Revision to Electric Reliability Organization Definition of Bulk Electric System, 16263-16277 [2011-6779]
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Online Support at 202–502–6652 (toll
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ferconlinesupport@ferc.gov, or the
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VII. Effective Date and Congressional
Notification
86. These regulations, including
regional Reliability Standard BAL–502–
RFC–02, are effective May 23, 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
16263
‘‘major rule’’ as defined in section 351 of
the Small Business Regulatory
Enforcement Fairness Act of 1996.
By the Commission.
Nathaniel J. Davis, Sr.,
Deputy Secretary.
Appendix A: Entities That Filed
Comments, Motions To Intervene or
Notices of Intervention
Abbreviation
Commenter
Commenters
Dominion ..........................................................................................................
Carden .............................................................................................................
ICC ...................................................................................................................
Midwest ISO ....................................................................................................
MRO .................................................................................................................
NARUC ............................................................................................................
NERC ...............................................................................................................
OCC .................................................................................................................
OMS .................................................................................................................
Ohio PUC .........................................................................................................
PJM Power Providers ......................................................................................
RFC ..................................................................................................................
Borlick ..............................................................................................................
Wilson ..............................................................................................................
Dominion Resources Services, Inc.
Kevin Carden, Johannes Pfeifenberger, and Nick Wintermantel.
Illinois Commerce Commission.
Midwest Independent Transmission System Operator, Inc.
Midwest Reliability Organization.
National Association of Regulatory Utility Commissioners.
North American Electric Reliability Corporation+.
Office of the Ohio Consumers’ Counsel.
Organization of MISO States.
Public Utilities Commission of Ohio.
PJM Power Providers Group.
ReliabilityFirst Corporation+.
Robert L. Borlick.
James F. Wilson.
Intervenors
Constellation Energy Commodities Group, Inc.
Dayton Power and Light Company.
Designated FirstEnergy Affiliates*.
Exelon Corp.
New York State Public Service Commission.
Pennsylvania Public Utility Commission.
PSEG Companies.
Public Utilities Commission of the State of California.
+ NERC
and RFC filed both comments and reply comments.
* The Designated FirstEnergy Affiliates include: Ohio Edison Co., Cleveland Electric Illuminating Co., Pennsylvania Power Co., Toledo Edison
Co., American Transmission Systems, Inc., Jersey Central Power & Light Co., Metropolitan Edison Co., Pennsylvania Electric Co., and
FirstEnergy Solutions Corp.
[FR Doc. 2011–6763 Filed 3–22–11; 8:45 am]
BILLING CODE 6717–01–P
DEPARTMENT OF ENERGY
Federal Energy Regulatory
Commission
18 CFR Part 40
[Docket No. RM09–18–001; Order No. 743–
A]
Revision to Electric Reliability
Organization Definition of Bulk Electric
System
Federal Energy Regulatory
Commission, DOE.
ACTION: Order on rehearing.
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AGENCY:
The Commission denies
rehearing and otherwise reaffirms its
determinations in Order No. 743. In
addition, the Commission clarifies
certain provisions of the Final Rule.
SUMMARY:
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Order No. 743 directed the Electric
Reliability Organization (ERO) to revise
the definition of the term ‘‘bulk electric
system’’ through the ERO’s Reliability
Standards Development Process to
address the Commission’s policy and
technical concerns and ensure that the
definition encompasses all facilities
necessary for operating an
interconnected electric transmission
network pursuant to section 215 of the
Federal Power Act.
DATES: Effective Date: This order on
rehearing and clarification will become
effective March 23, 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 Engineering,
PO 00000
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Planning and Operations, 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:
Before Commissioners: Jon Wellinghoff,
Chairman; Marc Spitzer, Philip D. Moeller,
John R. Norris, and Cheryl A. LaFleur.
I. Order on Rehearing
Issued March 17, 2011.
I. Introduction
1. On November 18, 2010, the
Commission issued a Final Rule (Order
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No. 743) 1 directing the Electric
Reliability Organization (ERO), through
the ERO’s Reliability Standards
Development Process, to revise its
definition of the term ‘‘bulk electric
system’’ to address the Commission’s
technical and policy concerns,
including inconsistency in application,
lack of oversight and exclusion of
facilities that are required for the
Reliable Operation of the interconnected
transmission network, and ensure that
the definition encompasses all facilities
necessary for operating an
interconnected electric transmission
network, pursuant to section 215 of the
Federal Power Act (FPA).2 The
Commission stated that it believes 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, the Final Rule allowed the
ERO to develop an alternative proposal
for addressing the Commission’s
concerns with the present definition
with the understanding that any such
alternative must be equally efficient and
effective 3 as the Commission’s
suggested approach in addressing the
identified technical and other concerns,
and may not result in a reduction in
reliability.
2. In this order, we deny requests for
rehearing of the Final Rule. Further, we
grant in part, and deny in part, requests
for clarification of the Final Rule, as
discussed below.
A. Summary of Order No. 743
3. In Order No. 693, the Commission
approved, with reservations, the current
North American Electric Reliability
Corporation (NERC) definition of the
term ‘‘bulk electric system.’’ 4 That
definition provides:
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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
1 Revision to Electric Reliability Organization
Definition of Bulk Electric System, Order No. 743,
75 FR 72910 (Nov. 26, 2010), 133 FERC ¶ 61,150
(2010).
2 16 U.S.C. 824o (2006).
3 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).
4 Order No. 693, FERC Stats. & Regs. ¶ 31,242 at
P 75.
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transmission facilities serving only load with
one transmission source are generally not
included in this definition.5
4. However, 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.6 In Order No. 743, the
Commission returned to the issue. The
Commission identified several concerns
with the current definition that may
compromise reliability. The
Commission indicated that Order No.
743’s aim 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.7 Thus, Order No. 743 directed the
ERO to revise the definition of ‘‘bulk
electric system’’ through the NERC
Standards Development Process to
address the Commission’s concerns.8
Order No. 743 also directed the ERO to
develop an exemption process that
includes clear, objective, transparent
and uniformly applicable criteria for
exempting facilities that are not
necessary for operating the
interconnected transmission grid.9
5. The Commission stated that it
believes the best way to address the
identified 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,
the Commission specified that NERC
may propose a different solution that is
equally efficient and effective as the
Commission’s suggested 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.10
B. Requests for Rehearing
6. The following entities have filed
timely requests for rehearing or for
clarification of Order No. 743: American
5 Id. n.47 (quoting NERC’s definition of ‘‘bulk
electric system’’).
6 Id. P 77.
7 Order No. 743, 133 FERC ¶ 61,150 at P 2.
8 Id. P 16.
9 Id. P 112–115.
10 Id.
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Public Power Association (APPA);
Consumers Energy Company
(Consumers); Edison Electric Institute
(EEI); Exelon Corporation (Exelon);
National Rural Electric Cooperative
Association (NRECA); New York State
Public Service Commission (NYPSC);
Portland General Electric Company
(Portland General); Public Power
Council; City of Redding, California
(Redding); Public Utility District No. 1
of Snohomish County, Washington
(Snohomish); Transmission Access
Policy study Group (TAPS); Western
Petitioners;11 Wisconsin Electric Power
Company (Wisconsin Electric); and
Transmission Agency of Northern
California (TANC).12
II. Discussion
A. Scope of Order No. 743 and
Commission Directive
7. Section 215(d)(5) of the FPA
authorizes the Commission to direct the
ERO to submit to the Commission a new
or revised Reliability Standard that
addresses a specific matter identified by
the Commission.13 In Order No. 743, the
Commission explained that this
authority also includes the authority to
direct the ERO to revise the definition
of a term used in a Reliability Standard.
8. Pursuant to this authority, the
Commission directed the ERO to modify
the definition of ‘‘bulk electric system’’
in order to address certain technical and
policy concerns identified by the
Commission.14 Specifically, the
Commission observed that Regional
Entities currently have broad discretion
to define the parameters of the bulk
electric system in their regions, and that
the exercise of this discretion has led to
inconsistencies in how facilities are
classified within and among regions, to
11 Blachly-Lane Electric Cooperative, Central
Electric Cooperative, Inc., Central Lincoln People’s
Utility District, Clearwater Power Company,
Consumers Power Inc., Coos-Curry Electric
Cooperative, Inc., Douglas Electric Cooperative, Fall
River Rural Electric Cooperative, Inc., Lane Electric
Cooperative, Inc., Lincoln Electric Cooperative, Inc.,
Lost River Electric Cooperative, Northern Lights,
Inc., Mason Public Utility District No. 3, Northwest
Public Power Association, Northwest Requirements
Utilities, Okanogan County Electric Cooperative,
Inc., Pacific Northwest Generating Cooperative,
Public Utility District No. 1 of Clallam County,
Public Utility District No. 1 of Snohomish County,
Raft River Rural Electric Cooperative, Inc., Salem
Electric Cooperative, Salmon River Electric
Cooperative, Inc., Umatilla Electric Cooperative,
Utah Associated Municipal Power Systems,
Washington Rural Electric Cooperative Association,
and West Oregon Electric Cooperative, Inc.
12 The California Public Utilities Commission
(CPUC) filed comments on January 25, 2011. The
Commission rejects the CPUC’s comments as an
untimely request for rehearing under Rule 713(b) of
the Commission’s Rules of Practice and Procedure.
13 Order No. 743, 133 FERC ¶ 61,150 at P 29.
14 Id. P 30.
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the effect that some facilities necessary
to reliably operate the interconnected
transmission network have been
excluded from the obligation to comply
with mandatory Reliability Standards.
The Commission stated that one means
to address its concerns is to eliminate
the regional discretion in the ERO’s
current definition, maintain the 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 the ERO determines
are not necessary for operating the
interconnected transmission network.15
However, the Final Rule made clear, the
ERO may develop an alternative
proposal for addressing the
Commission’s concerns with the current
definition and any such alternate
proposal must be equally efficient and
effective as the Commission’s suggested
approach for addressing the identified
concerns, may not result in a reduction
in reliability, and must be supported
with a technical analysis that
demonstrates and explains, with a
technical record sufficient for the
Commission to make an informed
decision, how it provides the same level
of reliability as the Commission’s
suggested solution.16
1. Identifying the Specific Matter To Be
Addressed
9. NRECA requests clarification, or in
the alternative rehearing, that the
Commission seeks to resolve a narrow
concern that ambiguity in the bulk
electric system definition and lack of
backstop review at NERC has permitted
inconsistencies across regions, and that
the Northeast Power Coordinating
Council (NPCC) in particular has not
made all facilities that could
significantly affect reliability subject to
the Reliability Standards. NRECA
expresses concern that the Final Rule
states in several places that NERC must
address the Commission’s ‘‘technical
and other concerns’’ without specifying
those concerns.17 NRECA asks that the
Commission clarify the specific matter
and present a clear list of technical and
other concerns to assist NERC in
developing appropriate and responsive
solutions.
10. NRECA further seeks clarification
whether NERC, in exercising its
technical expertise, may choose to
address the specific concerns identified
by the Commission through an
alternative other than an amendment to
15 Id.
P 31, 74.
at 11; citing Order No. 743, 133 FERC
¶ 61,150 at P 16, 31 and 96.
the definition of bulk electric system.
NRECA points out that, while Order No.
743 sets out a ‘‘preferred solution,’’ it
also allows the ERO to develop an
alternative proposal for addressing the
Commission’s concerns. NRECA states
that it is not clear from the Final Rule
if the ERO has discretion whether and
how it amends the definition of bulk
electric system, or only how to amend
the definition. NRECA seeks
clarification, or in the alternative
rehearing, that the ERO can comply
with the Final Rule by filing an
alternative approach that does not
amend the definition, provided that the
alternative addresses the Commission’s
concerns with inconsistency, lack of
oversight and exclusion of facilities that
are required for the reliable operation of
the interconnected transmission
network. According to NRECA, denying
the ERO the ability to develop an
alternative to amending the bulk electric
system definition is tantamount to the
Commission prescribing the text of a
Reliability Standard and denies the ERO
a full range of options in addressing the
specific matter identified by the
Commission.
Commission Determination
11. We clarify that the specific issue
the Commission directed the ERO to
rectify is the discretion the Regional
Entities have under the current bulk
electric system definition to define the
parameters of the bulk electric system in
their regions without any oversight from
the Commission or NERC.18 As we
explained in the Final Rule, NPCC’s use
of this discretion has resulted in an
impact-based approach to defining the
bulk electric system that allows
significant subjectivity in application
and thus creates anomalous results.19
While NPCC’s use of its discretion
brought the problems with the current
definition to our immediate attention,
the Commission’s concern is potentially
broader because any region could use its
discretion to define the bulk electric
system in a way that leads to similar
inconsistent and anomalous results.
12. We decline to provide the
clarification NRECA requests regarding
NERC’s ability to address the specific
matter through means other than
revising the definition, and also deny
rehearing on the issue. As noted above,
our concern with the current bulk
electric system definition is rooted in
the unfettered discretion granted therein
to Regional Entities to define the term.
Contrary to NRECA’s claim, it is well
within our section 215(d)(5) authority to
16 Id.
17 NRECA
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18 Order
No. 743, 133 FERC ¶ 61,150, at P 72.
19 Id. P 77–78.
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direct NERC to address the specific
issue we have identified—the overly
broad definition. We have not directed
the ERO to revise the definition to
incorporate a specified result; rather, we
require that the change address our
concerns.
2. Standard of Review
13. NRECA requests clarification that
the Commission is not imposing a
higher standard of review in the Final
Rule than permitted by section 215 of
the FPA. NRECA explains that the Final
Rule allows the ERO to develop an
alternative to the Commission’s
suggested approach provided that it is
‘‘as effective as, or more effective than,
the Commission’s proposed approach’’
and must not ‘‘result in a reduction in
reliability.’’ 20 NRECA contends that this
standard of review is not in the statute
and, rather, that the Commission should
clarify that it will judge by the statutory
provision that the proposal provides for
an ‘‘adequate level of reliability.’’
NRECA contends that this phrase
connotes a range of possible solutions.
NRECA claims that the Commission’s
approach, which allows the
Commission’s suggested solution to
serve as a benchmark for all subsequent
proposals, suggests a different, higher
standard than ‘‘adequate level of
reliability.’’
Commission Determination
14. FPA section 215(d)(2) establishes
the standard of review the Commission
must apply to ERO submissions with
respect to the content of Reliability
Standards:
The Commission may approve, by rule or
order, a proposed reliability standard or
modification to a reliability standard if it
determines that the standard is just,
reasonable, not unduly discriminatory or
preferential, and in the public interest. The
Commission shall give due weight to the
technical expertise of the Electric Reliability
Organization with respect to the content of a
proposed standard or modification to a
reliability standard and to the technical
expertise of a regional entity organized on an
Interconnection-wide basis with respect to a
reliability standard to be applicable within
that Interconnection, but shall not defer with
respect to the effect of a standard on
competition. A proposed standard or
modification shall take effect upon approval
by the Commission.21
As the statute specifies, the standard
of review the Commission must utilize
is whether the proposed Reliability
Standard or modification to a Reliability
Standard is ‘‘just, reasonable, not unduly
20 NRECA at 38, quoting Order No. 743, 133 FERC
¶ 61,158 at P 141.
21 16
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discriminatory or preferential, and in
the public interest.’’
15. We disagree with NRECA’s
assertion that section 215(c)(1)
establishes a standard of review the
Commission must apply to ERO
submissions. Section 215(c) sets forth
the criteria the Commission must
consider in certifying an ERO, and
section 215(c)(1) specifies that one of
the considerations for certification is
whether the ERO applicant ‘‘has the
ability to develop and enforce * * *
reliability standards that provide for an
adequate level of reliability of the bulkpower system.’’ 22
16. Certainly, whether a proposed
Reliability Standard provides for an
adequate level of reliability is included
in the factors used in determining
whether the proposal is just and
reasonable, but it is not the standard of
review.23 The Commission’s statement
that any alternative proposal must be ‘‘as
effective as, or more effective than, the
Commission’s proposed approach’’ and
must not ‘‘result in a reduction in
reliability’’ provides guidance regarding
the Commission’s view of what is
necessary to produce not only an
adequate level of reliability but also a
result that accords with the section
215(d)(2) review criterion.24
B. Jurisdictional Issues
17. Entities claim that the
Commission over-stepped its
jurisdiction in three ways. First, they
contend that the Commission exceeded
its authority by requiring a bright-line
100 kV threshold for determining which
facilities are included in the bulk
electric system. Second, entities argue
that Order No. 743 fails to recognize the
statutory exclusion of facilities used in
local distribution of electric energy.
Third, entities claim that the
Commission fails to give due weight to
the ERO’s technical expertise. Several
requests for rehearing, such as the
NYPSC, Public Power Council and
Snohomish, merge these arguments
together in more global claims that the
22 16
U.S.C. 824o(c).
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 320–338, order on
reh’g, Order No. 672–A, FERC Stats. & Regs. ¶
31,212 (2006).
24 See Transmission Relay Loadability Reliability
Standard, Order No. 733–A, 134 FERC ¶ 61,127, at
P 24–27 (2011) (stating that the Commission’s
detailed guidance on a possible approach to address
its underlying concern, including a statement that
any alternative approach must be ‘‘equally efficient
and effective’’ does not establish a ‘‘rebuttable
presumption’’ in favor of the Commission’s
suggested approach).
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Final Rule is in error and should be
withdrawn.
1. 100 kV Bright-Line Threshold
18. The NYPSC and Public Power
Council argue that the Commission’s
decision to ‘‘direct the ERO to define the
bulk electric system as all facilities
operated at 100 kV and above’’ is
arbitrary and capricious.25 They state
that section 215(a) of the FPA explicitly
excludes facilities used in local
distribution of electric energy. Thus, the
NYPSC reasons, ‘‘by defining the bulkpower system as all facilities operating
at above 100 kV, the Commission
exceeded its jurisdiction by
encompassing facilities that are clearly
part of the non-bulk power system
* * *’’ 26 The NYPSC contends that the
Commission incorrectly assumes that a
facility is considered part of the bulk
electric system simply because it is
operated at or above 100 kV. The
NYPSC recites evidence, presented in
its Notice of Proposed Rulemaking
(NOPR) comments, that facilities in New
York City do not serve a bulk system
function due to the high concentration
of load served by those lines. While
noting that the Final Rule dismissed this
evidence, the NYPSC contends that ‘‘it
is invalid to conclude that all facilities
rated at 100 kV and above support the
bulk-power system based on a belief
that ‘most’ of those facilities are not
involved in local distribution.’’ 27
Similarly, Public Power Council and
Snohomish contend that the Final Rule,
by mandating a 100 kV bright-line test,
will improperly classify many 115 kV
distribution facilities in the Western
Interconnection as bulk electric system
facilities.
19. The NYPSC notes that the Final
Rule explained that entities would have
an opportunity to seek an exemption if
they believe certain facilities should not
be included in the bulk electric system.
Based on this, the NYPSC claims that
the Final Rule implicitly acknowledged
that various non-jurisdictional facilities
are included within the Commission’s
‘‘redefinition’’ of bulk electric system. It
also claims that this approach is
inappropriate, i.e., the Commission
cannot assume it has jurisdiction over
facilities operated above 100 kV unless
and until an entity demonstrates
otherwise. The NYPSC claims that the
Commission also conceded that the 100
kV threshold is overly broad because
‘‘several 115 and 138 kV facilities that
some entities term as ‘distribution’ may
25 NYPSC
at 12; see also Public Power Council at
8–9.
26 NYPSC
27 NYPSC
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at 15.
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be needed to reliably operate the
interconnected transmission system.’’ 28
According to the NYPSC, by stating that
these facilities ‘‘may’’ be needed for
reliability of the interconnected system,
the Commission acknowledges that they
may not be needed. Similarly, Portland
General argues that the Commission
cannot claim jurisdiction over any local
distribution facilities and expresses
concern that the above language from
the Final Rule wrongly suggests that
some local distribution facilities are
jurisdictional under section 215.
Commission Determination
20. At the outset, the Commission
emphasizes that Order No. 743 did not
mandate or direct NERC to adopt a 100
kV bright-line threshold. Order No. 743
directed NERC to undertake the process
of revising the bulk electric system
definition to address the Commission’s
concerns about the broad discretion the
current definition grants to Regional
Entities to modify the definition without
Commission or ERO oversight, and
provided a suggested solution.
Specifically, the Order directed the ERO
to revise the definition of bulk electric
system ‘‘through the NERC Standards
Development Process to address the
Commission’s concerns.’’ 29 The
Commission stated its belief that one
effective way to address those concerns
would be to eliminate the regional
discretion contained in the current
definition, which allows Regional
Entities to define the term without
Commission or ERO oversight; maintain
the threshold contained in the current
definition, which includes all facilities
operated at or above 100 kV except
defined radial facilities; and adopt an
exemption process and criteria for
excluding facilities that the ERO
determines are not necessary to operate
an interconnected electric transmission
network. The Final Rule, however, did
not mandate this approach as it further
provided that NERC ‘‘may propose a
different solution that is as effective as,
or superior to, the Commission’s
proposed approach.’’ 30
21. Order No. 743’s approach is
entirely within the Commission’s
statutory authority and properly allows
the ERO to develop the revised bulk
electric system definition using its
technical expertise. We, therefore, reject
the requests for rehearing arising from
the inaccurate premise that the
Commission mandated a 100 kV brightline threshold. Beyond the concerns
28 NYPSC at 17, quoting Order No. 743, 133 FERC
¶ 61,150 at P 37.
29 Order No. 743, 133 FERC ¶ 61,150 at P 16.
30 Id.
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related to the Commission’s authority,
the substance of the arguments raised by
the NYPSC, Public Power Council,
Snohomish and Western Petitioners
relate to the term ‘‘used in local
distribution’’ and differentiating
between local distribution and
transmission, which we address below.
22. Further, we disagree with the
NYPSC’s claim that the Final Rule
implicitly acknowledges that various
non-jurisdictional facilities are included
within the Commission’s ‘‘redefinition’’
of bulk electric system. As we clarify
herein, regardless of the 100 kV
threshold, facilities that are determined
to be local distribution will be excluded
from the bulk electric system. Further,
NERC has yet to develop a modified
definition, so the NYPSC’s claim is
unfounded at this time.
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2. Facilities Used in Local Distribution
23. Western Petitioners, Portland
General, Snohomish, and Redding point
out that section 215(a) of the FPA
expressly exempts facilities ‘‘used in the
local distribution of electric energy’’
and, in section 215(i), provides that the
ERO ‘‘shall have authority to develop
and enforce compliance with reliability
standards for only the bulk-power
system.’’ On this basis, Western
Petitioners and Redding argue that the
Final Rule errs by not clearly stating
that the revised definition of bulk
electric system must exclude all
facilities that are used in local
distribution. Western Petitioners suggest
that the Final Rule, by emphasizing that
the revised definition must include ‘‘all
facilities necessary for operating an
interconnected electric transmission
network,’’ including lower voltage
facilities operated in parallel and in
support of higher voltage facilities,
‘‘could sweep in numerous local
distribution facilities.’’ 31
24. Similarly, Portland General claims
that the Commission erred by failing to
clearly and consistently acknowledge
the statutory exclusion of facilities used
in local distribution of energy. Portland
General argues that the failure to clearly
delineate this exclusion is inconsistent
with Detroit Edison Co. v. FERC, 334
F.3d 48 (DC Cir. 2003), where the court
rejected the Commission’s interpretation
of the phrase ‘‘used in local distribution’’
in section 201 of the FPA as rewriting
the statute to exclude from the
Commission’s jurisdiction only facilities
used exclusively in local distribution.
Commission Determination
25. We disagree that the Final Rule is
at odds with commenters’ view. In
Order No. 743, the Commission
acknowledged that ‘‘Congress has
specifically exempted ‘facilities used in
the local distribution of electric energy’ ’’
from the Bulk-Power System
definition.32 Since such facilities are
exempted from the Bulk-Power System,
they also are excluded from the bulk
electric system. Therefore, the
Commission agrees with Western
Petitioners and others that facilities
used in the local distribution of energy
should be excluded from the revised
bulk electric system definition.
3. Due Weight to Expertise of the ERO
26. As mentioned above, the NYPSC,
Snohomish and Public Power Council
characterize the Final Rule as
mandating the ERO to develop a revised
definition of bulk electric system that
incorporates a nationally uniform, 100
kV bright-line test. Based on this
understanding, they argue that the Final
Rule’s directive exceeds the
Commission’s authority under section
215(d)(5) of the FPA because it limits
NERC’s and the Western Electric
Coordinating Council’s (WECC)
‘‘substantial discretion’’ to develop
Reliability Standards based upon their
technical expertise. Public Power
Council and Snohomish claim that the
directive also denies the due weight to
which the ERO or an Interconnectionwide Regional Entity is entitled
pursuant to FPA sections 215(d)(2) and
(3).
27. Public Power Council and
Snohomish argue that the elimination of
regional discretion directed in the Final
Rule based on a desire for uniformity is
unsupported. They also claim that this
is inconsistent with the intent of
Congress to allow for regional variation
as evidenced by the provisions of
section 215 that require the ERO to
rebuttably presume that a WECCdeveloped Reliability Standard satisfies
the statutory criteria for approval and
that the Commission give due weight to
WECC’s expertise. Public Power Council
and Snohomish also cite to the
legislative history to support their claim
that Congress recognized the need for
regional differences and rejected a
uniform, centralized approach. Further,
they argue that ‘‘due weight’’ equates to
‘‘substantial deference’’ based on court
precedent and statutory analysis.33
32 Order
No. 743, 133 FERC ¶ 61,150 at P 37.
at 18–19, citing, e.g., City of Oconto
Falls v. FERC, 204 F.3d 1154 (DC Cir. 2000); Public
Power Council at 19–20.
33 Snohomish
31 Western Petitioners at 10; see also Public
Power Council at 16.
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28. The NYPSC, Snohomish and
Public Power Council claim that, while
the Commission has authority under
section 215(d)(5) of the FPA to require
the ERO to address a specific matter, the
Commission went beyond its authority
pursuant to that provision by
prescribing the particular content of a
Reliability Standard. They contend that
the ERO, in the first instance, should
decide how the Commission’s specific
concerns are best addressed. The
NYPSC acknowledges that the
Commission indicated that the ERO has
discretion to develop an alternative that
is as effective as, or superior to, the
Commission’s bright-line approach, but
claims that the ‘‘narrowly tailored
guidance’’ limits the ERO’s discretion
and, thus, the Commission acted beyond
its statutory authority. For all these
reasons, according to the NYPSC and
Public Power Council, the Commission
abused its discretion in imposing a 100
kV bright-line rule, thereby denying
NERC and WECC the opportunity to
develop a different threshold or
methodology based on their expertise.
Commission Determination
29. As indicated previously, Order
No. 743 did not mandate a specific
result. Rather, the Commission
determined that NERC should use its
technical expertise to develop a
definition that addresses the
Commission’s concerns with regional
discretion in the current definition. The
present definition contains the 100 kV
reference, and the Commission did not
change it in Order No. 743, other than
to suggest a solution that would remove
‘‘generally’’ from the current definition’s
reference to a 100 kV threshold and
eliminate unchecked regional
discretion. The Commission’s
suggestion of one way to address the
enumerated concerns does not preclude
NERC from proposing an alternate
solution.
30. Public Power Council and
Snohomish argue that there is no
evidence supporting the Commission’s
decision to require NERC to develop a
uniform national bulk electric system
definition. However, uniformity, absent
a showing that the alternative is more
stringent or necessitated by a physical
difference, has been a hallmark of the
mandatory Reliability Standards
construct since its inception. In
establishing the framework for
developing Reliability Standards, we
adopted the principle that proposed
Reliability Standards should ‘‘be
designed to apply throughout the
interconnected North American BulkPower System, to the maximum extent
this is achievable with a single
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Reliability Standard.’’ 34 The same
principle holds true for definitions
contained within the Reliability
Standards.
31. Moreover, we are not prohibiting
the Interconnection-wide regional
entities from arriving at their own
regional differences. However, as we
stated in Order No. 743, ‘‘[c]ommenters
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.’’ 35 Conversely, the Commission
does have a compelling concern that the
subjectivity and lack of ERO and
Commission oversight embodied in the
current definition could result in the
problems we identified in the NPCC
region occurring in other regions,
further supporting adoption of a
uniform national definition. As Order
No. 743 indicated, establishing such a
uniform national definition does not
preclude a region from proposing a
regional difference that is more stringent
than the continent-wide definition,
including a regional difference that
addresses matters that the continentwide definition does not, or a regional
definition that is necessitated by a
physical difference in the Bulk-Power
System.36
32. The Commission finds that the
arguments by Public Power Council and
Snohomish that the Commission has
failed to give due weight to NERC or an
Interconnection-wide Regional Entity as
required under sections 215(d)(2) and
(3) are premature. Once NERC has
developed a proposed bulk electric
system definition, the Commission will
evaluate the proposal and all supporting
evidence and documentation under
section 215(d)(2). Similarly, should one
of the two Regional Entities organized
on an Interconnection-wide basis
develop a proposal for a regional bulk
electric system definition, the ERO must
evaluate the proposal according to
requirements of section 215(d)(3).
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C. Challenges to Order No. 743’s
Technical Rationale
1. 100 kV Bright-Line Threshold
33. The NYPSC, Public Power
Council, and Snohomish request
rehearing, claiming that the Commission
erred in directing NERC to revise the
bulk electric system definition to
include facilities operated at 100 kV and
above where the record lacks a technical
justification for a bright-line test. The
NYPSC contends that, because the
34 Order No. 672, FERC Stats. & Regs. ¶ 31,204 at
P 331.
35 Order No. 743, 133 FERC ¶ 61,150 at P 141.
36 Id.
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bright-line 100 kV threshold adopted by
the Commission was not based on
whether those facilities are necessary for
operating the interconnected network,
the Commission’s decision lacked a
technical justification. The NYPSC
claims that the Commission’s approach
results in a ‘‘superficial consistency’’
and that Order No. 743 contains no
factual analysis as to why 100 kV is the
appropriate threshold. It contends that
the examples identified by the
Commission ‘‘that are purported to
support the 100 kV bright-line were all
115 kV or higher.’’ 37
34. Further, the NYPSC argues that
the Commission incorrectly assumes
that because a facility operates at 100 kV
or above in one part of the country that
all facilities operated at similar voltages
across the country should be treated as
part of the Bulk-Power System. It objects
to the Commission’s reliance on events
on facilities in other regions as rationale
for determining that similar facilities in
the NPCC region are part of the bulk
electric system. According to the
NYPSC, ‘‘that logic does not hold true,
since there are various facilities
operated at the same voltages across the
country that perform different functions
and interact to different degrees with
the bulk system, depending on the
regional differences.’’ 38 The NYPSC
reiterates that it presented evidence in
its earlier comments that certain 138 kV
facilities in New York City do not serve
a bulk electric system function due to
the high concentration of load served by
those lines. The NYPSC contends that
the Final Rule wrongfully dismissed
this evidence by indicating that it does
‘‘not believe that most of these facilities
are local distribution.’’ 39 The NYPSC
argues that it is invalid to conclude that
all facilities rated 100 kV or above
support the bulk electric system based
on a belief that ‘‘most’’ of these facilities
are not involved in local distribution.
Commission Determination
35. As noted previously, contrary to
the commenters’ assertions, the
Commission did not direct or mandate
that the bulk electric system definition
include a bright-line 100 kV threshold.
Instead, the Commission directed NERC
to address the inconsistency, lack of
oversight and exclusion of facilities that
are required for the reliable operation of
the interconnected transmission
network, outlined by the Commission in
Order No. 743 using the technical
expertise available to NERC. The
37 NYPSC
at 19.
at 14.
39 Id. at 15, quoting Order No. 743, 133 FERC
¶ 61,150 at P 39 (emphasis added).
38 Id.
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Commission suggested that one means
to address its concerns would be to,
among other things, maintain the 100
kV threshold and radial exclusion
contained in the current definition, but
left it to NERC’s discretion and
technical expertise to develop a revised
definition. The Commission also
supported its suggested solution.40
36. Nonetheless, we will reiterate and
expand on that discussion here. The
Commission’s suggested solution of a
100 kV threshold paired with an
exemption process, in essence, merely
clarifies the current NERC definition,
which classifies facilities operating at
100 kV or above as part of the bulk
electric system.
37. As discussed in Order No. 743, the
NPCC material impact assessment has
resulted in inconsistent classification of
some facilities along and within
Regional Entity borders.41 Further,
Order No. 743 pointed out the failure of
the NPCC test to classify facilities
associated with nuclear generation as
part of the bulk electric system and thus
subject to NERC Reliability Standards.42
The suggested 100 kV threshold would
maintain the current assumption, under
NERC’s current definition, that nonradial 100 kV transmission facilities (not
local distribution) are part of the bulk
electric system unless exempted
through the process NERC develops.
38. The Commission disagrees with
the characterization that its suggested
approach will only achieve superficial
consistency—our suggested approach
will require that facilities needed for the
reliable operation of interconnected
electrical network comply with the
NERC Reliability Standards. Regardless
of whether NERC adopts our suggested
solution in whole or in part, or develops
another approach, the bulk electric
system definition and related processes
that NERC ultimately produces, and the
Commission approves, will significantly
reduce or eliminate reliability problems
arising from incomplete Reliability
Standard coverage resulting from
ineffective material impact assessments
and inconsistent classification of
facilities. The Final Rule eliminates
these problems by directing the ERO to
revise the definition of bulk electric
system in a way that addresses the
concerns outlined in the Final Rule.
39. The NYPSC argues that the
Commission did not provide any
evidence supporting a 100 kV threshold
since all three examples in Order No.
743 involved facilities 115 kV or higher.
40 See, e.g., Order No. 743, 133 FERC ¶ 61,150 at
P 72–73, 85.
41 Order No. 743, 133 FERC ¶ 61,150, P 80.
42 Id. P 84.
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However, as indicated in Order No. 743,
the current NERC bulk electric system
definition contains a general 100 kV
threshold. The Commission’s suggested
solution simply would eliminate
regional discretion that is not subject to
review by the ERO or the Commission
in the application of the current
threshold. Additionally, the NYPSC’s
argument presents a distinction without
a difference, since nominal voltage
levels are established in industry for use
in power systems but no voltage
classification exists at 100 kV.43
Therefore, a 100 kV threshold will
effectively capture the same facilities as
a 115 kV threshold.
40. The Commission also disagrees
with the NYPSC’s characterization of
the suggested 100 kV threshold as
treating all facilities operated at similar
voltages across the country as part of the
bulk electric system. As we have
explained, the Commission views the
suggested threshold as a first step or
proxy in determining which facilities
are included and which are excluded or
exempted from the bulk electric system.
The Commission provided considerable
support in the Final Rule for its belief
that facilities operated at or above 100
kV are sufficiently similar throughout
the continental United States to be able
to use a 100 kV threshold as an initial
line of demarcation, which the ERO
would further refine using exclusions
(such as for radial facilities serving only
load with one transmission source) and
exemptions.44 Similarly, we are not
persuaded by the NYPSC’s contention
that Order No. 743’s reliance on events
in several regions as support for taking
action on a nationwide basis was
misplaced. The facilities in the several
regions are sufficiently similar to allow
the Commission to draw technical
justification for its actions from these
events. The same configurations cited in
the examples and the areas described in
Order No. 743 can be found throughout
the country.45 Facilities operated at
100–200 kV, in parallel with extra high
voltage facilities, connect areas with
generation to distant hubs and load
43 See, e.g., American National Standards
Institute, Incorporated (ANSI) Standard C84.1,
Electrical Power Systems and Equipment-Voltage
Ratings (60Hz).
44 See, e.g., Order No. 743, 133 FERC ¶ 61,150 at
P 73, 139–140.
45 The Commission reviewed transmission maps
available in annual Form 715 submissions (Form
715 submissions). (Form 715 is the ‘‘Annual
Transmission Planning and Evaluation Report,’’ in
which operators of integrated transmission at or
above 100 kV submit to the Commission base case
power flow and transmission system maps and
diagrams. Submissions are considered Critical
Energy Infrastructure Information (CEII) and are
subject to the Commission’s CEII rules.)
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centers.46 As discussed in Order No.
743, failure of 100–200 kV facilities has
caused cascading outages that would
have been minimized or prevented if
entities were in compliance with the
NERC Reliability Standards.47 For the
reasons discussed above, the
Commission denies the requests for
rehearing.
2. Impact-Based Methodology
41. The NYPSC requests rehearing on
the Commission’s rejection of an
impact-based test for identifying bulk
electric system elements and asks that
the Commission reconsider an impactbased test as a viable approach. The
NYPSC asserts that ‘‘NERC and the
NPCC have both determined that the
NPCC’s impact-based definition,
coupled with its regionally tailored
reliability criteria, effectively and
efficiently ensures reliability.’’ 48 It
contends that, because an impact-based
test identifies ‘‘facilities and control
system necessary for operating an
interconnected electric energy
transmission network,’’ that test is
consistent with section 215 of the FPA
and obviates the Commission’s concern
that a discrepancy in definitions could
result in reliability gaps.49 The NYPSC
argues that the Commission dismissed
the impact approach based on a single
event and the stated need for a
consistent and comprehensive test. In
response, the NYPSC argues that Order
No. 743 does not identify how
inconsistencies have impacted or may
impact the reliable operation of the bulk
electric system. Finally, the NYPSC
asserts that the Commission’s concerns
may be capable of being addressed
through modifications to the existing
impact tests and the Commission should
consider the validity of such an
approach.
42. Public Power Council also
expresses concern that the
Commission’s discussion about material
impact analysis leaves no room for a
meaningful test to distinguish between
facilities that are necessary for the
operation of the bulk electric system
and those that are not. Public Power
Council criticizes the Commission’s
rationale, contending that if a material
impact assessment indicates that the
Bulk-Power System can function
properly even if a fault or operational
failure occurs on a particular facility, it
is not clear why the Commission can
claim that that facility is nonetheless
46 Id.
47 Order
No. 743, 133 FERC ¶ 61,150, at P 87.
48 NYPSC at 28.
49 NYPSC at 28, quoting 16 U.S.C. 824o(a)(1)(A).
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‘‘necessary’’ for bulk electric system
operation.
43. In a related vein, NRECA seeks
clarification, or in the alternative
rehearing, that the Commission’s
determination regarding ‘‘material
impact’’ does not intend for NERC to
change the NERC Rules of Procedure
(other than to establish a process for
granting exemptions) or the NERC
Statement of Compliance Registry
Criteria. While NRECA acknowledges
that the Final Rule does not discuss
such changes to the NERC rules or
Registry Criteria, NRECA explains that it
raises the concern because it is unclear
whether Order No. 743 only rejects the
NPCC impact-based methodology or
every functional impact methodology.
NRECA points to various provisions of
the NERC rules and Registry Criteria
indicating that NERC’s registry
approach is based on identifying owner,
operators and users of the Bulk-Power
System that have a ‘‘material impact’’ on
the Bulk-Power System.50 Accordingly,
NRECA seeks assurance that the Final
Rule is not intended to ‘‘undermine the
core concepts’’ of the NERC Rules and
Registry Criteria.
Commission Determination
44. Order No. 743 did not reject all
material impact assessments but,
instead, took issue with particular tests
and outlined general problems with the
material impact tests used to determine
the extent of the bulk electric system
that we have seen to date. The NYPSC
incorrectly states that the Commission
rejected NPCC’s material impact
assessment based on one event. Rather,
as discussed extensively in the Final
Rule and elsewhere herein, the
Commission rejected NPCC’s material
impact assessment due to its subjective
language and failure to identify facilities
necessary to reliably operate the
interconnected transmission system.51
These flaws include use of the
amorphous term ‘‘local area,’’ which was
not consistently applied throughout the
NPCC region. The NYPSC does not
clarify application of this term in its
request for rehearing, and instead
merely states that the local area is
defined by ‘‘the Council members.’’ 52 As
Order No. 743 notes, the subjectivity of
the ‘‘local area’’ definition, which
ultimately determines whether or not a
facility is classified as part of the bulk
50 See NRECA at 14–15, quoting NERC Rules of
Procedure, section 501; Registry Criteria at 1.
51 Order No. 743, 133 FERC ¶ 61,150 at P 76–78.
52 NYPSC at 28.
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electric system, has led to varying
results throughout the NPCC region.53
45. The Commission does not agree
that Order No. 743 did not address how
inconsistencies in defining the facilities
that are included in the bulk electric
system may impact the operation of the
interconnected transmission network.
The Final Rule detailed several
instances where the NERC Reliability
Standards are less effective when they
are not applied to all necessary
facilities.54
46. Public Power Council contends
that it is not clear why the Commission
can claim that a particular facility is
nonetheless ‘‘necessary’’ for bulk electric
system operation if a material impact
assessment proves that the Bulk-Power
System can function properly even if a
fault or operational failure occurs on
that facility. As we noted in Order No.
743, by this metric the facilities that
caused the 2003 Blackout would not be
viewed as critical since none of the
individual facilities caused the outage.55
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.56
47. The Commission clarifies that it
was not our intent to disrupt the NERC
Rules of Procedure or the Statement of
Compliance Registry Criteria. Nor did
the Commission intend to rule out using
any form of a material impact test in the
reliability context that can be shown to
identify facilities needed for reliable
operation. However, as Order No. 743
explained, the Commission has serious
concerns about NPCC’s Document A–10
methodology. The Commission stated
that, as a threshold matter, the material
impact tests proffered by commenters
did not measure whether specific
system elements were necessary for
operating the system, but, rather,
measure the impact of losing the
element.57 The Commission’s extensive
discussion of the NPCC test further
noted that the NPCC methodology is
unduly subjective, and results in an
inconsistent process that excludes
facilities necessary for operating the
bulk electric system from the definition.
Therefore, the Commission indicated,
should NERC choose to define the bulk
electric system using a method other
than one employing the 100 kV bright
line threshold the Commission
suggested, such an alternative method
53 Order
No. 743, 133 FERC ¶ 61,150 at P 80.
e.g., Id. P 80, 83, 86, 90.
55 Id. P 38.
56 16 U.S.C. 824o(a)(i).
57 Order No. 743, 133 FERC ¶ 61,150 at P 76.
54 See,
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must be consistent, repeatable and
verifiable with supporting technical
analysis.58
3. Western Interconnection/Regional
Variation
48. In Order No. 743, the Commission
rejected arguments that 100–199 kV
facilities in the Western Interconnection
should be treated differently than
facilities in the Eastern
Interconnection.59 The Commission
stated that commenters had not
provided an adequate explanation,
supported by data and analysis, why
there is a physical difference that
justifies different treatment of these
facilities in the West.
49. Snohomish and Public Power
Council contend that, because 115 kV
facilities commonly are used in the
West for distribution, the Commission’s
‘‘inflexible’’ 100 kV threshold is
‘‘unworkable’’ in the West. Snohomish
and Public Power Council claim that the
Western Interconnection is materially
different from the Eastern
Interconnection because the long
distances between load centers, and the
vast areas commonly covered by
distribution systems, result in a
transmission system that is largely
operated at voltages of 230 kV or above,
and distribution systems that are
commonly operated at voltages of 115
kV. They contend that this physical
difference is documented in a study
performed by WECC’s Bulk Electric
System Definition Task Force.60
Snohomish contends that power flow
base cases examined by the Bulk
Electric System Definition Task Force
support their assertion that facilities
rated between 100 kV and 200 kV have
a small impact on transmission in the
West.
50. Further, Snohomish contends that
Order No. 743, at most, demonstrates a
problem in the NPCC region and does
not provide justification for action in
the West. Snohomish asserts that the
Final Rule fails to identify a single
reliability event in the Western
Interconnection arising from the bulk
electric system definition as currently
applied. Snohomish argues that the
Commission cannot use isolated and
localized problems to justify nationwide
action.61 According to Snohomish, the
three disturbances discussed in the
58 Id.
P 74, 85.
P 139–140.
60 See Public Power Council at 6, Snohomish at
9 quoting WECC Bulk Electric System Definition
Task Force, Initial Proposal, attached as Exh. A to
Snohomish’s NOPR comments.
61 Snohomish at 31–32, citing Associated Gas
Distributors v. FERC, 824 F.2d 981, 1019 (DC Cir.
1985).
59 Id.
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Final Rule cannot justify nationwide
action or demonstrate that all facilities
operated in the 100–200 kV range are
part of the interconnected transmission
grid.
51. Snohomish also contends that the
Commission implicitly accepted the
evidence that most 115 kV facilities in
the West operate as distribution by
failing to assert that the evidence is
flawed, but, instead, responding in the
Final Rule that some facilities operating
in the 100–200 kV range in the West are
‘‘operationally significant and needed
for reliable operation as identified by
certain WECC documents.’’ 62 According
to Snohomish, this demonstrates the
irrationality of Order No. 743’s
approach because it focuses on the
operating voltage of electric facilities to
the exclusion of more germane factors
such as how those facilities are
connected and interact with the grid.
Snohomish claims that the threshold
approach is inconsistent with previous
statements from the Commission that
acknowledge that the function of
facilities and how they are
interconnected determines their
significance. Public Power Council
explains that, currently, most Public
Power Council members that operate
115 kV distribution facilities are not
classified as transmission owners or
operators. Thus, according to
Snohomish and Public Power Council,
by taking a superficial view of the
matter, Order No. 743’s 100 kV
threshold would sweep in a large
number of facilities, including hundreds
or perhaps thousands of miles of local
distribution facilities, in the West.
52. Snohomish additionally raises a
concern that the Final Rule could be
read in a manner that would require an
end to the work of the WECC Bulk
Electric System Definition Task Force.
Snohomish states that the Bulk Electric
System Definition Task Force, which
was created in 2008 partly in response
to Order No. 693, has been working on
developing a bulk electric system
definition that is appropriate to the
unique facts of the Western
Interconnection.63 Snohomish argues
that a Commission directive ‘‘to
‘eliminate the regional discretion in the
ERO’s current definition’ of BES’’ would
mean ‘‘that the work of the [Bulk
Electric System Definition Task Force]
must be terminated because it would
result in a regional variation to the BES
definition that FERC has forbidden.’’ 64
62 Snohomish at 11–12, quoting Order No. 743,
133 FERC ¶ 61,150 at P 139.
63 See Snohomish at 35.
64 Snohomish at 40–41, quoting Order No. 743,
133 FERC ¶ 61,150 at P 30.
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This result, according to Snohomish,
would violate the FPA because ‘‘Section
215(d)(2) requires FERC to accord ‘due
weight’ to the ‘technical expertise’ of
both NERC and WECC, and Section
215(d)(3) requires NERC to ‘rebuttably
presume’ that reliability standards
developed and approved by WECC are
consistent with the FPA.’’ 65 Therefore,
Snohomish requests clarification, or in
the alternative rehearing, that the
Commission’s ‘‘findings concerning the
material impact assessment
methodology used in NPCC apply only
to the NPCC’’ and do not apply to the
Bulk Electric System Definition Task
Force efforts currently under way.66
Snohomish further seeks clarification,
or in the alternative rehearing, that the
bulk electric system definition currently
being developed for application in
WECC ‘‘may incorporate any voltage
threshold or other method of assessing
the impact of lower-voltage facilities,’’
that the WECC bulk electric system
definition ‘‘must exclude facilities used
in the local distribution of electric
energy,’’ and that the definition should
distinguish between facilities that are or
are not necessary for operating an
interconnected energy transmission
network.67 Finally, Snohomish argues
that the Commission should clarify that
the Final Rule is not intended to stop
NERC’s review of the findings of the Ad
Hoc Committee for Generator
Requirements and the Transmission
Interface (GOTO Task Force) because
such an action would be arbitrary and
capricious.68
Commission Determination
53. The Commission denies rehearing
on these issues. As stated elsewhere,
Order No. 743 did not mandate a 100 kV
threshold. Rather, the Commission
directed NERC to develop a revised
definition that addresses our concerns
with the current definition, including
inconsistency, lack of oversight and
exclusion of facilities that are required
for the reliable operation of the
interconnected transmission network.
We suggested that one means to address
our concerns would be to maintain the
100 kV threshold contained in the
current definition, while eliminating the
discretion that allows Regional Entities
65 Id.
at 41, citing 16 U.S.C. 824o(d)(2)–(3).
at 42.
67 Id. at 43 (emphasis in original).
68 As described in Order No. 743, NERC has
undertaken an initiative (the GOTO task force) to
address the special circumstances associated with
generators and to determine which Reliability
Standards might be inappropriate for such limited
facilities. See Order No. 743, 133 FERC ¶ 61,150,
at n.158.
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66 Id.
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to interpret and apply the definition
without ERO or Commission oversight.
54. Commenters contend that the
majority of 115 kV facilities in the West
are distribution facilities and therefore
not significant to the transmission of
power. First, as we have stated herein,
to the extent any facility is a local
distribution facility, it is exempted from
the requirements of section 215.69
However, the Commission observes that
numerous 115 kV and 138 kV
transmission lines in the Western
Interconnection often are the only
pathway available between various load
centers and networked points.70 Other
network points are electrically and
physically remote from each other and
have the potential for parallel flows
between two transmission paths, some
at different voltage levels and others at
the same voltage. Analyzing how the
flows split during normal, outage and
emergency conditions, as well as
implications to system constraint, could
lead to a conclusion that such facilities
are improperly labeled as local
distribution.
55. Snohomish argues that the
Commission errs in focusing on voltage
rather than the characteristics of the
facilities. However, in the first instance,
the Commission’s suggested approach
uses NERC’s current definition, which
includes a 100 kV threshold, as a
baseline for determining which facilities
are included in the bulk electric system.
As discussed below, we view a voltage
threshold as an initial proxy for
determining where the line between
local distribution and transmission lies.
We agree with Snohomish that it is
important to consider additional facility
characteristics in order to make a final
determination regarding which facilities
are included in the bulk electric system.
56. The Commission notes that while
the events cited in Order No. 743
occurred in the Eastern Interconnection,
the underlying concerns are applicable
to the nation as a whole. Currently,
NERC and the Commission do not have
oversight of regional bulk electric
system classification decisions. If all
facilities necessary for reliable operation
are not subject to the Reliability
Standards, the effectiveness of the
Reliability Standards is undermined.
57. Snohomish’s concern that Order
No. 743 would put an end to the WECC
Bulk Electric System Definition Task
Force is unfounded. The Commission
clarifies that our intent in requiring the
ERO to ‘‘eliminate the regional
discretion’’ from the current definition
was to prevent the regions from
69 16
U.S.C. 824o(a)(1).
715 submissions.
70 Form
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16271
modifying the regional bulk electric
system definition without Commission
or ERO oversight. As noted elsewhere,
WECC may petition for a regional
variation, if justified, through the
process outlined in Order No. 672.71
58. In response to Snohomish’s
question concerning local distribution,
we reiterate that facilities used for local
distribution are excluded from the BulkPower System definition under section
215, and thus are excluded from the
bulk electric system. With respect to
changing the 100 kV threshold in the
approved definition, the Commission
did not direct such a change.
59. Similarly, we reiterate that Order
No. 743 does not affect the GOTO Task
Force’s activities; however, the task
force members may submit their
comments and report to NERC for its
consideration as NERC develops an
exemption process.
60. We understand from the Public
Power Council’s comments that most
Public Power Council members owning
or operating 115 kV facilities are not
classified as transmission owners or
operators due to the fact that their
facilities are radial from one
transmission supply and serving only
load. Such facilities currently are
excluded from registration and we
believe would appropriately be
excluded in an acceptable revised bulk
electric system definition.
D. Bulk-Power System v. Bulk Electric
System
61. APPA and TANC request
clarification that the Commission is not
now making a determination as to
whether the Bulk-Power System is
broader than the bulk electric system
and is preserving for future proceedings
the rights of parties to challenge such a
determination. According to APPA, the
Final Rule appears to track the statutory
definition of Bulk-Power System, i.e.,
‘‘all facilities necessary to operate the
interconnected transmission network,’’
in framing its directive to NERC to
revise the definition of bulk electric
system. APPA also points to language in
Order No. 743 that it believes suggests
that the Commission considers that the
statutory definition of Bulk-Power
System may be broader than the bulk
electric system.72 APPA states that, to
preserve its legal rights on the matter, it
seeks ‘‘limited clarification’’ that the
Commission is not determining that the
statutory Bulk-Power System definition
extends beyond the bulk electric system
71 See Order No. 672, FERC Stats. & Regs. ¶
31,204 at P 291.
72 APPA at 5, quoting Order No. 743133 FERC ¶
61,150 at P 36, 41, and 100.
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definition as NERC is directed to revise
it in this proceeding. In the alternative,
if the Commission denies clarification,
APPA seeks rehearing that ‘‘given the
Final Rule’s directions to NERC to
define [bulk electric system] in a
manner that tracks, virtually word-forword, the statutory [Bulk-Power System]
definition, the Commission’s continued
suggestion that the [Bulk-Power System]
definition may reach further than the
[bulk electric system] would be arbitrary
and contrary to the express terms of the
statute.’’73
62. Based on similar concerns,
NRECA requests clarification, or in the
alternative rehearing, that the statutory
definition of Bulk-Power System and
the definition of bulk electric system are
synonymous. NRECA points to
provisions of the NERC Rules of
Procedure that reference the Bulk-Power
System to demonstrate such
convergence. NRECA also contends that
the language of section 215 and the
statute’s legislative history, and prior
usage of the two terms, supports its
position.
Commission Determination
63. The Commission grants APPA and
TANC’s requests for clarification. We do
not see any useful purpose that would
be served by defining the term BulkPower System in this proceeding, and
decline to do so. Accordingly, we
dismiss as premature NRECA’s request
for clarification, or in the alternative,
rehearing.
E. Identification of Facilities Used in
Local Distribution
64. In Order No. 743, the Commission
recognized that the ERO would need to
establish whether a particular facility is
local distribution or transmission, and
directed the ERO to develop a means to
make such a determination.74
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Comments
65. Consumers Energy, Exelon and
Portland General request clarification
that NERC’s evaluation of how to
classify facilities should consider prior
distribution classifications. Consumers
Energy and Portland General seek
clarification on the role of the Order No.
888 Seven Factor Test in determining
whether facilities are classified as ‘‘local
distribution facilities’’ and the impact of
a prior Seven Factor Test
determination.75 Consumers seeks
73 APPA
at 7–8.
P 37.
75 See Promoting Wholesale Competition Through
Open Access Non-Discriminatory Transmission
Services by Public Utilities; Recovery of Stranded
Costs by Public Utilities and Transmitting Utilities,
Order No. 888, FERC Stats. & Regs. ¶ 31,036 (1996),
74 Id.
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clarification whether facilities in excess
of 100 kV that have explicitly been
found by the Commission to be local
distribution under the Seven Factor Test
will automatically be excluded from the
bulk electric system or will they need to
go through the exemption process.
Consumers Energy further asks whether,
if the owner of such facilities must
apply for an exemption, the earlier
Seven Factor finding provides a
presumption that the facility should be
excluded. Exelon insists that a facility
can be classified as either local
distribution or bulk transmission—but
not both.
66. EEI and Portland General request
clarification that the term ‘‘used in local
distribution’’ does not have different
meanings under sections 201(b)76 and
215 of the FPA and that the Final Rule
does not affect other determinations of
what facilities are considered ‘‘used in
local distribution’’ and thus outside of
the Commission’s jurisdiction. EEI
argues that since Congress used the
same terminology in defining the
Commission’s jurisdiction in both
sections 201 and 215, it must have
intended the words to have the same
meaning. EEI seeks clarification that
previous or future regulatory decisions
regarding local distribution facilities can
serve as an exemption criterion, and
states that such clarification will better
align jurisdictional determinations
under the FPA. Portland General argues
that the Commission does not have the
flexibility to interpret ‘‘facilities used in
local distribution’’ to mean two different
things in two different parts of the FPA.
Specifically, Portland General argues
that the Commission ‘‘must
acknowledge and give effect to
established FPA Section 201(b)
precedent regarding the identification of
‘local distribution’ facilities, and must
recognize that Congress intended the
same ‘local distribution’ facilities to be
exempt from Commission jurisdiction
under Sections 201(b) and 215(a) of the
FPA.’’77
Commission Determination
67. Although local distribution
facilities are excluded from the
definition, it still is necessary to
determine which facilities are local
distribution, and which are
transmission. Whether facilities are
order on reh’g, Order No. 888–A, FERC Stats. &
Regs. ¶ 31,048 (1997), order on reh’g, Order No.
888–B, 81 FERC ¶ 61,248, order on reh’g, Order No.
888–C, 82 FERC ¶ 61,046 (1998), aff’d in relevant
part sub nom. Transmission Access Policy Study
Group v. FERC, 225 F.3d 667 (D.C. Cir. 2000), aff’d
sub nom. New York v. FERC, 535 U.S. 1 (2002).
76 16 U.S.C. 824.
77 Portland General at 10.
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used in local distribution will in certain
instances raise a question of fact, which
the Commission has jurisdiction to
determine.78 The Commission
envisioned that the process of
identifying which facilities are local
distribution and which are transmission
likely would require more than one
step. Under the methodology the
Commission proffered, the 100 kV
bright-line threshold would serve as the
initial proxy for determining which
facilities are local distribution, and
which are transmission. The Final Rule
provides ample support for the
reasonableness of a 100 kV threshold,
not the least of which is that the ERO’s
definition of bulk electric system
currently utilizes a general 100 kV
threshold.79 The Commission
recognized, however, that it would be
necessary to identify any local
distribution that is improperly included,
and conversely to identify any
transmission that is improperly
excluded, by the proxy.
68. The Commission clarifies that the
statement in Order No. 743,
‘‘determining where the line between
‘transmission’ and ‘local distribution’
lies * * * should be part of the
exemption process the ERO develops’’80
was intended to grant discretion to the
ERO, as the entity with technical
expertise, to develop criteria to
determine how to differentiate between
local distribution and transmission
facilities in an objective, consistent, and
transparent manner. This mechanism
will allow the ERO to maintain an
inventory of the transmission facilities
subject to the mandatory Reliability
Standards, and to exclude local
distribution facilities from the bulk
electric system definition by applying
the criteria. Once NERC develops and
submits its proposal to the Commission,
the Commission will, as part of its
evaluation of the proposal, determine
whether the process developed
adequately differentiates between local
distribution and transmission.
69. We agree with Consumers Energy,
Portland General and others that the
Seven Factor Test could be relevant and
possibly is a logical starting point for
determining which facilities are local
distribution for reliability purposes,
while also allowing NERC flexibility in
78 See, e.g., California Pacific Electric Company,
LLC, 133 FERC ¶ 61,018 at n.59 (2010) (‘‘The
Supreme Court has determined that whether
facilities are used in local distribution is a question
of fact to be decided by the Commission.’’), citing
FPC v. Southern California Edison Co., 376 U.S.
205, 210 n.6 (1964).
79 See, e.g., Order No. 743, 133 FERC ¶ 61,150 at
P 73, 85.
80 Order No. 743, 133 FERC ¶ 61,150 at P 37.
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applying the test or developing an
alternative approach as it deems
necessary.
70. With respect to Consumers
Energy’s request for clarification
regarding prior Seven Factor Test
determinations qualifying for automatic
exclusion, the Commission reiterates
that we have granted NERC discretion to
develop a means to differentiate
between local distribution and
transmission facilities, which NERC will
submit to the Commission for review
and approval. Consequently, we leave to
NERC in the first instance questions
about if and how the Seven Factor Test
should be considered in differentiating
between local distribution and
transmission facilities.
71. Our purpose in moving away from
the proposal in the NOPR was to
provide NERC with the greatest amount
of flexibility to utilize its technical
expertise and processes in developing
an appropriate exemption process to
complement a revised definition of
‘‘bulk electric system.’’ Considerations
regarding the Seven Factor Test and its
usefulness in a NERC-designed
exemption process are initially for
NERC to decide in response to our
directive in Order No. 743. As we said
in Order No. 743, ‘‘allowing the ERO to
develop an appropriate exemption
process should provide interested
stakeholders an opportunity to
participate in the development of the
process.’’81 Consumers Energy, Portland
General and others can raise any
concerns with respect to use of the
Seven Factor Test or any other concern
during the development of the
exemption process. Under the
exemption process the Commission
ultimately approves, once a facility is
classified as local distribution, the
facility will be excluded from the bulk
electric system unless changes to the
system warrant a review of the
determination.
72. We decline to provide the
clarification EEI and Portland General
request regarding the use of the term
‘‘used in local distribution’’ in FPA
sections 201(b) and 215, as we find the
request premature. Order No. 743 tasked
NERC, as the entity with technical
expertise, with developing a process for
differentiating between local
distribution and transmission facilities
to apply in the reliability context. Once
NERC develops and submits a proposed
methodology, we will evaluate whether
the proposal results in any conflicts
with the statutory language.
81 Order
No. 743, 133 FERC ¶ 61,150 at P 112.
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F. Exemption Process
73. Order No. 743 directed NERC to
develop a process for exempting
facilities operated at or above 100 kV
that are not necessary for operating the
transmission grid. The Final Rule
declined to dictate the substance of the
exemption process, leaving this task to
the ERO. This would provide interested
stakeholders an opportunity to
participate in developing the process.
The Final Rule did identify several
matters or concerns to be addressed in
an acceptable exemption process. The
Commission asked the ERO to 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 and any
related changes to its Rules of
Procedures that may be required to
implement the exemption process.
Numerous petitioners seek rehearing
and clarification regarding the
exemption process discussed in the
Final Rule.82
1. Exclusion of Facilities Used in Local
Distribution
74. Western Petitioners and Portland
General seek rehearing that the
exemption process developed by the
ERO should not apply to facilities used
in local distribution. Western
Petitioners and Portland General state
that facilities used in local distribution
are not subject to section 215. Thus,
they argue that the ERO lacks authority
to subject local distribution facilities to
an exemption process. According to
Western Petitioners, subjecting such
facilities to an exemption process
developed by the ERO, and allowing the
ERO to determine ‘‘jurisdictional
exemptions’’ for facilities not subject to
section 215 would ‘‘eviscerate state
jurisdiction over numerous local
facilities, in direct contravention of
Congress’ intent.’’83 For its part,
Portland General argues that, by
directing NERC to review facilities over
100 kV currently designated as local
distribution under the Seven Factor Test
and ‘‘by pushing the ERO to recognize
a bright-line presumption threshold that
was expressly rejected in Order No. 888,
the Commission is clearly departing
82 As discussed further below, the Commission
uses the term ‘‘exclusion’’ herein when discussing
facilities expressly excluded by the statute (i.e.,
local distribution) and the term ‘‘exemption’’ when
referring to the exemption process NERC will
develop for use with facilities other than local
distribution that may be exempted from compliance
with the mandatory Reliability Standards for other
reasons.
83 Western Petitioners at 12, quoting Detroit
Edison Co. v. FERC, 334 F.3d at 54.
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16273
from its existing precedent, under
which these same facilities have been
determined to be ‘local distribution’
facilities exempt from regulation under
Section 215.’’84
Commission Determination
75. As the Commission explained
above, we agree that local distribution
facilities are not subject to FPA section
215. However, we disagree with
Western Petitioners and Portland
General that it is outside our
jurisdiction to determine which
facilities are local distribution and
therefore excluded from the bulk
electric system. We have in the first
instance the authority to determine the
scope of our jurisdiction.85
76. The Commission notes some
confusion regarding ‘‘exclusions’’ versus
‘‘exemptions.’’ We understand that a
facility that is excluded would not have
to go through any process at NERC to
determine applicability. On the other
hand, where an entity applies to NERC
to seek to exempt its facility from the
bulk electric system, NERC would
follow an exemption process. With that
understanding, we clarify that, as
discussed herein, we envision that the
process for determining which facilities
will be included under the bulk electric
system will involve several steps. NERC
will develop criteria for determining
whether a facility that falls under the
definition of bulk electric system may
qualify for exclusion. If, for example,
the application of the criteria clearly
indicates that a facility is local
distribution, the facility is excluded,
and no process before the ERO is
required. If application of the NERC
criteria does not lead to a definitive
result, the entity could apply for an
exemption, invoking a factual inquiry
before the ERO to determine the proper
categorization of facilities.
2. Maintaining a List of Excluded
Facilities
77. Similarly, Western Petitioners
challenge the suggestion in the Final
Rule that the ERO maintain a list of
excluded facilities, including local
84 Portland
General at 14.
e.g., Nine Mile Point Nuclear Station LLC
v. Niagara Mohawk Power Corp., 110 FERC ¶
61,033, at P 30 & n.31 (2005), aff’d, 452 F.3d 822
(D.C. Cir. 2006); accord New York v. FERC, 535 U.S.
1, 22–23 (2002) (holding that the Commission was
within its authority to establish a seven-factor test
to determine which facilities are local distribution
facilities that fall outside of the Commission’s
jurisdiction pursuant to FPA section 201). Cf.
Western Massachusetts Electric Co., 61 FERC ¶
61,182, at 61,661 (1992), aff’d, 165 F.3d 922, 926
(D.C. Cir. 1999) (concluding the Commission may
examine contracts relating to transactions which
may be subject to its jurisdiction prior to making
its determination as to jurisdiction).
85 See,
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distribution facilities, arguing that the
establishment of a rule to maintain such
a list is beyond NERC’s statutory
authority. They argue that nothing in
FPA section 215 vests the ERO with
oversight of facilities used in
distribution, even for the purpose of
maintaining a list of exempt facilities.
Commission Determination
78. The Commission agrees with
Western Petitioners that section 215
does not grant the ERO oversight of
facilities used in local distribution.
However, as the Commission has
explained, we have jurisdiction to
determine which facilities are local
distribution, and which are
transmission. In order to exercise such
oversight, including the appropriate
application of the ERO’s exemption
determinations, it is important to have
an inventory of facilities.86
79. Once the ERO develops the
inventory of facilities by applying the
process the Commission ultimately
approves, the Commission has
authority, in its ERO oversight role, to
review the determinations to ensure
consistent application of the process
and the accuracy of the resulting
inventory. Such a review necessarily
includes reviewing not only the
inventory of facilities ultimately
classified as transmission, but also those
excluded as local distribution,
particularly in instances where the
decision was a close call. In performing
such a review, the Commission is not
inappropriately overseeing local
distribution facilities but, rather, is
reviewing the ERO’s application of the
process for drawing the line between
local distribution and transmission,
which is within our authority under
section 215 of the FPA.
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3. Exemption v. Exclusion of ‘‘Radials
To Load’’ Facilities
80. In Order No. 743, the Commission
reiterated that we do not seek to modify
the second part of the current NERC
bulk electric system definition, which
states that ‘‘[r]adial transmission
facilities serving only load with one
transmission source are generally not
included in this definition.’’ 87 The
Commission also suggested that the ERO
could also track exemptions for radial
facilities.88
Comments
81. APPA, TANC, NRECA and TAPS
request clarification that radial
transmission facilities serving only load,
86 Order
No. 743, 133 FERC ¶ 61,150 at P 117.
No. 743, 133 FERC ¶ 61,150, at P 55.
88 Id. P 119.
87 Order
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i.e., radials to load, with one
transmission source may be excluded
from the bulk electric system definition
and entities with such facilities need
not go through an exemption process.
TAPS and APPA state that exclusion of
radials to load, rather than inclusion
subject to exemption, is consistent with
section 215 of the FPA. TAPS argues
that the Final Rule makes no attempt to
demonstrate that radials to load are
among the ‘‘facilities necessary to
operate an interconnected network’’ that
the Commission directed NERC to
include in the bulk electric system
definition. APPA explains that a 20 MW
distribution utility that owns a 115 kV
radial to load is likely not to have any
contact with NERC since the utility’s
load is radial and below the threshold
for NERC registration. APPA expresses
concern that, pursuant to the Final Rule,
such a utility could now have to incur
the time and resources necessary to
demonstrate that it falls within an
exemption. TAPS and APPA contend
that subjecting currently-excluded
‘‘radial to load’’ to an exemption process
would create an unnecessary burden on
industry, particularly small entities, as
well as NERC and the Regional Entities.
Likewise, NRECA seeks clarification
that the Commission did not intend that
the owner of every currently-excluded
facility operated at above 100 kV reapply for an exclusion or exemption and
that the ERO conduct a de novo review
of such facilities. NRECA contends that
such an approach would unreasonably
burden the resources of utilities, create
a huge backlog that slows the exemption
process, and denies the ERO the ability
to exercise its judgment in the matter.
82. For the same reasons, TAPS also
seeks clarification that the Commission,
in suggesting that the ERO establish a
mechanism for reporting and tracking
exempted radial facilities, did not
intend to include excluded radial to
load. TAPS contends that the Final Rule
does not support the need for such
reporting and tracking, and that the
burden to industry and the ERO is not
justified. TAPS states that it agrees that
radial facilities outside the current bulk
electric system definition, i.e., those that
are not ‘‘radial transmission facilities
serving only load with one transmission
source,’’ that still warrant exclusion,
would be appropriate for an exemption
process and the suggested tracking.
83. Consumers Energy, noting that the
current definition of bulk electric
system excludes ‘‘radial transmission
facilities serving only load with one
transmission source,’’ requests
clarification whether the exclusion
applies to a radial line with only one
transmission source that is designed to
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serve load, but also serves ‘‘incidental
small generation.’’ According to
Consumers, such situations are
becoming more common with the
interconnection of small distributed
renewable generation. Consumers
Energy asks how much incidental
generation a line could serve and
continue to meet the bulk electric
system radial line exclusion.
Commission Determination
84. In Order No. 743, the Commission
directed the ERO to develop an
exemption process and made clear that
‘‘we will not dictate the substance or
content of the exemption process
* * *.’’ 89 Thus, while the Commission
stated that the ERO should develop an
exemption process that includes ‘‘clear,
objective, transparent, and uniformly
applicable criteria’’ for determining
exemptions, the Commission otherwise
left it to the ERO’s discretion to develop
an appropriate exemption process,
which the Commission will review. Any
exemption of radial facilities is not
based on a statutory requirement, unlike
exclusion of local distribution.
However, the Commission believes that
certain categories of radial facilities may
lend themselves to an ‘‘exclusion’’
process as described above (i.e., once
identified as belonging in a certain
radial category, the facilities could be
excluded without further review). For
example, should the revised bulk
electric system definition maintain the
exclusion of radial facilities serving
only load from one transmission source,
these types of facilities easily could be
excluded without further analysis.
85. We believe that, in general, the
decision whether, and in what
circumstances, to apply an exemption
versus exclusion process for radial to
load facilities is largely a matter of
balancing between, on the one hand,
administrative ease, e.g., NERC having
to review thousands of exemptions for
facilities outside the NPCC region that
previously were excluded as radial and,
on the other hand, assuring that
facilities necessary for operation of an
interconnected grid are not
inadvertently excluded. That being said,
we believe that the ERO should balance
these matters when developing an
appropriate process. Likewise, with
regard to NRECA’s request to clarify that
the Commission does not seek to require
NERC or the regions to conduct a de
novo review of all exemptions granted
to date, we did not require a de novo
review and leave an appropriate review
process to the ERO.
89 Id.
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86. The Commission clarifies that
Order No. 743 granted NERC discretion
to make a determination regarding
whether to exclude or exempt radial
facilities. One consideration in this
regard is whether an exclusion process
will avoid NERC having to review
thousands of exemptions for facilities
outside the NPCC region that previously
were excluded as radial.
87. Additionally, as the Commission
noted, commenters have many ideas
about what types of facilities should be
considered ‘‘radial.’’ 90 NERC can
consider whether these facilities should
be candidates for exemption.91 Any
expansion of the definition of radial
facilities beyond the approved
definition must be supported with a
technical analysis.
88. With respect to Consumers’
request for clarification regarding how
much incidental generation a line could
serve and continue to meet the bulk
electric system radial line exclusion,
this is an issue that should be raised
with NERC as it develops criteria for
determining what is considered radial.
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4. Development of Exemption Process
Through NERC Reliability Standards
Development Process
89. While agreeing with the
Commission’s directive that NERC
develop revisions to the bulk electric
system definition through NERC’s
Reliability Standards Development
Process, NRECA requests clarification,
or in the alternative rehearing, that
NERC also must develop criteria for
exemptions through the Standards
Development Process. NRECA
maintains that exemptions from the
bulk electric system are as much a part
of the Reliability Standards as the
definition itself, as both determine the
Standards’ scope and applicability.
According to NRECA, the purely
procedural aspects of an exemption
process can be developed by NERC and
included in the Rules of Procedure.
However, NRECA contends that the
development of exemption criteria is a
‘‘core’’ technical task that requires use of
the Reliability Standards Development
Process.
Commission Determination
90. Given that the decision as to how
to proceed in response to Order No. 743
rests first with NERC, we decline to
provide the clarification requested by
NRECA at this time. We explained in
Order No. 743 that the NERC Glossary
(which includes the definition of bulk
electric system) is part of the Reliability
Standards, and thus changes to the
Glossary should be developed through
the Reliability Standards Development
Process.92 However, although the
exemption process certainly will play a
role in determining which facilities are
included in the bulk electric system, the
process is not part of the definition, nor
part of any Reliability Standard.
Accordingly, the Commission leaves the
decision as to how to proceed in
response to its directive to NERC in the
first instance. The Commission expects,
as indicated in Order No. 743, that
NERC will provide ample opportunity
for stakeholder input into the exemption
process regardless of whether NERC
determines to proceed using the
Reliability Standard Development
Process or by amending the Rules of
Procedure. Accordingly, the
Commission denies NRECA’s rehearing
request on this matter.
5. Compliance While an Exemption
Application Is Pending
91. NRECA seeks clarification that
currently unregistered entities that may
be required to seek an exemption for
facilities under the revised bulk electric
system definition will not be required to
register and thereafter comply with
Reliability Standards until a final
decision is made to deny the application
for exemption. NRECA, noting that the
Commission indicated that it did not
expect the Final Rule to result in many
additional facilities outside of the NPCC
region becoming subject to Reliability
Standards,93 states that this observation
is particularly true for currently-exempt
facilities in the other seven regions.
NRECA contends that it is unreasonable
to require an entity to expend the
financial and staff resources needed to
develop a compliance program when
the ERO may ultimately determine that
the facilities are exempt.
92. In a related vein, NRECA requests
clarification that the ERO should have
the flexibility to propose a transition
process that it deems feasible and
appropriate, not necessarily a hard
deadline of 18 months after Commission
approval.
Commission Determination
93. As the Commission indicated in
the Final Rule, the transition period is
intended to allow a reasonable period of
time for the affected entities to achieve
compliance with respect to facilities
that are subject to the mandatory
Reliability Standards for the first time.94
We agree with NRECA that affected
entities should not be required to take
costly steps to comply with the
Reliability Standards prior to the ERO’s
initial determination on an exemption
request. However, as indicated in Order
No. 743, ‘‘we expect that the transition
periods will be long enough for
exemption requests to be processed and
to allow entities to bring newlyincluded facilities into compliance prior
to the mandatory enforcement date.’’ 95
We reiterate that we do not anticipate a
large number of exemption requests
arising outside NPCC.96 Thus, our
expectation remains that NERC should
be able to process any exemption
requests in a timely manner, allowing
any entity denied an exemption to come
into compliance with the relevant
Reliability Standards within the
transition period.
94. With respect to the length of the
transition period, as discussed in the
Final Rule, we based our determination
to establish an 18-month transition
period on ReliabilityFirst’s prior
experience in adopting a revised bulk
electric system definition in that region,
and continue to believe it is a
reasonable transition period.97
Additionally, we noted that the ERO
may request a longer transition period
based on a specific justification. This
provides sufficient flexibility should the
ERO determine that the 18-month
transition period is insufficient.
6. Step-Down Transformers
95. The Final Rule, in response to a
ReliabilityFirst request for clarification
that 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, stated that ‘‘we
agree with [ReliabilityFirst’s] developed
delineation point with regard to ‘stepdown’ transformers, but note that these
kinds of refinements can and should be
addressed as part of the NERC
exemption process.’’ 98
96. EEI, Consumers and Wisconsin
Electric request clarification that this
statement concerning the treatment of
step-down transformers was offered to
provide guidance and not intended to
prejudge the exemption criteria to be
developed by the ERO. EEI claims that
many state commissions treat step-down
transformers with a low-side winding
below 100 kV as under state rate
jurisdiction. Wisconsin Electric
contends that, while the suggested
No. 743, 133 FERC ¶ 61,150 at P 55.
91 Id.
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15:27 Mar 22, 2011
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95 Id.
93 NRECA
90 Order
92 Id.
96 Id.
P 29–30.
at 20–21, citing Order No. 743, 133
FERC ¶ 61,150 at P 131, 169.
94 Order No. 743, 133 FERC ¶ 61,150 at P 131.
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P 132.
P 131.
97 Id.
98 Id.
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Federal Register / Vol. 76, No. 56 / Wednesday, March 23, 2011 / Rules and Regulations
approach would simplify auditing, it
would impose burdens on registered
entities without a commensurate
enhancement to reliability.
97. Consumers Energy suggests that
the characteristics of the ‘‘low side’’ of a
facility be considered when determining
whether an entire facility is considered
part of the bulk electric system.
Consumers states that it has facilities
with a 138 kV high side voltage and a
low side ranging from 46 kV to 2.5 kV,
and contends that the low side provides
service only for local distribution.
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Commission Determination
98. Order No. 743 directed the ERO to
develop an exemption process, and
specifically declined to ‘‘dictate the
substance or content of the exemption
process.’’ 99 However, we provided
guidance, stating that the process
should include clear, objective,
transparent and uniformly applicable
criteria for exemption of facilities that
are not necessary for operating the
interconnected transmission system.
Accordingly, the Commission grants
EEI’s, Consumers Energy’s and
Wisconsin Electric’s requests for
clarification that the discussion
regarding which facilities should or
should not be included in the bulk
electric system definition was intended
to provide guidance, not to prejudge
what should be included in the
exemption criteria. Therefore, the
Commission declines to provide the
specific clarifications requested
regarding treatment of various types of
step down transformers.
7. Process for Including Sub-100 kV
Facilities
99. In the rulemaking, ERCOT
commented that facilities operated
below 100 kV generally are not
considered part of the bulk electric
system, but can be included if identified
as a critical facility by a Regional Entity.
ERCOT suggested that, similar to the
development of an exemption process to
consider applications for exemption of
facilities above 100 kV, the Commission
should consider imposing a process for
inclusion of critical facilities below 100
kV. In Order No. 743, the Commission
responded that it agrees with ERCOT’s
suggestion and ‘‘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.’’ 100
100. Western Petitioners state that the
Commission should clarify that all local
distribution facilities, including those
99 Id.
P 114.
P 121.
100 Id.
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15:27 Mar 22, 2011
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operated at below 100 kV which may be
deemed ‘‘critical’’ by a Regional Entity,
are expressly excluded under section
215 of the FPA.
101. APPA and TANC request
clarification that, in suggesting that
NERC formalize the criteria for
including critical facilities operated
below 100 kV in developing the
exemption process, the Commission was
not seeking to alter NERC’s Statement of
Registry Criteria (Registry Criteria) or
shift the evidentiary burdens. APPA
notes that the current Registry Criteria
include a provision that allows the
registry of entities that own critical
facilities below the 100 kV threshold.101
APPA expresses concern that a parallel
process developed in conjunction with
the exemption process might be
construed as a departure from the
Registry Criteria, which places the
burden on NERC and the Regional
Entities to demonstrate the need to
include facilities operated at below 100
kV as part of the bulk electric system.
APPA supports a process that enhances
consistency among Regional Entity
determinations and ensures better due
process to would-be registered entities
with potentially critical facilities
operated at below 100 kV facilities, and
seeks clarification that this
understanding of the Commission’s
statement is correct.
Commission Determination
102. The Commission clarifies that
Order No. 743 did not intend to alter the
Registry Criteria, shift the evidentiary
burden for registration, or otherwise
address matters involving the Registry
Criteria. Indeed, the Statement of
Compliance Registry Criteria currently
provides that the Regional Entities may
propose registration of entities that do
not meet the registry criteria if the
Regional Entity believes and can
reasonably demonstrate that the
organization is a bulk power system
owner, or operates, or uses bulk power
system assets, and is material to the
reliability of the bulk power system.102
However, we note that while the
Registry Criteria will not change, it is
possible that additional facilities may
come under the revised definition and
some entities may be required to register
for the first time.
103. The Commission agrees with
APPA that underlying our suggestion
101 APPA at 11, citing Registry Criteria, section
II.D.2 (providing for registration of ‘‘[a]n entity that
owns/operates a transmission element below 100
kV associated with a facility that is included on a
critical facilities list that is defined by the Regional
Entity’’).
102 Statement of Registry Criteria at 10 (Note 1 to
Registry Criteria).
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that NERC consider an inclusion
process for critical facilities operated
below 100 kV was a concern that
Regional Entities make such
determinations in an appropriate and
consistent manner, according to
developed criteria, which should better
ensure due process.
104. We agree with Western
Petitioners that, as stated elsewhere
herein, the Commission does not have
jurisdiction over facilities that are
determined to be local distribution
through the process NERC develops and
we approve.
G. Requests for Revised Regulatory
Flexibility Act Analysis
105. In Order No. 743, the
Commission stated that the Final Rule
will not have a significant economic
impact on a substantial number of small
entities since most transmission owners,
transmission operators and transmission
service providers do not fall within the
definition of small entities. Further, the
Commission suggested that the ERO
create an appropriate exemption process
and that this process will further ensure
that the Final Rule minimally affects
small entities. As we noted in the
NOPR, the Commission estimated that
approximately four of the 33
transmission owners, transmission
operators and transmission services
providers identified in the U.S. portion
of the NPCC region may fall within the
definition of small entities.
Comments
106. APPA and NRECA request that
the Commission clarify that it will
perform a revised Regulatory Flexibility
Act analysis once the exemption process
has been developed by NERC and
approved by the Commission in order to
determine whether the Commission’s
finding that the Final Rule will not have
a significant economic impact on a
substantial number of small entities is
arbitrary. In particular, APPA and
NRECA assert that the Commission
erred by certifying that the Final Rule
will not have a significant economic
impact on a substantial number of small
entities, particularly in light of the
uncertainties of an as-yet-to-bedeveloped exemption process to
mitigate the impact of the Final Rule on
small entities. APPA and NRECA argue
that the Commission’s reliance on the
exemption process to be established by
NERC to support its Regulatory
Flexibility Act certification is not
justified. They assert that the ability of
the exemption process to minimize the
impact on small entities cannot be
assessed until the exemption process is
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developed by NERC and approved by
the Commission.
107. TANC requests clarification that
the Commission has not yet finalized its
Regulatory Flexibility Act analysis and
will not do so until NERC has submitted
a proposed exemption process.
108. Public Power Council, NYPSC
and Snohomish argue that
implementing the 100-kV threshold will
be enormously costly. Public Power
Council, for its part, argues that the
Commission’s rejection of evidence of
such increased compliance costs was
arbitrary and capricious since, inter alia,
Public Power Council did provide
specific assertions as to how the Final
Rule will have a significant economic
impact on small entities. The NYPSC
requests rehearing on whether the
Commission’s decision to direct NERC
to revise the bulk electric system
definition to include facilities operated
at 100 kV and above where the
Commission failed to determine
sufficient benefits in relation to the
costs, resulting in the imposition of
unnecessary costs without reliability
benefits, was arbitrary, capricious, and
an abuse of discretion. Snohomish states
that it and many other entities operating
in the Western Interconnection
provided evidence demonstrating that
imposition of the 100-kV threshold in
the Western Interconnection will result
of enormous compliance costs with no
benefit to reliability since the 115-kV
systems operated by these entities
generally are used only for local
distribution and their operation
therefore has little or no effect on the
interconnected bulk system.
Commission Determination
109. The Commission does not agree
with commenters that its Regulatory
Flexibility Act analysis was deficient,
and we continue to believe that our
suggested approach in Order No. 743
will not have a significant economic
impact on a substantial number of small
entities.103 With respect to comments
that we did not adequately consider the
costs of implementing a 100 kV
threshold, we note that the current bulk
electric system definition contains a
general 100 kV threshold. Thus, the
burden of our suggested proposal to
eliminate the regional discretion in the
current definition and maintain a brightline 100 kV threshold should be
minimal in all regions except NPCC.
Even within the U.S. portion of the
NPCC region, the Commission estimated
in the Final Rule that only four of the
33 transmission owners, transmission
operators and transmission service
103 Order
No. 743, 133 FERC ¶ 61,150 at P 169.
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15:27 Mar 22, 2011
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providers may fall within the definition
of small entities. We also believe that
the exemption process will further
ensure that the Final Rule minimally
affects small entities. Finally, we have
clarified on rehearing that NERC may
develop criteria to identify local
distribution facilities and certain
categories of radial facilities that qualify
for exclusion from the definition of the
bulk electric system and therefore do
not need to apply for exemption. For
these reasons the Commission rejects
the comments objecting to the
Commission’s determinations regarding
the cost of implementing a 100 kV
threshold.
110. However, the Commission will
grant APPA’s and NRECA’s request for
clarification in part. The Commission
clarifies that it will perform a new
Regulatory Flexibility Act analysis to
determine whether the revised bulk
electric system definition will have a
significant economic impact on small
entities when NERC submits its
proposed definition, criteria for
exclusion and the exemption process.104
We believe that the revisions NERC will
propose will be sufficiently different
from the initial NOPR proposal to
warrant additional review to ensure that
small entities are not unduly burdened.
16277
8371, TTY (202) 502–8659. E-mail the
Public Reference Room at
public.referenceroom@ferc.gov.
By the Commission.
Nathaniel J. Davis, Sr.,
Deputy Secretary.
[FR Doc. 2011–6779 Filed 3–22–11; 8:45 am]
BILLING CODE 6717–01–P
DEPARTMENT OF ENERGY
Federal Energy Regulatory
Commission
18 CFR Part 40
[Docket No. RM10–16–000; Order No. 749]
System Restoration Reliability
Standards
Federal Energy Regulatory
Commission, DOE.
ACTION: Final rule.
AGENCY:
Under section 215 of the
Federal Power Act, the Commission
approves three Emergency Operations
and Preparedness (EOP) Reliability
Standards, EOP–001–1 (Emergency
Operations Planning), EOP–005–2
(System Restoration from Blackstart
Resources), and EOP–006–2 (System
Restoration Coordination) as well as the
III. Document Availability
111. In addition to publishing the full definition of the term ‘‘Blackstart
Resource’’ submitted to the Commission
text of this document in the Federal
for approval by the North American
Register, the Commission provides all
Electric Reliability Corporation (NERC),
interested persons an opportunity to
the Electric Reliability Organization
view and/or print the contents of this
certified by the Commission. The
document via the Internet through
FERC’s Home Page (https://www.ferc.gov) approved Reliability Standards require
transmission operators, generation
and in FERC’s Public Reference Room
during normal business hours (8:30 a.m. operators, and certain transmission
owners and distribution providers to
to 5 p.m. Eastern time) at 888 First
ensure that plans, facilities and
Street, NE., Room 2A, Washington, DC
personnel are prepared to enable system
20426.
restoration from Blackstart Resources
112. From FERC’s Home Page on the
Internet, this information is available on and require reliability coordinators to
establish plans and prepare personnel to
eLibrary. The full text of this document
enable effective coordination of the
is available on eLibrary in PDF and
system restoration process. The
Microsoft Word format for viewing,
printing, and/or downloading. To access Commission also approves the NERC’s
proposal to retire four existing EOP
this document in eLibrary, type the
Reliability Standards and a definition
docket number excluding the last three
that are replaced by the Standards and
digits of this document in the docket
definition approved in this Final Rule.
number field.
113. User assistance is available for
DATES: Effective Date: This rule will
eLibrary and the FERC’s Web site during become effective May 23, 2011.
normal business hours from FERC
FOR FURTHER INFORMATION CONTACT:
Online Support at 202–502–6652 (toll
Terence Burke (Legal Information),
free at 1–866–208–3676) or e-mail at
Office of the General Counsel, Federal
ferconlinesupport@ferc.gov, or the
Energy Regulatory Commission, 888
Public Reference Room at (202) 502–
First Street, NE., Washington, DC
20426, (202) 502–6498.
104 This analysis will determine if an Initial
David O’Connor (Technical
Regulatory Flexibility Analysis is required or if the
Information), Office of Electric
Commission can certify that the revised definition
Reliability, Division of Reliability
will not have a significant economic impact on a
substantial number of small companies.
Standards, Federal Energy Regulatory
PO 00000
Frm 00047
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SUMMARY:
E:\FR\FM\23MRR1.SGM
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]]>Agencies
[Federal Register Volume 76, Number 56 (Wednesday, March 23, 2011)]
[Rules and Regulations]
[Pages 16263-16277]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-6779]
-----------------------------------------------------------------------
DEPARTMENT OF ENERGY
Federal Energy Regulatory Commission
18 CFR Part 40
[Docket No. RM09-18-001; Order No. 743-A]
Revision to Electric Reliability Organization Definition of Bulk
Electric System
AGENCY: Federal Energy Regulatory Commission, DOE.
ACTION: Order on rehearing.
-----------------------------------------------------------------------
SUMMARY: The Commission denies rehearing and otherwise reaffirms its
determinations in Order No. 743. In addition, the Commission clarifies
certain provisions of the Final Rule. Order No. 743 directed the
Electric Reliability Organization (ERO) to revise the definition of the
term ``bulk electric system'' through the ERO's Reliability Standards
Development Process to address the Commission's policy and technical
concerns and ensure that the definition encompasses all facilities
necessary for operating an interconnected electric transmission network
pursuant to section 215 of the Federal Power Act.
DATES: Effective Date: This order on rehearing and clarification will
become effective March 23, 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 Engineering, Planning and Operations, 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:
Before Commissioners: Jon Wellinghoff, Chairman; Marc Spitzer,
Philip D. Moeller, John R. Norris, and Cheryl A. LaFleur.
I. Order on Rehearing
Issued March 17, 2011.
I. Introduction
1. On November 18, 2010, the Commission issued a Final Rule (Order
[[Page 16264]]
No. 743) \1\ directing the Electric Reliability Organization (ERO),
through the ERO's Reliability Standards Development Process, to revise
its definition of the term ``bulk electric system'' to address the
Commission's technical and policy concerns, including inconsistency in
application, lack of oversight and exclusion of facilities that are
required for the Reliable Operation of the interconnected transmission
network, and ensure that the definition encompasses all facilities
necessary for operating an interconnected electric transmission
network, pursuant to section 215 of the Federal Power Act (FPA).\2\ The
Commission stated that it believes 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, the Final Rule allowed
the ERO to develop an alternative proposal for addressing the
Commission's concerns with the present definition with the
understanding that any such alternative must be equally efficient and
effective \3\ as the Commission's suggested approach in addressing the
identified technical and other concerns, and may not result in a
reduction in reliability.
---------------------------------------------------------------------------
\1\ Revision to Electric Reliability Organization Definition of
Bulk Electric System, Order No. 743, 75 FR 72910 (Nov. 26, 2010),
133 FERC ] 61,150 (2010).
\2\ 16 U.S.C. 824o (2006).
\3\ 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).
---------------------------------------------------------------------------
2. In this order, we deny requests for rehearing of the Final Rule.
Further, we grant in part, and deny in part, requests for clarification
of the Final Rule, as discussed below.
A. Summary of Order No. 743
3. In Order No. 693, the Commission approved, with reservations,
the current North American Electric Reliability Corporation (NERC)
definition of the term ``bulk electric system.'' \4\ That definition
provides:
\4\ Order No. 693, FERC Stats. & Regs. ] 31,242 at P 75.
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.\5\
\5\ Id. n.47 (quoting NERC's definition of ``bulk electric
system'').
4. However, 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.\6\ In Order No. 743, the Commission returned to the issue. The
Commission identified several concerns with the current definition that
may compromise reliability. The Commission indicated that Order No.
743's aim 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.\7\ Thus, Order No. 743 directed the ERO to revise the definition
of ``bulk electric system'' through the NERC Standards Development
Process to address the Commission's concerns.\8\ Order No. 743 also
directed the ERO to develop an exemption process that includes clear,
objective, transparent and uniformly applicable criteria for exempting
facilities that are not necessary for operating the interconnected
transmission grid.\9\
---------------------------------------------------------------------------
\6\ Id. P 77.
\7\ Order No. 743, 133 FERC ] 61,150 at P 2.
\8\ Id. P 16.
\9\ Id. P 112-115.
---------------------------------------------------------------------------
5. The Commission stated that it believes the best way to address
the identified 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, the Commission specified that NERC may propose a different
solution that is equally efficient and effective as the Commission's
suggested 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.\10\
---------------------------------------------------------------------------
\10\ Id.
---------------------------------------------------------------------------
B. Requests for Rehearing
6. The following entities have filed timely requests for rehearing
or for clarification of Order No. 743: American Public Power
Association (APPA); Consumers Energy Company (Consumers); Edison
Electric Institute (EEI); Exelon Corporation (Exelon); National Rural
Electric Cooperative Association (NRECA); New York State Public Service
Commission (NYPSC); Portland General Electric Company (Portland
General); Public Power Council; City of Redding, California (Redding);
Public Utility District No. 1 of Snohomish County, Washington
(Snohomish); Transmission Access Policy study Group (TAPS); Western
Petitioners;\11\ Wisconsin Electric Power Company (Wisconsin Electric);
and Transmission Agency of Northern California (TANC).\12\
---------------------------------------------------------------------------
\11\ Blachly-Lane Electric Cooperative, Central Electric
Cooperative, Inc., Central Lincoln People's Utility District,
Clearwater Power Company, Consumers Power Inc., Coos-Curry Electric
Cooperative, Inc., Douglas Electric Cooperative, Fall River Rural
Electric Cooperative, Inc., Lane Electric Cooperative, Inc., Lincoln
Electric Cooperative, Inc., Lost River Electric Cooperative,
Northern Lights, Inc., Mason Public Utility District No. 3,
Northwest Public Power Association, Northwest Requirements
Utilities, Okanogan County Electric Cooperative, Inc., Pacific
Northwest Generating Cooperative, Public Utility District No. 1 of
Clallam County, Public Utility District No. 1 of Snohomish County,
Raft River Rural Electric Cooperative, Inc., Salem Electric
Cooperative, Salmon River Electric Cooperative, Inc., Umatilla
Electric Cooperative, Utah Associated Municipal Power Systems,
Washington Rural Electric Cooperative Association, and West Oregon
Electric Cooperative, Inc.
\12\ The California Public Utilities Commission (CPUC) filed
comments on January 25, 2011. The Commission rejects the CPUC's
comments as an untimely request for rehearing under Rule 713(b) of
the Commission's Rules of Practice and Procedure.
---------------------------------------------------------------------------
II. Discussion
A. Scope of Order No. 743 and Commission Directive
7. Section 215(d)(5) of the FPA authorizes the Commission to direct
the ERO to submit to the Commission a new or revised Reliability
Standard that addresses a specific matter identified by the
Commission.\13\ In Order No. 743, the Commission explained that this
authority also includes the authority to direct the ERO to revise the
definition of a term used in a Reliability Standard.
---------------------------------------------------------------------------
\13\ Order No. 743, 133 FERC ] 61,150 at P 29.
---------------------------------------------------------------------------
8. Pursuant to this authority, the Commission directed the ERO to
modify the definition of ``bulk electric system'' in order to address
certain technical and policy concerns identified by the Commission.\14\
Specifically, the Commission observed that Regional Entities currently
have broad discretion to define the parameters of the bulk electric
system in their regions, and that the exercise of this discretion has
led to inconsistencies in how facilities are classified within and
among regions, to
[[Page 16265]]
the effect that some facilities necessary to reliably operate the
interconnected transmission network have been excluded from the
obligation to comply with mandatory Reliability Standards. The
Commission stated that one means to address its 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.\15\ However, the Final Rule made clear, the ERO
may develop an alternative proposal for addressing the Commission's
concerns with the current definition and any such alternate proposal
must be equally efficient and effective as the Commission's suggested
approach for addressing the identified concerns, may not result in a
reduction in reliability, and must be supported with a technical
analysis that demonstrates and explains, with a technical record
sufficient for the Commission to make an informed decision, how it
provides the same level of reliability as the Commission's suggested
solution.\16\
---------------------------------------------------------------------------
\14\ Id. P 30.
\15\ Id.
\16\ Id. P 31, 74.
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1. Identifying the Specific Matter To Be Addressed
9. NRECA requests clarification, or in the alternative rehearing,
that the Commission seeks to resolve a narrow concern that ambiguity in
the bulk electric system definition and lack of backstop review at NERC
has permitted inconsistencies across regions, and that the Northeast
Power Coordinating Council (NPCC) in particular has not made all
facilities that could significantly affect reliability subject to the
Reliability Standards. NRECA expresses concern that the Final Rule
states in several places that NERC must address the Commission's
``technical and other concerns'' without specifying those concerns.\17\
NRECA asks that the Commission clarify the specific matter and present
a clear list of technical and other concerns to assist NERC in
developing appropriate and responsive solutions.
---------------------------------------------------------------------------
\17\ NRECA at 11; citing Order No. 743, 133 FERC ] 61,150 at P
16, 31 and 96.
---------------------------------------------------------------------------
10. NRECA further seeks clarification whether NERC, in exercising
its technical expertise, may choose to address the specific concerns
identified by the Commission through an alternative other than an
amendment to the definition of bulk electric system. NRECA points out
that, while Order No. 743 sets out a ``preferred solution,'' it also
allows the ERO to develop an alternative proposal for addressing the
Commission's concerns. NRECA states that it is not clear from the Final
Rule if the ERO has discretion whether and how it amends the definition
of bulk electric system, or only how to amend the definition. NRECA
seeks clarification, or in the alternative rehearing, that the ERO can
comply with the Final Rule by filing an alternative approach that does
not amend the definition, provided that the alternative addresses the
Commission's concerns with inconsistency, lack of oversight and
exclusion of facilities that are required for the reliable operation of
the interconnected transmission network. According to NRECA, denying
the ERO the ability to develop an alternative to amending the bulk
electric system definition is tantamount to the Commission prescribing
the text of a Reliability Standard and denies the ERO a full range of
options in addressing the specific matter identified by the Commission.
Commission Determination
11. We clarify that the specific issue the Commission directed the
ERO to rectify is the discretion the Regional Entities have under the
current bulk electric system definition to define the parameters of the
bulk electric system in their regions without any oversight from the
Commission or NERC.\18\ As we explained in the Final Rule, NPCC's use
of this discretion has resulted in an impact-based approach to defining
the bulk electric system that allows significant subjectivity in
application and thus creates anomalous results.\19\ While NPCC's use of
its discretion brought the problems with the current definition to our
immediate attention, the Commission's concern is potentially broader
because any region could use its discretion to define the bulk electric
system in a way that leads to similar inconsistent and anomalous
results.
---------------------------------------------------------------------------
\18\ Order No. 743, 133 FERC ] 61,150, at P 72.
\19\ Id. P 77-78.
---------------------------------------------------------------------------
12. We decline to provide the clarification NRECA requests
regarding NERC's ability to address the specific matter through means
other than revising the definition, and also deny rehearing on the
issue. As noted above, our concern with the current bulk electric
system definition is rooted in the unfettered discretion granted
therein to Regional Entities to define the term. Contrary to NRECA's
claim, it is well within our section 215(d)(5) authority to direct NERC
to address the specific issue we have identified--the overly broad
definition. We have not directed the ERO to revise the definition to
incorporate a specified result; rather, we require that the change
address our concerns.
2. Standard of Review
13. NRECA requests clarification that the Commission is not
imposing a higher standard of review in the Final Rule than permitted
by section 215 of the FPA. NRECA explains that the Final Rule allows
the ERO to develop an alternative to the Commission's suggested
approach provided that it is ``as effective as, or more effective than,
the Commission's proposed approach'' and must not ``result in a
reduction in reliability.'' \20\ NRECA contends that this standard of
review is not in the statute and, rather, that the Commission should
clarify that it will judge by the statutory provision that the proposal
provides for an ``adequate level of reliability.'' NRECA contends that
this phrase connotes a range of possible solutions. NRECA claims that
the Commission's approach, which allows the Commission's suggested
solution to serve as a benchmark for all subsequent proposals, suggests
a different, higher standard than ``adequate level of reliability.''
---------------------------------------------------------------------------
\20\ NRECA at 38, quoting Order No. 743, 133 FERC ] 61,158 at P
141.
---------------------------------------------------------------------------
Commission Determination
14. FPA section 215(d)(2) establishes the standard of review the
Commission must apply to ERO submissions with respect to the content of
Reliability Standards:
The Commission may approve, by rule or order, a proposed
reliability standard or modification to a reliability standard if it
determines that the standard is just, reasonable, not unduly
discriminatory or preferential, and in the public interest. The
Commission shall give due weight to the technical expertise of the
Electric Reliability Organization with respect to the content of a
proposed standard or modification to a reliability standard and to
the technical expertise of a regional entity organized on an
Interconnection-wide basis with respect to a reliability standard to
be applicable within that Interconnection, but shall not defer with
respect to the effect of a standard on competition. A proposed
standard or modification shall take effect upon approval by the
Commission.\21\
\21\ 16 U.S.C. 824o(d)(2).
As the statute specifies, the standard of review the Commission
must utilize is whether the proposed Reliability Standard or
modification to a Reliability Standard is ``just, reasonable, not
unduly
[[Page 16266]]
discriminatory or preferential, and in the public interest.''
15. We disagree with NRECA's assertion that section 215(c)(1)
establishes a standard of review the Commission must apply to ERO
submissions. Section 215(c) sets forth the criteria the Commission must
consider in certifying an ERO, and section 215(c)(1) specifies that one
of the considerations for certification is whether the ERO applicant
``has the ability to develop and enforce * * * reliability standards
that provide for an adequate level of reliability of the bulk-power
system.'' \22\
---------------------------------------------------------------------------
\22\ 16 U.S.C. 824o(c).
---------------------------------------------------------------------------
16. Certainly, whether a proposed Reliability Standard provides for
an adequate level of reliability is included in the factors used in
determining whether the proposal is just and reasonable, but it is not
the standard of review.\23\ The Commission's statement that any
alternative proposal must be ``as effective as, or more effective than,
the Commission's proposed approach'' and must not ``result in a
reduction in reliability'' provides guidance regarding the Commission's
view of what is necessary to produce not only an adequate level of
reliability but also a result that accords with the section 215(d)(2)
review criterion.\24\
---------------------------------------------------------------------------
\23\ 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 320-338, order on reh'g, Order No.
672-A, FERC Stats. & Regs. ] 31,212 (2006).
\24\ See Transmission Relay Loadability Reliability Standard,
Order No. 733-A, 134 FERC ] 61,127, at P 24-27 (2011) (stating that
the Commission's detailed guidance on a possible approach to address
its underlying concern, including a statement that any alternative
approach must be ``equally efficient and effective'' does not
establish a ``rebuttable presumption'' in favor of the Commission's
suggested approach).
---------------------------------------------------------------------------
B. Jurisdictional Issues
17. Entities claim that the Commission over-stepped its
jurisdiction in three ways. First, they contend that the Commission
exceeded its authority by requiring a bright-line 100 kV threshold for
determining which facilities are included in the bulk electric system.
Second, entities argue that Order No. 743 fails to recognize the
statutory exclusion of facilities used in local distribution of
electric energy. Third, entities claim that the Commission fails to
give due weight to the ERO's technical expertise. Several requests for
rehearing, such as the NYPSC, Public Power Council and Snohomish, merge
these arguments together in more global claims that the Final Rule is
in error and should be withdrawn.
1. 100 kV Bright-Line Threshold
18. The NYPSC and Public Power Council argue that the Commission's
decision to ``direct the ERO to define the bulk electric system as all
facilities operated at 100 kV and above'' is arbitrary and
capricious.\25\ They state that section 215(a) of the FPA explicitly
excludes facilities used in local distribution of electric energy.
Thus, the NYPSC reasons, ``by defining the bulk-power system as all
facilities operating at above 100 kV, the Commission exceeded its
jurisdiction by encompassing facilities that are clearly part of the
non-bulk power system * * *'' \26\ The NYPSC contends that the
Commission incorrectly assumes that a facility is considered part of
the bulk electric system simply because it is operated at or above 100
kV. The NYPSC recites evidence, presented in its Notice of Proposed
Rulemaking (NOPR) comments, that facilities in New York City do not
serve a bulk system function due to the high concentration of load
served by those lines. While noting that the Final Rule dismissed this
evidence, the NYPSC contends that ``it is invalid to conclude that all
facilities rated at 100 kV and above support the bulk-power system
based on a belief that `most' of those facilities are not involved in
local distribution.'' \27\ Similarly, Public Power Council and
Snohomish contend that the Final Rule, by mandating a 100 kV bright-
line test, will improperly classify many 115 kV distribution facilities
in the Western Interconnection as bulk electric system facilities.
---------------------------------------------------------------------------
\25\ NYPSC at 12; see also Public Power Council at 8-9.
\26\ NYPSC at 13.
\27\ NYPSC at 15.
---------------------------------------------------------------------------
19. The NYPSC notes that the Final Rule explained that entities
would have an opportunity to seek an exemption if they believe certain
facilities should not be included in the bulk electric system. Based on
this, the NYPSC claims that the Final Rule implicitly acknowledged that
various non-jurisdictional facilities are included within the
Commission's ``redefinition'' of bulk electric system. It also claims
that this approach is inappropriate, i.e., the Commission cannot assume
it has jurisdiction over facilities operated above 100 kV unless and
until an entity demonstrates otherwise. The NYPSC claims that the
Commission also conceded that the 100 kV threshold is overly broad
because ``several 115 and 138 kV facilities that some entities term as
`distribution' may be needed to reliably operate the interconnected
transmission system.'' \28\ According to the NYPSC, by stating that
these facilities ``may'' be needed for reliability of the
interconnected system, the Commission acknowledges that they may not be
needed. Similarly, Portland General argues that the Commission cannot
claim jurisdiction over any local distribution facilities and expresses
concern that the above language from the Final Rule wrongly suggests
that some local distribution facilities are jurisdictional under
section 215.
---------------------------------------------------------------------------
\28\ NYPSC at 17, quoting Order No. 743, 133 FERC ] 61,150 at P
37.
---------------------------------------------------------------------------
Commission Determination
20. At the outset, the Commission emphasizes that Order No. 743 did
not mandate or direct NERC to adopt a 100 kV bright-line threshold.
Order No. 743 directed NERC to undertake the process of revising the
bulk electric system definition to address the Commission's concerns
about the broad discretion the current definition grants to Regional
Entities to modify the definition without Commission or ERO oversight,
and provided a suggested solution. Specifically, the Order directed the
ERO to revise the definition of bulk electric system ``through the NERC
Standards Development Process to address the Commission's concerns.''
\29\ The Commission stated its belief that one effective way to address
those concerns would be to eliminate the regional discretion contained
in the current definition, which allows Regional Entities to define the
term without Commission or ERO oversight; maintain the threshold
contained in the current definition, which includes all facilities
operated at or above 100 kV except defined radial facilities; and adopt
an exemption process and criteria for excluding facilities that the ERO
determines are not necessary to operate an interconnected electric
transmission network. The Final Rule, however, did not mandate this
approach as it further provided that NERC ``may propose a different
solution that is as effective as, or superior to, the Commission's
proposed approach.'' \30\
---------------------------------------------------------------------------
\29\ Order No. 743, 133 FERC ] 61,150 at P 16.
\30\ Id.
---------------------------------------------------------------------------
21. Order No. 743's approach is entirely within the Commission's
statutory authority and properly allows the ERO to develop the revised
bulk electric system definition using its technical expertise. We,
therefore, reject the requests for rehearing arising from the
inaccurate premise that the Commission mandated a 100 kV bright-line
threshold. Beyond the concerns
[[Page 16267]]
related to the Commission's authority, the substance of the arguments
raised by the NYPSC, Public Power Council, Snohomish and Western
Petitioners relate to the term ``used in local distribution'' and
differentiating between local distribution and transmission, which we
address below.
22. Further, we disagree with the NYPSC's claim that the Final Rule
implicitly acknowledges that various non-jurisdictional facilities are
included within the Commission's ``redefinition'' of bulk electric
system. As we clarify herein, regardless of the 100 kV threshold,
facilities that are determined to be local distribution will be
excluded from the bulk electric system. Further, NERC has yet to
develop a modified definition, so the NYPSC's claim is unfounded at
this time.
2. Facilities Used in Local Distribution
23. Western Petitioners, Portland General, Snohomish, and Redding
point out that section 215(a) of the FPA expressly exempts facilities
``used in the local distribution of electric energy'' and, in section
215(i), provides that the ERO ``shall have authority to develop and
enforce compliance with reliability standards for only the bulk-power
system.'' On this basis, Western Petitioners and Redding argue that the
Final Rule errs by not clearly stating that the revised definition of
bulk electric system must exclude all facilities that are used in local
distribution. Western Petitioners suggest that the Final Rule, by
emphasizing that the revised definition must include ``all facilities
necessary for operating an interconnected electric transmission
network,'' including lower voltage facilities operated in parallel and
in support of higher voltage facilities, ``could sweep in numerous
local distribution facilities.'' \31\
---------------------------------------------------------------------------
\31\ Western Petitioners at 10; see also Public Power Council at
16.
---------------------------------------------------------------------------
24. Similarly, Portland General claims that the Commission erred by
failing to clearly and consistently acknowledge the statutory exclusion
of facilities used in local distribution of energy. Portland General
argues that the failure to clearly delineate this exclusion is
inconsistent with Detroit Edison Co. v. FERC, 334 F.3d 48 (DC Cir.
2003), where the court rejected the Commission's interpretation of the
phrase ``used in local distribution'' in section 201 of the FPA as
rewriting the statute to exclude from the Commission's jurisdiction
only facilities used exclusively in local distribution.
Commission Determination
25. We disagree that the Final Rule is at odds with commenters'
view. In Order No. 743, the Commission acknowledged that ``Congress has
specifically exempted `facilities used in the local distribution of
electric energy' '' from the Bulk-Power System definition.\32\ Since
such facilities are exempted from the Bulk-Power System, they also are
excluded from the bulk electric system. Therefore, the Commission
agrees with Western Petitioners and others that facilities used in the
local distribution of energy should be excluded from the revised bulk
electric system definition.
---------------------------------------------------------------------------
\32\ Order No. 743, 133 FERC ] 61,150 at P 37.
---------------------------------------------------------------------------
3. Due Weight to Expertise of the ERO
26. As mentioned above, the NYPSC, Snohomish and Public Power
Council characterize the Final Rule as mandating the ERO to develop a
revised definition of bulk electric system that incorporates a
nationally uniform, 100 kV bright-line test. Based on this
understanding, they argue that the Final Rule's directive exceeds the
Commission's authority under section 215(d)(5) of the FPA because it
limits NERC's and the Western Electric Coordinating Council's (WECC)
``substantial discretion'' to develop Reliability Standards based upon
their technical expertise. Public Power Council and Snohomish claim
that the directive also denies the due weight to which the ERO or an
Interconnection-wide Regional Entity is entitled pursuant to FPA
sections 215(d)(2) and (3).
27. Public Power Council and Snohomish argue that the elimination
of regional discretion directed in the Final Rule based on a desire for
uniformity is unsupported. They also claim that this is inconsistent
with the intent of Congress to allow for regional variation as
evidenced by the provisions of section 215 that require the ERO to
rebuttably presume that a WECC-developed Reliability Standard satisfies
the statutory criteria for approval and that the Commission give due
weight to WECC's expertise. Public Power Council and Snohomish also
cite to the legislative history to support their claim that Congress
recognized the need for regional differences and rejected a uniform,
centralized approach. Further, they argue that ``due weight'' equates
to ``substantial deference'' based on court precedent and statutory
analysis.\33\
---------------------------------------------------------------------------
\33\ Snohomish at 18-19, citing, e.g., City of Oconto Falls v.
FERC, 204 F.3d 1154 (DC Cir. 2000); Public Power Council at 19-20.
---------------------------------------------------------------------------
28. The NYPSC, Snohomish and Public Power Council claim that, while
the Commission has authority under section 215(d)(5) of the FPA to
require the ERO to address a specific matter, the Commission went
beyond its authority pursuant to that provision by prescribing the
particular content of a Reliability Standard. They contend that the
ERO, in the first instance, should decide how the Commission's specific
concerns are best addressed. The NYPSC acknowledges that the Commission
indicated that the ERO has discretion to develop an alternative that is
as effective as, or superior to, the Commission's bright-line approach,
but claims that the ``narrowly tailored guidance'' limits the ERO's
discretion and, thus, the Commission acted beyond its statutory
authority. For all these reasons, according to the NYPSC and Public
Power Council, the Commission abused its discretion in imposing a 100
kV bright-line rule, thereby denying NERC and WECC the opportunity to
develop a different threshold or methodology based on their expertise.
Commission Determination
29. As indicated previously, Order No. 743 did not mandate a
specific result. Rather, the Commission determined that NERC should use
its technical expertise to develop a definition that addresses the
Commission's concerns with regional discretion in the current
definition. The present definition contains the 100 kV reference, and
the Commission did not change it in Order No. 743, other than to
suggest a solution that would remove ``generally'' from the current
definition's reference to a 100 kV threshold and eliminate unchecked
regional discretion. The Commission's suggestion of one way to address
the enumerated concerns does not preclude NERC from proposing an
alternate solution.
30. Public Power Council and Snohomish argue that there is no
evidence supporting the Commission's decision to require NERC to
develop a uniform national bulk electric system definition. However,
uniformity, absent a showing that the alternative is more stringent or
necessitated by a physical difference, has been a hallmark of the
mandatory Reliability Standards construct since its inception. In
establishing the framework for developing Reliability Standards, we
adopted the principle that proposed Reliability Standards should ``be
designed to apply throughout the interconnected North American Bulk-
Power System, to the maximum extent this is achievable with a single
[[Page 16268]]
Reliability Standard.'' \34\ The same principle holds true for
definitions contained within the Reliability Standards.
---------------------------------------------------------------------------
\34\ Order No. 672, FERC Stats. & Regs. ] 31,204 at P 331.
---------------------------------------------------------------------------
31. Moreover, we are not prohibiting the Interconnection-wide
regional entities from arriving at their own regional differences.
However, as we stated in Order No. 743, ``[c]ommenters 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.'' \35\ Conversely, the Commission does have a
compelling concern that the subjectivity and lack of ERO and Commission
oversight embodied in the current definition could result in the
problems we identified in the NPCC region occurring in other regions,
further supporting adoption of a uniform national definition. As Order
No. 743 indicated, establishing such a uniform national definition does
not preclude a region from proposing 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 a regional definition that is necessitated by a physical
difference in the Bulk-Power System.\36\
---------------------------------------------------------------------------
\35\ Order No. 743, 133 FERC ] 61,150 at P 141.
\36\ Id.
---------------------------------------------------------------------------
32. The Commission finds that the arguments by Public Power Council
and Snohomish that the Commission has failed to give due weight to NERC
or an Interconnection-wide Regional Entity as required under sections
215(d)(2) and (3) are premature. Once NERC has developed a proposed
bulk electric system definition, the Commission will evaluate the
proposal and all supporting evidence and documentation under section
215(d)(2). Similarly, should one of the two Regional Entities organized
on an Interconnection-wide basis develop a proposal for a regional bulk
electric system definition, the ERO must evaluate the proposal
according to requirements of section 215(d)(3).
C. Challenges to Order No. 743's Technical Rationale
1. 100 kV Bright-Line Threshold
33. The NYPSC, Public Power Council, and Snohomish request
rehearing, claiming that the Commission erred in directing NERC to
revise the bulk electric system definition to include facilities
operated at 100 kV and above where the record lacks a technical
justification for a bright-line test. The NYPSC contends that, because
the bright-line 100 kV threshold adopted by the Commission was not
based on whether those facilities are necessary for operating the
interconnected network, the Commission's decision lacked a technical
justification. The NYPSC claims that the Commission's approach results
in a ``superficial consistency'' and that Order No. 743 contains no
factual analysis as to why 100 kV is the appropriate threshold. It
contends that the examples identified by the Commission ``that are
purported to support the 100 kV bright-line were all 115 kV or
higher.'' \37\
---------------------------------------------------------------------------
\37\ NYPSC at 19.
---------------------------------------------------------------------------
34. Further, the NYPSC argues that the Commission incorrectly
assumes that because a facility operates at 100 kV or above in one part
of the country that all facilities operated at similar voltages across
the country should be treated as part of the Bulk-Power System. It
objects to the Commission's reliance on events on facilities in other
regions as rationale for determining that similar facilities in the
NPCC region are part of the bulk electric system. According to the
NYPSC, ``that logic does not hold true, since there are various
facilities operated at the same voltages across the country that
perform different functions and interact to different degrees with the
bulk system, depending on the regional differences.'' \38\ The NYPSC
reiterates that it presented evidence in its earlier comments that
certain 138 kV facilities in New York City do not serve a bulk electric
system function due to the high concentration of load served by those
lines. The NYPSC contends that the Final Rule wrongfully dismissed this
evidence by indicating that it does ``not believe that most of these
facilities are local distribution.'' \39\ The NYPSC argues that it is
invalid to conclude that all facilities rated 100 kV or above support
the bulk electric system based on a belief that ``most'' of these
facilities are not involved in local distribution.
---------------------------------------------------------------------------
\38\ Id. at 14.
\39\ Id. at 15, quoting Order No. 743, 133 FERC ] 61,150 at P 39
(emphasis added).
---------------------------------------------------------------------------
Commission Determination
35. As noted previously, contrary to the commenters' assertions,
the Commission did not direct or mandate that the bulk electric system
definition include a bright-line 100 kV threshold. Instead, the
Commission directed NERC to address the inconsistency, lack of
oversight and exclusion of facilities that are required for the
reliable operation of the interconnected transmission network, outlined
by the Commission in Order No. 743 using the technical expertise
available to NERC. The Commission suggested that one means to address
its concerns would be to, among other things, maintain the 100 kV
threshold and radial exclusion contained in the current definition, but
left it to NERC's discretion and technical expertise to develop a
revised definition. The Commission also supported its suggested
solution.\40\
---------------------------------------------------------------------------
\40\ See, e.g., Order No. 743, 133 FERC ] 61,150 at P 72-73, 85.
---------------------------------------------------------------------------
36. Nonetheless, we will reiterate and expand on that discussion
here. The Commission's suggested solution of a 100 kV threshold paired
with an exemption process, in essence, merely clarifies the current
NERC definition, which classifies facilities operating at 100 kV or
above as part of the bulk electric system.
37. As discussed in Order No. 743, the NPCC material impact
assessment has resulted in inconsistent classification of some
facilities along and within Regional Entity borders.\41\ Further, Order
No. 743 pointed out the failure of the NPCC test to classify facilities
associated with nuclear generation as part of the bulk electric system
and thus subject to NERC Reliability Standards.\42\ The suggested 100
kV threshold would maintain the current assumption, under NERC's
current definition, that non-radial 100 kV transmission facilities (not
local distribution) are part of the bulk electric system unless
exempted through the process NERC develops.
---------------------------------------------------------------------------
\41\ Order No. 743, 133 FERC ] 61,150, P 80.
\42\ Id. P 84.
---------------------------------------------------------------------------
38. The Commission disagrees with the characterization that its
suggested approach will only achieve superficial consistency--our
suggested approach will require that facilities needed for the reliable
operation of interconnected electrical network comply with the NERC
Reliability Standards. Regardless of whether NERC adopts our suggested
solution in whole or in part, or develops another approach, the bulk
electric system definition and related processes that NERC ultimately
produces, and the Commission approves, will significantly reduce or
eliminate reliability problems arising from incomplete Reliability
Standard coverage resulting from ineffective material impact
assessments and inconsistent classification of facilities. The Final
Rule eliminates these problems by directing the ERO to revise the
definition of bulk electric system in a way that addresses the concerns
outlined in the Final Rule.
39. The NYPSC argues that the Commission did not provide any
evidence supporting a 100 kV threshold since all three examples in
Order No. 743 involved facilities 115 kV or higher.
[[Page 16269]]
However, as indicated in Order No. 743, the current NERC bulk electric
system definition contains a general 100 kV threshold. The Commission's
suggested solution simply would eliminate regional discretion that is
not subject to review by the ERO or the Commission in the application
of the current threshold. Additionally, the NYPSC's argument presents a
distinction without a difference, since nominal voltage levels are
established in industry for use in power systems but no voltage
classification exists at 100 kV.\43\ Therefore, a 100 kV threshold will
effectively capture the same facilities as a 115 kV threshold.
---------------------------------------------------------------------------
\43\ See, e.g., American National Standards Institute,
Incorporated (ANSI) Standard C84.1, Electrical Power Systems and
Equipment-Voltage Ratings (60Hz).
---------------------------------------------------------------------------
40. The Commission also disagrees with the NYPSC's characterization
of the suggested 100 kV threshold as treating all facilities operated
at similar voltages across the country as part of the bulk electric
system. As we have explained, the Commission views the suggested
threshold as a first step or proxy in determining which facilities are
included and which are excluded or exempted from the bulk electric
system. The Commission provided considerable support in the Final Rule
for its belief that facilities operated at or above 100 kV are
sufficiently similar throughout the continental United States to be
able to use a 100 kV threshold as an initial line of demarcation, which
the ERO would further refine using exclusions (such as for radial
facilities serving only load with one transmission source) and
exemptions.\44\ Similarly, we are not persuaded by the NYPSC's
contention that Order No. 743's reliance on events in several regions
as support for taking action on a nationwide basis was misplaced. The
facilities in the several regions are sufficiently similar to allow the
Commission to draw technical justification for its actions from these
events. The same configurations cited in the examples and the areas
described in Order No. 743 can be found throughout the country.\45\
Facilities operated at 100-200 kV, in parallel with extra high voltage
facilities, connect areas with generation to distant hubs and load
centers.\46\ As discussed in Order No. 743, failure of 100-200 kV
facilities has caused cascading outages that would have been minimized
or prevented if entities were in compliance with the NERC Reliability
Standards.\47\ For the reasons discussed above, the Commission denies
the requests for rehearing.
---------------------------------------------------------------------------
\44\ See, e.g., Order No. 743, 133 FERC ] 61,150 at P 73, 139-
140.
\45\ The Commission reviewed transmission maps available in
annual Form 715 submissions (Form 715 submissions). (Form 715 is the
``Annual Transmission Planning and Evaluation Report,'' in which
operators of integrated transmission at or above 100 kV submit to
the Commission base case power flow and transmission system maps and
diagrams. Submissions are considered Critical Energy Infrastructure
Information (CEII) and are subject to the Commission's CEII rules.)
\46\ Id.
\47\ Order No. 743, 133 FERC ] 61,150, at P 87.
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2. Impact-Based Methodology
41. The NYPSC requests rehearing on the Commission's rejection of
an impact-based test for identifying bulk electric system elements and
asks that the Commission reconsider an impact-based test as a viable
approach. The NYPSC asserts that ``NERC and the NPCC have both
determined that the NPCC's impact-based definition, coupled with its
regionally tailored reliability criteria, effectively and efficiently
ensures reliability.'' \48\ It contends that, because an impact-based
test identifies ``facilities and control system necessary for operating
an interconnected electric energy transmission network,'' that test is
consistent with section 215 of the FPA and obviates the Commission's
concern that a discrepancy in definitions could result in reliability
gaps.\49\ The NYPSC argues that the Commission dismissed the impact
approach based on a single event and the stated need for a consistent
and comprehensive test. In response, the NYPSC argues that Order No.
743 does not identify how inconsistencies have impacted or may impact
the reliable operation of the bulk electric system. Finally, the NYPSC
asserts that the Commission's concerns may be capable of being
addressed through modifications to the existing impact tests and the
Commission should consider the validity of such an approach.
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\48\ NYPSC at 28.
\49\ NYPSC at 28, quoting 16 U.S.C. 824o(a)(1)(A).
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42. Public Power Council also expresses concern that the
Commission's discussion about material impact analysis leaves no room
for a meaningful test to distinguish between facilities that are
necessary for the operation of the bulk electric system and those that
are not. Public Power Council criticizes the Commission's rationale,
contending that if a material impact assessment indicates that the
Bulk-Power System can function properly even if a fault or operational
failure occurs on a particular facility, it is not clear why the
Commission can claim that that facility is nonetheless ``necessary''
for bulk electric system operation.
43. In a related vein, NRECA seeks clarification, or in the
alternative rehearing, that the Commission's determination regarding
``material impact'' does not intend for NERC to change the NERC Rules
of Procedure (other than to establish a process for granting
exemptions) or the NERC Statement of Compliance Registry Criteria.
While NRECA acknowledges that the Final Rule does not discuss such
changes to the NERC rules or Registry Criteria, NRECA explains that it
raises the concern because it is unclear whether Order No. 743 only
rejects the NPCC impact-based methodology or every functional impact
methodology. NRECA points to various provisions of the NERC rules and
Registry Criteria indicating that NERC's registry approach is based on
identifying owner, operators and users of the Bulk-Power System that
have a ``material impact'' on the Bulk-Power System.\50\ Accordingly,
NRECA seeks assurance that the Final Rule is not intended to
``undermine the core concepts'' of the NERC Rules and Registry
Criteria.
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\50\ See NRECA at 14-15, quoting NERC Rules of Procedure,
section 501; Registry Criteria at 1.
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Commission Determination
44. Order No. 743 did not reject all material impact assessments
but, instead, took issue with particular tests and outlined general
problems with the material impact tests used to determine the extent of
the bulk electric system that we have seen to date. The NYPSC
incorrectly states that the Commission rejected NPCC's material impact
assessment based on one event. Rather, as discussed extensively in the
Final Rule and elsewhere herein, the Commission rejected NPCC's
material impact assessment due to its subjective language and failure
to identify facilities necessary to reliably operate the interconnected
transmission system.\51\ These flaws include use of the amorphous term
``local area,'' which was not consistently applied throughout the NPCC
region. The NYPSC does not clarify application of this term in its
request for rehearing, and instead merely states that the local area is
defined by ``the Council members.'' \52\ As Order No. 743 notes, the
subjectivity of the ``local area'' definition, which ultimately
determines whether or not a facility is classified as part of the bulk
[[Page 16270]]
electric system, has led to varying results throughout the NPCC
region.\53\
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\51\ Order No. 743, 133 FERC ] 61,150 at P 76-78.
\52\ NYPSC at 28.
\53\ Order No. 743, 133 FERC ] 61,150 at P 80.
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45. The Commission does not agree that Order No. 743 did not
address how inconsistencies in defining the facilities that are
included in the bulk electric system may impact the operation of the
interconnected transmission network. The Final Rule detailed several
instances where the NERC Reliability Standards are less effective when
they are not applied to all necessary facilities.\54\
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\54\ See, e.g., Id. P 80, 83, 86, 90.
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46. Public Power Council contends that it is not clear why the
Commission can claim that a particular facility is nonetheless
``necessary'' for bulk electric system operation if a material impact
assessment proves that the Bulk-Power System can function properly even
if a fault or operational failure occurs on that facility. As we noted
in Order No. 743, by this metric the facilities that caused the 2003
Blackout would not be viewed as critical since none of the individual
facilities caused the outage.\55\ 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.\56\
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\55\ Id. P 38.
\56\ 16 U.S.C. 824o(a)(i).
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47. The Commission clarifies that it was not our intent to disrupt
the NERC Rules of Procedure or the Statement of Compliance Registry
Criteria. Nor did the Commission intend to rule out using any form of a
material impact test in the reliability context that can be shown to
identify facilities needed for reliable operation. However, as Order
No. 743 explained, the Commission has serious concerns about NPCC's
Document A-10 methodology. The Commission stated that, as a threshold
matter, the material impact tests proffered by commenters did not
measure whether specific system elements were necessary for operating
the system, but, rather, measure the impact of losing the element.\57\
The Commission's extensive discussion of the NPCC test further noted
that the NPCC methodology is unduly subjective, and results in an
inconsistent process that excludes facilities necessary for operating
the bulk electric system from the definition. Therefore, the Commission
indicated, should NERC choose to define the bulk electric system using
a method other than one employing the 100 kV bright line threshold the
Commission suggested, such an alternative method must be consistent,
repeatable and verifiable with supporting technical analysis.\58\
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\57\ Order No. 743, 133 FERC ] 61,150 at P 76.
\58\ Id. P 74, 85.
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3. Western Interconnection/Regional Variation
48. In Order No. 743, the Commission rejected arguments that 100-
199 kV facilities in the Western Interconnection should be treated
differently than facilities in the Eastern Interconnection.\59\ The
Commission stated that commenters had not provided an adequate
explanation, supported by data and analysis, why there is a physical
difference that justifies different treatment of these facilities in
the West.
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\59\ Id. P 139-140.
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49. Snohomish and Public Power Council contend that, because 115 kV
facilities commonly are used in the West for distribution, the
Commission's ``inflexible'' 100 kV threshold is ``unworkable'' in the
West. Snohomish and Public Power Council claim that the Western
Interconnection is materially different from the Eastern
Interconnection because the long distances between load centers, and
the vast areas commonly covered by distribution systems, result in a
transmission system that is largely operated at voltages of 230 kV or
above, and distribution systems that are commonly operated at voltages
of 115 kV. They contend that this physical difference is documented in
a study performed by WECC's Bulk Electric System Definition Task
Force.\60\ Snohomish contends that power flow base cases examined by
the Bulk Electric System Definition Task Force support their assertion
that facilities rated between 100 kV and 200 kV have a small impact on
transmission in the West.
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\60\ See Public Power Council at 6, Snohomish at 9 quoting WECC
Bulk Electric System Definition Task Force, Initial Proposal,
attached as Exh. A to Snohomish's NOPR comments.
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50. Further, Snohomish contends that Order No. 743, at most,
demonstrates a problem in the NPCC region and does not provide
justification for action in the West. Snohomish asserts that the Final
Rule fails to identify a single reliability event in the Western
Interconnection arising from the bulk electric system definition as
currently applied. Snohomish argues that the Commission cannot use
isolated and localized problems to justify nationwide action.\61\
According to Snohomish, the three disturbances discussed in the Final
Rule cannot justify nationwide action or demonstrate that all
facilities operated in the 100-200 kV range are part of the
interconnected transmission grid.
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\61\ Snohomish at 31-32, citing Associated Gas Distributors v.
FERC, 824 F.2d 981, 1019 (DC Cir. 1985).
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51. Snohomish also contends that the Commission implicitly accepted
the evidence that most 115 kV facilities in the West operate as
distribution by failing to assert that the evidence is flawed, but,
instead, responding in the Final Rule that some facilities operating in
the 100-200 kV range in the West are ``operationally significant and
needed for reliable operation as identified by certain WECC
documents.'' \62\ According to Snohomish, this demonstrates the
irrationality of Order No. 743's approach because it focuses on the
operating voltage of electric facilities to the exclusion of more
germane factors such as how those facilities are connected and interact
with the grid. Snohomish claims that the threshold approach is
inconsistent with previous statements from the Commission that
acknowledge that the function of facilities and how they are
interconnected determines their significance. Public Power Council
explains that, currently, most Public Power Council members that
operate 115 kV distribution facilities are not classified as
transmission owners or operators. Thus, according to Snohomish and
Public Power Council, by taking a superficial view of the matter, Order
No. 743's 100 kV threshold would sweep in a large number of facilities,
including hundreds or perhaps thousands of miles of local distribution
facilities, in the West.
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\62\ Snohomish at 11-12, quoting Order No. 743, 133 FERC ]
61,150 at P 139.
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52. Snohomish additionally raises a concern that the Final Rule
could be read in a manner that would require an end to the work of the
WECC Bulk Electric System Definition Task Force. Snohomish states that
the Bulk Electric System Definition Task Force, which was created in
2008 partly in response to Order No. 693, has been working on
developing a bulk electric system definition that is appropriate to the
unique facts of the Western Interconnection.\63\ Snohomish argues that
a Commission directive ``to `eliminate the regional discretion in the
ERO's current definition' of BES'' would mean ``that the work of the
[Bulk Electric System Definition Task Force] must be terminated because
it would result in a regional variation to the BES definition that FERC
has forbidden.'' \64\
[[Page 16271]]
This result, according to Snohomish, would violate the FPA because
``Section 215(d)(2) requires FERC to accord `due weight' to the
`technical expertise' of both NERC and WECC, and Section 215(d)(3)
requires NERC to `rebuttably presume' that reliability standards
developed and approved by WECC are consistent with the FPA.'' \65\
Therefore, Snohomish requests clarification, or in the alternative
rehearing, that the Commission's ``findings concerning the material
impact assessment methodology used in NPCC apply only to the NPCC'' and
do not apply to the Bulk Electric System Definition Task Force efforts
currently under way.\66\ Snohomish further seeks clarification, or in
the alternative rehearing, that the bulk electric system definition
currently being developed for application in WECC ``may incorporate any
voltage threshold or other method of assessing the impact of lower-
voltage facilities,'' that the WECC bulk electric system definition
``must exclude facilities used in the local distribution of electric
energy,'' and that the definition should distinguish between facilities
that are or are not necessary for operating an interconnected energy
transmission network.\67\ Finally, Snohomish argues that the Commission
should clarify that the Final Rule is not intended to stop NERC's
review of the findings of the Ad Hoc Committee for Generator
Requirements and the Transmission Interface (GOTO Task Force) because
such an action would be arbitrary and capricious.\68\
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\63\ See Snohomish at 35.
\64\ Snohomish at 40-41, quoting Order No. 743, 133 FERC ]
61,150 at P 30.
\65\ Id. at 41, citing 16 U.S.C. 824o(d)(2)-(3).
\66\ Id. at 42.
\67\ Id. at 43 (emphasis in original).
\68\ As described in Order No. 743, NERC has undertaken an
initiative (the GOTO task force) to address the special
circumstances associated with generators and to determine which
Reliability Standards might be inappropriate for such limited
facilities. See Order No. 743, 133 FERC ] 61,150, at n.158.
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Commission Determination
53. The Commission denies rehearing on these issues. As stated
elsewhere, Order No. 743 did not mandate a 100 kV threshold. Rather,
the Commission directed NERC to develop a revised definition that
addresses our concerns with the current definition, including
inconsistency, lack of oversight and exclusion of facilities that are
required for the reliable operation of the interconnected transmission
network. We suggested that one means to address our concerns would be
to maintain the 100 kV threshold contained in the current definition,
while eliminating the discretion that allows Regional Entities to
interpret and apply the definition without ERO or Commission oversight.
54. Commenters contend that the majority of 115 kV facilities in
the West are distribution facilities and therefore not significant to
the transmission of power. First, as we have stated herein, to the
extent any facility is a local distribution facility, it is exempted
from the requirements of section 215.\69\ However, the Commission
observes that numerous 115 kV and 138 kV transmission lines in the
Western Interconnection often are the only pathway available between
various load centers and networked points.\70\ Other network points are
electrically and physically remote from each other and have the
potential for parallel flows between two transmission paths, some at
different voltage levels and others at the same voltage. Analyzing how
the flows split during normal, outage and emergency conditions, as well
as implications to system constraint, could lead to a conclusion that
such facilities are improperly labeled as local distribution.
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\69\ 16 U.S.C. 824o(a)(1).
\70\ Form 715 submissions.
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