having a secondary feed
via a normally open line by requiring it
to automatically become part of the bulk
electric system. The bright line 100 kV
threshold would encourage small
utilities to choose not to provide backup
service options, reducing overall
customer service.
49. Arguing that NERC’s current
definition of radial transmission
facilities, defined as ‘‘facilities serving
only load with one transmission
source,’’ is too narrow, National Grid
supports adoption of a broader
definition that includes tap lines and
associated facilities used to serve local
load only, and transmission lines that
are operated in an open position for
normal operations.67
50. ELCON states that the Final Rule
should specify that radial lines do not
have to go through the exemption
process.
51. FRCC states the Commission
should afford the Regional Entities
sufficient time to complete their efforts
to define the scope of the bulk electric
system, since they are in the process of
establishing criteria for the exclusion of
facilities as ‘‘radial transmission
facilities.’’
(3) Commission Determination
52. We grant the clarification sought
by commenters that the 100 kV
threshold will not modify thresholds
established in individual Reliability
Standards such as FAC–003.
53. In response to comments,
although the NOPR used the term ‘‘rated
at,’’ the Commission did not intend to
require NERC to utilize that term rather
than the term ‘‘operated at’’ which is
reflected in the current definition of
bulk electric system. While the
Commission does not have firm data on
the number of facilities that operate at
a voltage significantly lower than the
rated voltage, we find that the term
‘‘rated at’’ could generate confusion.68
54. We believe that the issues of
whether a distribution provider or loadserving entity may de-register if it is
shown not to own any bulk electric
system elements, and whether the
inclusion of a facility as part of the bulk
electric system is or is not determinative
of that facility’s status as a transmission
asset, are addressed by the NERC
Registry Criteria and beyond the scope
of this proceeding.
67 National
Grid at 10.
voltage usually encompasses a small
range of voltages around the expected or normal
operating value while rated voltage depends on the
design of the facilities.
68 Operating
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55. As we stated in the NOPR, we do
not seek to modify the second part of
the definition through this Final Rule,
which states that ‘‘[r]adial transmission
facilities serving only load with one
transmission source are generally not
included in this definition.’’ While
commenters would like to expand the
scope of the term ‘‘radial’’ to exclude
certain transmission facilities such as
tap lines and secondary feeds via a
normally open line, we are not
persuaded that such categorical
exemption is warranted. For example,
when the normally ‘‘open’’ line is
‘‘closed,’’ it becomes part of the
transmission network and therefore
should be subject to mandatory
Reliability Standards. Commenters also
argued that the bright line 100 kV
threshold would encourage small
utilities to choose not to provide backup
service options, reducing overall
customer service. We acknowledge
these concerns, and direct the ERO to
consider these comments regarding
radial facilities in crafting an exemption
methodology.
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(c) Technical and Historical Justification
for Modification
(1) NOPR Proposal
56. In the NOPR, the Commission
stated its concern that if it does not
clarify the ‘‘bulk electric system’’
definition to apply a stricter 100 kV
threshold, it would not be fulfilling
Congress’s intent in enacting section
215. The NOPR stated that the
Commission believes there is an
adequate technical and reliabilityrelated justification, discussed further
below, for the proposed 100 kV
operating threshold for identifying bulk
electric system facilities. Additionally,
the NOPR noted that NERC already
applies a general 100 kV threshold.69
Further, at present all regions, with the
exception of NPCC, also apply a 100 kV
threshold.
57. The NOPR identified
inconsistencies between regions, such
as two transmission lines that are
classified as bulk electric system in
ReliabilityFirst but not in NPCC.70 The
NOPR also offered examples of
disturbances that either began on or
were propagated by 100–200 kV
facilities, including a February 26, 2008
event in FRCC originating at a 138 kV
facility that resulted in the loss of 24
transmission lines and 4,300 MW of
generation, and a June 27, 2007 event on
138 kV transmission lines in the NPCC
69 NOPR,
FERC Stats. & Regs. ¶ 32,654 at P 13–
(2) Comments
58. Several commenters including
ISO–NE, BGE, Northeast Utilities,
ReliabilityFirst, Manitoba Hydro, and
Dominion Power support the proposed
change, arguing that the increased
consistency and applicability of NERC
Reliability Standards will ensure
reliability. Moreover, a number of other
commenters who ultimately suggest that
other processes are more appropriate for
undertaking a modification to the
definition of ‘‘bulk electric system’’ agree
with the overriding goal to develop a
more consistent definition of ‘‘bulk
electric system.’’ For example, NERC
notes that it ‘‘supports the Commission’s
objectives of ensuring a common
understanding and consistent
application of the definition of ‘bulk
electric system’ across the regions,’’ with
variations justified on the basis of
reliability.71 Likewise, ReliabilityFirst
supports the creation of a bright-line
rule for determining which facilities are
subject to Reliability Standards (with
appropriate process for refinement or
exemption), and both SCE and WECC
generally support a rebuttable
presumption that transmission facilities
above 100 kV should be initially
classified as ‘‘bulk electric system’’
facilities, as long as appropriate
mechanisms for exclusion are in
place.72
59. Several other commenters contend
that the proposal does not explain how
the proposed changes to bulk electric
system classification would have
prevented the discussed events or
improved reliability.73 They argue that
the NOPR did not describe whether
these events took place on facilities
classified as ‘‘bulk electric system’’ or
non-‘‘bulk electric system.’’ Similarly,
commenters contend that the NOPR
does not show the connection between
regional inconsistencies and reliability
71 NERC
at 2.
72 ReliabilityFirst
14.
70 See
NERC/NPCC, compliance filing, Docket No.
RC09–3 (filed Feb. 20, 2009).
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region that included sequential tripping
of four 138 kV cable-circuits without a
contingency. The June 27, 2007 NPCC
event (the ‘‘Astoria West event’’) resulted
in the interruption of service to about
137,000 customers as well as the loss of
five generators and six 138 kV
transmission lines. Further, the NOPR
pointed to Transmission Loading Relief
(TLR) issuances on non-bulk electric
system elements in New York and the
historical basis for a 100 kV threshold
as justification.
18:42 Nov 24, 2010
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at 2; SCE at 2; WECC at 3.
e.g., FRCC, NARUC, NYSRC, Redding,
GTC/GSOC.
73 See,
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concerns.74 Commenters also assert the
proposal will be expensive and lengthy
to implement without improving
reliability.
60. Additionally, several commenters
state that a material impact assessment
should be used instead of a ‘‘bright-line’’
test, thus deferring to the Regional
Entities’ technical expertise.75
Commenters also contend that the
Commission has not shown how the
current NPCC method is flawed or how
it has harmed reliability. They conclude
that a material impact assessment is
preferable to a ‘‘bright-line’’ test because
they believe it will focus limited
resources towards critical facilities that
have the largest impact.
61. APPA/NRECA, NARUC, CMUA,
CPUC, and TANC state that the specific
examples cited by the Commission of
outages on lower voltage lines in one
region do not support making sweeping
changes to the definition of bulk electric
system as proposed in the NOPR.
APPA/NRECA notes that the
Commission’s stated concerns about
facilities inappropriately excluded from
the bulk electric system definition are
limited to the NPCC region, while the
Commission’s proposed solution is
directed at and would affect all
regions.76 APPA/NRECA asserts that the
Commission’s limited examples of
outages on lines excluded from the bulk
electric system definition in NPCC
cannot support imposing the Reliability
Standards on all lower-voltage facilities,
regardless of the function and impact of
such facilities.77 Finally, APPA/NRECA
notes that the Commission’s attempt to
justify the proposal based on the total
amount of 100 kV facilities in service is
inapposite, as it has no bearing on
whether or not those facilities function
as part of the bulk electric system.78
Similarly, CMUA asserts that it is
inappropriate to draw conclusions
regarding the effect of disturbances on
lower-voltage facilities based on a
limited number of cases in one region,
without consideration of the nature of
the facilities and particular features of
that region.79 NARUC also contends that
a key part of the historical approach to
the ‘‘bulk electric system’’ definition was
the Regional Entities’ ability to define
the bulk electric system for its own
region. Further, NARUC states that the
NOPR does not identify any excluded
lines critical to reliability. Additionally,
74 See, e.g., NARUC, NYPSC, FRCC, Dow, GTC/
´
GSOC, Hydro-Quebec, Ontario Power, NV Energy,
Snohomish, Southern.
75 See, e.g., NARUC, NYSRC.
76 APPA/NRECA at 15–16.
77 Id. at 30–31.
78 Id. at 32.
79 CMUA at 5.
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NARUC believes NPCC’s estimated $280
million cost to comply with the new
ruling will outweigh the expected
minimal to negligible benefit.
62. The Joint Canadian Parties assert
that the impact-based methodology
ensures that all facilities critical to
wide-area reliability, independent of
voltage level, are covered by the bulk
electric system definition. Similarly,
they argue that the NERC Reliability
Standards should apply only to facilities
that, if lost, would have the potential for
a wide-area reliability impact.
63. The Indicated New York
Transmission Owners and NYSRC state
that the NOPR does not sufficiently
account for the time and cost required
to implement the proposed rule change.
Further, they contend that the TLR
events cited in the NOPR were issued in
order to mitigate an unanticipated
clockwise flow around Lake Erie, and
that classification of lower voltage
facilities as part of the ‘‘bulk electric
system’’ would not have affected the
need for the TLR. The NYPSC and Duke
Energy contend that the 115 kV facility
in the Central East ties flowgate
constitutes a minor element of the
flowgate that would not result in a
cascading event on the bulk system.
64. NYSRC also contends that the
February 26, 2008 and the June 13, 2008
events cited in the NOPR occurred in
regions that already use a 100 kV
threshold and therefore do not show
that the 100 kV threshold is more
effective at protecting reliability than
the impact-based approach.
Additionally, NYSRC believes that the
current methodology appropriately
defers to regional expertise.
65. NYPSC also states that the June
27, 2007 event ‘‘was caused by lighting
[sic] strikes on the telecommunications
system over which several relay signals
were carried,’’ and that the utility
involved has since ensured separate
paths are provided for
telecommunications beyond the fence of
the electric utility’s facilities.80
Additionally, the NPCC Working Group
concluded that the event was confined
to the Astoria West load pocket and that
no other portions of the Consolidated
Edison (ConEd) system were affected.
Separately, the NYPSC states that the
Commission has not provided evidence
as to how the regional inconsistencies
identified in the NOPR jeopardize
reliability.
66. Alcoa states that it supports
NPCC’s current material impact
assessment because it believes most of
the facilities not included in the bulk
electric system are accurately excluded.
Alcoa further contends that the
Commission has not shown how
inclusion of lines like these will
improve reliability and that the
reliability benefit is only presumed.
Dow likewise argues that it does not
believe that the applicability of NERC
Reliability Standards is a sufficient basis
to assume that reliability will improve
and argues that the NOPR does not
provide any additional evidence.
67. Constellation/CNEG supports
continued use of Regional Reliability
Organizations’ technical discretion as
opposed to the Commission’s proposal.
Constellation/CNEG states that current
proposals from WECC utilizing a Short
Circuit Megavolt Ampere methodology,
or a three-phase fault with delayed
clearing analysis, demonstrate the
proper regional discretion and technical
expertise. Similarly, Tacoma Power
requests that the WECC Bulk Electric
System Definition Task Force (BESDTF)
be allowed to complete its work, and
states that the Commission has not
provided sufficient technical support for
requiring a bright-line voltage-based
standard.81 The Joint Western
Commenters state that the Final Rule
should be consistent with the WECC
BESDTF’s efforts that will utilize an
impact based approach. Further, if the
Commission has issues with the NPCC
method, Constellation/CNEG state that
the Commission should address its
concerns with NPCC specifically rather
than through an across the board
proposal. The Joint Western
Commenters similarly state that the
Western entities should not be
penalized for NPCC’s actions, which
actions are the apparent impetus for
issuance of the NOPR.
´
68. Hydro-Quebec and Ontario Power
state that application of the NERC
Reliability Standards should be limited
to facilities with a material impact on
reliability, based on regional variances
and expertise. The proposed change
would divert needed resources from
more important facilities.
69. NESCOE requests the Commission
study the impact of the proposal more
before implementing the rule.
70. Bay Area Municipal agrees that
115 kV and 138 kV facilities have either
caused or contributed to significant bulk
system disturbances and cascading
outages. Utah Municipal also concedes
that some facilities rated at 100 kV and
above may have been improperly
excluded from classification in the bulk
electric system, at least in the NPCC.
However, Utah Municipal also states
that unless the facilities described were
not included in the bulk electric system
of the applicable Regional Entities, the
cited events do not show a flaw in the
existing definition.82 Utah Municipal
also disputes the NOPR’s claim of a
historical precedent supporting the 100
kV threshold since the previous
threshold was presumptive rather than
a ‘‘bright-line.’’ Utah Municipal
recommends that the Commission allow
WECC’s BESDTF to complete its work
on a hybrid definition that utilizes a
presumptive 100 kV threshold and a
material impact assessment. Utah
Municipal suggests that this model be
used as a template for other Regional
Entities’ bulk electric system
definitions.
71. The WPSC and Consumers Energy
state that without substantial
refinement, the proposal will cause
public utilities to experience significant
but unnecessary compliance costs.
Additionally, the WPSC anticipates that
utilities would elect to build facilities
below the 100 kV threshold to avoid
‘‘bright-line’’ oversight, which will in
turn result in a lower voltage, less
technically capable system and will
therefore adversely affect reliability.83
(3) Commission Determination
72. The Commission finds sufficient
justification for the action in this Final
Rule. The current definition has failed
to ensure that all facilities necessary for
operation of the interconnected
transmission network are covered by the
Reliability Standards. As discussed
above, the current definition allows
broad regional discretion without ERO
or Commission oversight, which has
resulted in reliability issues such as the
exclusion of transmission serving bulk
electric generators (including nuclear
plants), inconsistency in classification
at the seams that compromises the
effectiveness of the Reliability
Standards, routine TLR events on nonbulk electric system facilities, and the
exclusion of elements necessary to
operate the interconnected transmission
network. Given the inconsistency of the
application among regions and the
reliability issues created as a result of
the current definition, we conclude that
it is necessary to direct the ERO to
revise the definition of ‘‘bulk electric
system’’ to ensure that all facilities
necessary to operate the interconnected
transmission network are included and
to address the concerns noted herein.
We believe that the Commission’s
proposed approach of adopting a brightline, 100 kV threshold, along with a
NERC-developed, Commissionapproved exemption process, as well as
82 Utah
80 NYSPC
at 10.
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eliminating regional variations unless
approved by the Commission as
provided in Order No. 672,84 is an
appropriate action to ensure bulk
electric system reliability.
73. As discussed in this Final Rule,
many facilities operated at 100 kV and
above have a significant effect on the
overall functioning of the grid. The
majority of 100 kV and above facilities
in the United States operate in parallel
with other high voltage and extra high
voltage facilities, interconnect
significant amounts of generation
sources and operate as part of a defined
flow gate, which illustrates their parallel
nature and therefore their necessity to
the reliable operation of the
interconnected transmission system.
Parallel facilities operated at 100–200
kV will experience similar loading as
higher voltage parallel facilities at any
given time and the lower voltage
facilities will be relied upon during
contingency scenarios. Further, as
illustrated by the Commission’s
examples and as Bay Area Municipal
states, 115 kV and 138 kV facilities have
either caused or contributed to
significant bulk system disturbances
and cascading outages. Additionally, the
current definition’s broad regional
discretion has allowed classification
inconsistencies to develop within and
along the borders of Regional Entities, as
discussed in further detail herein.85 The
proposed 100kV threshold is intended
to ensure facilities necessary for reliable
operation are captured by the definition
and to avoid entities exempting their
facilities by any means other than
through a Commission-approved
exemption process.
74. While the Commission believes
the solution described above is the best
way to address the identified problems
with the current definition, the ERO has
the discretion to develop an alternate
solution that is as effective as, or
superior to, the Commission’s proposed
approach in addressing the identified
84 See Order No. 672, FERC Stats. & Regs.
¶ 31,204 at P 291.
85 See NERC Petition, Docket No. RM08–013–000,
at 18 (filed July 30, 2008). There NERC indicated
that the PRC–023 standard drafting team selected a
voltage threshold for the Reliability Standard’s
applicability because the bulk electric system
definition has too many variances to be effective for
defining a Reliability Standard’s applicability: ‘‘This
conclusion [to use a voltage-specific-threshold] was
reached by considering the potential variances in
the facilities included as the bulk power system in
different Regional Entities, together with an
observation that the effects of the proposed
reliability standard are not constrained to Regional
boundaries. For example, if one Region has a purely
performance-based criteria and an adjoining Region
has a voltage-based criteria, these criteria may not
permit consideration of the effects of protective
relay operation in one Region upon the behavior of
facilities in the adjoining Region.’’
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technical and other concerns, and may
not result in a reduction in reliability.
If the ERO chooses to propose a
different solution, it must demonstrate
that its proposal is equally effective or
more effective at ensuring that all
facilities necessary to operate the
interconnected transmission network
are captured by the definition and that
the proposal will not produce the
inconsistencies and inaccuracies that
result from the current definition, as
described in this Final Rule. The ERO
must support any alternate proposal
with a technical analysis that
demonstrates and explains, with a
technical record sufficient for the
Commission to make an informed
decision, how its proposal provides the
same level of reliability as the
Commission’s proposal, and reflects the
reality of how entities use and rely on
their 100 kV and above facilities.
75. Finally, we believe use of the term
‘‘operated at’’ rather than ‘‘rated at’’
together with the exemption
methodology that NERC will develop as
discussed in this Final Rule addresses
the WPSC’s concern that utilities may
elect to build facilities below 100 kV to
avoid oversight.
(i) Impact-Based Methodology and
Regional Variation
76. Several commenters argue that the
Commission did not adequately justify
the proposed changes to the ‘‘bulk
electric system’’ definition and that the
technical examples provided similarly
do not justify the proposed changes. In
their opinion, an impact-based
methodology is superior to the proposed
approach. The Commission does not
support using the material impact tests
proffered by commenters as a basis for
determining a facility’s importance.
Section 215 states that the Reliability
Standards apply to facilities that are
necessary for operating an
interconnected electric energy
transmission network (or any portion
thereof). The material impact tests that
either are under development or
implemented appear to exclude
facilities without regard to whether they
are necessary to operate the system, and
instead seek to determine the impact of
the loss of an element. The Commission
is not aware of any consistent and
comprehensive material impact test that
the industry has implemented to date.
The scale and magnitude of generation
and load loss during the Astoria West
event described herein further
demonstrates the shortcomings of
NPCC’s material impact assessment in
determining bulk electric system
elements necessary to ensure reliable
operation. We disagree with assertions
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that the Astoria West event was an
invalid example, as the commenters did
not provide sufficient evidence
supporting their assertions.
77. We disagree with commenters
who assert that NPCC’s current material
impact assessment, referred to as NPCC
Document A–10, ensures that the proper
facilities are included in the bulk
electric system. Although the NPCC
Document A–10 provides a test
methodology to identify elements of the
bulk electric system, the tests prescribed
are subjective. In the test, a specific bus
is subjected to a three-phase fault and
the impacts on other buses are
determined.86 NPCC Document A–10
states that ‘‘a transient stability test may
be done first to identify buses at which
faults may cause a significant adverse
impact outside of the ‘local area.’ ’’ 87
The term ‘‘local area’’ is broadly defined
and is open to interpretation.88 Thus,
under NPCC Document A–10, if an
entity chooses a large geographical area
for its ‘‘local area,’’ the impact resulting
from a fault at a specific bus could be
considered a ‘‘significant adverse
impact,’’ but since the impact falls
within the large ‘‘local area,’’ the bus
may not be declared part of the bulk
electric system. For example, if one
entity defines the ‘‘local area’’ as the
boundary of the balancing authority,
while another entity defines the local
area as adjacent buses, the outcome of
the two tests could vary significantly. In
particular, this likely could result in an
exclusion of a large number of facilities
from the purview of the bulk electric
system for the first entity that applies a
broader view of ‘‘local area.’’
78. NPCC Document A–10 does not
assess whether the facilities within the
‘‘local area’’ are necessary for reliable
operation of the interconnected
transmission network and also does not
discuss system performance or any
‘‘significant adverse impact’’ on the
facilities within the ‘‘local area.’’
Therefore, facilities within a local area
could operate in an unstable manner or
violate emergency operating limits, and
as long as these adverse effects are
86 NPCC Document A–10 defines the term bus as
‘‘a junction with sensing or protection equipment
within a substation or switching station at which
the terminals of two or more elements are
connected, regardless of whether circuit breakers
are provided.’’ See NPCC Document A–10 at
page 2.
87 See NPCC Document A–10 at 4.
88 See NPCC Glossary of Terms, NPCC Document
A–7 at 13–14 (‘‘Local area—An electrically confined
or radial portion of the system. The geographic size
and number of system elements contained will vary
based on system characteristics. A local area may
be relatively large geographically with relatively
few buses in a sparse system, or be relatively small
geographically with a relatively large number of
buses in a densely networked system.’’).
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contained within the defined ‘‘local
area,’’ NPCC’s Document A–10
assessment would deem those facilities
outside the scope of the bulk electric
system. For these reasons, we believe
NPCC’s Document A–10 assessment has
resulted in an inconsistent process that
excludes facilities from the bulk electric
system.
79. NARUC and other commenters
contend that the Commission has not
demonstrated any reliability issues
created by NPCC’s current
methodology.89 To the contrary, the
NOPR noted that seven high and extrahigh voltage lines in NPCC are not
included in the bulk electric system
under the current definition, including
some serving nuclear power plants, and
pointed to several events that occurred
in other regions on facilities that may
not have been included in the bulk
electric system if they were under
NPCC’s current methodology.
Additionally, thousands of megawatts of
capacity resources are connected to
these excluded transmission facilities.
80. Further, there is even
inconsistency within NPCC in that a 345
kV tie-line between ISO–NE and NYISO
is classified as part of the ‘‘bulk electric
system’’ in one ISO but not the other.
Regional classification inconsistencies
can also lead to issues under TOP–002,
Requirement R7.90 If one Regional
Entity or balancing authority within a
region complies with TOP–002,
Requirement R7 by ensuring system
deliverability during a single
contingency along its portion of an
intra-regional tie-line while the other
Regional Entity or the other balancing
authority within the same region on the
other end of the tie-line does not, during
a contingency, deliverability is not
ensured, which could lead to loss of
load and undermine reliability.
81. Moreover, one of the main
justifications for the Final Rule is to
reduce inconsistencies across regions in
order to increase the effectiveness of the
NERC Reliability Standards. Some
commenters challenge the supposition
that regional inconsistency is a
drawback of the current definition.
Commenters state that regional variation
allows regional entities to use their
technical expertise to adopt a tailored
regional bulk electric system definition.
NARUC and Utah Municipal contend
that a key part of the historical approach
89 See, e.g., APPA, NRECA, CMUA, CPUC, and
TANC.
90 TOP–002, Requirement R7 provides that ‘‘each
Balancing Authority shall plan to meet capacity and
energy reserve requirements, including the
deliverability/capability for any single
Contingency.’’
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was the discretion of the Regional
Entities.
82. In response, as the Commission
stated in Order No. 672, uniform
Reliability Standards, and uniform
implementation, should be the goal and
the practice, the rule rather than the
exception, absent a showing that a
regional variation is superior or
necessary due to regional differences.91
Consistency is important as it sets a
common bar for transmission planning,
operation, and maintenance necessary
to achieve reliable operation. As noted,
we have found several reliability issues
with allowing Regional Entities broad
discretion without ERO or Commission
oversight. The Commission’s proposed
approach to addressing these concerns
will enable affected entities to pursue
exemptions for facilities they believe
should not be included in the bulk
electric system, and also will allow
Regional Entities to add facilities below
100 kV they believe should be included.
83. Additionally, Requirement R4 of
PRC–001–1 (System Protection
Coordination) requires that ‘‘[e]ach
Transmission Operator shall coordinate
protection systems on major
transmission lines and interconnections
with neighboring Generator Operators,
Transmission Operators and Balancing
Authorities.’’ If the protection systems
on one end of the tie line that are not
classified as bulk electric system are not
coordinated with protection systems on
the other end or with those protection
systems on the major transmission lines
connected to the same end, the
protection system will not operate as
desired and cascading outages are likely
to occur. This could lead to a significant
system event. Deficiencies and lack of
coordination in protection systems have
been and remain a major cause of power
outages since the Reliability Standards
became effective in June 2007.92 These
are but a few examples of how uniform
application of the Reliability Standards
to lines operated at 100 kV or above
results in improved reliability. These
examples demonstrate that NPCC’s
current methodology does not
necessarily accurately assess situations
that warrant exclusion of facilities from
the bulk electric system definition.
91 Order No. 672, FERC Stats. & Regs. ¶ 31,204 at
P 290.
92 See, e.g., Mandatory Reliability Standards for
the Bulk Power System, Notice of Proposed
Rulemaking, FERC Stats. & Regs., Proposed
Regulations 2004–2007 ¶ 32,608, at P 280 (2006);
U.S.-Canada Power System Outage Task Force,
Final Report on the August 14, 2003 Blackout in the
United States and Canada: Causes and
Recommendations 107 (2004) (Blackout Report),
available at https://www.ferc.gov/industries/electric/
indus-act/reliability.asp.
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84. Separately, the NPCC impactbased test has excluded elements that
interconnect generators, including
multiple nuclear facilities. Nuclear
facilities generally are significantly
larger than other power plants, serve as
base load, and often are critical to
meeting capacity demand. They require
external interconnections to provide
power to auxiliary equipment within
the plant under normal and emergency
conditions, which includes issues
related to black starts and system
restoration. Additionally, many nonnuclear generators representing over
10,000 MW of capacity resources that
are subject to reliability rules and which
provide needed capacity are
interconnected to the network through
facilities that are not classified as bulk
electric system facilities under NPCC’s
rules, which may undermine the
reliability of the capacity provided. The
facilities that these generators connect
to tend to be 100 kV and above facilities
that are operated in parallel with extra
high voltage facilities and have
numerous interconnections to the extra
high voltage network while also serving
some distribution facilities.
85. Given the questionable and
inconsistent exclusions of facilities from
the bulk electric system by the material
impact assessment and the variable
results of the Transmission Distribution
Factor test proposed in NPCC’s
compliance filing in Docket No. RC09–
3, there are no grounds on which to
reasonably assume that the results of the
material impact assessment are accurate,
consistent, and comprehensive.93
93 See WECC BESDTF Proposal V5 Appendix B,
at B–11–B–12, available at https://www.wecc.biz/
Standards/Development/BES/
Shared%20Documents/WECC058%20BES%20Comments%20Posting%205/
P5%20Appendix%20B%20FINAL%20CLEAN.doc:
‘‘The BESDTF considered the Northeast Power
Coordinating Council’s Transfer Distribution Factor
(TDF) approach to determining which networked
Elements and facilities are used to distribute
electricity locally and do not provide meaningful
flow-through capability for the BES. In general, the
TDF approach increases generation on one side of
a transmission interface, decreases generation on
the other side of the transmission interface, and
measures the resulting change in flow across the
interface. NPCC proposed that an Element with a
TDF of less than 1% would not be part of the BES.
WECC staff expressed concern that the results of
the TDF studies subjectively depended on which
generating units had their output increased and
which generating units had their output decreased.
The results would also depend on the location, and
what kind, of slack bus [a designated generator bus
without a real power injection setting used in
power system modeling for the purpose of
producing or absorbing real power such as change
in real losses, loss of generation or interchange]
used in the power flow simulation. As a result, the
BESDTF did not propose to adopt the TDF method
to determine which networked facilities could be
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Additionally, we have noted how the
results of multiple material impact tests
can vary depending on how the test is
implemented. In contrast, the proposed
‘‘bright-line’’ test would continue the
100 kV threshold currently in use
throughout much of the industry
without allowing entities to vary this
definition outside a Commissionapproved exemption process. Further,
since most regions currently use the 100
kV general threshold, most regions
should have little difficulty maintaining
a 100 kV bright-line threshold. If NERC
proposes an alternate methodology, it
must ensure that the method is
consistent, repeatable, and verifiable,
which the material impact tests we have
discussed are not.
86. With respect to the comments
about the relevance of the FRCC,
ReliabilityFirst and Astoria West events,
and statements that they do not provide
an adequate basis for our action here,
the Commission emphasizes that for the
Reliability Standards to have their
intended outcome of protecting the
system from instability, uncontrolled
separation, or cascading failures, the
bulk electric system definition must
include the facilities necessary for
reliable operation of the system and the
registered entities must comply with the
requirements of the Reliability
Standards applicable to those facilities.
If the definition excludes facilities that
are necessary for reliable operation, the
result is that more system events may
occur, the impact of such events may be
broader, and NERC and the Commission
may have little or no authority to
require the entities to mitigate the issues
going forward. The FRCC,
ReliabilityFirst and Astoria West
examples demonstrate that, had all the
relevant requirements in the Reliability
Standards been adhered to, such as
those in the PRC, IRO and TOP
categories, the impacts of the events
could have been minimized, if not
avoided all together. The examples also
illustrate that, because FRCC and
ReliabilityFirst classify the facilities at
issue as part of the bulk electric system,
NERC and the Commission could
require mitigation or take other action to
ensure that the entities comply with the
Reliability Standards in the future, thus
enhancing system reliability. On the
other hand, NERC and the Commission
were unable to require mitigation with
respect to the NPCC event because
NPCC’s definition excluded the
facilities involved from the bulk electric
system. We will address our specific
classified as Local Distribution Networks and
excluded from the BES.’’
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concerns with each event in turn,
below.
FRCC Event
87. The FRCC event originated from a
single fault on a 138 kV facility, which
is included in the ‘‘bulk electric system’’
according to FRCC’s definition. This
single 138 kV fault led to the loss of 22
transmission lines, 4,300 MW of
generation, and 3,650 MW of customer
service or load distributed over the
lower two thirds of Florida. It is clear
from the facts that this was a wide-scale
cascading outage, which deserves the
Commission’s attention. Subsequent to
this event, Florida Power & Light
implemented mitigation plans that
would preclude similar problems. The
Commission notes that if this same
event had occurred in NPCC, the
Commission or NERC would not have
had the chance to require mitigation of
the issue because these facilities would
not be considered part of the bulk
electric system.
(iii) ReliabilityFirst Event
88. Similarly, the June 13, 2008 event
in ReliabilityFirst demonstrates how
problems on 100–200 kV facilities can
cascade into significant outages. As
noted in NOPR, ‘‘the inappropriate
operation of the relay on a 138 kV
facility contributed to the loss of three
138 kV–13 kV transformers, three 138
kV transmission lines, and estimated
loss of approximately 150 MW of firm
load in a critical high population
density area,’’ 94 that includes the White
House, for over four hours.95 Because
ReliabilityFirst classifies these facilities
as part of the bulk electric system, the
circumstances are covered by the
Reliability Standards. Thus,
ReliabilityFirst, NERC and the
Commission are able to require
mitigation, which can be informed by
the mandatory Reliability Standards.
Facilities similar to those involved in
this example would not, in NPCC, be
included under the bulk electric system
definition. Thus those facilities would
not have to be operated pursuant to the
Reliability Standards and, if a problem
occurred, neither the Commission nor
NERC could require a mitigation plan to
be developed and completed.
94 NOPR,
FERC Stats. & Regs. ¶ 32,654 at 22.
e.g., WTOP story ‘‘Friday the 13th’’
Blackout hits DC (June 13, 2008), available at
https://www.wtop.com/?sid=1421434&nid=25; CBS
News story ‘‘Power Outage Knocks Out D.C.’’ (June
13, 2008) (‘‘ ‘The White house had been running on
generator power,’ said deputy press secretary Tony
Fratto.’’) available at https://www.cbsnews.com/
stories/2008/06/13/national/main4178695.shtml.
95 See,
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(iv) Astoria West Event
89. On the other hand, the ConEd
Astoria West facilities are not part of the
bulk electric system according to
NPCC’s impact-based criteria.
Nonetheless, as reported by the news
media, the event resulted in widespread
loss of load affecting around 385,000
people in parts of Manhattan and the
Bronx.96 The NYPSC identified the
cause of the outage as a lightning strike
not to any ConEd transmission facilities,
but a communications facility. The
Commission understands that this
communication disruption to a
protection system by itself did not cause
any faults on the 138 kV facilities.
However, as explained earlier, this nonfault (N–0) event resulted in the
interruption of service to about 137,000
customers, affecting portions of two
boroughs in New York City, as well as
the loss of five generators and six 138
kV transmission lines. Unlike the FRCC
event, ConEd was not required to
mitigate, under section 215, the root
cause of the Astoria event because the
facilities are not included under the
bulk electric system definition. We note
that these facilities are not included in
the definition despite the fact that the
138 kV network is heavily
interconnected to the extra-high voltage
network through ten 138 kV phase angle
regulators in 345 kV stations.
Additionally, approximately 2,000 MW
of capacity resources and a similarly
large quantity of customer firm demand
in the Astoria area is directly connected
to the 138 kV network or supplied from
the 138 kV to lower voltage levels via
step-down transformers. While the
NYPSC stated that ConEd did mitigate
the communication issue at the cited
location, it is not clear if ConEd
addressed similar vulnerabilities at
other locations or if other underlying
root cause items were identified or
addressed.97
(v) Relevance of TLR
90. Reliability Standard IRO–006–
4.1—Reliability Coordination—
Transmission Loading Relief has the
purpose of providing ‘‘Interconnectionwide transmission loading relief
96 See, e.g., New York Times article, ‘‘Brief Power
Failure Is Long Enough to Unsettle’’ (June 28, 2007),
available at https://query.nytimes.com/gst/
fullpage.html?res=9A02E0DB163EF93
BA15755C0A9619C8B63&sec=&spon=
&&scp=1&sq=Brief%20Power%
20Failure%20Is%20Long%
20Enough%20to%20Unsettle&st=cse; ABC News
story ‘‘Power Back on in NYC after Outages’’ (June
27, 2007), available at https://abclocal.go.com/wabc/
story?section=weather&id=5428326.
97 NYPSC at 10–11. The NYPSC’s comments do
not specify whether ConEd took any action besides
the telecommunications fixes.
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procedures that can be used to prevent
or manage potential or actual [System
Operating Limit] and [Interconnection
Reliability Operating Limit] violations
to maintain reliability of the Bulk
Electric System.’’ The only time that
transmission loading relief (TLR)
procedures can be used is when a
Reliability Coordinator is experiencing a
potential or actual System Operating
Limit (SOL) 98 or Interconnection
Reliability Operating Limit (IROL) 99 on
the bulk electric system within its
Reliability Coordinator area.100 The
Commission understands that TLR
procedures used to curtail firm and nonfirm transactions 101 have been activated
in NPCC on flowgates that contain
facilities that are not part of the bulk
electric system under NPCC’s definition,
but were needed to prevent or manage
potential or actual SOL or IROL
violations on the NPCC-defined bulk
electric system. Since a flowgate
generally defines facilities that operate
in parallel and collectively respond to a
transmission loading relief event as if it
were a single transmission facility, it is
logical that these 115 and 138 kV
parallel facilities are included in these
flowgates. Therefore, we disagree with
ICNU’s and NYSRC’s claims that these
facilities can be dismissed as
unimportant. If a flowgate contains
facilities that are needed to prevent or
manage SOL or IROL violations, they
should be included in the bulk electric
system. Since the material impact test
did not show this, this is another
indication that the test does not
adequately identify bulk electric system
elements.
srobinson on DSKHWCL6B1PROD with RULES3
(vi) International Concerns
91. Ontario Power contends that the
Commission must explicitly state that
the proposed change applies only to
98 The NERC Glossary defines System Operating
Limit as: ‘‘The value (such as MW, MVar, Amperes,
Frequency or Volts) that satisfies the most limiting
of the prescribed operating criteria for a specified
system configuration to ensure operation within
acceptable reliability criteria.’’
99 The NERC Glossary defines Interconnection
Reliability Operating Limit as ‘‘A System Operating
Limit that, if violated, could lead to instability,
uncontrolled separation, or Cascading Outages that
adversely impact the reliability of the Bulk Electric
System.’’
100 See IRO–006–4.1, Requirement R1.
101 Flowgate 7004 in NPCC, which contains nonbulk electric system facilities, had 31 TLR events
totaling 484 hours in 2009 and 44 TLR events
totaling 798 hours to date in 2010. Additionally,
three other NPCC flowgates that contain non-bulk
electric system facilities had TLR events called in
2009 and 2010. Specifically, flowgates 7001, 7002,
and 7010 were collectively subject to 11 TLR events
totaling 91 hours during that period. See NERC
Transmission Loading Relief Procedure Logs
(October 28, 2010) available at https://
www.nerc.com/filez/Logs/tlrlogs.html.
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those jurisdictions within the United
States. Ontario Power argues that
although the Commission indicates that
the proposal seeks to increase
consistency across reliability regions by
imposing a bright line definition,
Ontario Power believes that
implementation of the Order as
currently proposed will not achieve this
goal. Specifically, Ontario Power argues
that the proposed modification ‘‘will
simply move the point of demarcation
from one methodology to the other (i.e.,
100 kV threshold versus a performancebased approach) from Regional Entity
borders to National borders.’’ 102 Ontario
Power reiterates that it is not aware of
any significant reliability issues
attributable to the use of NPCC’s
performance-based methodology.
Accordingly, Ontario Power does not
believe that Canadian jurisdictions
maintaining the performance-based
approach would suffer reduced
reliability as compared to those who are
required to adopt the 100 kV threshold.
´
92. Hydro-Quebec contends that the
NOPR’s proposal does not take into
account the characteristics of the
´
Quebec Interconnection, particularly
that it is asynchronous with the other
systems that make up the Eastern
Interconnection and thus is not freely
influenced by power flows in other
balancing areas. According to Hydro´
Quebec, application of the NERC
Reliability Standards should be limited
to facilities with a material impact on
reliability, and this decision is best left
to the Regional Entities.
93. The Joint Canadian Parties argue
that the NOPR’s proposal would result
in the Reliability Standards being
applied to the majority of facilities 100
kV and above, a significant number of
which only impact the local area in the
event of a contingency, and often under
the purview of different regulatory
authorities. Additionally, they state that
the proposed ‘‘one-size fits all’’ approach
does not give due consideration to
either regional variations or the
technical expertise of the regions.
According to the Joint Canadian Parties,
the impact-based methodology ensures
that all facilities critical to wide-area
reliability are included in the bulk
electric system definition.
94. The Commission acknowledges
that it does not have jurisdiction to
enforce a modified definition with
respect to non-U.S. entities. However, as
Ontario Power correctly notes, the
problems discussed above with respect
to transmission lines classified as ‘‘bulk
electric system’’ in one region but not
classified as such in a connected region
102 Ontario
PO 00000
Fmt 4701
also can occur when lines cross the
international border. Thus, we will, and
we encourage NERC to, work with the
Canadian authorities to ensure
consistent treatment of transmission
lines that cross the border.
95. In response to Ontario Power’s
statement that it is not aware of any
significant reliability issues attributable
to use of NPCC’s material impact test,
and the Joint Canadian Parties’
argument that the NOPR proposal
would result in Reliability Standards
being applied to facilities that only
impact the local area, we have discussed
elsewhere in this order our concerns
with the NPCC methodology including
the reliability concerns arising from that
test’s inconsistent results and our
concerns with the subjective nature of
the term ‘‘local area’’ as defined in NPCC
Document A–10. We also note that the
Final Rule directs the ERO to consider
adopting an exemption process that
would help alleviate the Joint Canadian
Parties’ concerns about a ‘‘one-size fits
all’’ approach. Finally, because this
Final Rule directs the ERO to develop a
revised bulk electric system definition
through the Standards Development
process, the Canadian commenters will
be able to raise and address a number
of their substantive concerns in that
forum.
(4) Summary
96. In general, the Final Rule
identifies the reliability concerns
created by the current definition and a
method to ensure that certain facilities
needed for the reliable operation of the
nation’s bulk electric system are subject
to mandatory and enforceable
Reliability Standards, and that
exemption methodologies would be
developed by NERC and subject to
Commission review. From the
Commission’s review, the material
impact assessments implemented by
NPCC are subjective in nature, and
results from such tests are inconsistent
in application, as shown through the
exclusion of facilities that clearly are
needed for reliable operation. Further,
we find that the vast majority of 100 kV
and above facilities are part of parallel
networks with high voltage and extra
high voltage facilities and are necessary
for reliable operation. As a result, and
consistent with our previous statements
in Order No. 672,103 we find it is best
for the ERO to establish a uniform
definition that eliminates subjectivity
and regional variation in order to ensure
reliable operation of the bulk electric
system. We further find that the existing
103 Order No. 672, FERC Stats. & Regs. ¶ 31,204
at P 290.
Power at 4.
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Federal Register / Vol. 75, No. 227 / Friday, November 26, 2010 / Rules and Regulations
NPCC impact test is not a consistent,
repeatable, and comprehensive
alternative to the bright-line, 100 kV
definition we prefer. By directing the
ERO to revise the definition of ‘‘bulk
electric system,’’ through the approach
proposed by the Commission, or
through an equally effective alternative
proposed approach, the Commission is
fulfilling its responsibility to ensure
reliable operation of the grid.104 Any
alternative proposal from the ERO must
be as effective as, or more effective than
the 100 kV threshold at ensuring
facilities necessary for reliable operation
are captured in the definition while also
addressing the issues outlined in this
Final Rule.
System.’’ Although the statutory term
Bulk-Power System defines our
jurisdiction, the Commission believes
more clarity and certainty is achieved in
this context by focusing on whether
facilities are part of the bulk electric
system. Ensuring that the bulk electric
system definition encompasses all
facilities necessary to reliably operate an
interconnected electric transmission
system will not cause the application of
the Reliability Standards to extend
beyond the jurisdiction prescribed in
section 215. The Commission, the ERO,
and the Regional Entities will continue
to enforce Reliability Standards for
facilities that are included in the bulk
electric system.
(d) Usage and Definition of ‘‘Bulk-Power
System’’
2. Exemption Process
101. The NOPR proposed that a
Regional Entity must seek ERO and
Commission approval before exempting
any transmission facility rated at 100 kV
or above from compliance with
mandatory Reliability Standards.106
Pursuant to the NOPR proposal, a
Regional Entity would submit proposed
facility exclusions to the ERO and then,
in turn, the ERO would submit to the
Commission for review on a facility-byfacility basis any ERO-approved
exception to the proposed threshold of
all transmission facilities at 100 kV or
above, except for radial transmission
facilities serving only load with one
transmission source. Any such
submission would also include
adequate supporting information
explaining why it is appropriate to
exempt a specific transmission facility
that would otherwise satisfy the
proposed 100 kV threshold. Only after
Commission approval would the
proposed exclusion take effect.
(1) Comments
97. Anaheim states that the
Commission’s observation that the term
‘‘Bulk-Power System’’ is somehow
broader than the term ‘‘bulk electric
system,’’ coupled with its refusal to
define, explain, or otherwise implement
the statutory term, creates substantial
uncertainty within the industry
concerning the scope of the Reliability
Standards going forward.
98. ReliabilityFirst states the use of
the terms ‘‘bulk electric system’’ and
‘‘Bulk-Power System’’ at times has
created confusion within the industry
and in compliance enforcement matters.
Therefore, ReliabilityFirst believes that
NERC should formally document the
use of both terms and, going forward,
use a single term and definition for all
compliance and enforcement of the
Reliability Standards.105
99. SCE states that the industry has
been seeking final resolution of the
statutory term ‘‘Bulk-Power System’’ and
requests that the Commission act now
and through this Final Rule to resolve
the statutory term ‘‘Bulk-Power System.’’
It requests that the Commission’s Final
Rule recognize that the definition of
‘‘bulk electric system’’ developed under
this Final Rule is identical to the
statutory term ‘‘Bulk-Power System’’ and
no further definitional change will take
place.
srobinson on DSKHWCL6B1PROD with RULES3
(2) Commission Determination
100. In the NOPR, the Commission
addressed the definition of ‘‘bulk
electric system’’ and not the definition
of the statutory term ‘‘Bulk-Power
(a) Comments
102. Most commenters disagree with
the exemption process outlined in the
NOPR, and several requested that the
Commission abandon the NOPR’s
proposal or adopt a more streamlined
process. NERC and other commenters
characterize the Commission’s proposal
as costly, time consuming, and
potentially unworkable.107 Some parties
suggested alternatives, such as the
Commission reviewing and approving a
Regional Entity’s exemption
methodology rather than reviewing each
individual’s exemption application.
106 NOPR,
FERC Stats. & Regs. ¶ 32,654 at P 18.
e.g., Alcoa, BPA, CMUA, Palo Alto,
Redding, Constellation/CENG, ICNU, APPA/
NRECA, National Grid, NERC, NESCOE, NCPA, NV
Energy, Public Power Council, SWTDUG, NYSRC,
SCE, State Utility Commissions and Consumer
Counsel, TANC, TAPS, Utah Municipal, Wells,
WPSC.
107 See,
104 As noted previously, any alternative proposal
must be as effective as, or superior to, the
Commission’s proposed approach in addressing the
identified technical and other concerns, and may
not result in a reduction in reliability.
105 ReliabilityFirst at 10.
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Other commenters argue that the
Commission should approve a
methodology that allows the Regional
Entities or ERO to perform a facility-byfacility review rather than the
Commission.108 Several commenters
requested that the Commission adopt a
blanket exemption for distribution
facilities, as defined by the Regional
Entities, or clarification that the
Commission did not intend to include
distribution facilities within the scope
of the definition of bulk electric
system.109 Commenters also request that
the Commission suspend enforcement
of Reliability Standards to newlyclassified bulk electric system facilities
while the Regional Entities evaluate
exemption requests.
103. APPA/NRECA argues that the
NOPR’s approach represents an extreme
departure from current practice with
respect to allowing appropriate
exemptions from the Reliability
Standards requirements. APPA/NRECA
notes that entities seeking an exemption
for even radial line facilities may
require NERC and Commission approval
before that exemption would take effect,
and that these entities would not only
have the burden of obtaining the
necessary approvals for the exemption
but also would have to comply with the
Reliability Standards while those
approvals are pending.110 APPA/
NRECA contends that the proposal
could impose significant burdens on
many smaller utilities, some of which
have never been subject to Reliability
Standards, without affording them any
procedural protections and without
imposing on Regional Entities the
appropriate and parallel burden of
demonstrating that expanded authority
over low-voltage (less than 100 kV)
facilities is necessary to preserve
reliability.111
104. Alcoa points out that the
proposal would increase the costs
associated with their facilities in the
NPCC region either through additional
compliance measures associated with
mandatory Reliability Standards or by
obtaining approvals for an exemption
from such requirements. EEI believes
that NERC should determine whether to
grant or deny a specific request for an
exemption and that Commission
approval should not be required in
every case. Instead, an appeal to the
108 See, e.g., EEI, BPA, Utility Services, Inc.,
NPCC, WECC, TAPS, Santa Clara, NUSCO,
Indicated New York Transmission Owners,
SWTDUG.
109 See, e.g., GTC/GSOC, Redding, Dow, NV
Energy, PGE, TIEC.
110 APPA/NRECA at 19–23.
111 Id. at 25–27.
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Commission should be available as an
option.
105. GTC/GSOC proposes that the
definition for a blanket exemption of
localized and load-serving lines include:
An area serving load that is connected
to the rest of that network at a single
transmission substation at a single
transmission voltage by one or more
transmission circuits; tap lines and
associated facilities that are required to
serve local load only; and transmission
lines that are operated open for normal
operation.
106. On the other hand, Manitoba
Hydro supports the Commission’s
proposal to require a Regional Entity to
obtain NERC and Commission approval
prior to exempting any facility rated at
100 kV or above, except for radial
transmission facilities serving only load.
Manitoba Hydro also believes regulatory
review provides a wider opportunity for
stakeholder review.
107. Several commenters argue that
the Commission should direct
modifications to section 500 of the
NERC Rules of Procedure, which
governs NERC’s business practices,
including its operation and review
processes.112 For example, NPCC
proposes minimal revision to the NERC
Rules of Procedure, Section 500 to
include a process for evaluating bulk
electric system exclusions
recommended to NERC by the Regional
Entities. NERC states that changes likely
will be necessary in the NERC Rules of
Procedure and the NERC Statement of
Compliance Registry Criteria.
108. TIEC states that many industrial
sites are interconnected to the grid
through lines rated at or above 100 kV,
or otherwise contain lines rated at 100
kV or above within a private use
network. TIEC notes that although these
lines are operated at a high voltage due
to the size of the industrial loads, they
are used to provide electric service to
end-use industrial customers and do not
serve a ‘‘transmission’’ function for the
interconnected grid within the meaning
of the Commission rules and NERC
Reliability Standards. Instead, these
facilities deliver electricity from the grid
or a cogeneration facility to the
consuming loads within a plant site.
TIEC states that the Commission should
clarify that customer-owned facilities
that are used to distribute electricity to
consuming facilities on the customer’s
premises, which do not therefore serve
a ‘‘transmission’’ function for the
interconnected grid, are not part of the
bulk electric system. Alcoa contends
that its industrial facilities are
connected to the grid using 115 kV lines
112 See,
e.g., NERC, NPCC, and Utility Services.
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for efficiency purposes, but that they
have no practical impact on the grid,
and therefore would be improperly
included in the bulk electric system by
the proposal.
109. ExxonMobil suggests modifying
the definition of the bulk electric system
to include ‘‘those facilities rated at 100
kV or above intended for the
transmission of power within an
interconnected grid,’’ i.e., ExxonMobil
suggests that the Commission draw a
distinction between facilities that could
under limited circumstances transmit
power but were not intended or
designed to be a transmission path.
ExxonMobil notes that in order to meet
the reliability target requirements to
safely and economically operate
manufacturing and production facilities,
many industrial facilities are fed by two
or more utility transmission lines that
originate at different utility substations.
Due to the magnitude of an industrial
site’s load, these transmission lines are
typically designed to operate at levels in
excess of 100 kV at the request of the
utility company. These transmission
lines typically terminate into an
interconnection facility, owned by the
industrial facility, that networks the
transmission lines together within the
industrial facility’s private use network
in order to serve the load of the facility’s
private use network. ExxonMobil states
that its proposed approach is consistent
with the Commission’s stated goal of
requiring the Regional Entities to
register transmission lines that are
operated at the 100 kV level and above;
while at the same time clearly excluding
end user facilities rated 100 kV or
above.
110. ERCOT suggests that the
Commission should consider imposing
a parallel process for including facilities
that are below 100 kV in the bulk
electric system. ERCOT notes that
presently, facilities below 100 kV
generally are not considered part of the
bulk electric system, but the Regional
Entities can explicitly include facilities
below 100 kV if they are deemed
‘‘critical facilities.’’ ERCOT states that
‘‘Regional Entities should not have
unbounded unilateral discretion to
make such designations given the
potential impact to affected parties.’’ 113
Thus, consistent with the Commission’s
proposal to subject all 100 kV and above
exemptions to due process, ERCOT asks
the Commission to consider imposing a
similar process for the inclusion of
facilities below 100 kV.
113 ERCOT
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(b) Commission Determination
111. As mentioned above, the NOPR
proposed an exemption process
pursuant to which a Regional Entity
would seek ERO and Commission
approval before exempting a
transmission facility rated at 100 kV or
above from compliance with the
Reliability Standards. In response to the
NOPR proposal, we received numerous
comments that the proposed exemption
process would be costly, timeconsuming and potentially unworkable.
Other commenters expressed concern
that the proposal was unduly
burdensome, particularly on smaller
entities. We continue to believe that an
exemption process is appropriate and is
complementary to our directive,
discussed earlier, that the ERO develop
a revised definition of the term bulk
electric system that addresses the
concerns resulting from the current
discretion of Regional Entities to
develop alternative regional definitions
of the term. However, we are persuaded
by the commenters’ concerns and the
Final Rule does not adopt the
exemption model proposed in the
NOPR.
112. Rather than devising a revised
exemption process in the Final Rule, we
direct the ERO to develop a proposed
exemption process. We believe that it is
appropriate that NERC develop the
process in its function as the ERO.
Further, allowing the ERO to develop an
appropriate exemption process should
provide interested stakeholders an
opportunity to participate in the
development of the process, as
requested by some commenters. This
stakeholder participation should result
in a process with practical application
that is less burdensome than the NOPR
proposal.
113. The ERO must submit the
proposed exemption process within one
year of the effective date of this Final
Rule. After notice and opportunity for
comment, the Commission will act on
the ERO’s proposal.
114. We will not dictate the substance
or content of the exemption process in
this Final Rule. Rather, we identify
below several matters or concerns that
should be addressed in an acceptable
exemption process.
115. NERC should develop an
exemption process that includes clear,
objective, transparent, and uniformly
applicable criteria for exemption of
facilities that are not necessary for
operating the grid. The ERO also should
determine any related changes to its
Rules of Procedures that may be
required to implement the exemption
process, and file the proposed
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exemption process and rule changes
with the Commission.
116. As indicated above, since we are
not adopting the exemption model
proposed in the NOPR, we no longer
contemplate a process that requires
Commission review of each request for
exemption. However, in order to avoid
an inconsistent application of the
exemption process, NERC should
oversee the facility-by-facility
exemption process to ensure an
objective and uniform application of the
exemption criteria that it develops.
NERC may consider delegating
responsibilities for the exemption
process to Regional Entities, so long as
the process is clear and capable of being
applied consistently, objectively and
uniformly across all regions. However,
consistent with our statements in Order
No. 672 regarding the need for a strong
ERO, NERC should maintain oversight
of any Regional Entity activity.114 We
believe ERO oversight is also vital in
ensuring consistent application of any
nation-wide exemption criteria that the
ERO develops.
117. While the Commission will not
require that we review each exemption
on a facility-by-facility basis, we would
maintain the authority to conduct audits
to determine the appropriateness of a
particular exemption. We contemplate
that a Commission staff audit would
review the application of the exemption
criteria developed by NERC in NERC’s
or a Regional Entity’s determination to
approve an exemption for a particular
facility. However, to facilitate such
audits, the ERO should maintain a list
of exempted facilities that can be made
available to the Commission upon
request. NERC can decide how best to
maintain the list, including determining
whether or not to post it on the NERC
Web site.
118. Additionally, the ERO should
consider developing criteria for
revoking an exemption if a particular
transmission facility no longer qualifies
for such an exemption. This may be
appropriate, for example, when a
transmission system in the vicinity
undergoes a significant change.
119. A number of comments raised
concerns that the Commission’s
directive that the ERO revise the
definition of bulk electric system would
result in the erroneous inclusion of
distribution facilities within the
definition. As we explained above, these
arguments are unconvincing because the
majority of facilities operated at or
above 100 kV are parallel paths that are
necessary for the reliable operation of
114 Order No. 672, FERC Stats. & Regs ¶ 31,204 at
P 140, 654.
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the transmission system. In addition,
the exemption process provides a means
of ensuring that relatively high voltage
distribution facilities are excluded from
compliance with mandatory Reliability
Standards. In this light, we believe that
it would be beneficial for the ERO, in
maintaining a list of exempted facilities,
to consider including a means to track
and review facilities that are classified
as local distribution to ensure accuracy
and consistent application of the
definition. Similarly, the ERO could
track exemptions for radial facilities.
120. In response to comments seeking
a blanket exemption for industrial
facilities, the Commission is not
inclined to grant categorical exemptions
of any kind. However, NERC should
consider the parties’ concerns regarding
exemption categories in developing an
exemption process and criteria. Entities
can submit specific facilities for
exemption through the NERC-developed
exemption process. As previously
discussed, radial facilities, as well as
facilities used in the local distribution
of electric energy as provided in section
215, will continue to be excluded.
121. We agree with ERCOT’s
suggestion that the ERO should develop
a parallel process for including as part
of the bulk electric system ‘‘critical’’
facilities, operated at less than 100 kV,
that the Regional Entities determine are
necessary for operating the
interconnected transmission network.
Currently, Regional Entities have the
ability to include ‘‘critical’’ facilities
operated below 100 kV.115 We believe
that it would be worthwhile for NERC
to consider formalizing the criteria for
inclusion of critical facilities operated
below 100 kV in developing the
exemption process. Additionally, we
note that Order No. 716 creates a
process to include critical facilities
under NUC–001–1.116 Similarly, we
note that Order No. 733 creates an
additional ‘‘add in’’ approach to sub-100
kV facilities that Regional Entities and
planning coordinators have identified as
critical to the reliability of the bulk
electric system.117
3. Transition Process
122. In the NOPR, the Commission
proposed to allow a Regional Entity
affected by the Commission’s Final Rule
to submit a transition plan that allows
115 See, e.g., Order No. 693, FERC Stats. & Regs.
¶ 31,242 at P 77.
116 Mandatory Reliability Standard for Nuclear
Plant Interface Coordination, Order No. 716, 125
FERC ¶ 61,065, at P 51–53 (2008), order on reh’g,
Order No. 716–A, 126 FERC ¶ 61,122 (2009).
117 Transmission Relay Loadability Reliability
Standard, Order No. 733, 130 FERC ¶ 61,221, at
P 20–25, 47, 60, 62 (2010).
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a reasonable period of time for affected
entities within that region to achieve
compliance with respect to facilities
that are subject to Commissionapproved Reliability Standards for the
first time.118
(a) Comments
123. Certain commenters argue that
the NOPR fails to clearly detail a
transition process for bringing
additional facilities into compliance
with Commission-approved Reliability
Standards.119 APPA/NRECA believe
that if the definition of bulk electric
system is ultimately modified, NERC
should be responsible for developing a
clear and achievable transition plan to
bring new facilities (and entities) into
compliance.120 APPA/NRECA further
note that the NOPR is somewhat
inconsistent in its discussion of a
transition plan and required
compliance, recognizing at one point
that a transition plan for newly-affected
facilities would be appropriate while
elsewhere stating that facilities falling
within the broad definition of bulk
electric system would only be exempt
after Commission approval.121
124. National Grid requests that the
Commission allow entities affected by
the new rule the opportunity to develop
a reasonable transition plan for bringing
existing facilities into compliance with
newly-applicable Commission-approved
Reliability Standards, through a
collaborative process involving NERC,
Regional Entities, state commissions
and other affected parties.122 National
Grid notes that the process for bringing
all of its and its subsidiaries’ newlyaffected facilities into compliance could
take several years and would require
significant increases in operations and
maintenance costs as well as capital
expenditures.123 National Grid suggests
a transition period of 24–36 months
would be necessary to study and to
begin to implement compliance
programs.124
125. Several commenters state that the
Final Rule should include a sufficient
transition period, and many propose
specific minimum transition time
periods.125 For example, FRCC
118 NOPR,
FERC Stats. & Regs. ¶ 32,654 at P 27.
e.g., APPA/NRECA and Bay Area
Municipal.
120 APPA/NRECA at 4.
121 Id. at 35.
122 National Grid at 5.
123 Id. at 3, 8 (estimating compliance costs for
transmission planning standards alone to be $75
million to $125 million).
124 Id. at 5–6.
125 See, e.g., APPA/NRECA, EEI, FRCC, NERC,
NPCC, National Grid, NYISO, Northeast Utilities,
Indicated New York Transmission Owners, and
Utah Municipal.
119 See,
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recommends a transition period of 24
months for Registered Entities to phase
in compliance of additional facilities
with Commission-approved Reliability
Standards.126
126. NPCC recommends that the
effective date of any new bulk electric
system definition be 24 months
following the Commission’s Final Rule
and that within 90 days of the Final
Rule, all Registered Entities be required
to submit implementation plans to bring
all newly identified bulk electric system
facilities into compliance and submit
any needed changes in registration by
the effective date of the bulk electric
system definition.127
127. Likewise, NYISO recommends
that the effective date of any new
definition should be no sooner than 24
months following the effective date of a
Commission order requiring compliance
with that definition.128 NYISO further
argues that during the transition period,
no parties should be required to selfreport or be deemed non-compliant by
NPCC.129
128. Several commenters request that
the Commission provide for temporary
waivers from enforcement of
Commission-approved Reliability
Standards while entities wait for initial
exemption requests to be processed.130
For example, Utility Services argues that
the Commission must grant a temporary
waiver for audit, certification, or other
compliance requirements to any
requesting Registered Entity while its
application is pending at the regional,
NERC, or Commission levels, as this
process has already been deemed
acceptable by the Commission in the
technical feasibility exemptions for
cyber security.131 Similarly, ELCON
argues that the Commission should
clarify that a facility will not be subject
to the obligations of registered status
until the notification and any review
process, followed by the transition
period, is completed.132
129. Dow argues that the Commission
must afford companies an opportunity
to secure facility-specific exemptions
before the Commission-approved
Reliability Standards become applicable
to those facilities.133
130. NYISO further argues that during
the transition period no parties should
be required to self-report or be deemed
non-compliant by a Regional Entity.
126 FRCC
at 9.
at 5.
128 NYISO at 8–9.
129 Id.
130 See, e.g., Utility Services, Dow, and ELCON.
131 Utility Services at 5.
132 ELCON at 5.
133 Dow at 7.
127 NPCC
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(b) Commission Determination
131. As discussed above, we are
directing the ERO to revise the
definition through the Standards
Development Process. We direct NERC
to work with the Regional Entities
affected by this Final Rule to submit for
Commission approval transition plans
that allow a reasonable period of time
for the affected entities within each
region to achieve compliance with
respect to facilities that are subject to
Commission-approved Reliability
Standards for the first time based on a
revised bulk electric system definition.
The Commission expects that NPCC is
the only region that will be significantly
affected. Based on ReliabilityFirst’s
experience in adopting a ‘‘bright-line’’
definition for bulk electric system
facilities, we expect transition periods
not to exceed 18 months from the time
the Commission approves a revised
definition and exemption process,
unless the Commission approves a
longer transition period based on
specific justification. The Commission
directs NERC to file the proposed
transition plans within one year of the
effective date of this Final Rule.
132. While the Commission is
sensitive to commenters’ concerns
regarding non-compliance during the
transition period, the Commission will
not provide a trial period, as we
declined to do in Order No. 693,134 with
respect to those facilities that are subject
to Commission-approved Reliability
Standards for the first time. We expect
that the transition periods will be long
enough for exemption requests to be
processed and to allow entities to bring
newly-included facilities into
compliance prior to the mandatory
enforcement date. Additionally, the
ERO and Regional Entities may exercise
their enforcement discretion during the
transition period.
4. Cost Recovery
(a) Comments
133. The Indicated New York
Transmission Owners requested that the
Commission provide a new process to
ensure recovery for costs incurred by
NPCC members to comply with
implementation of the new definition of
bulk electric system.135 While not
seeking a specific cost recovery
mechanism, other commenters noted
their concern that the transition period
established by the Commission must be
sufficient to allow affected companies to
recover any one-time or annual
134 Order No. 693, FERC Stats. and Regs. ¶ 31,242
at P 221–222.
135 Indicated New York Transmission Owners at
11.
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72927
compliance costs incurred.136 NYISO
states that implementing the 100 kV
‘‘bulk electric system’’ definition in the
New York Control Area will cause it to
incur increased capital costs and staff
additions for which cost recovery will
be required.137
(b) Commission Determination
134. We note that the Commission has
adopted an explicit rule, as required
under Section 219(b)(4) of EPAct 2005,
allowing the recovery of ‘‘all prudently
incurred costs necessary to comply with
mandatory reliability standards issued
pursuant to section 215,’’ 138 and that
the proposed modifications to the
definition of bulk electric system do not
raise any new issues with respect to cost
recovery of reliability compliance costs.
Finally, the transition plan that we
direct herein will facilitate an
opportunity for transmission owners
and any other affected entities to
recover any one-time or annual costs of
compliance that result from any changes
to the definition of ‘‘bulk electric
system’’ as ultimately adopted by NERC.
5. Issues Regarding the Western
Interconnection
(a) Comments
135. Several entities from the Western
Interconnection state that the proposal
should not apply to the Western
Interconnection because the West is
built and operated differently.139 The
parties argue that 100–200 kV facilities
in the West are often used for
distribution of power and have a limited
or no impact on reliability over the
wider area.140 Multiple entities
supported utilizing a technical test to
differentiate which facilities should be
included, such as the material impact
assessment methodology currently being
developed by the WECC BESDTF.141
Several commenters also argue that the
proposal would be expensive to
implement while providing minimal
reliability benefits.
136. State Utility Commissions and
Consumer Counsel state that facilities
ranging from 100–199 kV in the West
are typically used for radial distribution
or local area distribution networks, and
not necessarily for bulk power
136 See,
e.g., Northeast Utilities at 6.
at 11.
138 16 U.S.C. 824s(b)(4)(A); see also 18 CFR
35.35(f)(2010).
139 See, e.g., WECC, State Utility Commissions
and Consumer Counsel, WPSC, Joint Western
Commenters, Snohomish.
140 Id.
141 See, e.g., Bay Area Municipal, Joint Western
Commenters, Redding, NV Energy, Snohomish,
Tacoma Power, Utah Municipal.
137 NYISO
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transmission.142 They believe that a 200
kV bulk electric system threshold
reflects the usage and history of the
Western Interconnection.143 They
further argue that nearly all new
transmission in the West is being built
at 500 and 230 kV and that the average
line capacity of 100–199 kV lines makes
up a very small percentage of the overall
network capacity in the West.144
137. The WPSC notes that certain
utilities within its service area have
elected to build distribution facilities
above 100 kV, and such utilities could
become subject to substantial
compliance costs without measurable
benefits under the proposed bright-line
rule.145 Moreover, if the 100 kV
threshold is adopted, certain
commenters are concerned that utilities
will elect to build facilities below 100
kV in order to avoid complying with the
Commission-approved Reliability
Standards.146
138. Likewise, Utah Municipal argues
that any proposal to classify facilities in
excess of 100 kV as part of the bulk
electric system may be appropriate for
the Eastern Interconnection, but that
such an approach is inappropriate and
extremely burdensome for entities in the
Western Interconnection.147 Utah
Municipal further notes that the NOPR
does not address the ‘‘demonstrable
differences between the Western and
Eastern Interconnections,’’ i.e., that the
spread out nature of the West makes use
of lines over 100 kV appropriate for use
as distribution lines.148 Rather than
adopting an across the board change in
each region’s approach to determining
‘‘bulk electric system’’ facilities, Utah
Municipal recommends letting the
WECC BESDTF finish work on its
hybrid threshold and material impact
assessment classification, and requests
that the Commission defer to the
technical experts at Regional Entities
such as WECC regarding any bulk
electric system definition change.149
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(b) Commission Determination
139. The Commission does not agree
with the commenters’ arguments that
100–199 kV facilities in the Western
Interconnection should be treated
differently than facilities in the Eastern
Interconnection as a threshold matter.
The bulk electric system definition
should include all facilities that are
142 State
Utility Commissions and Consumer
Counsel at 2.
143 Id.
144 Id.
145 WPSC at 2–3.
146 Id. at 2–3, 5; Utah Municipal at 6–7.
147 Utah Municipal at 5–7.
148 Id. at 8.
149 Id. at 13.
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necessary for operating an
interconnected electric transmission
network. While commenters have
implied that not all 100–199 kV
facilities are needed for reliable
operation, the Commission notes that
100 kV and some lower voltage facilities
are included in some of the WECC Rated
Paths. Clearly, these facilities are
operationally significant and needed for
reliable operation as identified by
certain WECC documents.150 Any entity
wishing to seek exemption of non-radial
facilities from compliance with
Commission-approved Reliability
Standards may utilize the exemption
process NERC will develop. While the
Western Interconnection has a higher
percentage of transmission facilities
above 200 kV compared to the Eastern
Interconnection,151 it is how the lines
below 200 kV are interconnected with
higher voltage facilities that determines
their significance.
140. Therefore, commenters have not
provided adequate explanation in this
proceeding, supported by data and
analysis, as to why there is a physical
difference upon which to treat the
Western Interconnection differently. In
fact, the present WECC definition uses
100 kV as the threshold for classifying
bulk electric system facilities.152 The
Commission understands that the audits
performed by WECC and self-reporting
by entities includes all facilities 100 kV
and above.153
141. Further, the suggestion that the
modifications should not apply to the
West contradicts guidance regarding
Reliability Standards from Order No.
672. Order No. 672 details several
factors the Commission will consider in
determining whether a proposed
Reliability Standard is just and
reasonable. One of the factors indicates
that a ‘‘proposed Reliability Standard
should be designed to apply throughout
the interconnected North American
Bulk-Power System, to the maximum
extent this is achievable with a single
Reliability Standard.’’ 154 Moreover, and
particularly compelling with respect to
the definition of bulk electric system,
Order No. 672 indicates that proposed
Reliability Standards ‘‘should be clear
and unambiguous regarding what is
required and who is required to
150 See
WECC Rated Path Catalog.
the Western Interconnection, 59 percent of
the total circuit miles of transmission lines above
100 kV also are above 200 kV, compared to 43
percent in the Eastern Interconnection. See NOPR,
FERC Stats. & Regs. ¶ 32,654 at n. 36.
152 See https://www.wecc.biz/Standards/
Development/BES/default.aspx.
153 June 2007 Filing at 13–14.
154 Order No. 672, FERC Stats. & Regs. ¶ 31,204
at P 331.
151 In
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comply.’’ 155 Eliminating broad regional
discretion without ERO or Commission
oversight and maintaining a 100 kV
bright-line definition, coupled with an
exemption process, removes any
ambiguity regarding who is required to
comply and accomplishes the goal of
reducing inconsistencies across regions.
Commenters have not provided
compelling evidence that the proposed
definition should not apply to the
United States portion of the Western
Interconnection as a threshold matter.
As Order No. 672 detailed, however, the
regions may propose: (1) A regional
difference that is more stringent than
the continent-wide definition, including
a regional difference that addresses
matters that the continent-wide
definition does not; or (2) a regional
definition that is necessitated by a
physical difference in the Bulk-Power
System. Should a region decide to
propose a regional difference, in
addition to the criteria above, such a
proposal must address the
Commission’s concerns with the present
definition with the understanding that
any such alternative must be as effective
as, or more effective than, the
Commission’s proposed approach in
addressing the identified technical and
other concerns, and may not result in a
reduction in reliability.156
6. Impact on Generation Owners and
Operators
(a) Comments
142. NERC and several other
commenters raise the concern that the
revised definition could bring a large
number of generator owners and
generator operators within the ambit of
the Reliability Standards for the first
time, and could result in an extremely
large number of exemption requests
despite the fact that the relevant
facilities can have limited or no impact
on the Bulk-Power System.157 NERC
and other commenters generally request
that the Ad Hoc Group for Generator
Requirements at the Transmission
Interface (the ‘‘GOTO task force’’) 158
155 Id.
at P 325.
e.g., Version One Regional Reliability
Standard for Resource and Demand Balancing, 133
FERC ¶ 61,063, at P 14 (2010); North American
Electric Reliability Corporation Reliability
Standards Development and NERC and Regional
Entity Enforcement, 132 FERC ¶ 61,217 at P 112
(2010).
157 NERC at 12–14; see also Palo Alto at 6–7,
NCPA at 6–10.
158 NERC has undertaken an initiative to address
the special circumstances associated with
generators and to determine which Reliability
Standards might be inappropriate for such limited
facilities. The GOTO task force was formed in
February 2009, and included a broad array of
participants across regions and industry segments,
156 See,
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findings and process be taken into
account as part of any final Commission
rule, and/or that any new ‘‘bulk electric
system’’ definition otherwise adopted be
developed in concert with the GOTO
task force findings.159
143. A few other parties request
additional clarification with respect to
the proposed rule’s applicability to
generation facilities. The U.S.
Department of the Interior suggests that
the Commission clarify its policy
regarding the exclusion of radial lines
from the bulk electric system definition,
such that transmission facilities linking
small generators are also treated as
excluded radial lines.160 WECC notes
that the Commission’s proposed brightline standard is somewhat unclear, in
that parts of the NOPR suggest that the
100 kV standard would apply only to
transmission facilities, while the current
‘‘bulk electric system’’ definition used by
NERC applies to transmission,
generation, and interconnection
facilities.
(b) Commission Determination
srobinson on DSKHWCL6B1PROD with RULES3
144. We expect that our decision to
direct NERC to develop a uniform
modified definition of ‘‘bulk-electric
system’’ will eliminate regional
discretion and ambiguity. The change
will not significantly increase the scope
of the present definition, which applies
to transmission, generation and
interconnection facilities. The proposed
exemption process will provide
sufficient means for entities that do not
believe particular facilities are necessary
for operating the interconnected
transmission system to apply for an
exemption.
145. As noted above, NERC has
undertaken an initiative to address the
special circumstances associated with
such generators.161 Although the NERC
with representatives from operating and planning
perspectives. The GOTO task force developed a
Final Report, issued in November 2009, and has
submitted a Standards Authorization Request to
NERC to implement its proposed recommendations.
See Final Report from the Ad Hoc Group for
Generator Requirements at the Transmission
Interface and related materials, available at https://
www.nerc.com/filez/standards/Project201007_GOTO_Project.html.
159 NERC at 14; Palo Alto at 7, NCPA at 9–10.
160 U.S. Department of Interior at 1–2 (suggesting
that small generators be defined as set out in the
NERC Statement of Compliance Registry Criteria,
Section III(c)).
161 The GOTO task force was formed in February
2009, and included a broad array of participants
across regions and industry segments, with
representatives from operating and planning
perspectives. The GOTO task force developed a
Final Report, issued in November 2009, and has
submitted a Standards Authorization Request to
NERC to implement its proposed recommendations.
NERC and other commenters generally request that
the GOTO task force findings and process be taken
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Board of Trustees has not approved any
action arising from the GOTO task force
at this time, the task force members may
submit their comments and report to
NERC for its consideration as NERC
develops an exemption process.
7. Clarifying Terms
(a) Comments
146. Several commenters seek
clarification on the definitions and
implications of specific terms and
concepts such as ‘‘integrated
transmission element’’ and ‘‘material
impact.’’ 162
147. For example, the North Carolina
Independent Cooperatives request that
the Commission clarify the terms
‘‘integrated transmission element’’ and
‘‘material impact.’’ They state that unless
these terms are clarified there is a real
danger that very small facilities will be
unnecessarily included in the bulk
electric system and their owners
subjected to unreasonable compliance
costs. The North Carolina Independent
Cooperatives propose that the
Commission adopt additional factors to
determine the types of facilities that fall
within or outside of the scope of these
terms.
148. ReliabilityFirst requests
clarification on whether transformers
with a high side winding above 100 kV
and a low side winding below 100 kV
are included in the bulk electric system
definition. It argues that, to eliminate
uncertainty, ‘‘any and all’’ facilities that
operate at 100 kV or above should be
considered bulk electric system
facilities, even if, for example, one
transformer winding operates below 100
kV.163
(b) Commission Determination
149. With regard to ReliabilityFirst’s
comments, we agree with its developed
delineation point with regard to ‘‘stepdown’’ transformers, but note that these
kinds of refinements can and should be
addressed as part of NERC’s exemption
process.
150. We disagree with commenters
that definitions of ‘‘integrated
transmission elements’’ and ‘‘material
impact’’ are needed to implement this
Final Rule. These terms are not defined
by the present bulk electric system
definition, and defining these terms is
not necessary to revise the definition as
directed herein. Whether specific
facilities have a material impact is not
into account as part of any final Commission rule,
and/or that any new ‘‘bulk electric system’’
definition otherwise adopted be developed in
concert with the GOTO task force findings.
162 See, e.g., North Carolina Independent
Cooperatives, SWTDUG.
163 ReliabilityFirst at 6.
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dispositive with respect to whether they
are needed for reliable operation. These
questions are more appropriately
addressed through development of an
exemption process at NERC.
III. Information Collection Statement
151. The information collection
requirements in this Final Rule are
identified under the Commission data
collection, FERC–725–A ‘‘Revision of
Definition of Bulk Electric System.’’
Under section 3507(d) of the Paperwork
Reduction Act of 1995,164 the proposed
reporting requirements in the subject
rulemaking will be submitted to OMB
for review. Interested persons may
obtain information on the reporting
requirements by contacting the Federal
Energy Regulatory Commission, 888
First Street, NE., Washington, DC 20426
(Attention: Michael Miller, Office of the
Executive Director, 202–502–8415) or
from the Office of Management and
Budget (Attention: Desk Officer for the
Federal Energy Regulatory Commission,
fax: 202–395–7285, e-mail:
oira_submission@omb.eop.gov).
152. The ‘‘public protection’’
provisions of the Paperwork Reduction
Act of 1995 require each agency to
display a currently valid control number
and inform respondents that a response
is not required unless the information
collection displays a valid OMB control
number on each information collection
or provides a justification as to why the
information collection number cannot
be displayed. In the case of information
collections published in regulations, the
control number is to be published in the
Federal Register.
153. Public Reporting Burden: In the
NOPR, the Commission based its
estimate of the Public Reporting Burden
on its belief that only one Regional
Entity, NPCC, would be immediately
affected by the Commission’s proposal.
In particular the Commission stated that
the transmission owners, transmission
operators and transmission service
providers in the U.S. portion of the
NPCC region would be affected by the
Commission’s proposal. Based on
registration information available on
NPCC’s Web site, it appeared that
approximately 33 transmission owners,
transmission operators and transmission
service providers in the U.S. portion of
the NPCC region would potentially be
affected by the Commission’s
proposal.165 These entities are currently
responsible for complying with
applicable mandatory Reliability
164 44
U.S.C. 3507(d).
Registered Entities as of January 13,
2010,’’ available on the NPCC Web site: https://
www.npcc.org/.
165 ‘‘NPPC
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Standards approved by the Commission
in Order No. 693 and subsequent orders.
Given these parameters, the
Data collection
Commission estimated the Public
Reporting Burden as follows:
Numbers of
respondents
FERC–725–A
Numbers of
responses
Hours per
respondent
Total annual hours
33
1
Reporting: 0 ...................................
Reporting: 0.
Total .........................................
srobinson on DSKHWCL6B1PROD with RULES3
Transmission
Owners,
Transmission Operators and Transmission Service Providers in the
U.S. portion of the NPCC Region.
........................
........................
Recordkeeping: 500 .......................
........................................................
Recordkeeping: 16,500.
16,500.
154. Based on the available
information, the Commission estimated
that 33 entities would be affected by the
proposal. The Commission also
estimated that it would require 16,500
total annual hours for collection
(reporting and recordkeeping) and that
the average annualized cost of
compliance would be $660,000 ($40/
hour for 16,500 hours; the Commission
based the $40/hour estimate on $17/
hour for a file/record clerk and $23/hour
for a supervisor).
155. Commenters argue that the
Commission has severely
underestimated the potential impact of
the change in the definition of bulk
electric system and the exemption
process as proposed in the NOPR.
APPA/NRECA asserts that the NOPR is
deficient in its assessment of the public
reporting burden.166 APPA/NRECA
argues that the burden of compliance
and/or of obtaining exempt status is
significant and reaches far beyond
entities in NPCC. Moreover, APPA/
NRECA notes that the Commission has
used underlying assumptions about the
kind and cost of work needed to comply
with the change in rules that
significantly underestimate the costs
associated with compliance. Finally,
APPA/NRECA argues that the NOPR is
deficient in failing to make any
assessment of the increased burden
related to the change in the
Commission’s approach to allowing
lower-voltage (less than 100 kV)
facilities to be included as part of the
bulk electric system by a Regional
Entity.
156. Snohomish argues that the NOPR
does not reflect the existing practice
outside NPCC and that the Commission
is simply wrong in asserting that the
NOPR proposal would not substantially
increase regulatory compliance burdens.
Snohomish asserts that the
Commission’s stated basis for
compliance with the Paperwork
166 APPA/NRECA
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Reduction Act and associated
regulations is incorrect.
157. Given the Commission’s decision
to direct NERC to develop a revised bulk
electric system definition, rather than
implement the NOPR’s proposal, and by
granting certain clarifications, some of
the comments are no longer relevant
and the remainder are best responded to
in a future order addressing the revised
definition developed by NERC. By
directing NERC to develop a revised
definition, the Commission is
maintaining the status quo (i.e., the
current bulk electric system definition)
until the Commission approves a
revised definition. Thus, the
Commission’s action does not add to or
increase entities’ reporting burden.
IV. Environmental Analysis
158. The Commission is required to
prepare an Environmental Assessment
or an Environmental Impact Statement
for any action that may have a
significant adverse effect on the human
environment.167 The Commission has
categorically excluded certain actions
from this requirement as not having a
significant effect on the human
environment. The actions proposed here
fall within the categorical exclusion in
the Commission’s regulations for rules
that are clarifying, corrective or
procedural, for information gathering,
analysis, and dissemination.168
Accordingly, neither an environmental
impact statement nor environmental
assessment is required.
159. Greenburgh Environmental
Forum LORAX Working Group
(Greenburgh) states that the Commission
must address the environmental impact
of the NOPR on the human
environment.169
160. We disagree with Greenburgh.
Any revised bulk electric system
167 Regulations Implementing the National
Environmental Policy Act, Order No. 486, 52 FR
47897 (Dec. 17, 1987), FERC Stats. & Regs., Regs.
Preambles 1986–1990 30,783 (1987).
168 18 CFR 380.4(a)(5).
169 Greenburgh at 2.
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definition the ERO develops will not
modify thresholds established in
individual Reliability Standards such as
FAC–003 with respect to vegetation
management. The Final Rule requires
the ERO to clarify which facilities will
be included within the definition of
‘‘bulk electric system’’ and the actions
proposed here fall within the categorical
exclusion in the Commission’s
regulations for rules that are clarifying,
corrective or procedural, for information
gathering, analysis, and dissemination.
V. Regulatory Flexibility Act Analysis
161. The Regulatory Flexibility Act of
1980 (RFA) generally requires a
description and analysis of any final
rule that will have significant economic
impact on a substantial number of small
entities. The RFA does not mandate any
particular outcome in a rulemaking, but
rather requires consideration of
alternatives that are less burdensome to
small entities and an agency
explanation of why alternatives were
rejected.
162. In drafting a rule, an agency is
required to: (1) Assess the effect that its
regulation will have on small entities;
(2) analyze effective alternatives that
may minimize a regulation’s impact;
and (3) make the analyses available for
public comment. In its NOPR, the
agency must either include an Initial
Regulatory Flexibility Act Analysis
(Initial Analysis) or certify that the
proposed rule will not have a
‘‘significant impact on a substantial
number of small entities.’’
163. If, in preparing the NOPR, an
agency determines that the proposal
could have a significant impact on a
substantial number of small entities, the
agency shall ensure that small entities
will have an opportunity to participate
in the rulemaking procedure.
164. In its Final Rule, the agency must
also either prepare a Final Regulatory
Flexibility Act Analysis (Final Analysis)
or make the requisite certification.
Based on the comments the agency
receives on the NOPR, it can alter its
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original position as expressed in the
NOPR but it is not required to make any
substantive changes to the proposed
regulation.
165. The statute provides for judicial
review of an agency’s final RFA
certification or Final Analysis. An
agency must file a Final Analysis
demonstrating a ‘‘reasonable, good-faith
effort’’ to carry out the RFA mandate.
However, the RFA is a procedural, not
a substantive, mandate. An agency is
only required to demonstrate a
reasonable, good faith effort to review
the impact the proposed rule would
place on small entities, any alternatives
that would address the agency’s and
small entities’ concerns and their
impact, provide small entities the
opportunity to comment on the
proposals, and review and address
comments. An agency is not required to
adopt the least burdensome rule.
Further, the RFA does not require an
agency to assess the impact of a rule on
all small entities that may be affected by
the rule, only on those entities that the
agency directly regulates and that are
subject to the requirements of the rule.
A. NOPR Proposal
166. In the NOPR, the Commission
stated that the immediate effect of the
proposed directive that the ERO revise
its current definition of bulk electric
system to establish a 100 kV threshold
would likely be limited to certain
transmission owners, transmission
operators and transmission service
providers in the U.S. portion of the
NPCC region. Most transmission
owners, transmission operators and
transmission service providers do not
fall within the definition of small
entities. The Commission estimated that
approximately four of the 33
transmission owners, transmission
operators and transmission services
providers may fall within the definition
of small entities. The Commission
determined that this rule will not have
a significant economic impact on a
substantial number of small entities.
Accordingly, no regulatory flexibility
analysis is required.
B. Comments
167. APPA/NRECA state that the
Commission’s RFA statement is flawed,
in that the likely impacts of the
proposed rule will reach far beyond
entities in NPCC. APPA/NRECA argues
that it is a substantial possibility that a
substantial number of entities outside of
NPCC will be affected by the proposal.
As such, it asks for a delay in
implementing the proposal in order to
avoid impacting a broader group of
smaller entities.170
168. TAPS generally supports the
APPA/NRECA comments on the
Commission’s RFA analysis. TAPS
argues that the NOPR’s RFA
Certification, which states that only a
few (presumably already-registered)
transmission owners, transmission
operators, and transmission service
providers in the NPCC footprint would
be affected by this rulemaking, is fatally
flawed.171
C. Commission Determination
169. The Commission disagrees with
commenters that challenge the
Commission’s conclusion that the rule
will not have a significant economic
impact on a substantial number of small
entities. Commenters have not made
specific assertions regarding how the
Commission’s analysis is erroneous or
in what ways the Final Rule will have
a significant economic impact on a
substantial number of small entities. As
the Commission stated in its NOPR,
most transmission owners, transmission
operators and transmission service
providers do not fall within the
definition of small entities. Further, the
Commission has suggested that the ERO
create an appropriate exemption process
and this will further ensure that the
Final Rule minimally affects small
entities. In addition, the ability of
Regional Entities to identify ‘‘critical’’
facilities, operated at less than 100 kV,
and require these facilities to comply
with mandatory Reliability Facilities is
not new. Our direction here that the
ERO formalize the process for including
such facilities will provide additional
protections to small entities. Based on
this analysis, we certify that this Final
Rule will not have a significant
economic impact on a substantial
number of small entities. Accordingly,
no further RFA analysis is required.
VI. Document Availability
170. In addition to publishing the full
text of this document in the Federal
Register, the Commission provides all
interested persons an opportunity to
view and/or print the contents of this
document via the Internet through the
Commission’s Home Page (https://
www.ferc.gov) and in the Commission’s
Public Reference Room during normal
business hours (8:30 a.m. to 5 p.m.
Eastern time) at 888 First Street, NE.,
Room 2A, Washington, DC 20426.
171. From the Commission’s Home
Page on the Internet, this information is
available on eLibrary. The full text of
this document is available on eLibrary
in PDF and Microsoft Word format for
viewing, printing, and/or downloading.
To access this document in eLibrary,
type the docket number excluding the
last three digits of this document in the
docket number field.
172. User assistance is available for
eLibrary and the Commission’s Web site
during normal business hours from
FERC Online Support at (202) 502–6652
(toll free at 1–866–208–3676) or e-mail
at ferconlinesupport@ferc.gov, or the
Public Reference Room at (202) 502–
8371, TTY (202) 502–8659. E-mail the
Public Reference Room at
public.referenceroom@ferc.gov.
VII. Effective Date and Congressional
Notification
173. These regulations are effective
January 25, 2011. The Commission has
determined, with the concurrence of the
Administrator of the Office of
Information and Regulatory Affairs of
OMB, that this rule is not a ‘‘major rule’’
as defined in section 351 of the Small
Business Regulatory Enforcement
Fairness Act of 1996.
List of Subjects in 18 CFR Part 40
Electric power, Electric utilities,
Reporting and recordkeeping
requirements.
By the Commission.
Nathaniel J. Davis, Sr.,
Deputy Secretary.
srobinson on DSKHWCL6B1PROD with RULES3
APPENDIX A
Commenter
Abbreviation
Alcoa Inc. and Alcoa Power Generating Inc ...................................................................................
American Public Power Association and the National Rural Electric Cooperative Association .....
170 APPA/NRECA
171 TAPS
Alcoa
APPA/NRECA
at 41–42.
at 12.
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APPENDIX A—Continued
srobinson on DSKHWCL6B1PROD with RULES3
Commenter
Abbreviation
Baltimore Gas and Electric Company .............................................................................................
Bay Area Municipal Transmission Group ........................................................................................
Bonneville Power Administration .....................................................................................................
California Municipal Utilities Association .........................................................................................
California Public Utilities Commission .............................................................................................
Central Hudson Gas & Electric Corporation, Consolidated Edison Company of New York, Inc.,
Long Island Power Authority, New York Power Authority, New York State Electric & Gas Corporation, Orange and Rockland Utilities, Inc. and Rochester Gas and Electric Corporation.
City of Anaheim, California ..............................................................................................................
City of Palo Alto, California .............................................................................................................
City of Redding, California ..............................................................................................................
City of Santa Clara, California d/b/a Silicon Valley Power .............................................................
Constellation Energy Commodities Group, Inc., Constellation Energy Control and Dispatch,
LLC, Constellation Energy Nuclear Group, LLC, Constellation NewEnergy, Inc. and Constellation Power Source Generation, Inc.
Consumers Energy Company .........................................................................................................
Dow Chemical Company .................................................................................................................
Duke Energy Corporation ................................................................................................................
Edison Electric Institute ...................................................................................................................
Electric Reliability Council of Texas, Inc .........................................................................................
Electricity Consumers Resource Council ........................................................................................
ExxonMobil Research and Engineering ..........................................................................................
Florida Reliability Coordinating Council ..........................................................................................
Georgia Transmission Corporation and Georgia System Operations Corporation ........................
Greenburgh Environmental Forum LORAX Working Group ...........................................................
´
´
Hydro-Quebec TransEnergie ...........................................................................................................
Independent Electricity System Operator, Hydro One Networks Inc., Ontario Power Generation
Inc., Five Nations Energy Inc., Brookfield Renewable Power Inc., New Brunswick System
Operator, and Nova Scotia Power Inc.
Industrial Customers of Northwest Utilities .....................................................................................
ISO New England Inc. .....................................................................................................................
Large Public Power Council
Manitoba Hydro
National Association of Regulatory Utility Commissioners .............................................................
National Grid USA ...........................................................................................................................
Nevada Power Company and Sierra Pacific Power Company, d/b/a NV Energy ..........................
New England States Committee on Electricity ...............................................................................
New York Independent System Operator, Inc ................................................................................
New York State Public Service Commission ..................................................................................
New York State Reliability Council, L.L.C. ......................................................................................
North American Electric Reliability Corporation ..............................................................................
North Carolina Independent Cooperatives
Northeast Power Coordinating Council, Inc ....................................................................................
Northeast Utilities Service Company ...............................................................................................
Northern California Power Agency ..................................................................................................
Ontario Power Generation Inc .........................................................................................................
Joint Western Commenters .............................................................................................................
Benton Rural Electric Association
Big Bend Electric Cooperative
Blachley-Lane Electric Cooperative
Central Electric Cooperative
Central Lincoln People’s Utility District
City of Ellensburg, Washington
City of Richland, Washington
Clearwater Power Company
Consumers Power
Coos-Curry Electric Cooperative
Douglas Electric Cooperative
Eugene Water & Electric Board
Fall River Rural Electric Cooperative
Fergus Electric Cooperative, Inc.
Idaho Falls Power
Inland Power and Light Company
Lane Electric Cooperative
Lincoln Electric Cooperative
Lost River Electric Cooperative
Northern Lights
Northwest Public Power Association
Northwest Requirements Utilities
Okanogan Electric Cooperative
Pacific Northwest Generating Cooperative
Public Utility District No. 1 of Douglas County, Washington
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BGE
Bay Area Municipal
BPA
CMUA
CPUC
Indicated New York Transmission Owners
Anaheim
Palo Alto
Redding
Santa Clara
Constellation/CENG
Consumers Energy
Dow
Duke Energy
EEI
ERCOT
ELCON
ExxonMobil
FRCC
GTC/GSOC
Greenburgh
´
Hydro-Quebec
Joint Canadian Parties
ICNU
ISO–NE
NARUC
National Grid
NV Energy
NESCOE
NYISO
NYPSC
NYSRC
NERC
NPCC
Northeast Utilities
NCPA
Ontario Power
Joint Western Commenters
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APPENDIX A—Continued
Commenter
Abbreviation
Public Utility District No. 1 of Klickitat County, Washington
Raft River Rural Electric Cooperative
Salmon River Electric Cooperative
Tillamook PUD
Umatilla Electric Cooperative
Wells Rural Electric Company
West Oregon Electric Cooperative
Western Montana Electric Generating and Transmission Cooperative, Inc
Portland General Electric Company ................................................................................................
Public Power Council
Public Utility District No. 1 of Snohomish County, Washington ......................................................
ReliabilityFirst Corporation ..............................................................................................................
Southern California Edison Company .............................................................................................
Southern Company Services, Inc ....................................................................................................
Southwest Transmission Dependent Utility Group .........................................................................
State Utility Commissions and Consumer Counsel
Idaho Public Utilities Commission
Montana Public Service Commission
Montana Consumer Counsel
Oregon Public Utility Commission
Utah Public Service Commission
Washington Utilities and Transportation Commission
Tacoma Power ................................................................................................................................
Texas Industrial Energy Consumers ...............................................................................................
Transmission Access Policy Study Group ......................................................................................
Transmission Agency of Northern California ..................................................................................
U.S. Department of the Interior
Utah Associated Municipal Power Systems ....................................................................................
Utility Services, Inc ..........................................................................................................................
Virginia Electric and Power Company, d/b/a Dominion Virginia Power .........................................
Western Electricity Coordinating Council ........................................................................................
Wyoming Public Service Commission .............................................................................................
PGE
Snohomish
ReliabilityFirst
SCE
Southern Company
SWTDUG
TIEC
TAPS
TANC
Utah Municipal
Utility Services
Dominion Power
WECC
WPSC
[FR Doc. 2010–29570 Filed 11–24–10; 8:45 am]
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]]>Agencies
[Federal Register Volume 75, Number 227 (Friday, November 26, 2010)]
[Rules and Regulations]
[Pages 72910-72933]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-29570]
[[Page 72909]]
-----------------------------------------------------------------------
Part III
Department of Energy
-----------------------------------------------------------------------
Federal Energy Regulatory Commission
-----------------------------------------------------------------------
18 CFR Part 40
Revision to Electric Reliability Organization Definition of Bulk
Electric System; Final Rule
Federal Register / Vol. 75 , No. 227 / Friday, November 26, 2010 /
Rules and Regulations
[[Page 72910]]
-----------------------------------------------------------------------
DEPARTMENT OF ENERGY
Federal Energy Regulatory Commission
18 CFR Part 40
[Docket No. RM09-18-000; Order No. 743]
Revision to Electric Reliability Organization Definition of Bulk
Electric System
Issued November 18, 2010.
AGENCY: Federal Energy Regulatory Commission.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: In this Final Rule, pursuant to section 215 of the Federal
Power Act (FPA),\1\ the Federal Energy Regulatory Commission
(Commission) adopts, with modifications, the proposal outlined in its
March 18, 2010 Notice of Proposed Rulemaking to require the Electric
Reliability Organization (ERO) to revise its definition of the term
``bulk electric system.'' \2\ The Commission directs the ERO, through
the ERO's Reliability Standards Development Process, to revise the
definition to address the Commission's technical concerns, as discussed
fully below, and ensure that the definition encompasses all facilities
necessary for operating an interconnected electric transmission
network. The Commission believes that the best way to accomplish these
goals is to eliminate the regional discretion in the current
definition, maintain a bright-line threshold that includes all
facilities operated at or above 100 kV except defined radial
facilities, and establish an exemption process and criteria for
excluding facilities that are not necessary for operating the
interconnected transmission network. However, this Final Rule allows
the ERO, in accordance with Order No. 693, to develop an alternative
proposal for addressing the Commission's concerns with the present
definition with the understanding that any such alternative must be as
effective as, or more effective than, the Commission's proposed
approach in addressing the identified technical and other concerns, and
may not result in a reduction in reliability.
---------------------------------------------------------------------------
\1\ 16 U.S.C. 824o.
\2\ Revision to Electric Reliability Organization Definition of
Bulk Electric System, Notice of Proposed Rulemaking, 75 FR 14097
(Mar. 24, 2010), FERC Stats. & Regs. ] 32,654 (2010).
DATES: Effective Date: This Final Rule will become effective January
---------------------------------------------------------------------------
25, 2011.
FOR FURTHER INFORMATION CONTACT:
Robert V. Snow (Technical Information), Office of Electric Reliability,
Division of Reliability Standards, Federal Energy Regulatory
Commission, 888 First Street, NE., Washington, DC 20426, Telephone:
(202) 502-6716.
Patrick A. Boughan (Technical Information), Office of Electric
Reliability, Division of Reliability and Engineering Services, Federal
Energy Regulatory Commission, 888 First Street, NE., Washington, DC
20426, Telephone: (202) 502-8071.
Jonathan E. First (Legal Information), Office of the General Counsel,
Federal Energy Regulatory Commission, 888 First Street, NE.,
Washington, DC 20426, Telephone: (202) 502-8529.
Mindi Sauter (Legal Information), Office of the General Counsel,
Federal Energy Regulatory Commission, 888 First Street, NE.,
Washington, DC 20426, Telephone: (202) 502-6830.
SUPPLEMENTARY INFORMATION:
Table of Contents
Paragraph
No.
I. Background............................................... 3
A. Section 215 of the FPA................................. 3
B. Order No. 693.......................................... 5
C. NERC's June 14, 2007 Filing............................ 8
D. NPCC's Identification of Bulk Electric System 11
Facilities...............................................
E. Notice of Proposed Rulemaking.......................... 13
II. Discussion.............................................. 16
A. Overview............................................... 16
1. Definition of Bulk Electric System................... 17
(a) Commission Authority.............................. 17
(1) Comments........................................ 18
(i) NERC Standards Development Process and 19
Deference to NERC and the Regional Entities......
(ii) Bulk-Power System............................ 24
(iii) Distribution Facilities..................... 26
(2) Commission Determination........................ 29
(i) Overview...................................... 29
(ii) NERC Standards Development Process and 34
Deference to NERC and the Regional Entities......
(iii) Bulk-Power System........................... 36
(iv) Distribution Facilities...................... 37
(b) Scope of the Definitional Change of ``Bulk 42
Electric System''....................................
(1) NOPR Proposal................................... 42
(2) Comments........................................ 43
(3) Commission Determination........................ 52
(c) Technical and Historical Justification for 56
Modification.........................................
(1) NOPR Proposal................................... 56
(2) Comments........................................ 58
(3) Commission Determination........................ 72
(i) Impact-Based Methodology and Regional 76
Variation........................................
(ii) FRCC Event................................... 87
(iii) ReliabilityFirst Event...................... 88
(iv) Astoria West Event........................... 89
(v) Relevance of TLR.............................. 90
(vi) International Concerns....................... 91
(4) Summary......................................... 96
(d) Usage and Definition of ``Bulk-Power System''..... 97
(1) Comments........................................ 97
(2) Commission Determination........................ 100
[[Page 72911]]
2. Exemption Process.................................... 101
(a) Comments.......................................... 102
(b) Commission Determination.......................... 111
3. Transition Process................................... 122
(a) Comments.......................................... 123
(b) Commission Determination.......................... 131
4. Cost Recovery........................................ 133
(a) Comments.......................................... 133
(b) Commission Determination.......................... 134
5. Issues Regarding the Western Interconnection......... 135
(a) Comments.......................................... 135
(b) Commission Determination.......................... 139
6. Impact on Generation Owners and Operators............ 142
(a) Comments.......................................... 142
(b) Commission Determination.......................... 144
7. Clarifying Terms..................................... 146
(a) Comments.......................................... 146
(b) Commission Determination.......................... 149
III. Information Collection Statement....................... 151
IV. Environmental Analysis.................................. 158
V. Regulatory Flexibility Act Analysis...................... 161
A. NOPR Proposal.......................................... 166
B. Comments............................................... 167
C. Commission Determination............................... 169
VI. Document Availability................................... 170
VII. Effective Date and Congressional Notification.......... 173
Before Commissioners: Jon Wellinghoff, Chairman; Marc Spitzer, Philip
D. Moeller, John R. Norris, and Cheryl A. LaFleur.
1. In this Final Rule, pursuant to section 215 of the FPA,\3\ the
Commission adopts, with modifications described below, the proposal set
forth in its March 18, 2010 Notice of Proposed Rulemaking (NOPR)
requiring the Electric Reliability Organization (ERO) to revise its
definition of the term ``bulk electric system.'' \4\ The Commission
directs the ERO, through the ERO's Reliability Standards Development
Process, to revise the definition to address the Commission's technical
concerns, as discussed fully below, and ensure that the definition
encompasses all facilities necessary for operating an interconnected
electric transmission network. The Commission believes that the best
way to accomplish these goals is to eliminate the regional discretion
in the current definition, maintain a bright-line threshold that
includes all facilities operated at or above 100 kV except defined
radial facilities, and establish an exemption process and criteria for
excluding facilities that are not necessary for operating the
interconnected transmission network. However, this Final Rule allows
the ERO, in accordance with Order No. 693, to develop an alternative
proposal for addressing the Commission's concerns with the present
definition with the understanding that any such alternative must be as
effective as, or more effective than,\5\ the Commission's proposed
approach in addressing the identified technical and other concerns, and
may not result in a reduction in reliability.\6\
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\3\ 16 U.S.C. 824o.
\4\ Revision to Electric Reliability Organization Definition of
Bulk Electric System, Notice of Proposed Rulemaking, 75 FR 14097
(Mar. 24, 2010), FERC Stats. & Regs. ] 32,654 (2010).
\5\ Mandatory Reliability Standards for the Bulk-Power System,
Order No. 693, FERC Stats. & Regs. ] 31,242, at P 31 (2007), order
on reh'g, Order No. 693-A, 120 FERC ] 61,053 (2007).
\6\ See, e.g., Version One Regional Reliability Standard for
Resource and Demand Balancing, 133 FERC ] 61,063, at P 14 (2010)
(Noting the Commission's concern that approving a proposed
Reliability Standard may result in reduced reliability). In
addition, as a general matter, any proposed regional difference must
be: (1) More stringent than the continent-wide definition, including
a regional difference that addresses matters that the continent-wide
Reliability Standard does not, or (2) necessitated by a physical
difference in the Bulk-Power System. See Rules Concerning
Certification of the Electric Reliability Organization; and
Procedures for the Establishment, Approval, and Enforcement of
Electric Reliability Standards, Order No. 672, FERC Stats. & Regs. ]
31,204, at P 291 (2006), order on reh'g, Order No. 672-A, FERC
Stats. & Regs. ] 31,212 (2006).
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2. In Order No. 693, the Commission noted its concern that the
current ``bulk electric system'' definition has the potential for gaps
in coverage of facilities, and indicated that it would revisit the
issue. This Final Rule is the next step towards addressing the
Commission's concerns. The approved changes will help ensure
reliability and consistency in the bulk electric system classification
throughout the interconnected United States. The Commission takes this
action as a continuation of Order No. 693's efforts to ensure that the
mandatory Reliability Standards fulfill the intent of Congress in
enacting section 215 of the FPA to protect reliability of the nation's
Bulk-Power System. The aim of the Final Rule is to eliminate
inconsistencies across regions, eliminate the ambiguity created by the
current discretion in NERC's definition of bulk electric system,
provide a backstop review to ensure that any variations do not
compromise reliability, and ensure that facilities that could
significantly affect reliability are subject to mandatory rules. The
Commission is not adding any new or modified text to its regulations.
I. Background
A. Section 215 of the FPA
3. On August 8, 2005, the Energy Policy Act of 2005 (EPAct 2005)
was enacted into law. Title XII of EPAct 2005 added a new section 215
to the FPA,\7\ which requires a Commission-certified ERO to develop
mandatory and enforceable Reliability Standards, subject to Commission
review and approval. Once approved, the Reliability Standards may be
enforced by the ERO, subject to Commission oversight, or by the
Commission independently.\8\
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\7\ Public Law 109-58, Title XII, Subtitle A, 119 Stat. 594, 941
(2005) (codified at 16 U.S.C. 824o).
\8\ See 16 U.S.C. 824o(e)(3).
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[[Page 72912]]
4. In February 2006, the Commission issued Order No. 672 \9\ in
which the Commission certified one organization, the North American
Electric Reliability Corporation (NERC), as the ERO.\10\
---------------------------------------------------------------------------
\9\ Order No. 672, FERC Stats. & Regs. ] 31,204, order on reh'g,
Order No. 672-A, FERC Stats. & Regs. ] 31,212.
\10\ North American Electric Reliability Corp., 116 FERC ]
61,062, order on reh'g and compliance, 117 FERC ] 61,126 (2006)
(certifying NERC as the ERO responsible for the development and
enforcement of mandatory Reliability Standards), aff'd sub nom.
Alcoa Inc. v. FERC, 564 F.3d 1342 (D.C. Cir. 2009).
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B. Order No. 693
5. On March 16, 2007, in Order No. 693, pursuant to section 215(d)
of the FPA,\11\ the Commission approved 83 of 107 proposed Reliability
Standards, six of the eight proposed regional differences, and the
Glossary of Terms Used in Reliability Standards developed by NERC, the
Commission-certified ERO. In addition, Order No. 693 addressed the
applicability of mandatory Reliability Standards to the statutorily
defined Bulk-Power System.
---------------------------------------------------------------------------
\11\ See Order No. 693, FERC Stats. & Regs. ] 31,242 (directing
improvements to 56 of the 83 approved Reliability Standards and
leaving 24 Reliability Standards as pending until further
information is provided), order on reh'g, Order No. 693-A, 120 FERC
] 61,053 (2007).
---------------------------------------------------------------------------
6. In Order No. 693, the Commission explained that section 215(a)
of the FPA broadly defines the Bulk-Power System as:
Facilities and control systems necessary for operating an
interconnected electric energy transmission network (or any portion
thereof) [and] electric energy from generating facilities needed to
maintain transmission system reliability.\12\
---------------------------------------------------------------------------
\12\ Order No. 693, FERC Stats. & Regs. ] 31,242 at P 76.
The Commission also approved NERC's definition of ``bulk electric
system,'' which is an integral part of the NERC Reliability Standards
and is included in the NERC Glossary of Terms Used in Reliability
---------------------------------------------------------------------------
Standards (NERC Glossary):
As defined by the Regional Reliability Organization, the
electrical generation resources, transmission lines,
interconnections with neighboring systems, and associated equipment,
generally operated at voltages of 100 kV or higher. Radial
transmission facilities serving only load with one transmission
source are generally not included in this definition.\13\
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\13\ Order No. 693, FERC Stats. & Regs. ] 31,242 at P 75 n.47
(quoting NERC's definition of ``bulk electric system'').
7. The Commission approved NERC's definition of ``bulk electric
system'' with reservations. The Commission stated in Order No. 693
that, ``at least for an initial period, the Commission will rely on the
NERC definition of `bulk electric system' and NERC's registration
process to provide as much certainty as possible regarding the
applicability to and the responsibility of specific entities to comply
with the Reliability Standards.'' \14\ In approving the use of NERC's
definition of ``bulk electric system,'' the Commission stated that
``[it] remains concerned about the need to address the potential for
gaps in coverage of facilities.'' \15\
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\14\ Id. P 75; see also Order No. 693-A, 120 FERC ] 61,053 at P
19 (``the Commission will continue to rely on NERC's definition of
bulk electric system, with the appropriate regional differences, and
the registration process until the Commission determines in future
proceedings the extent of the Bulk-Power System'').
\15\ Order No. 693, FERC Stats. & Regs. ] 31,242 at P 77
(footnotes omitted). For example, the Commission noted that some
regional definitions of bulk electric system exclude facilities
below 230 kV and transmission lines that serve Washington, DC and
New York City and the Commission stated its intent to address this
matter in a future proceeding. Id.
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C. NERC's June 14, 2007 Filing
8. In a June 14, 2007 filing, NERC submitted the regional
definitions of ``bulk electric system.'' \16\ NERC represented that
``[e]ach Regional Entity utilizes the definition of bulk electric
system in the [NERC Glossary of Terms Used in Reliability Standards];
however, as permitted by that definition * * * several Regional
Entities define specific characteristics or criteria that the Regional
Entity uses to identify the bulk electric system facilities for its
members.[\17\] In addition, the Reliability Standards apply to load
shedding and special protection relay facilities below 100 kV, which
are monitored by Regional Entities, in compliance with NERC's
Reliability Standards.'' \18\
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\16\ NERC Informational Filing in Response to Paragraph 77 of
Order No. 693, Docket No. RM06-16-000 (Jun. 14, 2007) (June 2007
Filing).
\17\ Id. at 7. NERC also noted that the Texas Regional Entity,
Florida Reliability Coordinating Council (FRCC), Midwest Reliability
Organization, and SERC Reliability Corporation use the NERC
definition of bulk electric system without modification. In a
supplemental filing, NERC informed the Commission that Western
Electricity Coordinating Council (WECC) uses the NERC definition
alone in its implementation of Regional Entity activities. See NERC
Supplemental Informational Compliance Filing, Docket No. RM06-16-000
(Mar. 6, 2009). Three other Regional Entities, ReliabilityFirst
Corporation (ReliabilityFirst), Southwest Power Pool (SPP Regional
Entity), and Northeast Power Coordinating Council, Inc. (NPCC),
stated that they use the NERC definition supplemented with
additional criteria. For example, SPP Regional Entity indicated that
it uses the criteria specified in the NERC Statement of Registry
Criteria (with one exception). ReliabilityFirst supplemented the
NERC definition with specific voltage-based inclusions and
exclusions. For example, ReliabilityFirst includes ``lines operated
at voltage of 100 kV or higher.'' June 2007 Filing at 10.
ReliabilityFirst excludes certain radial facilities, balance of
generating plant control and operation functions, and ``all other
facilities operated at voltages below 100 kV.''
\18\ June 2007 Filing at 7.
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9. As noted in the NOPR, NERC's June 2007 Filing indicated that
NPCC uses the NERC definition of ``bulk electric system'' supplemented
by additional criteria. Unlike the supplemental criteria of other
Regional Entities, however, NPCC utilizes a significantly different
approach to identifying bulk electric system elements. According to
NERC, NPCC identifies elements of the bulk electric system using an
impact-based methodology, as opposed to a voltage-based methodology.
Further, as part of its approach to defining the ``bulk electric
system,'' NPCC includes its own definition of ``bulk power system.''
\19\
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\19\ ``The interconnected electrical systems within northeastern
North America comprised of system elements on which faults or
disturbances can have a significant adverse impact outside of the
local area.'' Id., Attachment 1 (NPCC Document A-10, Classification
of Bulk Power System Elements (Apr. 28, 2007)).
---------------------------------------------------------------------------
10. According to NERC, NPCC analyzes all system elements within its
footprint regardless of size (voltage) to determine their impact based
on its ``bulk electric system'' definition. NPCC also utilizes a
guidance document, which provides further information on the NPCC
definition of ``bulk power system'' and how it is applied.\20\
---------------------------------------------------------------------------
\20\ Id.
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D. NPCC's Identification of Bulk Electric System Facilities
11. In a December 2008 Order, the Commission directed NERC and NPCC
to submit to the Commission a comprehensive list of bulk electric
system facilities located within the United States portion of the NPCC
region.\21\ The Commission explained that there appeared to be
conflicting lists of bulk electric system elements developed by one of
the balancing authorities in the United States portion of the NPCC
region and it was not clear which, if any, of the lists were submitted
to NPCC or approved by NPCC's Task Force on System Studies. In a
compliance filing, NERC and NPCC indicated that the ``NPCC Approved
Bulk Electric System List'' of June 2007 was the only listing of bulk
electric system facilities approved by NPCC and is the current list of
facilities within the U.S. portion of NPCC to which the NERC
Reliability Standards apply.\22\
[[Page 72913]]
The filing indicated that a majority of the 115 kV and 138 kV
transmission facilities in the NYISO Balancing Authority Area of the
NPCC region are excluded from the NPCC list of bulk electric system
facilities, including those associated with nuclear power plants, and
thus are excluded from compliance with mandatory Reliability
Standards.\23\ The information provided by NPCC also indicated that
numerous transmission lines at 100 kV or above that interconnect with
registered generation facilities are excluded from NPCC's list of bulk
electric system facilities.
---------------------------------------------------------------------------
\21\ North American Electric Reliability Corp., 125 FERC ]
61,295 (2008) (December 2008 Order).
\22\ NERC and NPCC Compliance Filing at 5, Docket No. RC09-3-000
(Feb. 20, 2009). The February 20 Compliance Filing also indicated
that the NPCC approved list of bulk electric system elements was not
developed pursuant to NPCC's Document A-10, Classification of Bulk
Power System Elements, identified in the June 2007 Filing. Rather,
the approved NPCC list was developed pursuant to an earlier version
of the NPCC impact-based methodology.
\23\ In addition, NPCC excludes approximately seven higher
voltage (e.g., 230 kV, 345 kV and 500 kV) transmission facilities,
some connecting to nuclear power plants.
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12. In September 2009, NERC and NPCC submitted a compliance filing
in which NPCC evaluated the impact and usefulness of a 100 kV ``bright-
line'' ``bulk electric system'' definition as well as another optional
method, which utilizes Transmission Distribution Factor calculations to
determine reliability impacts. The NPCC definition would exclude radial
network portions of the transmission system, as opposed to radial
lines.\24\ However, NPCC stated that it continues to believe that its
current impact-based approach provides an adequate level of reliability
and, therefore, intends to continue to apply the impact-based approach
in classifying its bulk electric system elements.\25\
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\24\ NERC and NPCC Compliance Filing and Assessment of Bulk
Electric System Report, Docket No. RC09-3-000 (Sep. 21, 2009). NPCC
would define ``radial portions of the transmission system to include
(1) an area serving load that is connected to the rest of the
network at a single transmission substation at a single transmission
voltage by one or more transmission circuits; (2) tap lines and
associated facilities which are required to serve local load only;
(3) transmission lines that are operated open for normal operation;
or (4) additionally as an option, those portions of the NPCC
transmission system operated at 100 kV or higher not explicitly
designated as a bulk electric system path for generation which have
a one percent or less participation in area, regional or inter
regional power transfers. Id. at 11.
\25\ Id. at 7-8; see also id. at 14 (``If directed by the
Commission to adopt the developed [bulk electric system] definition
for U.S. Registered Entities within the NPCC footprint, NPCC would
need additional time to carefully consider and develop a more
extensive and detailed implementation plan.'').
---------------------------------------------------------------------------
E. Notice of Proposed Rulemaking
13. On March 18, 2010, the Commission issued a NOPR proposing to
direct NERC to revise the definition of ``bulk electric system'' in the
NERC Glossary. The current ``bulk electric system'' definition provides
Regional Entities discretion to define ``bulk electric system,''
including the ability to exclude facilities 100 kV or above, without
ERO or Commission oversight. The Commission's proposed revised
definition would continue to include all facilities rated above 100 kV
and eliminate regional variations, providing a consistent
identification of bulk electric system facilities across the nation's
reliability regions. The proposal called for Commission and NERC
approval for exempting facilities that would otherwise qualify as part
of the bulk electric system on a facility-by-facility basis.
14. The NOPR identified inconsistencies between regions that
resulted from the existing definition, such as NPCC not including two
115 kV transmission lines as part of the bulk electric system in its
region even though the sections of these same lines that connect to
PJM's balancing authority area are considered bulk electric system
elements within the ReliabilityFirst footprint. As an additional
example, seven higher voltage (e.g., 230 kV, 345 kV, and 500 kV)
transmission facilities (some connecting to nuclear power plants)
excluded from the list of bulk electric system facilities in NPCC would
be included in other regions. Further, the NOPR provided several
examples of disturbances that either began on or were propagated by
100-200 kV facilities including a February 26, 2008 event in FRCC
originating at a 138 kV facility that resulted in the loss of 24
transmission lines and 4,300 MW of generation.
15. The Commission issued the NOPR on March 18, 2010, and required
that comments be filed within 45 days after publication in the Federal
Register.\26\ More than eighty comments and reply comments to the NOPR
proposal were submitted to the Commission.\27\ Upon consideration of
the comments, the Commission modifies certain proposals from the NOPR
in this Final Rule, as described below.
---------------------------------------------------------------------------
\26\ See 75 FR 14097 (Mar. 24, 2010).
\27\ A list of commenters appears in Appendix A.
---------------------------------------------------------------------------
II. Discussion
A. Overview
16. After consideration of the comments submitted, the Commission
adopts the NOPR's proposal with some modifications. The Commission
directs the ERO to revise the definition of ``bulk electric system''
through the NERC Standards Development Process to address the
Commission's concerns discussed herein. The Commission believes the
best way to address these concerns is to eliminate the Regional
Entities' discretion to define ``bulk electric system'' without ERO or
Commission review, maintain a bright-line threshold that includes all
facilities operated at or above 100 kV except defined radial
facilities, and adopt an exemption process and criteria for excluding
facilities that are not necessary to operate an interconnected electric
transmission network. However, NERC may propose a different solution
that is as effective as, or superior to, the Commission's proposed
approach in addressing the Commission's technical and other concerns so
as to ensure that all necessary facilities are included within the
scope of the definition.
1. Definition of Bulk Electric System
(a) Commission Authority
17. In the NOPR, the Commission proposed, pursuant to section
215(d)(5) of the FPA and Sec. 39.5(f) of our regulations, to require
NERC to submit a revised NERC definition of ``bulk electric system''
that provides a 100 kV threshold for facilities that are included in
the bulk electric system and eliminates the currently-allowed
discretion of a Regional Entity to define ``bulk electric system''
within its system without NERC or Commission oversight.
(1) Comments
18. Several commenters argue that the Commission's proposal exceeds
its statutory authority.\28\ Other commenters contend that the
Commission's proposal is inconsistent with the statutory regime
envisioned in section 215 of the FPA, requiring the Commission to defer
to the ERO on technical issues and for the ERO to have primary
responsibility for developing specific Reliability Standards.
---------------------------------------------------------------------------
\28\ See, e.g., APPA/NRECA, NYPSC, NYSRC, EEI, Joint Western
Commenters, NERC, Snohomish, Tacoma Power, and PGE. Note that
although the parties we have identified as the ``Joint Western
Commenters'' submitted separate comments, the comments were
virtually identical. Consequently, we cite their comments as a
single group.
---------------------------------------------------------------------------
(i) NERC Standards Development Process and Deference to NERC and the
Regional Entities
19. NERC supports the Commission's objectives of ensuring a common
understanding and consistent application of ``bulk electric system''
across the regions, while allowing variations to the definition based
on reliability. However, NERC objects to the Commission making
unilateral decisions with respect to the definition, as it did in the
NOPR, rather than allowing this issue to be addressed through the NERC
Reliability Standards
[[Page 72914]]
Development Process.\29\ NERC states that the NERC Glossary of Terms is
part-and-parcel of the Reliability Standards and therefore falls under
the same section 215 process. NERC argues that the Commission may order
the ERO, pursuant to section 215(d)(5) of the FPA, to submit a proposed
Reliability Standard or modification to a Reliability Standard to the
Commission. Following this submission, NERC continues, the Commission
may then approve the proposal or remand it to the NERC Reliability
Standards Development Process for further consideration.
---------------------------------------------------------------------------
\29\ NERC at 8-11.
---------------------------------------------------------------------------
20. NERC states that by directing this change, the Commission is
bypassing the NERC Reliability Standards Development Process, and the
Commission will not have the opportunity to consider NERC's guidance in
developing an equally effective and perhaps superior alternative. NERC
states that the approach in the Commission's NOPR would accomplish
indirectly that which it is prohibited from doing directly, in
contravention of well-established judicial precedent. NERC notes that
the Commission refrained from taking similar unilateral action in Order
No. 693. NERC requests the Commission clarify in the Final Rule that
any modification to the definition of bulk electric system be
accomplished through the NERC Reliability Standards Development
Process.
21. Similarly, EEI, Duke Energy, APPA/NRECA, and other commenters
assert that the Commission should defer to the NERC Reliability
Standards Development Process, and allege that the proposal
unreasonably departs from the Commission's precedent in Order No. 693.
22. Snohomish also asserts that the proposed rule fails to defer to
the technical expertise of the regional reliability organizations and
inappropriately interferes in the local work of Snohomish's Board
regarding decisions on levels of service.
23. TAPS states that Congress did not intend for the Commission to
undertake a facility-by-facility review of all facilities above 100 kV,
and that the proposed rule is contrary to section 215's apportionment
of primary responsibility for reliability administration to the
ERO.\30\ Additionally, TAPS states that the Commission's proposed
facility-by facility review would not satisfy section 215's goal of
effective and efficient reliability administration.
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\30\ TAPS at 4; see also Snohomish at 22-28.
---------------------------------------------------------------------------
(ii) Bulk-Power System
24. NYSRC argues that section 215 does not provide a ``bright-
line'' test for Bulk-Power System facilities and states that the
statutory intent of section 215 limits the Commission's jurisdiction to
facilities that are necessary for the reliable operation of the Bulk-
Power System.\31\ Several commenters state that the Commission's
proposal exceeds its statutory authority as described in the definition
of ``Bulk-Power System'' because the proposed definition of bulk
electric system would likely encompass facilities not necessary for
operating the interconnected network,\32\ and that the statutory
definitions of ``Reliability Standard'' and ``Reliable Operation''
refer to protecting the system from instability, uncontrolled
separation, or cascading failures, not local-area outages.\33\ The
commenters contend that a functional test, such as NPCC's current
material impact assessment would be more appropriate since it is
tailored to include facilities that are necessary for operation of an
interconnected electric energy transmission network.
---------------------------------------------------------------------------
\31\ NYSRC at 7-8.
\32\ See, e.g., NYPSC, NYSRC, Duke Energy, Indicated New York
Transmission Owners, Snohomish and Joint Western Commenters.
\33\ NYSRC at 7.
---------------------------------------------------------------------------
25. GTC/GSOC add that the proposed change would make the definition
of ``bulk electric system'' broader than the statutory definition of
``Bulk-Power System,'' and therefore would exceed the Commission's
authority.
(iii) Distribution Facilities
26. Several other parties assert that the proposed rule will
inappropriately include distribution facilities as part of the bulk
electric system, and argue that the Commission's proposal is contrary
to Congress's definition of ``Bulk-Power System'' and the Commission's
own precedent regarding transmission versus local distribution.\34\
Several parties state that FPA section 215 specifically excludes
distribution facilities and that they therefore should be excluded from
the definition of ``bulk electric system.'' Constellation/CENG argues
that the Commission's proposal to exclude from the definition of ``bulk
electric system'' ``[r]adial transmission facilities serving only load
with one transmission source'' is too limiting. Constellation/CENG
believes that this approach will include local distribution facilities
in a manner contrary to section 215 of the FPA.
---------------------------------------------------------------------------
\34\ See, e.g., Constellation/CENG, Dow, Duke Energy, GTC/GSOC,
Hydro-Qu[eacute]bec, Indicated New York Transmission Owners, Joint
Western Commenters, NARUC, NV Energy, NYSRC, PGE, Public Power
Council, Snohomish Tacoma Power, TIEC.
---------------------------------------------------------------------------
27. The NYPSC contends that the Commission's proposal exceeds its
jurisdiction by encompassing local distribution facilities that are not
necessary for operating the interconnected transmission network. It
states that 138 kV facilities in New York City operate above 100 kV but
do not serve a bulk system function due to the high concentration of
load served by these lines. It asserts that transmission facilities
such as these that move power between Bulk-Power System and
distribution facilities do not affect the reliable operation of the
bulk system. The New York Transmission Owners contend that the Long
Island Power Authority's (LIPA) system east of the Northport system is
composed of 138 kV lines with limited connections to other areas that
is not affected by other regional flows, but instead mirrors a radial
system feeding local load.
28. Snohomish, Consumers Energy, PGE, Tacoma Power and other
commenters argue that the Commission's proposal, unless clarified to
exclude distribution facilities, is contrary to statute because section
215 directs that distribution facilities should be excluded on a
functional basis regardless of voltage.\35\ Snohomish argues that the
Commission's proposal departs from its previous determinations in Order
No. 693 regarding the difference between transmission and distribution
systems.\36\ Further, it states that section 215 emphasizes how
facilities are used rather than their voltage level, and asserts that
the NOPR's definition runs counter to the statutory definition.
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\35\ See, e.g., Snohomish at 20-22; PGE at 3-6; Tacoma Power at
2-3.
\36\ Snohomish at 20-21 (citing Order No. 693, FERC Stats. and
Regs. ] 31,242 at P 23 n.20).
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(2) Commission Determination
(i) Overview
29. We disagree that the Commission exceeded its statutory
authority by directing the ERO to revise the definition of bulk
electric system in its Glossary of Terms. We agree with NERC that the
NERC Glossary is part of the Reliability Standards and therefore falls
under the same section 215 process. Pursuant to section 215(d)(5), the
Commission may order the ERO to submit a proposed Reliability Standard
or a modification to a Reliability Standard that addresses a specific
matter. Here, by directing a revision to the definition of bulk
electric system, the Commission orders a modification to a definition
of a term contained in a
[[Page 72915]]
number of Commission-approved Reliability Standards.\37\ Because this
term is contained within Commission-approved Reliability Standards, the
Commission has the authority to direct the ERO to develop a
modification of the definition of a defined term contained in the
Reliability Standards under the process delineated in section 215 of
the FPA.
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\37\ See, e.g., CIP-002-2, COM-001-1.1, EOP-004-1, EOP-005-1,
FAC-008-1, FAC-009-1, FAC-010-2, FAC-011-2, FAC-013-1, FAC-014-2,
IRO-001-1.1, IRO-002-1, IRO-003-2, IRO-004-1, IRO-005-2, IRO-006-
4.1, NUC-001-2, PER-001-0.1, PER-002-0, PER-003-0, PRC-004-1, PRC-
005-1, PRC-021-1, PRC-022-1, PRC-023-1, TOP-001-1, TOP-002-2, TOP-
008-1, TPL-002-0, TPL-003-0, TPL-004-0.
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30. For the reasons discussed more fully below, the Commission
finds that the current definition of bulk electric system is
insufficient to ensure that all facilities necessary for operating an
interconnected electric energy transmission network are included under
the ``bulk electric system'' rubric. Therefore, pursuant to section
215(d)(5) of the FPA,\38\ the Commission directs the ERO to modify,
through the Standards Development Process, the definition of ``bulk
electric system'' to address the Commission's technical and policy
concerns described more fully herein. The Commission believes the best
way to address these concerns is to eliminate the regional discretion
in the ERO's current definition, maintain the bright-line threshold
that includes all facilities operated at or above 100 kV except defined
radial facilities, and establish an exemption process and criteria for
excluding facilities the ERO determines are not necessary for operating
the interconnected transmission network. It is important to note that
the Commission is not proposing to change the threshold value already
contained in the definition, but rather seeks to eliminate the
ambiguity created by the current characterization of that threshold as
a general guideline.\39\
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\38\ 16 U.S.C. 824o(d)(5).
\39\ We note that all regions except NPCC currently utilize 100
kV as a general threshold.
---------------------------------------------------------------------------
31. In accordance with Order No. 693, the ERO may develop an
alternative proposal for addressing the Commission's concerns with the
present definition with the understanding that any such alternative
must be as effective as, or more effective than, the Commission's
proposed approach in addressing the identified technical and other
concerns,\40\ and may not result in a reduction in reliability.\41\ If
the ERO decides to propose an alternative approach, it must explain in
detail, and with a technical record sufficient enough for the
Commission to make an informed decision, how its alternative addresses
each of the Commission's concerns in a manner that is as effective as,
or more effective than, the Commission's identified solution.\42\
Additionally, the ERO would need to address the factors the Commission
will consider in determining whether a proposed Reliability Standard is
just and reasonable, as outlined in Order No. 672. In particular, Order
No. 672 states that proposed Reliability Standards ``should be clear
and unambiguous regarding what is required and who is required to
comply.'' \43\ Another factor indicates that a ``proposed Reliability
Standard should be designed to apply throughout the interconnected
North American Bulk-Power System, to the maximum extent this is
achievable with a single Reliability Standard.'' \44\ As Order No. 672
further requires, any proposed regional difference must be: (1) More
stringent than the continent-wide definition, including a regional
difference that addresses matters that the continent-wide definition
does not; or (2) necessitated by a physical difference in the Bulk-
Power System.\45\
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\40\ Order No. 693, FERC Stats. & Regs. 31,242 at P 31.
\41\ See, e.g., Version One Regional Reliability Standard for
Resource and Demand Balancing, 133 FERC ] 61,063, at P 14 (2010);
North American Electric Reliability Corporation Reliability
Standards Development and NERC and Regional Entity Enforcement, 132
FERC ] 61,217, at P 112 (2010).
\42\ Order No. 693 FERC Stats. & Regs. 31,242 at P 31.
\43\ See Order No. 672, FERC Stats. & Regs. 31,204 at P 325.
\44\ See id. P 331.
\45\ Id. P 291.
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32. The Commission further finds that revising the definition to
address the identified concerns is a significant step toward improving
the reliability of the Bulk-Power System in North America because it
protects the reliability of the bulk electric system and provides
clarity and consistency across the nation's reliability regions in
identifying bulk electric system facilities.
33. The Commission directs the ERO to submit these modifications no
later than one year from the effective date of this Final Rule. We will
address each proposal and the specific comments received on each
proposal in the remainder of this Final Rule.
(ii) NERC Standards Development Process and Deference to NERC and the
Regional Entities
34. With regard to the concerns raised by some commenters about the
prescriptive nature of the Commission's proposed modifications, we
agree that, consistent with Order No. 693, a direction for modification
should not be so overly prescriptive as to preclude the consideration
of viable alternatives that may produce an equally effective or
efficient solution. However, some guidance is necessary, as the
Commission explained in Order No. 693:
[I]n identifying a specific matter to be addressed in a
modification * * * it is important that the Commission provide
sufficient guidance so that the ERO has an understanding of the
Commission's concerns and an appropriate, but not necessarily
exclusive, outcome to address those concerns. Without such direction
and guidance, a Commission proposal to modify a Reliability Standard
might be so vague that the ERO would not know how to adequately
respond.\46\
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\46\ Order No. 693, FERC Stats. & Regs. ] 31,242 at P 185.
35. Thus, due to the importance of the bulk electric system
definition to our overall ability to carry out the mandates of section
215, and the problems we have identified with the current definition,
we provide specific details regarding the Commission's expectations. We
intend by doing so to provide useful direction to assist in the
Reliability Standards Development Process, not to impede it. As we
explained in Order No. 693, we find that this is consistent with
statutory language that authorizes the Commission to direct the ERO to
submit a modification ``that addresses a specific matter'' if the
Commission considers it appropriate to carry out section 215 of the
FPA.\47\ Although some commenters' contend that we should ``defer to
regional expertise,'' we note that the statute specifies that we should
``give due weight'' to the ERO's technical expertise.\48\ The
Commission's action here does not conflict with that statutory
requirement. In this Final Rule, we have considered commenters'
concerns and, although we have identified a proposed approach, the
Commission provides flexibility by directing the ERO to address the
underlying issue through the Reliability Standards Development
Process.\49\ Consequently, consistent with Order No. 693, we clarify
that where the Final
[[Page 72916]]
Rule identifies a concern and offers a specific approach to address
that concern, we will consider an equivalent alternative approach
provided that the ERO demonstrates that the alternative will adequately
address the Commission's underlying concern or goal as efficiently and
effectively as the Commission's proposal.\50\
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\47\ Id. P 186 (citing 16 U.S.C. 824o(d)(5)).
\48\ 16 U.S.C. 824o(d)(2); see also Order No. 672, FERC Stats. &
Regs. ] 31,204 at P 345 (``We do not agree that giving due weight
means a rebuttable presumption that the Reliability Standard meets
the statutory requirement of being just, reasonable, not unduly
discriminatory or preferential, and in the public interest.'').
\49\ Order No. 693, FERC Stats. & Regs. ] 31,242 at P 186.
\50\ Id.
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(iii) Bulk-Power System
36. With regard to the alleged conflict between ``bulk electric
system'' and ``Bulk-Power System,'' the Commission noted in Order No.
693 that Congress chose to create a new term, ``Bulk-Power System,''
with a definition that is distinct from the term of art (``bulk
electric system'') used by industry, and thus there is an intentional
distinction between the Bulk-Power System and the bulk electric
system.\51\ The Commission further noted that the statutory term
``Bulk-Power System'' has not been definitively defined but does not
establish a voltage threshold limit of applicability or configuration
as does the NERC definition of ``bulk electric system,'' and therefore
may reach more facilities than NERC's definition of ``bulk electric
system.'' \52\
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\51\ Id. P 76.
\52\ See id. P 76; Order No. 693-A, 120 FERC ] 61,053 at P 17-
18.
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(iv) Distribution Facilities
37. The Commission has stated that the statutory term ``Bulk-Power
System'' defines the jurisdiction of the Commission.\53\ The Commission
noted that it has not defined the extent of the facilities covered by
the Bulk-Power System, but that Congress specifically exempted
``facilities used in the local distribution of electric energy'' from
the definition. FPA section 215 defines the term ``Bulk-Power System''
as encompassing the ``facilities and control systems necessary for
operating an interconnected electric energy transmission network (or
any portion thereof).'' \54\ In ascertaining the extent of the
facilities included in the ``Bulk-Power System'' definition, the
Commission's prior discussion regarding the inclusion of generation
facilities as part of the Bulk-Power System is instructive. In the
discussion, the Commission stated that, ``if electric energy from a
generating facility is needed to maintain a reliable transmission
system, that facility is part of the Bulk-Power System with respect to
the energy it generates that is needed to maintain reliability.'' \55\
Similarly, several 115 and 138 kV facilities that some entities term as
``distribution'' may be needed to reliably operate the interconnected
transmission system. Determining where the line between
``transmission'' and ``local distribution'' lies, which includes an
inquiry into which lower voltage ``transmission'' facilities are
necessary to operate the interconnected transmission system, should be
part of the exemption process the ERO develops.
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\53\ Order No. 693-A, 120 FERC ] 61,053 at P 19.
\54\ 16 U.S.C. 824o(a)(1).
\55\ Order No. 672, FERC Stats. & Regs. ] 31,204 at P 71.
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38. The Commission disagrees with comments that appear to assert
that the Commission's jurisdiction extends only to facilities that
could, if improperly operated, singularly cause cascading outages,
uncontrolled separation or instability. By this narrow metric, the
facilities that caused the 2003 Blackout would not be viewed as
critical since not one of the individual facilities caused the outage.
In defining jurisdictional facilities, section 215(a)(1) focuses on
whether facilities are necessary to operate the interconnected
transmission system, not solely on the consequences of unreliable
operation of those facilities. Lower voltage facilities needed to
reliably operate the grid tend to operate in parallel with other high
voltage and extra high voltage facilities, interconnect significant
amounts of generation sources and may operate as part of a defined flow
gate. These parallel facilities operated at 100-200 kV will experience
similar loading as higher voltage facilities at any given time.
Additionally, the lower voltage facilities will be relied upon during
contingency scenarios.
39. For example, we are not persuaded by the NYPSC's argument that
the 138 kV system in New York, and specifically the 138 kV system
including those facilities in the Astoria area, are all distribution
facilities. We do not believe that most of these facilities are local
distribution because: the facilities are not primarily radial in
character, as they are connected to the 345 kV network in the Astoria
area at over six different points; the 138 kV system is networked
amongst itself; power flows both in and out of the system into both
NYISO and PJM facilities depending on time of day and loading; and the
system is not constrained to a comparatively restricted geographical
area due to multiple interconnections. The 138 kV system in the Astoria
area includes six major substations that are interconnected at 345 kV
to both NYISO and PJM facilities that are integral parts of the Eastern
Interconnection. There are ten 138 kV phase angle regulators connecting
the 345 kV stations to the 138 kV network, which are necessary to
control the appropriate distribution of power flows between the 345 kV
and 138 kV systems to accommodate power transfers from upstate New York
and PJM into southeastern New York. In addition, there are
approximately 9,000 MW of capacity resources directly connected to the
138 kV network in the New York City area at different points, 2,000 MW
of which is connected in the Astoria area. Similarly over 10,000 MW of
customer firm demand in the area is supplied from the 138 kV to lower
voltage levels via step-down transformers. None of these
characteristics is consistent with any reasonable definition of local
distribution.\56\ To the extent that any individual line would be
considered to be local distribution, that line would not be considered
part of the bulk electric system.
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\56\ This example illustrates one of the deficiencies of the
NPCC impact-based approach for identifying bulk electric system
facilities, discussed more fully below.
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40. Nor are we persuaded by the Indicated New York Transmission
Owners' statement that LIPA's service territory--which includes a
majority of Long Island, identified as Zone K by NYISO and, as reported
in the NYISO ``Load & Capacity Data,'' had a 2010 summer peak load of
5,300 MW--``mirrors a radial system feeding local load.'' As with the
138 kV network in New York City discussed above, the LIPA system
contains significant capacity resources (5,700 MW), is interconnected
with other portions of NYISO, ISO-NE, and PJM, and its operations
affect and depend on operations in other portions of New York, as well
as New Jersey and Connecticut.\57\
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\57\ See https://www.nyiso.com/public/webdocs/services/planning/reliability_assessments/AppxE.pdf and https://www.nyiso.com/public/webdocs/services/planning/planning_data_reference_documents/2010_GoldBook_Public_Final_033110.pdf.
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41. Some commenters allege that the proposal is an unexpected
departure from the Commission's previous actions regarding the bulk
electric system in Order No. 693. To the contrary, the Commission was
very clear about its reservations in accepting the NERC bulk electric
system definition in Order No. 693 and expressly accepted the
definition for an ``initial period'' \58\ subject to subsequent
review.\59\ The
[[Page 72917]]
Commission's action here will ensure that all facilities necessary to
maintain a reliable transmission system are included as part of the
bulk electric system and thus will be subject to ERO and Commission
oversight.\60\
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\58\ Order No. 693, FERC Stats. & Regs. ] 31,242 at P 75.
\59\ In accepting NERC's definition of ``bulk electric system,''
the Commission explained: ``Although we are accepting the NERC
definition of bulk electric system and NERC's registration process
for now, the Commission remains concerned about the need to address
the potential for gaps in coverage of facilities. For example, some
current regional definitions of bulk electric system exclude
facilities below 230 kV and transmission lines that serve major load
centers such as Washington, DC and New York City. The Commission
intends to address this matter in a future proceeding.''
Id. P 77 (footnotes omitted).
\60\ While the Commission seeks to ensure that the definition of
``bulk electric system'' includes all facilities 100 kV or above
that are necessary for reliable operation, our action here is not
intended to determine the extent of the facilities included in the
Bulk-Power System. As stated in Order No. 693-A, the Commission
believes that the Bulk-Power System reaches farther than those
facilities that are included in NERC's definition of the bulk
electric system, but we have not definitively defined the extent of
the facilities covered by the Bulk-Power System, and we are not
doing so here. See Order No. 693-A at P 17-18.
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(b) Scope of the Definitional Change of ``Bulk Electric System''
(1) NOPR Proposal
42. In the NOPR, the Commission proposed to direct the ERO to
revise its definition of the term ``bulk electric system'' to include
all electric transmission facilities with a rating of 100 kV or
above.\61\ The Commission's proposal further states that a Regional
Entity must seek ERO and Commission approval before exempting any
facility rated at 100 kV or above from compliance with mandatory
Reliability Standards.
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\61\ NOPR, FERC Stats. & Regs. ] 32,654 at P 1.
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(2) Comments
43. NERC argues that the proposed definitional change would have a
much broader impact than acknowledged by the Commission. Among other
things, NERC states that the proposed change to ``rated at'' from the
current ``operated at'' will dramatically expand the scope of
facilities and entities affected by the change. NERC states that the
proposal will unnecessarily include some facilities that entities built
at higher voltage levels (i.e., 138 kV) to accommodate future load
growth while presently operating the facilities at lower voltages
(i.e., 69 kV).
44. Several commenters seek clarification that the definition of
``bulk electric system'' is not intended to supersede voltage
thresholds specified in specific Reliability Standards.\62\ For
example, Reliability Standard FAC-003 generally applies to transmission
lines 200 kV and above.
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\62\ See, e.g., EEI, Dominion Power, National Grid, and Southern
Company.
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45. Joint Western Commenters and Bay Area Municipal argue that the
definition of ``bulk electric system'' that the Commission ultimately
accepts should clarify that if an element is determined to be part of
the bulk electric system, such an element is not necessarily a
transmission asset.
46. Joint Western Commenters state that an entity should be able to
de-register as a Distribution Provider and Load-Serving Entity if it
does not own any bulk electric system elements.\63\ They state that an
entity with no elements in the bulk electric system cannot be
considered an owner or operator of the bulk electric system, and
because operation of that entity's distribution assets has no material
impact on the bulk electric system, it should be exempt from regulation
as transmission and the need to register and participate in the
regulatory framework for transmission facilities. These commenters also
state that requiring an entity with no bulk electric system elements to
comply with the mandatory Reliability Standards would be an unnecessary
burden on the entity, and a diversion of resources by the Regional
Entity, NERC, and the Commission.\64\
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\63\ Joint Western Commenters at section IV.B.
\64\ Id.
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47. Although EEI supports the Commission's proposal not to change
the ERO treatment of radials under the ERO definition of bulk electric
system, several commenters raise concerns about the scope of the
exemption going forward.
48. Several commenters believe that the statement in the NOPR that
radial lines would not be part of the bulk electric system is not
enough to remove ambiguity.\65\ APPA/NRECA notes that the NOPR leaves a
question open as to whether radial lines would be automatically exempt
under the bulk electric system definition or whether entities would
have to go through the multi-tiered exemption process.\66\ Other
commenters point out that certain Regional Entities currently provide a
clearer and more valid approach to determining whether facilities
should be classified as exempt radial facilities. They state for
example that the WECC process includes additional detail regarding
demarcation points and system characteristics that are important in
defining ``radial.'' Commenters also state that the WECC transmission
system includes radial lines, where a backup feed is possible, but is
normally open, and a utility should not be penalized for having a
secondary feed via a normally open line by requiring it to
automatically become part of the bulk electric system. The bright line
100 kV threshold would encourage small utilities to choose not to
provide backup service options, reducing overall customer service.
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\65\ See, e.g., id. at section III.C.
\66\ APPA/NRECA at 19-23.
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49. Arguing that NERC's current definition of radial transmission
facilities, defined as ``facilities serving only load with one
transmission source,'' is too narrow, National Grid supports adoption
of a broader definition that includes tap lines and associated
facilities used to serve local load only, and transmission lines that
are operated in an open position for normal operations.\67\
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\67\ National Grid at 10.
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50. ELCON states that the Final Rule should specify that radial
lines do not have to go through the exemption process.
51. FRCC states the Commission should afford the Regional Entities
sufficient time to complete their efforts to define the scope of the
bulk electric system, since they are in the process of establishing
cri
