Revisions to Electric Reliability Organization Definition of Bulk Electric System and Rules of Procedure, 803-851 [2012-31142]
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Federal Energy Regulatory Commission
18 CFR Part 40
Revisions to Electric Reliability Organization Definition of Bulk Electric
System and Rules of Procedure; Final Rule
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Federal Register / Vol. 78, No. 3 / Friday, January 4, 2013 / Rules and Regulations
DEPARTMENT OF ENERGY
Federal Energy Regulatory
Commission
18 CFR Part 40
[Docket Nos. RM12–6–000 and RM12–7–
000; Order No. 773]
Revisions to Electric Reliability
Organization Definition of Bulk Electric
System and Rules of Procedure
Federal Energy Regulatory
Commission.
ACTION: Final rule.
AGENCY:
In this Final Rule, pursuant to
section 215 of the Federal Power Act,
the Federal Energy Regulatory
Commission (Commission) approves
modifications to the currently-effective
definition of ‘‘bulk electric system’’
developed by the North American
Electric Reliability Corporation (NERC),
the Commission-certified Electric
Reliability Organization. The
Commission finds that the modified
definition of ‘‘bulk electric system’’
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SUMMARY:
removes language allowing for regional
discretion in the currently-effective bulk
electric system definition and
establishes a bright-line threshold that
includes all facilities operated at or
above 100 kV. The modified definition
also identifies specific categories of
facilities and configurations as
inclusions and exclusions to provide
clarity in the definition of ‘‘bulk electric
system.’’
In this Final Rule, the Commission
also approves: NERC’s revisions to its
Rules of Procedure, which create an
exception process to add elements to, or
remove elements from, the definition of
‘‘bulk electric system’’ on a case-by-case
basis; NERC’s form entitled ‘‘Detailed
Information To Support an Exception
Request’’ that entities will use to
support requests for exception from the
‘‘bulk electric system’’ definition; and
NERC’s implementation plan for the
revised ‘‘bulk electric system’’
definition.
DATES: This Final Rule will become
effective March 5, 2013.
FOR FURTHER INFORMATION CONTACT:
Susan Morris (Technical Information),
Office of Electric Reliability, Division
of Reliability Standards, Federal
Energy Regulatory Commission, 888
First Street NE., Washington, DC
20426, Telephone: (202) 502–6803.
Nicholas Snyder (Technical
Information), Office of Energy Market
Regulation, Division of Electric Power
Regulation—Central, Federal Energy
Regulatory Commission, 888 First
Street NE., Washington, DC 20426,
Telephone: (202) 502–6408.
Robert Stroh (Legal Information), Office
of the General Counsel, Federal
Energy Regulatory Commission, 888
First Street NE., Washington, DC
20426, Telephone: (202) 502–8473.
SUPPLEMENTARY INFORMATION:
141 FERC ¶ 61,236
Before Commissioners: Jon Wellinghoff,
Chairman; Philip D. Moeller, John R.
Norris, and Cheryl A. LaFleur.
FINAL RULE
(Issued December 20, 2012)
Table of Contents
I. Background ....................................................................................................................................................................................................
A. Section 215 of the FPA ........................................................................................................................................................................
B. Order No. 693 .......................................................................................................................................................................................
C. Order No. 743 .......................................................................................................................................................................................
D. NERC Petitions .....................................................................................................................................................................................
1. Revised Definition of Bulk Electric System .................................................................................................................................
2. NERC Petition for Approval of Revisions to Rules of Procedure To Adopt an Exception Process .........................................
E. Commission NOPR ...............................................................................................................................................................................
II. Discussion ....................................................................................................................................................................................................
A. Approval of the Revised Bulk Electric System Definition ................................................................................................................
NOPR Proposal ...................................................................................................................................................................................
Comments ...........................................................................................................................................................................................
Commission Determination ...............................................................................................................................................................
B. The Core Definition of Bulk Electric System ......................................................................................................................................
NOPR Proposal ...................................................................................................................................................................................
Comments ...........................................................................................................................................................................................
C. Local Distribution .................................................................................................................................................................................
Comments ...........................................................................................................................................................................................
Commission Determination ...............................................................................................................................................................
D. Inclusions and Exclusions in the Definition of Bulk Electric System ..............................................................................................
1. Inclusion I1 (Transformers) ...........................................................................................................................................................
Commission Determination ...............................................................................................................................................................
2. Inclusion I2 (Generating Resources) .............................................................................................................................................
3. Inclusion I3 (Blackstart Resources) ...............................................................................................................................................
4. Inclusion I4 (Dispersed Power Producing Resources) .................................................................................................................
5. Inclusion I5 (Static or Dynamic Reactive Power Devices) ..........................................................................................................
Exclusions ...........................................................................................................................................................................................
6. Exclusion E1 (Radial Systems) ......................................................................................................................................................
7. Exclusion E2 (Behind the Meter Generation) ...............................................................................................................................
8. Exclusion E3 (Local Networks) .....................................................................................................................................................
9. Exclusion E4 (Reactive Power Devices) ........................................................................................................................................
E. The NERC Rules of Procedure Exception Process, RM12–7–000 ......................................................................................................
NOPR Proposal ...................................................................................................................................................................................
1. How Entities Will Review and Seek Inclusion of Necessary Elements .....................................................................................
2. NERC Role in Identifying Necessary Elements ............................................................................................................................
3. Commission Role in Identifying Necessary Elements .................................................................................................................
4. Technical Review Panel ................................................................................................................................................................
NOPR Proposal ...................................................................................................................................................................................
5. Use of Industry Subject Matter Experts ........................................................................................................................................
6. NERC’s Detailed Information Form ..............................................................................................................................................
7. NERC’s Implementation Plan ........................................................................................................................................................
NOPR Proposal ...................................................................................................................................................................................
8. NERC List of Facilities Granted Exceptions .................................................................................................................................
9. Declassification of Facilities ..........................................................................................................................................................
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III. Information Collection Statement ..............................................................................................................................................................
IV. Regulatory Flexibility Act Analysis ..........................................................................................................................................................
V. Environmental Analysis ..............................................................................................................................................................................
VI. Document Availability ...............................................................................................................................................................................
VII. Effective Date and Congressional Notification ........................................................................................................................................
1. Pursuant to section 215(d) of the
Federal Power Act (FPA),1 the
Commission approves modifications to
the currently-effective definition of
‘‘bulk electric system’’ developed by the
North American Electric Reliability
Corporation (NERC), the Commissioncertified Electric Reliability
Organization (ERO). The Commission
finds that the modified definition of
‘‘bulk electric system’’ improves upon
the currently-effective definition by
establishing a bright-line threshold that
includes all facilities operated at or
above 100 kV and removing language
that allows for broad regional discretion.
The modified definition also provides
improved clarity by identifying specific
categories of facilities and
configurations as inclusions and
exclusions to the definition of ‘‘bulk
electric system.’’
2. We believe that the proposed
‘‘core’’ definition, together with the
more granular inclusions and
exclusions, should produce consistency
in identifying bulk electric system
elements across the reliability regions.
In addition, we find that NERC’s
proposed case-by-case exception
process to add elements to, and remove
elements from, the definition of the bulk
electric system adds transparency and
uniformity to the determination of what
constitutes the bulk electric system.
3. We recognize the substantial work
invested by NERC and industry
participants in developing the modified
bulk electric system definition. We also
appreciate that NERC timely submitted
the revised definition within the twelve
month time frame directed by the
Commission in the underlying order,
Order No. 743, which tasked NERC with
this project.2 We believe that NERC and
industry’s efforts provide a technically
grounded and legally supportable
foundation for identifying elements and
facilities that make up the bulk electric
system. Other highlights of the Final
Rule include:
• Accepts NERC’s revisions to its
Rules of Procedure, which creates an
exception procedure to add elements to,
or remove elements from, the definition
of ‘‘bulk electric system’’ on a case-bycase basis;
1 16
U.S.C. 824o(d) (2006).
to Electric Reliability Organization
Definition of Bulk Electric System, Order No. 743,
133 FERC ¶ 61,150 (2010), order on reh’g, Order No.
743–A, 134 FERC ¶ 61,210 (2011).
2 Revision
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• approves NERC’s implementation
plan for the revised ‘‘bulk electric
system’’ definition;
• approves NERC’s form entitled
‘‘Detailed Information to Support an
Exception Request’’ that entities will
use to support requests for exception
from the ‘‘bulk electric system’’
definition;
• finds that the Commission can
designate sub-100 kV facilities, or other
facilities, as part of the bulk electric
system, provided that the Commission
provides opportunity for notice and
comment; and
• establishes a process pursuant to
which an entity can seek a
determination by the Commission
whether facilities are ‘‘used in local
distribution’’ as set forth in the Federal
Power Act.
4. In the Notice of Proposed
Rulemaking (NOPR), the Commission
requested comment on certain aspects of
NERC’s petition to better understand the
application of the ‘‘core’’ definition, as
well as the specific inclusions and
exclusions.3 The explanations provided
by NERC and other entities in their
comments have assisted in our
understanding of the parameters of the
definition, and we adopt many of these
explanations in the Final Rule.
However, in two particular
circumstances we believe further action
is necessary. We direct NERC to
implement the bulk electric system
definition consistent with the
Commission determinations below.
Specifically, we direct NERC to
implement the exclusions for radial
systems and local networks so that they
do not apply to tie-lines for bulk electric
system generators. In addition, we direct
NERC to modify the local network
exclusion to remove the 100 kV
minimum operating voltage to allow
systems that include one or more looped
configurations connected below 100 kV,
(as shown in figures 3 and 5 below) to
be eligible for the local network
exclusion. Further explanation of these
configurations and the rationale for our
determinations is provided below.
3 Revision to Electric Reliability Organization
Definition of Bulk Electric System and Rules of
Procedure, Notice of Proposed Rulemaking, 77 FR
39857 (July 5, 2012) 139 FERC ¶ 61,247 (2012)
(NOPR).
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319.
333.
339.
340.
343.
I. Background
A. Section 215 of the FPA
5. Section 215 of the FPA requires a
Commission-certified ERO to develop
mandatory and enforceable Reliability
Standards, subject to Commission
review and approval. Once approved,
the Reliability Standards may be
enforced by the ERO, subject to
Commission oversight, or by the
Commission independently.4 The
Commission established a process to
select and certify an ERO 5 and,
subsequently, certified NERC as the
ERO.6
B. Order No. 693
6. On March 16, 2007, in Order No.
693, pursuant to section 215(d) of the
FPA, the Commission approved 83 of
107 proposed Reliability Standards, six
of the eight proposed regional
differences, and the NERC Glossary,
which includes NERC’s definition of
bulk electric system.7 That definition
provides:
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.8
7. In approving NERC’s definition of
bulk electric system, the Commission
stated that ‘‘at least for an initial period,
the Commission will rely on the NERC
definition of bulk electric system and
NERC’s registration process to provide
as much certainty as possible regarding
the applicability to and the
responsibility of specific entities to
4 See
16 U.S.C. 824o(e)(3) (2006).
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, order on reh’g, Order No.
672–A, FERC Stats. & Regs. ¶ 31,212 (2006).
6 North American Electric Reliability Corp., 116
FERC ¶ 61,062 (2006), order on reh’g and
compliance, 117 FERC ¶ 61,126 (2006) (certifying
NERC as the ERO responsible for the development
and enforcement of mandatory Reliability
Standards), aff’d sub nom. Alcoa Inc. v. FERC, 564
F.3d 1342 (D.C. Cir. 2009).
7 Mandatory Reliability Standards for the BulkPower System, Order No. 693, FERC Stats. & Regs.
¶ 31,242, order on reh’g, Order No. 693–A, 120
FERC ¶ 61,053 (2007).
8 Order No. 693, FERC Stats. & Regs. ¶ 31,242 at
P 75 n.47.
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comply with the Reliability
Standards.’’ 9 The Commission also
stated that ‘‘[it] remains concerned
about the need to address the potential
for gaps in coverage of facilities.’’ 10
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C. Order No. 743
8. On November 18, 2010, the
Commission revisited the definition of
‘‘bulk electric system’’ in Order No. 743,
which directed NERC, through NERC’s
Reliability Standards Development
Process, to revise its definition of the
term ‘‘bulk electric system’’ to ensure
that the definition encompasses all
facilities necessary for operating an
interconnected transmission network.11
The Commission also directed NERC to
address the Commission’s technical and
policy concerns. Among the
Commission’s concerns were
inconsistencies in the application of the
definition and a lack of oversight and
exclusion of facilities from the bulk
electric system required for the
operation of the interconnected
transmission network. In Order No. 743,
the Commission concluded that the best
way to address these concerns was to
eliminate the Regional Entity discretion
to define bulk electric system without
NERC 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 removing from the bulk electric
system facilities that are not necessary
for operating the interconnected
transmission network. In Order No. 743,
the Commission allowed NERC to
‘‘propose a different solution that is as
effective as, or superior to, the
Commission’s proposed approach in
addressing the Commission’s technical
and other concerns so as to ensure that
all necessary facilities are included
within the scope of the definition.’’ 12
The Commission directed NERC to file
the revised definition of bulk electric
system and its process to exempt
facilities from inclusion in the bulk
electric system within one year of the
effective date of the final rule.13
9. In Order No. 743–A, the
Commission reaffirmed its
determinations in Order No. 743. In
addition, the Commission clarified that
9 Id. P 75; see also Order No. 693–A, 120 FERC
¶ 61,053 at P 19 (‘‘the Commission will continue to
rely on NERC’s definition of bulk electric system,
with the appropriate regional differences, and the
registration process until the Commission
determines in future proceedings the extent of the
Bulk-Power System’’).
10 Order No. 693, FERC Stats. & Regs. ¶ 31,242 at
P 77.
11 Order No. 743, 133 FERC ¶ 61,150 at P 16.
12 Id.
13 Id. P 113.
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the issue the Commission directed
NERC to rectify was the discretion the
Regional Entities have under the current
definition to define the bulk electric
system in their regions without any
oversight from the Commission or
NERC.14 The Commission also clarified
that the 100 kV threshold was a ‘‘first
step or proxy’’ for determining which
facilities should be included in the bulk
electric system.15
10. The Commission further clarified
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’’
was intended to grant discretion to
NERC, 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.16 The Commission
stated that the ‘‘Seven Factor Test’’
adopted in Order No. 888 could be
relevant and possibly a logical starting
point for determining which facilities
are local distribution for reliability
purposes.17 However, the Commission
left it to NERC to determine if and how
the Seven Factor Test should be
considered in differentiating between
local distribution and transmission
facilities for purposes of determining
whether a facility should be classified as
part of the bulk electric system.18 Order
No. 743–A re-emphasized that local
distribution facilities are excluded from
the definition of Bulk-Power System
and, therefore, must be excluded from
the definition of bulk electric system.19
D. NERC Petitions
11. On January 25, 2012, NERC
submitted two petitions pursuant to the
directives in Order No. 743: (1) NERC’s
proposed revision to the definition of
‘‘bulk electric system’’ which includes
provisions to include and exclude
facilities from the ‘‘core’’ definition; and
(2) revisions to NERC’s Rules of
Procedure to add a procedure creating
14 Order
No. 743–A, 134 FERC ¶ 61,210 at P 11.
PP 40, 67, 102–103.
16 Id. P 68. 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 at 31,783–84 (1996), order on reh’g,
Order No. 888–A, FERC Stats. & Regs. ¶ 31,048,
order on reh’g, Order No. 888–B, 81 FERC ¶ 61,248
(1997), order on reh’g, Order No. 888–C, 82 FERC
¶ 61,046 (1998), aff’d in relevant part sub nom.
Transmission Access Policy Study Group v. FERC,
225 F.3d 667 (D.C. Cir. 2000), aff’d sub nom. New
York v. FERC, 535 U.S. 1 (2002).
17 Order No. 743–A, 134 FERC ¶ 61,210 at P 69.
18 Id. P 70.
19 Id. PP 25, 58.
15 Id.
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an exception process to classify or declassify an element as part of the ‘‘bulk
electric system.’’
1. Revised Definition of Bulk Electric
System
12. In Docket No. RM12–6–000, NERC
filed a petition requesting Commission
approval of a revised definition of ‘‘bulk
electric system’’ in the NERC Glossary
(NERC BES Petition). The definition
consists of a ‘‘core’’ definition and a list
of facilities configurations that will be
included or excluded from the ‘‘core’’
definition. NERC proposed the
following ‘‘core’’ definition of bulk
electric system:
Unless modified by the [inclusion and
exclusion] lists shown below, all
Transmission Elements operated at 100 kV or
higher and Real Power and Reactive Power
resources connected at 100 kV or higher. This
does not include facilities used in the local
distribution of electric energy.
NERC also requested approval of the
proposed ‘‘Detailed Information to
Support an Exception Request’’ form as
satisfying the requirement in Order No.
743 that NERC develop ‘‘technical
criteria’’ to address exception requests.
Finally, NERC requested Commission
approval of its plan for implementation
of the revised definition of ‘‘bulk
electric system.’’
a. Inclusions and Exclusions to the
Definition of Bulk Electric System
13. As part of the revised definition,
NERC developed inclusions and
exclusions to eliminate discretion in
application of the revised ‘‘bulk electric
system’’ definition. The inclusions
address five specific facilities
configurations to provide clarity that the
facilities described in these
configurations are included in the bulk
electric system.
Inclusions:
I1—Transformers with the primary
terminal and at least one secondary terminal
operated at 100 kV or higher unless excluded
under Exclusion E1 or E3.
I2—Generating resource(s) with gross
individual nameplate rating greater than 20
MVA or gross plant/facility aggregate
nameplate rating greater than 75 MVA
including the generator terminals through the
high-side of the step-up transformer(s)
connected at a voltage of 100 kV or above.
I3—Blackstart Resources identified in the
Transmission Operator’s restoration plan.
I4—Dispersed power producing resources
with aggregate capacity greater than 75 MVA
(gross aggregate nameplate rating) utilizing a
system designed primarily for aggregating
capacity, connected at a common point at a
voltage of 100 kV or above.
I5—Static or dynamic devices (excluding
generators) dedicated to supplying or
absorbing Reactive Power that are connected
at 100 kV or higher, or through a dedicated
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transformer with a high-side voltage of 100
kV or higher, or through a transformer that
is designated in Inclusion I1.
14. NERC also explained that the
facilities described in inclusions I1, I2,
I4, and I5 are each operated or
connected at or above 100 kV.
According to NERC, inclusion I3
encompasses blackstart resources
identified in a transmission operator’s
restoration plan, which are necessary for
the operation of the interconnection
transmission system and should be
included in the bulk electric system
regardless of their size (MVA) or the
voltage at which they are connected.
NERC stated that the inclusions will
further reduce the potential for the
exercise of discretion and subjectivity to
exclude such configurations from the
bulk electric system.
15. NERC explained that inclusion I1
includes transformers with the primary
terminal and at least one secondary
terminal operated at 100 kV or higher
unless excluded under exclusion E1 or
E3. NERC stated that transformers
operating at 100 kV or higher are part
of the existing definition, but since
transformers have windings operating at
different voltages, and multiple
windings in some circumstances,
clarification was required to explicitly
identify which transformers are
included in the bulk electric system.
16. According to NERC, inclusion I2
includes in the bulk electric system the
generator terminals through the highside of the step-up transformers
connected at a voltage of 100 kV or
above. NERC states that this inclusion
mirrors the text of the NERC Registry
Criteria (Appendix 5B of the NERC
Rules of Procedure) for generating
units.20
17. As noted above, inclusion I3
includes blackstart resources identified
in the transmission operator’s
restoration plan in the bulk electric
system. NERC added inclusion I4 to
accommodate the effects of variable
generation on the bulk electric system
and inclusion I5 to address static or
dynamic devices dedicated to supplying
or absorbing reactive power that are
connected at 100 kV or higher.
18. NERC’s modified definition of
bulk electric system also provides four
exclusions regarding facilities
configurations that are not included in
the bulk electric system. Generally, the
exclusions address radial systems,
behind-the-meter generation and local
networks that distribute power to load:
Exclusions:
20 See section III.c.1 and III.c.2 of Appendix 5B
of the NERC Rules of Procedure.
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E1—Radial systems: A group of contiguous
transmission Elements that emanates from a
single point of connection of 100 kV or
higher and:
(a) Only serves Load. Or,
(b) Only includes generation resources, not
identified in Inclusion I3, with an aggregate
capacity less than or equal to 75 MVA (gross
nameplate rating). Or,
(c) Where the radial system serves Load
and includes generation resources, not
identified in Inclusion I3, with an aggregate
capacity of non-retail generation less than or
equal to 75 MVA (gross nameplate rating).
Note—A normally open switching device
between radial systems, as depicted on prints
or one-line diagrams for example, does not
affect this exclusion.
E2—A generating unit or multiple
generating units on the customer’s side of the
retail meter that serve all or part of the retail
Load with electric energy if: (i) The net
capacity provided to the BES does not exceed
75 MVA; and (ii) standby, back-up, and
maintenance power services are provided to
the generating unit or multiple generating
units or to the retail Load by a Balancing
Authority, or provided pursuant to a binding
obligation with a Generator Owner or
Generator Operator, or under terms approved
by the applicable regulatory authority.
E3—Local networks (LN): A group of
contiguous transmission Elements operated
at or above 100 kV but less than 300 kV that
distribute power to Load rather than transfer
bulk-power across the interconnected system.
LN’s emanate from multiple points of
connection at 100 kV or higher to improve
the level of service to retail customer Load
and not to accommodate bulk-power transfer
across the interconnected system. The LN is
characterized by all of the following:
(a) Limits on connected generation: The LN
and its underlying Elements do not include
generation resources identified in Inclusion
I3 and do not have an aggregate capacity of
non-retail generation greater than 75 MVA
(gross nameplate rating);
(b) Power flows only into the LN and the
LN does not transfer energy originating
outside the LN for delivery through the LN;
and
(c) Not part of a Flowgate or transfer path:
The LN does not contain a monitored Facility
of a permanent Flowgate in the Eastern
Interconnection, a major transfer path within
the Western Interconnection, or a comparable
monitored Facility in the ERCOT or Quebec
Interconnections, and is not a monitored
Facility included in an Interconnection
Reliability Operating Limit (IROL).
E4—Reactive Power devices owned and
operated by the retail customer solely for its
own use.
Note—Elements may be included or
excluded on a case-by-case basis through the
Rules of Procedure exception process.
19. NERC explained that exclusion E1
is intended to enhance the clarity of the
radial facilities exclusion and that
criteria ‘‘b’’ and ‘‘c’’ of exclusion E1
identify the maximum amount of
generation allowed on the radial facility
while still qualifying for the radial
facilities exclusion. NERC added the
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‘‘normally open switch’’ note at the end
of exclusion E1 to address a common
network configuration in which two
separate sets of facilities would be
recognized as radial systems and not
included in the bulk electric system are
connected by a ‘‘normally open switch’’
which is a switch is set to the open
position for reliability purposes.21
20. NERC explained that the normally
open switch note avoids numerous
exception requests because this
configuration is common and subjecting
two sets of radial facilities that are
normally unconnected to each other
because the switch between them is
open to the Reliability Standards during
the limited time periods when the
switch is closed for maintenance-related
or outage-related circumstances is
impractical and unworkable.
21. According to NERC, exclusion E2
excludes a generating unit or units on
the customer’s side of the retail meter
that serves all or part of the retail load
subject to allowing a limited amount of
generating capacity to be connected and
that standby, back-up, and maintenance
power services are provided to the
generating unit. NERC stated that these
generating units are not necessary for
the operation of the interconnected
transmission network because they
serve a single retail load, provide a
limited amount of capacity to the bulk
electric system, and are fully backed up
by other resources.
22. With respect to the ‘‘local
network’’ exclusion (exclusion E3),
NERC explained that it encompasses
local networks of transmission elements
operated at between 100 kV and 300 kV
that distribute power to load rather than
transfer bulk power across the
interconnected system. NERC further
explained that local networks are not
intended to provide transfer capacity for
the interconnected transmission
network and such networks should not
be included in the bulk electric system,
and the conditions established in
exclusion E3 are sufficient to ensure
that such local networks are being used
exclusively for local distribution
purposes. NERC adds that facilities used
for the local distribution of electric
energy are expressly excluded from the
bulk electric system by the core
definition as well as by the local
network exclusion.22
21 NOPR, 139 FERC ¶ 61,247 at P 27 (citing NERC
BES Petition at 19).
22 See NOPR, 139 FERC ¶ 61,247 at P 30; See also
NERC BES Petition at 22–23.
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b. Detailed Information To Support an
Exception Request
23. In response to the Order No. 743
directive to develop technical criteria to
use in addressing requests for
exceptions to the definition of the bulk
electric system, NERC developed an
alternative approach because it would
be more feasible to develop a common
set of data and information that
Regional Entities and NERC could use to
evaluate exception requests rather than
to develop the detailed criteria.23 The
Detailed Information Form contains a
common set of data that entities seeking
an exception must submit with every
exception request. According to NERC,
the information that an applicant may
submit in support of an exception
request is not limited to the Detailed
Information Form. Rather, an applicant
is expected to submit all relevant data,
studies and other information that
support the exception request, and the
Regional Entity and NERC may ask an
applicant to provide other data and
studies in addition to the Detailed
Information Form.
mstockstill on DSK4VPTVN1PROD with
c. Implementation Plan for Revised
Definition of ‘‘Bulk Electric System’’
24. NERC requested that the revised
definition become effective on the first
day of the second calendar quarter after
receiving applicable regulatory
approval, or, in those jurisdictions
where no regulatory approval is
required, on the first day of the second
calendar quarter after its adoption by
the NERC Board of Trustees. NERC
stated that the proposed effective date is
appropriate to provide a reasonable time
between the date of regulatory approval,
which is not under the control of NERC
or the industry, and the effective date of
the revised definition of bulk electric
system.
25. NERC also requested that
compliance obligations for all newlyidentified elements to be included in
the bulk electric system should begin
twenty-four months after the applicable
effective date of the revised definition.
While the Commission stated in Order
Nos. 743 and 743–A that the transition
period should not exceed 18 months,
NERC explained that it is requesting a
longer transition period in light of the
actions that entities will need to
complete in connection with the revised
definition.
2. NERC Petition for Approval of
Revisions To Rules of Procedure To
Adopt an Exception Process
26. In Docket No. RM12–7–000, NERC
filed proposed revisions to its Rules of
23 NERC
BES Petition at 26.
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Procedure for the purpose of adopting
an ‘‘exception process’’ mechanism to
add elements to, and remove elements
from, the bulk electric system. NERC
stated that decisions to approve or
disapprove exception requests will be
made by NERC, rather than by the
Regional Entities, thereby eliminating
the potential for inconsistency and
subjectivity. Further NERC explained
that the exception process is ‘‘not
intended to be used to resolve
ambiguous situations,’’ i.e., the
exception process is only available after
an initial determination has been made
regarding whether an element is part of
or not part of the bulk electric system
through the application of the definition
to the element.’’ 24
27. NERC stated that an owner of an
element may submit a request to the
applicable Regional Entity to include
the element in, or remove it from, the
bulk electric system.25 In addition, a
Regional Entity, planning authority,
reliability coordinator, transmission
operator, transmission planner, or
balancing authority that has the
elements covered by an exception
request within its scope of
responsibility may submit an exception
request for the inclusion of an element
or elements owned by a registered
entity. Upon receiving an exception
request, the applicable Regional Entity
will review the exception request and
will issue a recommendation to NERC.
NERC will evaluate the Regional Entity
recommendation, the accompanying
technical documents, the Technical
Review Panel opinion (if any), and any
comments submitted, and will issue a
final determination. Finally, NERC
stated that an exception request will be
subject to review to verify continuing
justification for the exception. NERC
also stated that an entity must certify
every 36 months to the appropriate
Regional Entity that the basis for the
exception request remains valid.
Further, NERC also included a method
for an entity to challenge the NERC
decision on an exception request to a
NERC Compliance Committee. The
entity may also appeal the final NERC
decision to the Commission within 30
days following the date of the
Compliance Committee‘s decision, or
within such time period as the
Commission’s legal authority permits.
28. In response to the Order No. 743
Commission statement that NERC
should maintain a list of exempted
facilities that can be made available to
24 NOPR, 139 FERC ¶ 61,247 at P 38, quoting
NERC ROP Petition at 10–11.
25 See NOPR, 139 FERC ¶ 61,247 at PP 39–45,
detailing the three-step exception process.
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the Commission upon request, NERC
maintained that the proposed exception
process does not include provisions for
such a list, adding that this is an
internal administrative matter for NERC
to implement that does not need to be
embedded in the Rules of Procedure.26
NERC stated it will develop a specific
internal plan and procedures for
maintaining a list of facilities for which
exceptions have been granted.
E. Commission NOPR
29. The Commission issued the NOPR
on June 22, 2012, and required that
comments be filed within 60 days after
publication in the Federal Register, or
September 4, 2012. While seeking
comment on various provisions of
NERC’s petitions, the NOPR proposed to
approve NERC’s modification to the
currently-effective definition of bulk
electric system and changes to the Rules
of Procedure to add the exception
process. The NOPR also requested
comment on the appropriate role for
NERC and the Commission in the
identification of bulk electric system
facilities and elements.
30. The Commission received more
than sixty comments on the proposed
rulemaking. NERC and other
commenters, inter alia, respond to the
Commissions questions regarding the
application of the proposed bulk electric
system definition. These comments
have assisted us in developing this Final
Rule. A list of commenters appears in
Appendix A to this Final Rule.27
II. Discussion
31. For the reasons discussed below,
the Commission adopts the NOPR
proposal and approves NERC’s revised
definition of bulk electric system and
the specific inclusions and exclusions
set forth in the definition, as just,
reasonable, not unduly discriminatory
or preferential, and in the public
interest. Likewise, the Commission
approves NERC’s revised Rules of
Procedure that set forth an exceptions
process for determining whether
elements and facilities are included in
the bulk electric system on a case-bycase basis. While we discuss below
specific provisions of the NERC
proposal, provisions of the modified
bulk electric system definition and
related Rules of Procedures not
specifically mentioned are approved in
26 NERC
ROP Petition at 49.
NERC, MISO, Consumers, MISO
Transmission Owners, Barrick, ITC Companies, and
AMP filed reply comments. Although the NOPR did
not allow for reply comments, we will accept these
pleadings because they have assisted our
understanding of NERC’s proposal in this Final
Rule.
27 Further,
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this Final Rule. Below, we address the
following matters: (A) Approval of the
NERC definition; (B) issues concerning
the ‘‘core’’ bulk electric system
definition; (C) local distribution; (D)
exclusions and inclusions in the bulk
electric system definition; and (E)
NERC’s Rules of Procedures exceptions
process.
mstockstill on DSK4VPTVN1PROD with
A. Approval of the Revised Bulk Electric
System Definition NOPR Proposal
32. In the NOPR, the Commission
proposed to approve a modification to
the currently-effective definition of
‘‘bulk electric system’’ because it
removes language allowing for regional
discretion in the currently-effective bulk
electric system definition, establishes a
bright-line threshold that includes all
facilities operated at or above 100 kV
and identifies specific categories of
facilities and configurations as
inclusions and exclusions to provide
clarity in the definition of bulk electric
system.28
Comments
33. NERC, Regional Entities, trade
organizations and a majority of
commenters from various industry
segments support the Commission’s
proposal to approve NERC’s proposals.
APPA ‘‘strongly support[s]’’ NERC’s
proposed definition.29 EEI supports
NERC’s proposals and states that any
changes to the definition should be
made through the standard development
process, not through directives. LPPC,
NRECA, and WPPC also support
approval of the definition and urge the
Commission to adopt the NERC
proposal and to refrain from pursuing
additional regulatory mandates.
Snohomish and WPPC agree that NERC
has developed a ‘‘clear and workable
definition’’ of the bulk electric system
that markedly improves the existing
definition. They also opine that the
definition creates a foundation for
reliability that focuses on core elements
of the interconnected bulk transmission
system, and provides a means for lowervoltage or peripheral elements of the
electric system to be excluded from the
bulk electric system. Other commenters
state that the definition is consistent,
repeatable and verifiable and will
provide clarity that will assist NERC
and affected entities in implementing
Reliability Standards.
34. Other commenters, while noting
that the NOPR represents a ‘‘positive
development,’’ believe additional
modifications are necessary ‘‘to achieve
consistency within the limitations’’ of
section 215 of the FPA and the
Commission’s directives in Order Nos.
743 and 743–A.30
35. Some commenters oppose
approval on various grounds. For
example, NARUC is concerned that,
even though the definition appears to
honor the exclusion of local distribution
from the bulk electric system, the
definition does not go far enough to
ensure ‘‘that a costly analysis * * * is
not required to be performed with
regard to local distribution elements
that are by law excluded.’’ 31 NARUC is
also concerned that exclusion E3 (local
networks) will exclude some, but not
all, local distribution elements.
According to NARUC, this could cause
confusion as to the status of local
distribution elements that are not also
described in exclusion E3.
Consequently, NARUC believes that the
definition does not appropriately reflect
the statutory limits of the Commission’s
authority under FPA section 215 and its
implementation could unnecessarily
overreach into state jurisdictional local
distribution facilities.
36. NYPSC believes that the proposed
definition will likely result in
classifying certain facilities as part of
the bulk electric system despite their
being unnecessary for operating an
interconnected transmission network.
NYPSC states that the majority of the
138 kV lines within New York City
serve as direct feeders to the networked
distribution system serving load.
NYPSC also states that there is no
technical justification for a 100 kV
bright-line definition.32 NYPSC
contends that, even with the exclusions
and the exception process, it is
uncertain whether an exclusion or
exception would apply to the 138 kV
lines noted above. NYPSC believes that
this approach presumes the Commission
has jurisdiction over all facilities
operated at 100 kV or above, unless
proven otherwise, which
inappropriately shifts the legal and
technical burdens to the states.
37. NYPSC, NARUC, and the
Massachusetts DPU argue that the
revised definition does not include a
cost impact analysis that weighs costs
related to the modified definition
against the reliability benefits that the
new definition would achieve. They
contend that the lack of a cost-benefit
analysis accompanying the revised
definition represents an additional gap
in the process for developing this
Reliability Standard. NYPSC and the
30 Holland
Comments at 2.
Comments at 4.
32 NYPSC Comments at 3. See also Massachusetts
DPU Comments at 6–7.
Massachusetts DPU contend that the
costs of compliance with the definition
will be excessive. NYPSC states that,
according to NERC and the Northeast
Power Coordinating Council, Inc.
(NPCC), it would exceed $280 million.
Thus, they advocate that, given the
significant costs that the revised
definition could impose on consumers,
the Commission should reject NERC’s
proposed modifications until they are
supported by a cost-benefit analysis.
Commission Determination
38. Pursuant to section 215(d)(2) of
the FPA, we approve NERC’s revised
definition of bulk electric system and
the specific inclusions and exclusions
set forth in the definition, as just,
reasonable, not unduly discriminatory
or preferential, and in the public
interest. NERC’s proposal provides
additional clarity and granularity that
will allow for greater transparency and
consistency in the identification of
elements and facilities that make up the
bulk electric system and is responsive to
the technical and policy concerns
discussed in Order No. 743.
39. NERC’s proposal adequately
ensures that all facilities necessary for
operating an interconnected electric
energy transmission network are
included under the bulk electric system.
As we observed in Order No. 743,
‘‘[U]niform Reliability Standards, and
uniform implementation, should be the goal
and the practice, the rule rather than the
exception, absent a showing that a regional
variation is superior or necessary due to
regional differences. Consistency is
important as it sets a common bar for
transmission planning, operation, and
maintenance necessary to achieve reliable
operation * * * . [W]e have found several
reliability issues with allowing Regional
Entities broad discretion without ERO or
Commission oversight.33
The core definition eliminates the
provision that allows broad regional
discretion, and establishes a 100 kV
bright-line threshold for determining, in
the first instance, those elements and
facilities that are included in the bulk
electric system. The definition also
includes specific inclusions and
exclusions that address typical system
facilities and configurations such as
generation and radial systems,
providing additional granularity that
improves consistency and provides a
practical means to determine the status
of common system configurations. Thus,
we agree with commenters that the
modified definition is consistent,
repeatable and verifiable and will
provide clarity that will assist NERC
31 NARUC
28 NOPR,
29 APPA
139 FERC ¶ 61,247 at P 18.
Comments at 7.
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809
33 Order No. 743, 133 FERC ¶ 61,150 at P 82
(footnote omitted).
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and affected entities in implementing
Reliability Standards.
40. Accordingly, the Commission
finds that NERC’s proposal satisfies the
directives of Order No. 743 to develop
modifications to the currently-effective
definition of bulk electric system to
ensure that the definition encompasses
all facilities necessary for operating an
interconnected transmission network
and remove the Regional Entity
discretion that currently allows for
regional variations without review or
oversight. We also find that NERC’s
definition satisfies the Commission’s
technical concerns in Order No. 743
through the use of a bright-line 100 kV
threshold, with specific inclusions and
exclusions within the definition, for
identifying bulk electric system
elements and the establishment of an
exception process for facilities that are
not necessary for operating the
interconnected transmission network.
41. Moreover, we are not persuaded
by the rationale of the commenters who
advocate that we remand the NERC
proposal. We disagree with NYPSC that
the proposed definition will likely
result in classifying certain facilities as
part of the bulk electric system despite
their being unnecessary for operating an
interconnected transmission network.
An entity that believes its facility is
improperly classified as part of the bulk
electric system by application of the
definition may avail itself of the
exception process to have the facility
removed from inclusion in the
definition. With regard to NYPSC’s
claim that there is no technical
justification for the 100 kV threshold, in
Order No. 743, the Commission found
‘‘that many facilities operated at 100 kV
and above have a significant effect on
the overall functioning of the grid and
that the majority of 100 kV and above
facilities in the United States operate in
parallel with other high voltage and
extra high voltage facilities,
interconnect significant amounts of
generation sources and operate as part
of a defined flowgate.’’ The Commission
explained that this ‘‘illustrates their
parallel nature and therefore their
necessity to the reliable operation of the
interconnected transmission system’’
and that ‘‘[p]arallel facilities operated at
100–200 kV will experience similar
loading as higher voltage parallel
facilities at any given time and the
lower voltage facilities will be relied
upon during contingency scenarios.’’ 34
In addition, in Order No. 743 the
Commission identified the reliability
concerns created by the current
definition and a method to ensure that
34 Order
No. 743, 133 FERC ¶ 61,150 at P 73.
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certain facilities needed for the reliable
operation of the nation’s bulk electric
system are subject to mandatory and
enforceable Reliability Standards. The
Commission noted that the material
impact assessments implemented, for
example, by NPCC ‘‘are subjective in
nature, and results from such tests are
inconsistent in application, as shown
through the exclusion of facilities that
clearly are needed for reliable
operation.’’ 35 The Commission also
found that the vast majority of 100 kV
and above facilities are part of parallel
networks with high voltage and extra
high voltage facilities and are necessary
for reliable operation.36 Thus, the
Commission found that NERC should
‘‘establish a uniform definition that
eliminates subjectivity and regional
variation in order to ensure reliable
operation of the bulk electric system’’
and that ‘‘the existing NPCC impact test
is not a consistent, repeatable, and
comprehensive alternative to the brightline, 100kV definition we prefer.’’ 37
42. NERC already applies a general
100 kV threshold, and today all regions,
with the exception of NPCC, also apply
a 100 kV threshold. We also note
NYPSC cites to the same methodology
that the Commission found dubious in
Order No. 743–A where the Commission
explained that it had:
serious concerns about NPCC’s []
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. 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.38
43. We also disagree with NYPSC’s
contention that this approach presumes
the Commission has jurisdiction over all
facilities operated at 100 kV or above,
unless proven otherwise, which
inappropriately shifts the legal and
technical burdens to the states. As noted
above and in Order No. 743–A, the
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.’’ 39
35 Order
No. 743, 133 FERC ¶ 61,150 at P 96.
36 Id.
37 Id.
38 Order No. 743–A, 134 FERC ¶ 61,210 at P 47
(footnotes omitted) (citing Order No. 743, 133 FERC
¶ 61,150 at PP 74, 76 and 85).
39 Order No. 743–A, 134 FERC ¶ 61,210 at P 36.
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Thus, we are not persuaded that NERC’s
proposal inappropriately shifts legal or
technical burdens. In addition, the
Commission has maintained that the
bright-line threshold would be a ‘‘first
step or proxy’’ in determining which
facilities should be included in the bulk
electric system. The definition, coupled
with the exception process will ensure
that facilities not necessary for the
operation of the interconnected
transmission network will be properly
categorized. Further, the Commission’s
approach for determining whether
elements are used for local distribution
on a case-by-case basis, as discussed
more fully below, addresses NARUC’s
concerns as to the status of local
distribution elements that are not also
described in exclusion E3 and that the
definition does not appropriately reflect
the statutory limits of the Commission’s
authority under FPA section 215 as well
as NYPSC’s concern about the
Commission having jurisdiction over all
facilities operated at 100 kV or above.
With regard to the specific examples
cited by NYPSC, we find that such
determinations are more appropriate for
the exception process and beyond the
scope of this proceeding.
44. We also disagree with NYPSC and
Massachusetts DPU that NERC’s
proposal is flawed because NERC’s
petition did not include a formal cost
analysis. Order No. 743 did not require
such an analysis. Rather, Order No. 743
tasked NERC with certain directives and
NERC’s petitions are intended to
comply with those directives. In
addition, while cost of implementation
can be relevant in Commission review
of a proposed Reliability Standard, the
foremost concern is the reliability of the
interconnected transmission network.40
Therefore, we find that NERC’s petition
adequately addresses the Commission’s
Order No. 743 directives.
B. The Core Definition of Bulk Electric
System
NOPR Proposal
45. In the NOPR, the Commission
proposed to approve the bulk electric
system ‘‘core’’ definition developed by
NERC which states as follows:
Unless modified by the lists shown below,
all Transmission Elements operated at 100
kV or higher and Real Power and Reactive
Power resources connected at 100 kV or
higher. This does not include facilities used
in the local distribution of electric energy.
In the NOPR, the Commission noted
that NERC’s proposal appears to satisfy
the objectives set forth in Order No. 743.
40 See Order No. 672, FERC Stats. & Regs. ¶
31,204 at P 330.
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The Commission also stated that NERC’s
‘‘core’’ definition establishes the
fundamental threshold for inclusion of
facilities in the bulk electric system as
those that are operated at 100 kV or
higher, if they are transmission
elements, or are connected at 100 kV or
higher, if they are real power or reactive
power resources. In addition, the
Commission stated that the core
definition also establishes a 100 kV
criterion as a bright-line threshold,
rather than as a general guideline as in
the current definition, i.e., the phrase
‘‘generally operated at’’ in the current
definition is eliminated.
mstockstill on DSK4VPTVN1PROD with
Comments
46. NERC and a majority of
commenters including most trade
organizations believe that the core
definition satisfies the Order No. 743
directives. By eliminating the language
‘‘as defined by the Regional Reliability
Organization’’ and ‘‘generally operated
at,’’ they state that the revised definition
eliminates the subjectivity and regional
variations that are possible under the
current definition.41 WPPC supports the
NERC proposals but is concerned that
the NOPR could be read as attempting
to impose nationally uniform standards
without allowing regional variation.
WPPC believes that FPA section 215
requires deference to Regional Entities
in developing Reliability Standards and
is concerned that the NOPR’s references
to uniformity of the definition of bulk
electric system must be limited by the
deference accorded to Regional Entities
in the statute.
47. Other commenters seek
modification of the core definition. For
example, PSEG Companies believe that
the core definition will introduce
subjectivity because it omits facilities
and systems necessary to operate the
facilities above 100 kV, such as
protection systems, underfrequency
load shedding systems and control
centers.42 PSEG Companies suggest the
addition of demand response above 75
MW within a balancing authority into
the definition. In the same vein, ISO
New England suggests including
capacity resources connected below 100
kV and identifies protection systems,
under-frequency and under-voltage load
shedding systems, inclusion of non-bulk
electric system facilities into
transmission and operational planning,
and control rooms as items that are
important to operating the bulk electric
41 See e.g., NERC, APPA, EEI, NRECA, ELCON,
the Regional Entities, NV Energy, National Grid,
Southern Companies, Duke Energy, International
Transmission Company, TAPS, BPA, Hydro One
and IESO, and Snohomish.
42 PSEG Comments at 4–6.
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system but not in the definition. ISO
New England, therefore, believes that
NERC should make the determination
whether or not these facilities and
control systems must comply with
Reliability Standards independent of
their designation. Valero seeks
clarification that the core definition
excludes elements ‘‘that are owned and
used by an industrial end-user to serve
its load.’’ 43
48. Similarly, IUU and Barrick state
that industrial generators are intrastate
facilities that serve only the owner’s
load and believe that they are excluded
from the jurisdiction of the
Commission.44 IUU and Barrick believe
that some of the Reliability Standards
appear to reach beyond the limits
imposed by Congress and into these
intrastate industrial generator facilities.
According to IUU and Barrick, the
definition needs an additional exclusion
that excludes these intrastate facilities.
49. Several commenters that support
the NERC proposal also comment on
matters not specifically raised in the
NOPR. APPA recommends that the
Commission state that it expects NERC
will continue to treat the Phase 2 bulk
electric system definition project as a
priority in the 2013 budget year. APPA
also requests that the Commission direct
NERC to expedite the deregistration
process for those entities or facilities
that are no longer designated as part of
the bulk electric system under the new
definition or through application of the
Rules of Procedure exception process.
APPA believes that an expedited
deregistration process would reduce the
associated burden on entities that are no
longer required to document
compliance due to the revisions in the
bulk electric system definition and the
exception process.
50. Redding requests that, due to the
connection between the definition and
the NERC Functional Model, the
Commission should direct revisions to
the NERC Functional Model to
accommodate entities that own or
operate facilities that technically qualify
as transmission but that have a limited,
if any, impact on reliability.
Commission Determination
51. We find that the ‘‘core’’ definition
satisfies the Order No. 743 directives to
remove the subjectivity and regional
variations that are possible under the
current definition by eliminating the
language ‘‘as defined by the Regional
Reliability Organization’’ and ‘‘generally
operated at,’’ in the revised definition.
The ‘‘core’’ definition, quoted above,
43 Valero
44 See
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also Barrick Reply Comments at 2–3.
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811
establishes the fundamental threshold
for inclusion of facilities in the bulk
electric system as those that are
operated at 100 kV or higher, if they are
transmission elements, or are connected
at 100 kV or higher, if they are real
power or reactive power resources. The
core definition also establishes a 100 kV
criterion as a bright-line threshold,
rather than as a general guideline as in
the current definition, i.e., the phrase
‘‘generally operated at’’ in the current
definition is eliminated. The core
definition also continues to capture
equipment associated with the facilities
included in the bulk electric system.
52. Other than the directive to modify
exclusion E3 as discussed below, the
Commission declines to direct NERC to
further modify the definition or the
specified inclusions and exclusions.
Specifically, we will not direct further
revisions to address demand response,
protection systems and other facilities
or equipment as separate inclusions or
exclusions as advocated by ISO New
England, PSEG Companies, IUU or
Barrick.45 Rather, NERC has indicated
that it has initiated a Phase 2 of the
development project for the definition
of bulk electric system, and interested
stakeholders have the opportunity in the
first instance to raise their ideas in that
forum regarding possible additions,
inclusions and exclusion set forth in the
bulk electric system definition.46
53. Moreover, in the NOPR we
acknowledged NERC’s statement that
the core definition also continues to
capture equipment associated with the
facilities included in the bulk electric
system.47 In the NOPR we agreed with
NERC that while the new definition
does not use the term ‘‘associated
equipment,’’ the phrase is included in
the definition through the defined term
‘‘Transmission Elements.’’ 48 We adopt
the NOPR proposal that the term
‘‘associated equipment,’’ is included in
the definition through the defined term
‘‘Transmission Elements’’ which could
45 We note that, in Order No. 693, the
Commission recognized demand side management
as a type of resource for contingency reserve that
should be treated on a comparable basis with other
resources; and must meet similar technical
requirements as other resources providing this
service. Order No. 693, FERC Stats. & Regs. ¶ 31,242
at PP 330–335.
46 According to NERC, due to time constraints in
meeting the compliance deadline set in Order No.
743, NERC separated the development of the
revised definition into two phases. See NERC
Petition at 46. NERC stated that Phase 1 culminated
in the language of the proposed modified definition
that is the primary subject of this Final Rule. Phase
2, which is ongoing, intends to focus on other
industry concerns raised during Phase 1.
47 NOPR, 139 FERC ¶ 61,247 at PP 16, 55.
48 NOPR, 139 FERC ¶ 61,247 at P 55 n.69.
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include the facilities identified by PSEG
Companies.
54. With regard to Valero’s
clarification, that the core definition
excludes elements ‘‘that are owned and
used by an industrial end-user to serve
its load,’’ Valero can either seek to have
this matter addressed generically, if
appropriate, in NERC’s Phase 2, or seek
to have this addressed on a case-by-case
basis in the exception process that we
approve in this Final Rule.
55. We decline, as APPA requests, to
direct NERC to expedite the
deregistration process for those entities
who own or operate facilities that are no
longer designated as part of the bulk
electric system. We do not expect there
to be significant numbers of entities
either needing to register or deregister
due to the change in definition.49 To the
extent entities seek to deregister, NERC,
as the ERO, can determine the
appropriate timeframe for making such
a determination. We also decline to
order NERC to modify the Functional
Model as Redding requests as the issues
Redding raises are outside the scope of
this proceeding. In response to WPPC’s
concern, this Final Rule adopts the
revised definition which eliminates
regional discretion for determining
whether an element is part of the bulk
electric system. It does not address or
subsume the ability of Regional Entities
to develop Reliability Standards for
their regions that meet criteria for
regional Reliability Standards.
56. In summary, the Commission
finds that NERC’s proposal adequately
addresses the concerns articulated in
Order No. 743 regarding regional
discretion and the need for a consistent
approach and satisfies the concerns
regarding the elimination of
inconsistencies across regions.
mstockstill on DSK4VPTVN1PROD with
C. Local Distribution
NOPR Proposal
57. The NOPR noted that, although
Order No. 743 acknowledged that
‘‘Congress has specifically exempted
‘facilities used in the local distribution
of electric energy’ ’’ it still is necessary
to determine which facilities are local
distribution, and which are
transmission.50 The NOPR observed that
Order No. 743–A stated that ‘‘[w]hether
facilities are used in local distribution
will in certain instances raise a question
of fact, which the Commission has
jurisdiction to determine.’’ 51 In
addressing what constitutes local
distribution, NERC stated in its petition
49 See
NOPR, 139 FERC ¶ 61,247 at P 132.
No. 743–A, 134 FERC ¶ 61,210 at P. 67.
51 NOPR, 139 FERC ¶ 61,247 at P. 58, quoting
Order No. 743–A, 134 FERC ¶ 61,210 at P. 67.
50 Order
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that facilities used for the local
distribution of electric energy are
expressly excluded from the bulk
electric system by the core definition as
well as by the local network exclusion,
exclusion E3.52 In the NOPR, the
Commission requested comment
regarding how NERC’s proposed
definition is responsive to the
Commission’s directives in Order Nos.
743 and 743–A. Specifically, the
Commission requested comment on
how NERC’s proposal adequately
differentiates between local distribution
and transmission facilities in an
objective, consistent, and transparent
manner.
Comments
58. NERC and numerous commenters
state that the definition adequately
differentiates between local distribution
and transmission.53 NERC states that the
revised definition distinguishes between
bulk electric system facilities and nonbulk electric system facilities and local
distribution facilities fall into the latter
category.54 NERC adds that, by applying
the definition, facilities used for local
distribution will not be included due to
their specific exclusion in the core
definition. NERC and others also state
that the exception process can be used
to determine whether facilities are used
for local distribution when an entity
believes such facilities have been
improperly included.55
59. While ELCON generally agrees
with NERC’s position, ELCON
comments that NERC’s proposal does
not fully respond to the Commission’s
directive in Order Nos. 743 and 743–A.
ELCON maintains that a definition of
‘‘local distribution’’ is necessary to
avoid including assets that are clearly
used for the local distribution as part of
the bulk electric system. ELCON
expresses concern that industrial
consumers’ equipment that is rated 100
kV or above will be designated as a
component of the bulk electric system,
irrespective of whether such elements
are material for the reliable operation of
the interconnected Bulk-Power System.
ELCON recommends that the
Commission address this issue by
establishing a joint working group with
NARUC to draft a proposed definition of
local distribution to exclude certain
52 NOPR, 139 FERC ¶ 61,247 at P. 59, (citing
NERC BES Petition at 16).
53 See e.g., APPA Comments at 8–9, EEI
Comments at 4, NRECA Comments at 7, Hydro One
Comments at 3, NV Energy Comments at 3–4, PHI
Companies Comments at 3, TAPS Comments at 3,
BPA Comments at 3, WPPC Comments at 27–30.
54 NERC Comments at 6.
55 See e.g. WPPC Comments at 28.
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facilities from the scope of the
definition of bulk electric system.
60. Some entities that generally agree
with NERC also suggest clarifications to
improve the distinction between local
distribution and transmission. MISO
suggests that, to identify local
distribution facilities, the Commission
direct NERC to clarify the last sentence
of the core definition by ‘‘crossreferencing’’ the exclusion criteria in the
definition.56 Snohomish requests that
the Commission clarify that the Seven
Factor Test established in Order No. 888
is one element that can be used to
evaluate an exception request in
addition to other engineering and
technical considerations.57
61. Other commenters contend that
NERC’s proposal does not adequately
differentiate between local distribution
and transmission facilities or reflect the
statutory limits of the Commission’s
authority under FPA section 215.58 As
noted above, NARUC states that the
NERC definition does not appropriately
reflect the statutory limits of the
Commission’s authority under Federal
Power Act Section 215 and its
implementation could unnecessarily
overreach into state jurisdictional local
distribution facilities. NARUC
maintains that, while the definition of
bulk electric system appears to exclude
local distribution by restating the law,
the definition does not go far enough to
ensure that a costly analysis applying
for an ‘‘exception’’ is not required to be
performed with regard to local
distribution elements that are by law
‘‘excluded.’’ NARUC contends that the
mere fact that a subset of local
distribution elements expressly
excluded from the bulk electric system
by the core definition are specifically
identified in exclusion E3 could cause
confusion as to the status of local
distribution elements that are not also
described in E3. Similarly, the Steel
Manufacturers Association states that
the Commission cannot allow NERC’s
exception process to determine the
boundaries of the Commission’s
jurisdiction.
62. Consumers Energy believes that
the definition does not differentiate
between transmission and local
distribution because ‘‘Transmission
Elements’’ and ‘‘local distribution’’ are
undefined. Consumers Energy states
that the Commission should clarify that
any facilities that have been found by
the Commission to be local distribution
pursuant to the Seven Factor Test are
56 MISO
Comments at 4.
Comments at 3.
58 E.g., NARUC, Holland, NYPSC, and
SmartSenseCom.
57 Snohomish
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also local distribution under FPA
section 215 and therefore outside the
bulk electric system.59 Consumers
references a prior Commission
declaratory order accepting the
Michigan Public Service Commission’s
determination of transmission and local
distribution facilities.60 Consumers
notes that it sold all of its ‘‘bulk electric
system elements’’ to Michigan Electric
Transmission Company, who is the
registered transmission owner. ITC
Companies and MISO filed reply
comments requesting that the
Commission reject the coordination and
continuity aspect of Consumers’
proposal to automatically exclude from
the definition those facilities that are
‘‘in series’’ with transmission facilities
that are included in the bulk electric
system definition.61 In addition, they
state that this is not the proper
proceeding to address whether specific
facilities may or may not be part of the
bulk electric system. Consumers filed a
motion to strike the MISO reply
comments.
63. Portland is concerned that the
Commission is assessing its reliability
jurisdiction without addressing ‘‘the
inconsistency between its reliability
jurisdiction and its traditional
‘transmission’ jurisdiction under FPA
section 201(b).’’ Portland states that the
Commission could clarify that for
entities who apply the local distribution
exception in good faith, any future
regulatory determination that such
distribution facilities are to be treated as
part of the bulk electric system within
the scope of FPA section 215 regulation
will be prospective only.62
64. Holland argues that, aside from
the exclusions in the core definition,
there are no criteria or guidelines that
exclude local distribution facilities from
the bulk electric system. Holland also
argues that if an entity challenges a
registration, there is no guidance as to
what information NERC will consider
whether to recognize the facilities in
question as local distribution and
exclude them from the bulk electric
system. Holland contends that the
proposed Rules of Procedure fail to
provide any distinction between those
facilities that must be excluded because
they are local distribution versus those
that should be excluded because,
although they meet the [bulk electric
system] bright-line criteria, they are not
necessary for the reliable operation of
the interconnected transmission system.
59 Consumers
Comments at 3–8.
Comments at 4 (citing July 29, 1998
letter order in Docket No. EL98–21–000).
61 ITC Reply Comments at 6–7.
62 Portland Comments at 4.
60 Consumers
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Holland claims that the exception
process does not make ‘‘any distinction
between criteria necessary for
determining those facilities that must be
excluded because they are local
distribution versus those that should be
excluded because they [
] meet the
[bulk electric system] criteria, but are
not material.’’ 63 Holland adds that
‘‘because the exclusions are not
comprehensive, and because the
‘exceptions’ process provides no further
guidance on the proper exclusion of
these facilities, there would be no basis
to support a conclusion that the NOPR
has effectively and transparently
identified, let alone justified, a second
class or test for identifying local
distribution for purposes of Section 215
of the FPA.’’ 64 Similarly, Massachusetts
DPU comments that exception requests
will inevitably involve difficult
questions regarding whether a facility is
‘‘used in the local distribution of
electric energy,’’ an area over which
states have exclusive authority under
the FPA.65
65. Valero requests that the
Commission direct NERC to develop
criteria based on a ‘‘primary function
test’’ to exclude facilities used in local
distribution. In addition, Valero states
that the Commission should ‘‘provide
guidance to NERC by [
] stating
that, to constitute distribution, a facility
need not be used exclusively for
distribution purposes.66 Further, Valero
contends that NERC’s ‘‘distribution use
only’’ position contradicts the plain
language of sections 201 and 215 of the
FPA. Valero states that its ‘‘discrete onsite electrical equipment’’ is designed
only to serve load at its refineries. While
the facilities may enhance the reliability
of electric service, Valero asserts they
are only used by an industrial end-user
of electricity for ‘‘the local distribution
of electric energy’’ and must be
excluded from the bulk electric system.
The Power Agencies ask for clarification
of footnote 79 in the NOPR and assume
that the Commission is clarifying that
certain facilities may not satisfy the
revised definition, but may constitute
transmission facilities for purposes
other than applying FPA section 215.67
63 Holland
Comments at 6.
Comments at 9. See also Barrick Reply
Comments at 2.
65 Massachusetts DPU Comments at 10.
66 Valero Comments at 8–12 (emphasis in
original) (citing Detroit Edison v. FERC, 334 F.3d
48, 54 (D.C. Cir. 2003)).
67 See NOPR, 139 FERC ¶ 61,247 at P 60 n.79
stating that ‘‘an element that falls outside of the
definition of bulk electric system is not necessarily
local distribution.’’
64 Holland
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813
Commission Determination
66. For the reasons discussed below,
we find that NERC’s ‘‘core’’ definition of
bulk electric system definition, together
with exclusion E3 (local networks), is
consistent with the section 215
exclusion of local distribution facilities.
We also find that, while NERC’s caseby-case exceptions process is
appropriate to determine the technical
issue of whether facilities are part of the
bulk electric system, the jurisdictional
question of whether facilities are used
in local distribution should be decided
by the Commission.
67. NERC’s ‘‘core’’ definition provides
a 100 kV threshold for determining
whether elements or facilities are
included in the bulk electric system. As
we indicated in Order No. 743, the 100
kV threshold is a reasonable ‘‘first step
or proxy’’ for determining which
facilities should be included in the bulk
electric system. Indeed, it is reasonable
to anticipate that this threshold will
remove from the bulk electric system
the vast majority of facilities that are
used in local distribution, which tend to
be operated at lower, sub-100 kV
voltages. Moreover, applying the four
exclusions in NERC’s proposed
definition should serve to further
exclude facilities used in local
distribution from the bulk electric
system. In particular, as NERC indicates,
exclusion E3 (local networks)—although
not synonymous with local
distribution—should serve to reasonably
exclude many above-100 kV facilities
that are used in local distribution. Based
on the information provided in NERC’s
petition, as well as the supporting
comments of EEI and others, we
anticipate that the ‘‘core’’ definition
together with exclusion E3 should
provide a reasonable means to
accurately and consistently determine
on a generic basis whether facilities are
part of the bulk electric system. In other
words, most local distribution facilities
will be excluded by the 100 kV
threshold or exclusion E3 without
needing to seek a Commission
jurisdictional determination.
Accordingly, we find this aspect of
NERC’s petition reasonable.
68. In addition to the definition,
NERC also submitted revisions to the
Rules of Procedure (discussed below in
greater detail) that allow for a case-bycase exception process. Included in this
process is an opportunity for entities to
seek to exclude facilities from the bulk
electric system because they are used in
local distribution. NERC’s petition does
not provide criteria or guidance that it
would apply in the case-by-case
exception process to determine whether
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an element above 100 kV should be
excluded as local distribution, as
directed in Order No. 743.68 Thus, we
cannot conclude that the case-by-case
exception process will ‘‘adequately
differentiate[] between local distribution
and transmission facilities in an
objective, consistent, and transparent
manner.’’ 69
69. In Order No. 743, the Commission
stated that determining the line between
transmission and local distribution
should be part of the exception process
and left it to NERC in the first instance
to determine how to make such a
determination.70
After further review of NERC’s
proposal in this proceeding, and upon
consideration of the comments
submitted, we believe that it is more
appropriate that the Commission make
such case-by-case jurisdictional
determinations when necessary, and to
apply the Seven Factor Test set forth in
Order No. 888 to make such
determinations. The determination
whether an element or facility is ‘‘used
in local distribution,’’ as the phrase is
used in the FPA, requires a
jurisdictional analysis that is more
appropriately performed by the
Commission.71 Further, Commission
review of whether a facility is used in
local distribution comports with
relevant legal precedent. As we
explained in Order No. 743–A,
‘‘[w]hether facilities are used in local
distribution will in certain instances
raise a question of fact, which the
Commission has jurisdiction to
determine.’’ 72
68 The Commission, in Order No. 743–A,
explained 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 applying the test or developing an
alternative approach as it deems necessary.’’ Order
No. 743–A, 134 FERC ¶ 61,210 at P 69. NERC, in
its petition, did not adopt a specific test or criteria
for determining whether a facility is local
distribution, but indicated that an entity seeking an
exception for local distribution facilities could
provide a ‘‘seven factor’’ analysis as one means to
support the petition. NERC BES Petition at 49.
69 See NOPR, 139 FERC 61,247 at P 59.
70 Order No. 743, 133 FERC ¶ 61,150 at P 38.
71 Standardization of Generator Interconnection
Agreements and Procedures, Order No. 2003, FERC
Stats. & Regs. ¶ 31,146, at P 803 (2003), order on
reh’g, Order No. 2003–A, FERC Stats. & Regs. ¶
31,160, order on reh’g, Order No. 2003–B, FERC
Stats. & Regs. ¶ 31,171 (2004), order on reh’g, Order
No. 2003–C, FERC Stats. & Regs. ¶ 31,190 (2005),
aff’d sub nom. Nat’l Ass’n of Regulatory Util.
Comm’rs v. FERC, 475 F.3d 1277 (D.C. Cir. 2007),
cert. denied, 552 U.S. 1230 (2008) (‘‘‘Local
distribution’ is a legal term; under FPA Section
201(b)(1), the Commission lacks jurisdiction over
local distribution facilities.’’).
72 Order No. 743–A, 134 FERC ¶ 61,210 at P 67
and n.78, (citing California Pacific Electric Co., LLC,
133 FERC ¶ 61,018 at n.59 (2010) (citing FPC v.
Southern California Edison Co., 376 U.S. 205, 210
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70. As noted above, application of the
‘‘core’’ definition and the four
exclusions should serve to exclude most
facilities used in local distribution from
the bulk electric system. However, there
may be certain circumstances that
present a factual question as to whether
a facility that remains in the bulk
electric system after applying the ‘‘core’’
definition and the four exclusions
should nonetheless be excluded because
it is used in local distribution. In such
circumstances, which we expect will be
infrequent, an entity must petition the
Commission seeking a determination
that the facility is used in local
distribution.73 Such petitions should
include information that will assist the
Commission in making such
determination, and notice of the petition
must be provided to NERC and relevant
Regional Entities.
71. In addressing such petitions, the
Commission will apply the Seven Factor
Test set forth in Order No. 888. In Order
No. 888, the Commission articulated the
Seven Factor Test to determine, on a
case-by-case basis, whether a facility is
a local distribution facility or a
transmission facility.74 However, the
Commission has found that the factors
identified in the Seven Factor Test are
not exclusive when determining
whether an element is used for local
distribution. Specifically, the
Commission recognized that the Seven
Factor Test does not resolve all possible
issues and that ‘‘there may be other
factors that should be taken into account
in particular situations.’’ 75 The
Commission will apply a similar
analysis in determining in the context of
FPA section 215 whether a facility is
used in local distribution. In other
words, while the starting point for the
Commission’s analysis will be an
analysis based on the Seven Factor Test,
the Commission will consider other
factors that should be taken into account
in particular situations.
72. To reiterate, we expect that the
100 kV threshold as a ‘‘first step or
proxy’’ for determining which facilities
should be included in the bulk electric
n.6 (1964) (asserting that ‘‘the Supreme Court has
determined that whether facilities are used in local
distribution involves a question of fact to be
decided by the [Commission] as an original
matter.’’))). See also Connecticut Light & Power Co.
v. Federal Power Commission, 324 U.S. 515, 534–
35 (1945).
73 Such petitions will be assigned an ‘‘RC’’ docket
prefix. The determinations would be public
proceedings subject to notice and comment
requirements which will allow NERC and interested
parties (including state regulators) to provide input
on a petition.
74 Order No. 888, FERC Stats. & Regs. ¶ 31,036 at
31,771, 31,783–84, Appendix G.
75 Order No. 888–A, FERC Stats. & Regs. ¶ 31,048
at 30,242.
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system, plus the four exclusions (in
particular the local network exclusion
E3), will exclude many facilities that are
used in local distribution and thus
should be excluded from the bulk
electric system. This approach
recognizes that, although local
distribution facilities are excluded from
the definition, it still may be necessary
to determine which facilities are local
distribution, and which are
transmission. Whether facilities are
used in local distribution will in certain
instances raise a question of fact, which
the Commission has jurisdiction to
determine. We decline to clarify, as
Portland requests, that for entities who
apply the local distribution exception in
good faith, any future regulatory
determination that such distribution
facilities are to be treated as part of the
bulk electric system within the scope of
FPA section 215 regulation will be
prospective only. As explained above,
in circumstances where a factual
question remains after applying the
‘‘core’’ definition and the exclusions,
entities must apply to the Commission
for a determination of whether an
element is used in local distribution. We
believe this approach provides a means
to maintain consistency and
transparency across the various
reliability regions but still have the
necessary flexibility to make case-bycase determinations appropriate for
reliability.
73. To the extent the various reply
comments by ITC Companies, MISO and
Consumers raise questions about the
status of specific facilities, we decline to
address them in this Final Rule as this
rulemaking proceeding is not the proper
forum to decide such matters.
D. Inclusions and Exclusions in the
Definition of Bulk Electric System NOPR
Proposal
74. In the NOPR, the Commission
proposed to approve, in addition to the
core definition, specific inclusions and
exclusions because the inclusions and
exclusions provide added clarity
regarding which elements are part of the
bulk electric system as compared to the
existing definition. In the NOPR, the
Commission also posed questions about
how some of the inclusions and
exclusions will be applied to better
understand potential applications of the
inclusions and exclusions, their effect
on identifying the facilities or elements
for bulk electric system reliability, and
whether possible gaps exist. We address
these questions below.
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1. Inclusion I1 (Transformers)
NOPR Proposal
75. Inclusion I1 includes as part of the
bulk electric system ‘‘[t]ransformers
with the primary terminal and at least
one secondary terminal operated at 100
kV or higher unless excluded under [the
radial system or local network
exclusion].’’ In its petition, NERC
explained that, due to transformers
having multiple windings operating at
differing voltages, the intent of
inclusion I1 includes transformers
operating at 100 kV or higher on the
primary winding and at least one
secondary winding.76
76. In the NOPR, the Commission
stated that NERC’s approach to
inclusion I1 ‘‘is a reasonable approach
to identifying transformers that are
appropriately included as part of the
bulk electric system.’’ 77 However, the
Commission expressed concern whether
a particular transformer—operated at
100 kV or higher on the primary
winding but all secondary terminals are
operated below 100 kV—should be part
of the bulk electric system or whether
the exception process would be
sufficient to include these
transformers.78 The Commission also
requested comment on whether
transformers that have a terminal
operated at 100 kV or above on the high
side and below 100 kV on the low side
should be designated as part of the bulk
electric system.
Comments
77. NERC supports allowing the
exception process to include the
transformers described by the
Commission. NERC states that the ‘‘vast
majority’’ of transformers with low side
voltages step down to a voltage class
that is designed for distribution to load.
NERC adds that the 100 kV threshold for
secondary windings provides a ‘‘clear
demarcation’’ between facilities used to
transfer power as opposed to those that
serve load. According to NERC, while
there are instances where transformers
with secondary windings below 100 kV
are connected in parallel with high
voltage transmission lines, it is not
possible to craft a bright-line inclusion
of such transformers because the
distinction may hinge on function as
opposed to the physical characteristics
76 NERC
BES Petition at 17.
139 FERC ¶ 61,247 at P 63.
78 In the NOPR the Commission noted that the
joint NERC and Commission staff report on the
September 8, 2011, Arizona-Southern California
blackout explains how transformers of this type
were not monitored or analyzed by the reliability
coordinator, transmission operators and balancing
authorities. NOPR, 139 FERC ¶ 61,247 at P 63.
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77 NOPR,
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of the transformer. NERC states that the
exception process can evaluate whether
such transformers should be included in
the bulk electric system. A majority of
commenters share NERC’s position and
believe that most transformers with the
configuration described by the
Commission in the NOPR do not impact
the bulk electric system and those that
do can be classified as part of the bulk
electric system through the exception
process.79
78. SoCal Edison agrees with NERC,
but identifies transformers operated in
parallel with the bulk electric system as
those that should be designated as part
of the bulk electric system irrespective
of the operational voltage of the
transformer. SoCal Edison argues that
information regarding such transformers
should be provided to the impacted
entities, e.g., reliability coordinators and
neighboring regional entities. SoCal
Edison contends that including these
types of transformers in the bulk electric
system would have made the Regional
Entities, reliability coordinators,
transmission operators and balancing
authorities aware of the contingencies of
the transformers and their impact on the
bulk electric system in the September
2011 blackout.
79. SmartSenseCom states that
transformers that operate at 100 kV or
above with any secondary windings
below 100 kV should be included. On
the other hand, Consumers does not
support inclusion I1 because it goes
beyond the Commission’s jurisdiction
and would confuse the distinction
between the bulk electric system and
local distribution. Consumers argues
that inclusion I1 may create a ‘‘moving
registration target’’ if related facilities
are added to the bulk electric system.80
considered for inclusion through the
exception process. We are persuaded
that transformers with low side voltages
stepped down to a voltage class that is
designed to distribute power to load
and, therefore, the 100 kV threshold for
secondary windings provides an initial
screening between facilities used to
transfer power as opposed to those that
serve load. We agree with NERC’s
assessment that crafting an inclusion for
transformers described by the
Commission is difficult because the
distinction may hinge on function as
opposed to the physical characteristics
of the transformer. Therefore, we
decline to include such transformers in
inclusion I1.
81. With regard to the specific
configurations identified by SoCal
Edison (transformers that operate in
parallel with the bulk electric system
irrespective of the operational voltage of
the transformer), we will not make a
determination of general application.
Rather, such matters should be
addressed in the case-by-case exception
process.
82. We do not agree with Consumers
that inclusion I1 would be ineffective
because it would include lower voltage
distribution facilities that were not
designed to provide reliability to the
bulk electric system or prevent
cascading outages. The 100 kV
threshold for secondary windings
provides a bright line between facilities
used to transfer power as opposed to
those that serve load, and if a
transformer is included pursuant to
inclusion I1, but an entity believes it is
not necessary for operation of the
interconnected transmission network, it
may be considered for exclusion
through the exception process.
Commission Determination
80. We find that inclusion I1 is a
reasonable approach to identifying
transformers that are appropriately
included as part of the bulk electric
system. We agree with NERC that
inclusion I1 includes transformers
operating at 100 kV or higher on the
primary winding and at 100 kV or
higher on at least one secondary
winding. With regard to the
Commission’s concern in the NOPR
about inclusion of a transformer that is
operated at 100 kV or higher on the
primary winding but all secondary
terminals are operated below 100 kV,
we agree with NERC that it is
appropriate for such transformers to be
2. Inclusion I2 (Generating Resources)
79 E.g. APPA, EEI, ELCON, WREA, Anaheim,
Riverside, Imperial Irrigation District, G&T
Cooperatives, NV Energy, NESCOE, and TAPS.
80 Consumers Comments at 9–10.
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NOPR Proposal
83. Inclusion I2 of the bulk electric
system definition provides for specific
inclusion of generating resources with
gross individual nameplate rating
greater than 20 MVA or gross plant/
facility aggregate nameplate rating
greater than 75 MVA. NERC developed
this inclusion based on the text of the
Registry Criteria for generating units
while providing clarity by including
‘‘the generator terminals through the
high-side of the step-up transformer
connected at a voltage of 100 kV or
above.’’ 81
84. In the NOPR, the Commission
agreed that inclusion I2 is consistent
with the individual and aggregate
nameplate rating thresholds set forth in
81 NERC
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the Registry Criteria but noted the
differing descriptions of the connection
point of the generating resources.82
Inclusion I2 specifies ‘‘generator
terminals through the high-side of the
step-up transformer(s) connected at a
voltage of 100 kV or above,’’ and the
Registry Criteria specifies a ‘‘direct
connection’’ to the Bulk-Power System.
Accordingly, the Commission requested
comment whether inclusion I2 will
result in a material change to
registration of existing generating units
due to the difference in the language
regarding the connection point. The
Commission also requested comment if
a generating unit, with a gross
individual nameplate rating greater than
20 MVA connected through the highside of the step-up transformer
connected at a voltage of 100 kV or
above when the low side of the
transformer is less than 100 kV, is
included in the bulk electric system
pursuant to inclusion I2. Further, the
Commission asked how this result
differs for a generation resource with
two or more step-up transformers where
the last transformer in the series
operates at 100 kV or above.
mstockstill on DSK4VPTVN1PROD with
Comments
85. Most commenters do not believe
that inclusion I2 will materially change
registration of generating resources.
NERC states that inclusion I2
connection point language merely
clarifies the ‘‘directly connected’’
language in the Registry Criteria. NERC
explains that while most generation is
connected through a unit transformer on
the high voltage bus within a facility,
there are instances where generators are
connected to lower voltages within a
facility. NERC adds that most of these
types of configurations are in older
facilities where the higher voltage bus
was added after the original generators.
NERC confirms that the specific
scenario described by the Commission
would result in the generator being
included in the bulk electric system
provided that the transformers reside
within a single site boundary and are
used only to step-up the output voltage
of the generator.83 APPA and others
agree with NERC’s view. APPA adds
that, if the transformers in question are
also used to deliver power to serve local
load, the generation resources and
transformers should be excluded from
the bulk electric system.84 PSEG
Companies believe that inclusion I2
82 NOPR,
83 NERC
139 FERC ¶ 61,247 at P 65.
Comments at 9–10. See also comments
of EEI.
84 APPA Comments at 14–15. See also comments
of National Grid, TAPS, NESCOE, and G&T
Cooperatives.
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addresses the issue regarding two stepup transformers in series. PSEG
Companies explain that both step-up
transformers are part of the generator
per inclusion I2 if the purpose of the
transformers is to solely step-up the
output voltage.
86. Arizona Public Service requests
that the Commission clarify whether the
voltage connection language in
inclusion I2 applies only to the
aggregated 75 MVA threshold or also to
the 20 MVA threshold for individual
generating units. Southern Companies
believe that there are instances where
generators may be connected to lower
voltages that may fit under inclusion I2
but would not necessarily fit in the
Registry Criteria.
87. Some commenters do not support
inclusion I2 for varying reasons.
Dominion opposes inclusion of
elements such as those provided for in
inclusion I2 that are already subject to
reliability standards because the
element meets the criteria in the NERC
Compliance Registry. ISO New England
states that the connection language in
inclusion I2 should be eliminated. ISO
New England maintains that
interpreting inclusion I2 to be based on
generator plant size, independent of the
voltage connection, is important from a
generator stability modeling view point.
This is because generators connected at
voltages less than 100 kV can have a
significant impact on system stability.85
ISO New England supports adding
generators connected at lower voltages
but not the system to which the
generators are connected. ISO New
England believes that adding generators,
regardless of their connection voltage
levels, would increase the universe of
registered generators and would
enhance reliability.
88. MISO recommends that the
Commission clarify that operators of
generating resources included through
inclusion I2 will only be subject to
Reliability Standards for generators
unless a specific determination is made
that other standards should apply to a
particular piece of equipment. MISO
believes that, without this clarification,
inclusion I2 could increase the number
of transmission operators by including
generation equipment.
89. Barrick believes that the term
‘‘gross plant/facility’’ in inclusion I2
needs to be clarified. Barrick states that
it is not clear whether the terms are
based on geographic proximity or
structural definition. Barrick is also
concerned that inclusion I2 is based on
‘‘gross’’ rating while exclusion E2 is
based on net capacity and exclusion
E3(a) is based on a non-retail basis, and
that read together inclusion I2 and
exclusions E2 and E3(a) appear to be in
conflict.86 In reply comments, Barrick
suggests that, instead of focusing on
nameplate ratings, the focus should be
on the normal configuration and
operation of generation.
90. SmartSenseCom states that the
Commission should direct NERC to
modify inclusion I2 to include
generating units that are stepped up to
100 kV or above containing a
transformer with a low side below 100
kV because, at these levels, generating
resources should be presumed to impact
reliability. SmartSenseCom contends
that Reliability Standards should apply
to such facilities ‘‘in light of their
potential impact to system reliability,
especially given the increasing levels of
distributed generation penetration that
is expected in the near future.’’ 87
Springfield questions whether multiple
individual units are considered one unit
if they have a shared bus. Springfield
believes that such instances should not
be considered individually.
Commission Determination
91. The Commission approves
inclusion I2. Based on the language of
inclusion I2, its derivation from the
Registry Criteria and the statements
from NERC and commenters, the
Commission concludes that application
of inclusion I2 will not materially
change registration of generating
resources. The Commission accepts
NERC’s explanation that the inclusion
I2 connection point language merely
clarifies the ‘‘directly connected’’
language in the NERC Registry Criteria,
section III.c.1. Further, the Commission
agrees with NERC and other
commenters that multiple step-up
transformers that are solely used to
deliver the generation to the bulk
electric system at 100 kV or above
qualify the generator and the step-up
transformers pursuant to inclusion I2.
92. APPA and commenters claim that,
if a transformer is also used to deliver
power to serve local load, through, for
example a 69 kV network, the
generation resources and transformers
should be excluded from the bulk
electric system. The Commission agrees
with the specific example. In such
cases, local load refers to end-user load
and not generator-specific station
service load. This example depicts a
generator whose step-up transformer
delivers the generation to a voltage level
of 69 kV and thus does not meet the
criteria in inclusion I2. A second
86 Barrick
85 ISO
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Comments at 12.
87 SmartSenseCom
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transformer in this example that
connects the 69 kV network to the bulk
electric system is not solely delivering
the generation to the bulk electric
system but also delivers power from the
bulk electric system to the 69 kV
network.
93. Regarding Arizona Public
Service’s request for clarification, the
Commission finds that the voltage
connection language in inclusion I2
applies to both the aggregated 75 MVA
threshold for a plant/facility and the 20
MVA threshold for individual units.
94. The Commission disagrees with
Dominion’s contention that inclusion I2
is not needed because the elements
identified in inclusion I2 already meet
the Registry Criteria. The NERC
registration process uses element
criteria to identify and register
functional entities, not the actual
equipment. In contrast, the focus of the
bright-line definition is the facilities,
not the owners or operators of the
facilities. Similarly, with regard to
Southern Companies’ belief that there
are instances where generators may be
connected to lower voltages that may fit
under inclusion I2 but would not
necessarily fit in the Registry Criteria,
the Commission agrees that the Registry
Criteria allows the Regional Entities and
NERC to consider other factors
regarding entity registration which may
result in cases where the bulk electric
system status and registry status differs
for certain equipment owners and
operators.
95. Regarding ISO New England’s
assertion that generators that connect to
the bulk electric system via
transmission facilities with voltages
below 100 kV are needed for reliability,
the Commission believes these
generators can be added to the bulk
electric system through the exception
process, and if registration is warranted
for the owners and operators of these
generators, the Registry Criteria
provides NERC and the Regional
Entities the option of registering ‘‘[a]ny
generator, regardless of size, that is
material to the reliability of the Bulk
Power System.’’ 88 Aggregate stability
impacts of generation below 100 kV
could fall into this category of ‘‘material
to the reliability of the Bulk Power
System.’’
96. With respect to the suggestions
and requests for clarification submitted
by MISO, Barrick, SmartSenseCom and
Springfield, commenters may raise these
suggestions in NERC’s Phase 2
development effort.
88 NERC Statement of Compliance Registry
Criteria, section III.c.4.
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3. Inclusion I3 (Blackstart Resources)
NOPR Proposal
97. NERC included as part of the bulk
electric system definition ‘‘Blackstart
Resources identified in a Transmission
Operator’s restoration plan.’’ In the
NOPR, the Commission agreed with
NERC that inclusion of blackstart
resources in the definition is vital to
reliability and is an improvement to the
definition. The Commission requested
clarification whether the term
‘‘restoration plan’’ refers to the system
restoration plans required in the
Emergency Preparedness and
Operations (EOP) Reliability Standards
or included in a Commission approved
tariff.89 The Commission also expressed
concern whether a reliability gap exists
with regard to cranking paths. The
Commission explained that cranking
paths are an important element of
system restoration, and questioned
‘‘whether reliability can be adequately
maintained when blackstart generators
are defined as part of the bulk electric
system but not the transmission paths
that are used to deliver the energy from
blackstart generators to the integrated
transmission system.’’ 90 Accordingly,
the Commission requested comment on
whether a reliability gap exists and also
requested comment on the appropriate
role, if any, of state regulators in
ensuring that energy from blackstart
generation is reliably delivered through
cranking paths to restart the system after
an event.
Comments
98. NERC confirms that the
‘‘restoration plan’’ in inclusion I3 refers
to the restoration plans in the EOP
Reliability Standards. Other
commenters support NERC’s
explanation.91 With regard to cranking
paths, NERC explains that cranking
paths above 100 kV are included in the
bulk electric system by the core
definition. NERC states that some
cranking paths identified in a
restoration plan ‘‘are composed of
distribution system elements.’’ 92 NERC
adds that certain Reliability Standards,
such as Reliability Standards CIP–002–
4 and EOP–005–2, address reliability of
cranking paths without regard to voltage
which demonstrates there are other
ways to ensure reliable operation of the
89 NOPR, 139 FERC ¶ 61,247 at P 67. Reliability
Standard EOP–005–1, System Restoration Plans,
requires a transmission operator to create ‘‘a
restoration plan to reestablish its electric system in
a stable and orderly manner in the event of a partial
or total shutdown of its system.’’
90 NOPR, 139 FERC ¶ 61,247 at P 68.
91 E.g. EEI, APPA, Southern Companies, SoCal
Edison, PSEG Companies, and NV Energy.
92 NERC Comments at 11.
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817
bulk electric system without including
non-bulk electric system cranking paths
within the definition. In contrast, PSEG
Companies request that, if the
Commission supports NERC’s exclusion
of cranking paths below 100 kV, the
Commission confirm that below 100 kV
cranking paths would be excluded from
being enforced in Reliability Standards
that address cranking paths unless they
are added to the bulk electric system by
the exception process.93
99. Other commenters agree that no
reliability gap exists and that the
Commission correctly noted that
including cranking paths may
improperly bring distribution level
elements into the bulk electric system.
Southern Companies and others
contend that if a cranking path that does
not fall within the definition of bulk
electric system but is needed for
reliability, the exception process would
be the place to make that
determination.94 NESCOE states that
cranking paths are generally part of the
distribution system and state regulators
have the responsibility to ensure the
reliability of these lower voltage
facilities and are acutely aware of the
importance of effective blackstart
capability. NESCOE adds that these
facilities are needed for restoration not
for continuous operation.95 ODEC is
concerned that including cranking paths
will create an incentive for generators
not making their units available for
blackstart services. Alameda suggests
that ‘‘any potential gap can be closed by
requiring [t]ransmission [o]perators
(‘‘TOPs’’) that identify blackstart
generation and a related cranking path
or paths in their system restoration
plans to analyze and enter into an
operating agreement with the owner of
identified cranking path facilities not
owned by the [transmission
operator].’’ 96
100. While other commenters agree
that the term ‘‘restoration plan’’ refers to
the EOP Reliability Standards, they
assert that cranking paths should be
included in the bulk electric system.
Idaho Power, ITC Companies and BPA
assert that cranking paths are crucial to
system restoration and implicate
reliability even if they are local
distribution or below 100 kV facilities.97
ITC Companies state that not including
cranking paths will cause regional
differences and inconsistent application
resulting in some owners electing to
93 PSEG
Comments at 10.
Companies Comments at 7. See also
TAPS Comments at 5.
95 NESCOE Comments at 10.
96 Alameda Comments at 6.
97 Idaho Power Comments at 4, ITC Companies at
3–4. See also BPA Comments at 3–4.
94 Southern
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exclude such assets. Without cranking
paths included in the definition, ITC
Companies state that they will be
‘‘required to ensure its blackstart plan
does not include blackstart generators
connected to transmission facilities at
voltages below 100 kV since [they]
could not be assured that the proper
standards are being followed for these
blackstart cranking paths.’’ 98
101. MISO recommends that the
Commission clarify that the term
‘‘restoration plan’’ refers to the EOP
Reliability Standards but not include all
blackstart resources in a Commissionapproved tariff. MISO is concerned that
including blackstart resources from
sources other than the EOP Reliability
Standards is not necessary for reliability
and could encourage generators to
remove blackstart resources in order to
avoid being subject to ‘‘unduly complex
requirements.’’ 99
Commission Determination
102. We find that NERC’s inclusion of
blackstart resources in the definition is
an improvement to the definition. We
also agree with NERC’s statement that
the ‘‘restoration plan’’ in inclusion I3
refers to the restoration plans in the EOP
Reliability Standards. With regard to
cranking paths, the Commission
declines to include all cranking paths
regardless of voltage level. The
Commission finds that cranking paths
operating at or above 100 kV are
included in the bulk electric system by
the core definition, and if a cranking
path that does not fall within the
definition of bulk electric system, (i.e.
operating at or above 100 kV) but is
needed for reliability, such elements can
be included in the bulk electric system
through the exception process. We also
disagree that not including cranking
paths will cause regional differences
and inconsistent application resulting in
some owners electing to exclude such
assets. The revised definition includes
all Transmission Elements at or above
100 kV. Thus, to the extent a cranking
path is operating at or above 100 kV and
a ‘‘Transmission Element,’’ it would be
included in the bulk electric system. If
a cranking path is below 100 kV and is
necessary for operation of the
interconnected transmission network or
operates at or above 100 kV and is not
necessary for the operation of the
interconnected transmission network,
the status of the cranking path may be
determined in the exception process.
These steps will ensure consistent
treatment across the regions. In response
to ITC Companies’ concern that, without
98 ITC
Comments at 5.
Comments at 6.
99 MISO
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cranking paths included in the
definition it will be required to ensure
its blackstart plan does not include
blackstart generators connected to
transmission facilities at voltages below
100 kV, we note that such elements can
be considered for inclusion through the
exception process. Similarly, with
regard to NESCOE’s statement that
lower voltage cranking paths are
generally part of the distribution system,
we note that facilities operating below
100 kV would be excluded as part of
applying of the core definition. In
addition, as we discuss above, in certain
instances the Commission will make
determinations as to which facilities are
used in local distribution and thus
should be excluded from the bulk
electric system.100
103. With regard to PSEG Companies’
request that the Commission confirm
that Reliability Standards do not apply
to below 100 kV cranking paths unless
they are added to the bulk electric
system by the exception process, we
find that PSEG Companies’ request is
outside the scope of this proceeding but
note that Reliability Standard EOP–005–
2 addresses cranking paths with no
voltage limits.101
4. Inclusion I4 (Dispersed Power
Producing Resources)
NOPR Proposal
104. NERC asserts inclusion I4,
dispersed power producing resources
with aggregate capacity greater than 75
MVA (gross aggregate nameplate rating),
is needed ‘‘to accommodate the effects
of variable generation’’ on the bulk
electric system.102 NERC further stated
that even though inclusion I4 could be
considered subsumed in inclusion I2
(generating resources), NERC believes it
is appropriate ‘‘to expressly cover
dispersed power producing resources
utilizing a system designed primarily for
aggregating capacity.’’ 103
105. In the NOPR the Commission
stated that inclusion I4 provides ‘‘useful
granularity’’ in the bulk electric system
definition, but requested comment
whether inclusion I4 includes ‘‘the
individual elements (from each energy100 See
supra PP 66–73.
Standard EOP–005–2, Requirement
R6 states ‘‘[e]ach [t]ransmission [o]perator shall
verify through analysis of actual events, steady state
and dynamic simulations, or testing that its
restoration plan accomplishes its intended function.
This shall be completed every five years at a
minimum.’’ Requirement R6.1 states that the
transmission operator shall verify ‘‘[t]he capability
of [b]lackstart [r]esources to meet the [r]eal and
[r]eactive [p]ower requirements of the [c]ranking
[p]aths and the dynamic capability to supply initial
[l]oads.’’
102 NERC BES Petition at 18.
103 Id.
101 Reliability
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producing resource at the site through
the collector system to the common
point at a voltage of 100 kV or above)
used to aggregate the capacity and any
step-up transformers used to connect
the system to a common point at a
voltage of 100 kV or above.’’ 104
Comments
106. NERC states that the inclusion is
meant to address the dispersed power
producing resources themselves, not the
individual elements of the collector
systems operated below 100 kV. With
regard to energy delivery elements in
collector systems and interconnection
facilities, NERC states these items were
specifically not included in inclusion
I4. According to NERC, this decision
was intended to avoid categorically
including as part of the bulk electric
system assets that may include local
distribution facilities. EEI believes that
inclusion I4 applies to generating
resources meeting the threshold in the
aggregate, not the individual generating
units. EEI agrees with NERC that the
inclusion does not include individual
elements of the collector systems
operated below 100 kV. LPPC believes
that generating units aggregating to 75
MVA are often very small and nondispatchable, and the reliability
implications of these units will be
negligible but the compliance burden
would be quite high.
107. Several commenters urge the
Commission to not interpret inclusion
I4 as including wind turbines and
electrical collector systems within a
wind plant and only include the
electrical equipment at the point of
interconnection with the bulk electric
system.105 AWEA believes that
including all this equipment will
potentially burden the owners with
NERC compliance processes that were
intended for large scale generators.
AWEA argues that the ‘‘main
transformer’s high-side terminal and the
generator lead/tie line’’ should also be
excluded unless another generator
connects to the initial generator’s
facilities.106 AWEA asserts that no one
has demonstrated that there is any
material reliability benefit from
including resources envisioned by
inclusion I4. AWEA and others state
that if the Commission believes such
resources should be included, such
inclusion should be done on a case-bycase basis rather than generically.107
104 NOPR,
139 FERC ¶ 61,247 at P 71.
e.g., AWEA, Southern Companies,
Consumer Energy, BPA. Hydro One, G&T
Cooperatives, and ISO New England.
106 AWEA Comments at 2.
107 E.g., Idaho Power.
105 See,
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108. Along the same lines, NESCOE
believes that, absent a reliability risk a
generic inclusion could adversely
impact state policies to encourage
renewable generation development by
imposing additional costs. NESCOE
states that setting the line for inclusion
at 75 MVA is not supported by technical
analysis since intermittent sources of
power deliver only a fraction of their
nameplate rating. NESCOE believes 300
MVA is a better threshold.
109. ISO New England contends that
the term ‘‘common point’’ is unclear
and notes that the inclusion could be
interpreted to mean that if the
individual generating units are ‘‘all
collected at 34.5 kV, the ‘common point’
is at 34.5 kV and the entire group of
resources should be found to be [not
part of the bulk electric system].’’ 108
ISO New England believes this is not an
appropriate interpretation because it
would defeat the intent of the inclusion
which is to classify large aggregated
generating stations as part of the bulk
electric system. Similarly, Springfield
questions the meaning of ‘‘collector
system’’ and proposes language to
define it.109
110. SmartSenseCom states that
facilities over a certain significant
nameplate rating that are stepped up to
over 100 kV should be subject to
Reliability Standards in light of their
potential impact to system reliability.
SmartSenseCom suggests that the
Commission direct NERC to modify
inclusions I2 and I4 in order to ensure
that generating units that are stepped up
to 100 kV or above by the use of a
transformer with a low side of less than
100 kV (or multiple contiguous
transformers of less than 100 kV on the
low side) are also included within this
definition.110
111. MISO recommends that the
Commission withdraw its proposal to
approve inclusion I4. MISO believes
inclusion I4 is unnecessary given the
criteria in inclusion I2. MISO states that
elements meeting the criteria in
inclusion I2 would be considered part of
the bulk electric system, irrespective of
whether it is considered a dispersed
power producing resource. MISO adds
that a specific inclusion for dispersed
power producing resources could
subject the collector systems to
unnecessary monitoring by the
reliability coordinator or other
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108 ISO
New England Comments at 7.
proposes to add the following
sentence at the end of inclusion I4: ‘‘For purposes
of this inclusion, a Collector System is any
infrastructure not connected to load—where
parasitic load associated with a generation unit or
units is not considered load.’’
110 SmartSenseCom Comments at 12.
109 Springfield
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registered entities as collector systems at
dispersed power producing facilities
generally do not affect the reliability of
the bulk electric system.
Commission Determination
112. The Commission finds that
inclusion I4 provides useful granularity
in the bulk electric system definition.
The clarifying language in inclusion I4
regarding the collector system language
is consistent with language in the
Registry Criteria, section III.c.2. The
Commission agrees that it is appropriate
‘‘to expressly cover dispersed power
producing resources utilizing a system
designed primarily for aggregating
capacity.’’ 111
113. As the Commission previously
stated in the inclusion I2 discussion,
multiple step-up transformers that are
solely used to deliver the generation to
the bulk electric system at 100 kV or
above qualify the generator or plant/
facility and the step-up transformers for
inclusion in the bulk electric system.
114. Similarly, the collector system in
inclusion I4, described by NERC and
others as being designed for aggregating
capacity and solely used to deliver the
aggregated capacity to the bulk electric
system at 100 kV and above, falls into
the category of multiple step-up
transformers through the high side of
the main transformer that connects to
100 kV or above. NERC reasons that
proposed inclusion I4 was intended to
avoid categorically including assets that
may include local distribution facilities.
While we believe most collector systems
operate below 100 kV, the Commission
disagrees that collector systems
described in inclusion I4 that solely
deliver aggregated generation to the bulk
electric system contain local
distribution facilities because power is
delivered from the collector system to
the bulk electric system. However, the
Commission will not direct NERC to
categorically include collector systems
pursuant to inclusion I4.
115. We disagree with AWEA and
other commenters that contend that
inclusion I4 should be interpreted to not
include the dispersed power producing
resources within a wind plant in the
bulk electric system. We agree with
NERC’s statement that the purpose of
this inclusion is to include such
variable generation (e.g., wind and solar
resources). NERC noted that, while such
generation could be considered
subsumed in inclusion I2 (because the
gross aggregate nameplate rating of the
power producing resources must be
greater than 75 MVA), NERC considered
it appropriate for clarity to add this
111 NERC
PO 00000
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819
separately-stated inclusion to expressly
cover dispersed power producing
resources using a system designed
primarily for aggregating capacity. In
addition, although dispersed power
producing resources (wind, solar, etc.)
are typically variable suppliers of
electrical generation to the
interconnected transmission network,
there are geographical areas that depend
on these types of generation resources
for the reliable operation of the
interconnected transmission network.
The Commission believes that owners
and operators of these resources that
meet the 75 MVA gross aggregate
nameplate rating threshold are, in some
cases, already registered and have
compliance responsibilities as generator
owners and generator operators.
Regarding AWEA’s request that a
transformer’s high-side terminal and the
generator lead line should also be
excluded, such determinations may be
made on a case-by-case basis in the
exception process. With regard to
commenters who believe that dispersed
power producing resources should be
included on a case-by-case basis rather
than generically, this would be
inconsistent with the bright-line
concept that NERC developed to have
consistent application of the definition
across the country. If such generating
resources are included through
inclusion I4, they are eligible for
exclusion through use of the exception
process. With respect to the concern
raised by ISO New England regarding
the term ‘‘common point,’’ ISO New
England may raise this concern in
NERC’s Phase 2 development effort.
5. Inclusion I5 (Static or Dynamic
Reactive Power Devices)
NOPR Proposal
116. Inclusion I5 identifies as part of
the bulk electric system ‘‘[s]tatic or
dynamic devices (excluding generators)
dedicated to supplying or absorbing
Reactive Power that are connected at
100 kV or higher, or through a dedicated
transformer with a high-side voltage of
100 kV or higher, or through a
transformer that is designated in
Inclusion I1.’’ In its petition, NERC
explained that this inclusion is the
technical equivalent of inclusion I2
(generating resources), for reactive
power devices and points out that the
existing definition is unclear as to how
these devices are treated.112 NERC
stated inclusion I5 provides clarity by
‘‘providing specific criteria for Reactive
Power devices, thereby further limiting
subjectivity and the potential for
112 NERC
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discretion’’ in the application of the
revised definition.113
117. In the NOPR, the Commission
agreed with NERC that inclusion I5 adds
clarity to the application of the bulk
electric system definition by providing
specific criteria for reactive power
devices. For cases where the reactive
power device is connected through a
transformer designated in inclusion I1,
the Commission requested comment
whether both the reactive power device
and the transmission elements
connecting the reactive power device to
the transformer are included as part of
the bulk electric system pursuant to
inclusion I5.114
Comments
118. NERC and other commenters
note that inclusion I5 is intended to
include the reactive resource itself and
the other portions of the definition are
intended to designate whether the
remaining electrical components are
part of the bulk electric system.115
NERC, EEI, National Grid, Utility
Services and G&T Cooperatives refer to
inclusion I1 as the proper place to
determine whether transformers
connected to reactive devices are
included as part of the bulk electric
system.
119. BPA and WPPC support
excluding both the reactive device and
the transformer from the bulk electric
system if the device supports local
distribution. Conversely, if the facilities
provide reactive and voltage support to
the bulk electric system, the reactive
device and associated equipment, such
as the transformer, should be classified
as a bulk electric system facility.
120. AEP considers the transmission
elements connecting the reactive power
device to the transformer to be included
in the bulk electric system definition
and should be deemed part of inclusion
I5.116 Idaho Power contends that both
the reactive device and the transformer
should be included in the bulk electric
system. Idaho Power states that if the
transformer is included as part of
inclusion I1, then it should be
included.117
121. PSEG Companies view the issue
as one of ‘‘bulk electric system
contiguity’’ and therefore should be
addressed during Phase 2. MISO
recommends that the Commission
require NERC to include a size
threshold or an impact test. According
to MISO, this will avoid creating
113 Id.
114 NOPR,
139 FERC ¶ 61,247 at P 73.
EEI.
116 AEP Comments at 4.
117 Idaho Power Comments at 5.
115 E.g.,
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incentives to owners of small reactive
devices to disconnect them to avoid
being classified as transmission owners
or operators. With regard to
transformers, MISO states that both the
reactive power device and the
transmission elements are included, but
because these facilities have a generally
localized impact on reliability, MISO
recommends that the Commission
clarify that they are not transmission
equipment that subjects their owners
and operators to the requirements
applicable to registered transmission
operators under the NERC Reliability
Standards.
122. G&T Cooperatives suggest two
clarifications. First, inclusion I5 should
not apply to reactive power devices that
are connected to the bulk electric
system by a radial line excluded by
exclusion E1 or a local network
excluded by exclusion E3. G&T
Cooperatives view this exclusion as
implicit in inclusion I5, which
references devices ‘‘connected at 100 kV
or higher, or through a dedicated
transformer with a high-side voltage of
100 kV or higher, or through a
transformer that is designated in
[i]nclusion I1.’’ Second, G&T
Cooperatives believe that inclusion I5
should be clarified to include a
minimum size threshold similar to the
size threshold for generating resources
under Inclusion I2. According to G&T
Cooperatives because inclusion I2 does
not apply to all generating resources and
inclusion I5 is the ‘‘technical
equivalent’’ of inclusion I2, a size
threshold comparable to that found in
inclusion I2 is implicit for reactive
power devices.
Commission Determination
123. The Commission approves
inclusion I5 and finds that the inclusion
adds clarity to the application of the
bulk electric system definition by
providing specific criteria for reactive
power devices. The Commission also
accepts NERC’s response for cases
where the reactive power device is
connected through a transformer
designated in inclusion I1—that the
reactive resource itself is included in
the bulk electric system pursuant to
inclusion I5 and the transmission
elements connecting the reactive power
device to the transformer are addressed
in other portions of the definition. The
Commission notes that this
interpretation is different from inclusion
I2 because inclusion I2 specifies
including the equipment (step-up
transformers) that connects generators to
the bulk electric system. Nonetheless
inclusion I5 provides criteria for
reactive power devices that are not
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explicitly addressed in the existing
definition. The Commission does not
agree with G&T Cooperatives that
exclusions E1 and E3 override inclusion
I5 and exclude the reactive power
devices. Exclusions E1 and E3 exclude
transmission elements only and not
resources.
124. The Commission agrees with
PSEG Companies that issues, such as
whether the connecting equipment for
reactive devices should be included
pursuant to inclusion I5, can be raised
in Phase 2. Similarly, the issues raised
by AEP, Idaho Power, MISO and G&T
Cooperatives may be raised in NERC’s
Phase 2 effort.
Exclusions
125. The proposed definition
identifies four facilities configurations
that should not be included in the bulk
electric system: (1) Radial systems; (2)
behind-the-meter generating units; (3)
local networks; and (4) retail customer
reactive power devices.
126. We agree that the proposed
exclusions provide clarity and
granularity. For example, the exclusion
of generating units on the customer’s
side of the retail meter that serves all or
part of the retail load (exclusion E2) and
the exclusion for reactive power devices
owned and operated by a retail
customer for its own use (exclusion E4)
provide reasonable limitations on bulk
electric system elements. While we
approve in the Final Rule the language
of exclusions E1, E2 and E4, we have
concerns with regard to the application
of exclusions E1 and E3 in specific
situations and, thus, direct NERC to
implement or apply these exclusions
consistent with the determinations set
forth below. In addition, we direct
NERC to remove the 100 kV minimum
operating threshold language from
exclusion E3.
6. Exclusion E1 (Radial Systems)
127. Exclusion E1 provides as follows:
Radial systems: A group of contiguous
transmission Elements that emanates from a
single point of connection of 100 kV or
higher and:
(a) Only serves Load. Or,
(b) Only includes generation resources, not
identified in Inclusion I3, with an aggregate
capacity less than or equal to 75 MVA (gross
nameplate rating). Or,
(c) Where the radial system serves Load
and includes generation resources, not
identified in Inclusion I3, with an aggregate
capacity of non-retail generation less than or
equal to 75 MVA (gross nameplate rating).
Note—A normally open switching device
between radial systems, as depicted on prints
or one-line diagrams for example, does not
affect this exclusion.
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In its petition, NERC explained that
radial facilities are excluded under the
currently effective bulk electric system
definition, and the detailed criteria in
the revised definition provide enhanced
clarity.118
Commission Determination
128. The Commission approves
exclusion E1. We agree with NERC that
the currently-effective definition of bulk
electric system excludes radial facilities,
and the modifications provide
additional granularity regarding the
radial exclusion. In the NOPR, the
Commission requested comment
regarding specific applications of the E1
radial system exclusion. Below, we
discuss these applications and
comments received, and provide further
explanation or direction as we deem
appropriate.
a. Exclusion E1 Does Not Apply to
Whether Generation Is Included or
Excluded
NOPR Proposal
129. In the NOPR, the Commission
requested comment on whether
exclusion E1 removes from the bulk
electric system ‘‘generation connected to
a radial system that otherwise satisfies
inclusion I2.’’ 119 The Commission
sought to ensure that the conditions in
exclusion E1 would not ‘‘lead to
conflicting results when applying
inclusion I2 and exclusion E1.120 The
Commission noted that exclusion E1
applies to ‘‘a group of contiguous
transmission Elements that emanates
from a single point of connection of 100
kV or higher * * *.’’ 121 The
Commission observed that the term
‘‘Elements’’ includes the term generator,
and that the use of the term
‘‘transmission’’ before ‘‘Elements’’
indicates that exclusion E1 applies only
to transmission elements.122 Thus, the
118 NERC
BES Petition at 18.
139 FERC ¶ 61,247 at P 76.
119 NOPR,
Commission stated that ‘‘transmission
Elements’’ do not include generating
resources that are bulk electric system
resources pursuant to the generating
resources included in inclusion I2
connected to a radial line operated at
100 kV above.123
Comments
130. NERC confirms that exclusion E1
does not apply to nor is it determinative
of whether any generation is included or
excluded from the bulk electric system.
NERC states that, whether or not
generation is included in the bulk
electric system is determined by
inclusions I2 through I4 and exclusion
E2. Other commenters, including EEI,
SoCal Edison, TAPS, Hydro One, and
Alameda, also state that exclusion E1
does not apply to generating resources.
Southern Companies suggest that the
use of the term ‘‘includes’’ in subparts
(b) and (c) could lead to some ambiguity
because the implication is that a radial
system includes generating resources.
Southern Companies suggests that, the
word ‘‘serves’’ should replace the word
‘‘include’’ to better reflect the intent of
the provision.
131. PSEG Companies state there is
confusion created by the fact that
generators included in one provision of
the definition (inclusion I2) are
excluded under others (exclusions E1
through E3). According to PSEG
Companies, a generator cannot be
included under one provision of the
bulk electric system definition and
excluded under another provision and
that this issue requires clarification and,
once clarified, the bulk electric system
definition needs to be modified
accordingly.124
132. SmartSenseCom states that in the
event of a conflict between an inclusion
and exclusion, ‘‘there should exist a
presumption that the [e]lement be
considered included, absent an
[e]xception’’ and asks that the
Commission direct NERC to include a
120 Id.
121 NOPR,
139 FERC ¶ 61,247 at P 77.
is defined in the NERC Glossary as
‘‘[a]ny electrical device with terminals that may be
connected to other electrical devices such as a
generator, transformer, circuit breaker, bus section,
or transmission line. An element may be comprised
of one or more components.’’ (emphasis added).
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122 ‘‘Element’’
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123 See NOPR, 139 FERC ¶ 61,247 at P 77 and
n.100 (citing NERC BES Petition, Exh. D,
Consideration of Comments Report, at 223
(‘‘Exclusion E1 is an exclusion for the contiguous
transmission Elements connected at or above 100
kV.’’)).
124 PSEG Comments at 11–13.
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821
provision that states this
presumption.125
Commission Determination
133. The Commission finds that the
radial system exclusion only applies to
‘‘transmission Elements’’ and does not
apply to nor is it determinative of
whether any generation is included or
excluded from the bulk electric system.
This understanding is consistent with
NERC’s defined terms, and consistent
with the comment of NERC and other
commenters. Further, in response to
Southern Companies, AEP and PSEG
Companies, we believe that the language
of exclusion E1 is sufficiently clear that
it does not exclude generation facilities
that are otherwise included as part of
the bulk electric system pursuant to
inclusion I2. Thus, we will not direct
NERC to modify exclusion E1 to state
this more explicitly. We agree with
SmartSenseCom that exclusion E1
should not lead to conflicting results
when applying inclusion I2, but we
decline to direct NERC to include a
provision that specifically states this
presumption.
b. Definition of ‘‘Radial Systems,’’
Figure 1 and Condition (a) Radials Only
Serving Load
NOPR Proposal
134. Exclusion E1 defines the term
‘‘radial systems’’ as ‘‘a group of
contiguous transmission Elements that
emanates from a single point of
connection of 100 kV or higher.’’ In the
NOPR, the Commission requested
comment on how NERC’s proposal
would be applied in the three scenarios.
Figure 1 in the NOPR depicted facilities
configurations in which all of the 230
kV and 69 kV transmission elements
emanate from a single point of
connection of 100 kV or higher. The
Commission requested comment on
whether each of the radial systems
shown in figure 1, the 230 kV elements
above each transformer to the point of
connection to each 230 kV line,
respectively, are excluded from the bulk
electric system pursuant to exclusion
E1.
125 SmartSenseCom
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Comments
135. NERC and other commenters
state that both radial systems depicted
in figure 1 would be subject to exclusion
E1(a) because they each only serve
load.126 ELCON agrees with NERC
adding that these types of radial systems
pose no reliability risk to the
interconnected transmission network if
the system is lost due to a fault
condition. Similarly, SoCal Edison
states that the figure 1 facilities would
either be excluded or not part of the
bulk electric system. SoCal Edison
asserts that, because transformers 1 and
2 each have secondary voltages that are
less than 100 kV, they do not meet the
inclusion I1 requirements and, thus, are
not included in the bulk electric system.
In other words, SoCal Edison believes
exclusion E1 should exclude all radial
facilities that are greater than 100 kV up
to the point where ‘‘the system is no
longer radial, as indicated in figure 1 by
the brackets where the 230 kV lines
meet [lines 1 and 2].’’ 127 APPA believes
that all the scenarios described by the
Commission could create reliability
concerns ‘‘if taken in isolation and
operated in a certain matter’’ and
126 E.g., Southern Companies, AEP, National Grid,
TAPS, ISO New England, Barrick, IUU, and WPPC.
127 SoCal Edison Comments at 5.
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believes that the exception process can
capture configurations that pose a
significant risk to the reliable operation
of the interconnected transmission
network. Idaho Power maintains that it
is inappropriate to apply exclusion E1
for 230 kV elements in the scenarios if
the breakers are part of the protection
scheme for a three terminal 230 kV line.
Idaho Power adds that if either breaker
only opens for transformer protection,
the exclusion would be applicable.
136. Anaheim agrees that the radials
shown in figure 1 should be excluded
and requests clarification that the
associated bus work and protection
system equipment installed on those
radial lines are also excluded. Anaheim
advocates that the exclusion should also
apply to protection system equipment
on the excluded facilities that provide
backup protection for devices that are
part of the bulk electric system, i.e. lines
1 and 2 in figure 1.
137. BPA is concerned about
excluding the 230 kV lines without
review by a planning authority or
transmission operator because the fault
magnitude on voltages above 200 kV are
much higher than below 200 kV lines.
BPA states that since actual power flows
on systems above 200 kV are much
higher, these systems have a higher risk
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for serious impacts on the
interconnected transmission system.
138. Holland supports the exclusion
of radial systems but contends that the
phrase ‘‘emanates from a single point of
connection’’ could be too narrowly
interpreted. According to Holland,
multiple buses within a single
substation could be viewed as multiple
points of connections. Holland believes
that an entity whose connection
emanates from a single substation
should not be denied an exclusion
solely because it connects to multiple
buses at the single substation.
139. Consumers argues that the
exclusion of 100 kV radial systems that
only serve load exceeds the
Commission’s jurisdiction and the
Seven Factor Test.128 Consumers
believes that exclusion E1(a) would
exclude radials that only serve load and
this phrase expands the Commission’s
jurisdiction by classifying 100 kV
distribution systems that primarily serve
load but could also have a secondary
purpose. Consumers also argues that
this exclusion is inconsistent with the
Seven Factor Test which examines
128 Consumers cites to Detroit Edison Co. v. FERC,
334 F.3d 48 (D.C. Cir 2003) as support for its belief
that the Commission cannot rewrite the FPA to
exclude only facilities used exclusively in local
distribution. See Consumers comments at 7.
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whether local distribution facilities are
‘‘primarily’’ radial in character. Further,
Consumers argues that the Commission
should not adopt a rule that exceeds its
jurisdiction or constitutes a collateral
attack on the local distribution findings
of the Seven Factor Test.
mstockstill on DSK4VPTVN1PROD with
Commission Determination
140. The Commission agrees with
NERC that the radial systems shown in
figure 1 meet the definition of ‘‘radial
system’’ in exclusion E1. This
configuration would result in the 230
kV lines between transformers 1 and 2
to the two 230 kV lines, respectfully,
being excluded from the bulk electric
system. The Commission agrees with
NERC and other commenters that both
radial systems depicted in figure 1
would be subject to exclusion E1
condition (a) because they each only
serve load.
141. Idaho Power, BPA and Anaheim
raise concerns about protection system
equipment and design, needed for
analysis by the planning authority and
transmission operator, while APPA
states that all scenarios described by the
Commission could create reliability
concerns. Regarding these concerns, the
Commission agrees with APPA that the
exception process can be used to add to
the bulk electric system specific
configurations that pose a significant
risk to the operation of the
interconnected transmission network.
142. The Commission disagrees with
Holland’s interpretation that the phrase
‘‘emanates from a single point of
connection’’ can refer to multiple buses.
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The phrase refers to a single point, and
if there is more than one point of
connection the configuration does not
meet the radial system definition as
stated in exclusion E1. NERC, in the
standard development process,
emphasized that radial systems cannot
have multiple connections at 100 kV or
higher. Networks that have multiple
connections at 100 kV or higher may
qualify under exclusion E3.129
143. The Commission also disagrees
with Consumers that the exclusion of
100 kV radial systems that only serve
load expands the Commission’s
jurisdiction by classifying 100 kV
distribution systems that primarily serve
load, but may also have a secondary
purpose, as transmission. First,
exclusion E1 condition (a) reflects the
language contained in the current bulk
electric system definition and therefore,
is itself not an expansion from the
existing definition. In addition, as NERC
stated, application of the definition is a
three-step process. In step 1, the core
definition is used to establish the bright
line of 100 kV, the overall demarcation
point between bulk electric system and
non-bulk electric system elements. Step
2, applying the specific inclusions,
provides additional clarification for the
purposes of identifying specific
elements that are included in the bulk
electric system. Step 3 is to evaluate
specific situations for potential
129 NERC BES Petition, Exhibit E, ‘‘Complete
Development Record of the Proposed Revised
Definition of ‘‘Bulk Electric System,’’ Consideration
of Comments on Initial Ballot—Definition of BES,’’
at 259.
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823
exclusion from the bulk electric system.
Further, an entity may seek a casespecific exception if it believes that
facilities with radial qualities that are
not excluded pursuant to exclusion E1
or petition the Commission when
seeking a determination whether a
facility, otherwise included in the bulk
electric system, is used in local
distribution. Thus, merely applying the
definition, and the inclusions or
exclusions is not necessarily the end of
the inquiry regarding whether an
element is part of the bulk electric
system.
c. Figure 2 and Condition (a) Radials
Serving Only Load
NOPR Proposal
144. In the NOPR, the Commission
requested comment on the scenario
shown in figure 2 which shows a 115 kV
loop, with the configuration emanating
from two points of connection of 100 kV
or higher. Specifically, the Commission
requested comment on whether ‘‘the
115 kV and 230 kV elements above
Transformers 1 and 2 to the points of
connection to the two 230 kV lines
would be excluded from the bulk
electric system pursuant to exclusion
E1.’’ 130 The Commission asked for
comment on whether it is more
appropriate to analyze figure 2 pursuant
to the ‘‘local network’’ exclusion E3
and, if so, what if any elements operated
at or above 100 kV would be excluded
pursuant to exclusion E3.
130 NOPR,
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Comments
145. NERC states that figure 2 is a
non-radial loop on the 115 kV system.
According to NERC, the 115 kV
elements above transformers 1 and 2 to
the point of interconnection with lines
1 and 2 would not be eligible for
exclusion E1 because they do not
emanate from a single point of
connection. NERC also states that it
would be appropriate to evaluate figure
2 under exclusion E3 as a potential local
network.131 For such a candidate local
network to qualify for exclusion, NERC
states that additional technical analysis
is needed to determine if all the
exclusion E3 criteria are satisfied.132
NERC asserts that without such a
technical analysis, the 115 kV elements
above transformers 1 and 2 should be
considered part of the bulk electric
system.
146. Likewise, Idaho Power, ITC
Companies, and National Grid contend
that the figure 2 configuration should be
included in the bulk electric system.
Southern Companies believe exclusion
E1 may apply from the breakers down
and that the configuration may belong to
131 See also Comments of NESCOE, BPA, Idaho
Power, ITC Companies, and National Grid.
132 E.g., ISO New England Comments at 10, MISO
Comments at 7.
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exclusion E3. AEP assumes that each of
the facilities below the 115 kV loop
shown in figure 2, and including
breaker 1 and breaker 2, are radial and
excluded pursuant to exclusion E1.
According to AEP, the facilities above
breakers 1 and 2 may be excluded
pursuant to exclusion E3 depending on
the circumstances.133
147. Valero states that the figure 2
configuration is very similar to common
facilities configurations employed in
many industrial facilities involving the
interconnection of the industrial facility
to the utility through two high voltage
feeder lines that originate at different
utility owned and operated substations.
Valero requests that the Commission
include in the final rule an additional
exclusion that would ‘‘categorically
exclude from the [bulk electric system]
any on-site high voltage switchyard
facilities (less than 300 kV) owned by
the industrial end-user where the
predominant function of the facilities is
to distribute electricity in an inward
direction to the end-user’s load.’’ 134
WPPC argues that figure 2 shows both
radial and network systems and that the
system from the 115 kV loop upwards
would be assessed under exclusion E3
133 AEP
Comments at 7.
Comments at 8.
and below that point would be assessed
by exclusion E1.
Commission Determination
148. The Commission affirms NERC’s
statement that figure 2 is a non-radial
loop and thus would not be eligible for
exclusion E1 because it does not
emanate from a single point of
connection. The Commission agrees
with commenters that the elements
below the 115 kV loop should be
assessed as two separate radial systems
pursuant to exclusion E1. The
remaining elements (the 115 kV loop,
transformers 3 and 4 and the 230 kV tie
lines above the transformers to the two
230 lines 1 and 2) should be assessed
pursuant to exclusion E3 and if the
configuration meets the criteria of
exclusion E3, the elements could be
excluded.
149. Regarding Valero’s request for an
additional exclusion if equipment
owners’ configurations cannot meet the
exclusion E3 criteria, Valero can request
that the elements be excluded through
the exception process. The exception
process allows equipment owners to
request an exception regardless of the
owner’s registration status.
134 Valero
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NOPR Proposal
150. In the NOPR, the Commission
agreed with NERC’s proposal that radial
systems only serving load and
emanating from a single point of
connection of 100 kV or higher should
be excluded from the bulk electric
system. However, the Commission
expressed concern ‘‘that the exclusion
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Comments
151. NERC disagrees with the
Commission’s characterization of figure
3 in the NOPR. NERC states that figure
3 does not depict a configuration with
two points of 100 kV or higher or a
system emanating from two points of
connection at 230 kV. According to
NERC, except for lines 1 and 2, all the
other elements depicted in figure 3 are
excluded from the bulk electric system.
NERC explains that the elements
between line 1 and transformer 2 and
from line 2 to transformer 1 are
excluded by exclusion E1(a) because
‘‘each separate set of [e]lements
[described above] is contiguous and
emanate from a single point of
connection of 100 kV or higher.’’ 137
135 NOPR,
139 FERC ¶ 61,247 at P 81.
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could allow elements operating at 100
kV or higher in a configuration that
emanates from two or more points of
connection ‘‘to be deemed ‘‘radial’’ even
though the configuration remains
contiguous through elements that are
operated below 100 kV.’’ 135 Figure 3 in
the NOPR illustrated this concern, and
the Commission asked for comment on
how to evaluate the configuration
relative to the radial system definition.
The Commission also requested
comment on the appropriateness of
examining elements below 100 kV to
determine if the configuration meets
exclusion E1, i.e., whether figure 3
depicts ‘‘a system emanating from two
points of connection at 230 kV and,
therefore, the 230 kV elements above the
transformers to the points of connection
to the two 230 kV lines would not be
eligible for the exclusion E1
notwithstanding the connection below
100 kV.’’ 136
NERC states that the elements below the
69 kV side of transformers 1 and 2 are
excluded from the definition because
they are less than 100 kV, and
transformers 1 and 2 are excluded
because they ‘‘bridge voltages of 69 kV
and 230 kV’’ and therefore do not meet
inclusion I1.
152. NERC further explains that the
focus of the definition of bulk electric
system is on looped or networked
connections at or above 100 kV.
According to NERC, connections
operated below 100 kV, generally do not
carry significant parallel flow due to the
higher impedance of lower voltage
facilities. If such facilities are necessary
for the reliable operation of the
interconnected transmission network,
NERC states that the exception process
can be used to include such facilities.
153. Exelon agrees with NERC and
explains that it has many connections
similar to the one shown in figure 3 and
provides a specific example where a 138
kV substation is fed by two radially
connected 138 kV lines which in turn
are connected through 40 MVA
transformers to a 12 kV bus section.
Exelon states that in its example the 40
MVA transformers cross bus sections so
that if one of the 138 kV lines is out of
service, each side of the 12 kV bus
retains service. Exelon believes that due
to the high impedance of the
transformers, little energy flows
between the buses in Exelon’s
136 Id.
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d. Figure 3 and Condition (a) Radials
Only Serving Load
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example.138 Exelon states that owners
and operators of these configurations
would be required to go through the
exception process.
154. Other commenters believe that
the figure 3 configuration may not be
eligible for exclusion E1. SoCal Edison
explains that the 69 kV loop is not open
and therefore is a parallel path to the
230 kV system. BPA, Alameda and
WREA do not view the figure 3 system
as eligible for exclusion E1 because the
system is networked. Idaho Power states
that the 230 kV lines would be included
only if there is a protection system in
place for the 230 kV lines. According to
Idaho Power, the elements above the
transformers in figure 3 would not be
excluded from the bulk electric system.
Idaho Power believes this configuration
should be evaluated under exclusion E3.
mstockstill on DSK4VPTVN1PROD with
Commission Determination
155. The Commission finds figure 3,
which is identical to figure 5, is a
networked configuration through a 69
kV loop and does not qualify for
exclusion E1. The Commission also
finds that, because the load in figure 3
can be served by either 230 kV line, it
does not depict a ‘‘radial system.’’
However, the facilities below 100 kV
may or may not be necessary for the
operation of the interconnected
transmission network, and this decision
can be made case-by-case in the
exception process. In other words, such
facilities below 100 kV depicted in
figure 3 would be excluded under the
general threshold of the core definition
unless found on a case-specific basis as
necessary for the reliable operation of
the interconnected transmission
network. Thus, the Commission, while
disagreeing with NERC’s interpretation,
does not propose to include the below
100 kV elements in figure 3 in the bulk
electric system, unless determined
otherwise in the exception process.
Further, as we discuss below in
connection with exclusion E3 and figure
5, while we find that the configuration
shown in figures 3 and 5 would not be
eligible for exclusion E1, we believe that
such configurations should be eligible
for exclusion E3 for local networks.
However, exclusion E3 as written
requires the candidate local network to
be contiguous and above 100 kV, thus,
the exclusion E3 language as written
does not allow for figures 3 and 5 to be
eligible for the local network exclusion
138 Exelon Comments at 6. TAPS states that
impedance is inversely proportional to the square
of the voltage of the network and power flow is
inversely proportional to the impedance. According
to TAPS, impedance factors are very significant in
limiting the amount of parallel path flows. TAPS
Comments at 7.
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because they are not contiguous and
include facilities that are not above 100
kV. Therefore, we direct NERC to
modify exclusion E3 to remove the 100
kV minimum operating voltage in the
local network definition. This
modification will enable configurations
similar to figures 3 and 5 to be assessed
for the local network exclusion. The
Commission believes this modification,
together with satisfying the criteria
outlined in exclusion E3, will
appropriately exclude local network
configurations that are not necessary to
the reliable operation of the
interconnected transmission
network.139
e. Condition (b)—Radials With Limited
Generation and Condition (c)—Radials
With Limited Generation and Load
NOPR Proposal
156. Exclusion E1, condition (b)
describes generation connected to a
radial system with no load, and
condition (c) describes generation
connected to a radial system with
generation and load. In its petition,
NERC stated that conditions (b) and (c)
are ‘‘intended to address the
circumstances of small utilities
(including municipal utilities and
cooperatives).’’ 140
157. In the NOPR, the Commission
requested comment regarding the
specific circumstances that conditions
(b) and (c) are intended to address. In
addition, the Commission observed that
the power generated on these radial
systems would be ‘‘delivered or injected
to the bulk electric system and
transported to other markets.’’ 141 The
Commission noted that it appeared that
a line 100 kV or above connected to a
generator with a capacity 75 MVA or
below would not be included in the
bulk electric system. The Commission
139 NERC and Exelon contend that looped or
networked connections operating below 100 kV
generally do not carry significant parallel flow
because of higher impedance characteristics and
thus need not be evaluated as part of a radial
system. However, the Commission believes that
excluding these configurations solely on the level
of impedance does not consider other factors,
including voltage, the system configuration, type of
conductors, length of conductors, and proximity of
the networked system in the interconnected
transmission network. Regardless of our
disagreement with NERC and Exelon regarding the
consideration of impedance, however, as we
discuss above, configurations such as those
described by Exelon may be assessed for exclusion
through exclusion E3, which apply criteria to
determine whether such facilities are necessary for
reliable operation of the interconnected
transmission network. Accordingly, the inclusion or
exclusion of such facilities is better determined
through application of exclusion E3, or case-by-case
in the exception process.
140 NERC BES Petition at 19.
141 NOPR, 139 FERC ¶ 61,247 at P 83.
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requested comment on the
appropriateness of excluding such
radial facilities.
Comments
158. With respect to applicability to
small utilities, NERC states that
exclusion E1, conditions (b) and (c) are
not intended solely for such entities.
According to NERC, these conditions
are intended to exclude radial systems
that have limited benefit to the
reliability of the interconnected
transmission network. NERC states that
the configurations described in
exclusion E1(b) and (c) ‘‘pose no
reliability risk to the interconnected
transmission network when the radial
system is lost due to a failure or fault
condition.’’ 142
159. NERC states that the basis for
exclusion E1(b) ‘‘is dependent on a
single point of failure causing the radial
system to separate’’ from the bulk
electric system, which will result in a
limited loss of generation without an
adverse reliability impact to the
interconnected transmission
network.’’ 143 NERC explains that
exclusion E1(c) addresses the
installation of limited amounts of
generation that are installed within a
radial system and are intended to serve
local load within that radial system.
160. In response to the Commission’s
question about the delivery or injection
of power from the radial systems
described in these exclusions, NERC
states that because of the limitation of
the generation in exclusion E1(b) and
(c), the power generated on the radial
system would be delivered to the
embedded load within the radial system
and injected into the bulk electric
system in very limited quantities. NERC
argues that subjecting the elements
associated with this type of radial
system to all the Reliability Standards
has limited benefit to the reliability of
the interconnected transmission
network. NERC believes it is more
appropriate to identify these elements
through the ‘‘the applicability in
specific standards where a reliability
benefit can be identified.’’ 144
161. A number of commenters agree
with NERC.145 Idaho Power states that
the exclusion is appropriate if the
generation connected to the radials is
not relied on to meet reliability
performance criteria on bulk electric
system elements. Idaho Power indicates
that it follows the WECC guidelines and
142 NERC
Comments at 20.
Comments at 20.
144 NERC Comments at 21–22.
145 E.g. Idaho Power, National Grid, AEP, Hydro
One, ISO New England, and BPA.
143 NERC
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166. NERC explains that the exclusion
of radial systems pursuant to conditions
(b) and (c) is based on the premise that
a single point of failure causing the
radial system to separate from the bulk
electric system, resulting in the loss of
a limited amount of generation will not
have an adverse reliability impact.
However, there are other reliability
concerns that NERC does not address.
146 Anaheim
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confusion regarding the generation
limits in exclusion E1(b) and (c) and in
exclusion E3. They contend that it is not
clear if the generation limit only applies
to generators connected at 100 kV or
higher. PSEG Companies also ask for
clarification regarding the definition of
the phrase ‘‘non-retail generation.’’ 147
163. AEP does not believe that the
three conditions of exclusion E1 would
remove the generation connected to the
radial system from the bulk electric
system definition but states that the
conditions may have the consequence of
removing the radial line itself from the
definition in error. According to AEP,
this would be in cases of a 25 MVA
generator (meeting I2 properties) but
less than 75 MVA aggregate. AEP
suggests that the conditions in (b) and
(c) be revised to reference non-bulk
electric system generation.148
164. We approve exclusion E1
conditions (b) and (c). However, we
direct NERC to implement exclusion E1
so that the exclusions for radial systems
do not apply to tie-lines for bulk electric
system generators identified in
inclusion I2. If the generator is
necessary for the operation of the
interconnected transmission network,
the Commission believes that it is
generally appropriate to have the radial
tie-line operating at or above 100 kV
that delivers the generation to the bulk
electric system included as well.
165. In general, we believe that it is
appropriate to have the bulk electric
system contiguous, without facilities or
elements ‘‘stranded’’ or ‘‘cut-off’’ from
the remainder of the bulk electric
system as shown in the figure below.
However, the contiguous quality of the
bulk electric system is lost in exclusion
E1, condition (b), because it removes
from the bulk electric system the 100 kV
or greater generator tie-line that
connects the bulk electric system
generator to the interconnected
transmission network. Such tie-lines
should be subject to appropriate
Reliability Standards.
For example, both the radial line
emanating from a generator and the
portion of the bulk electric system to
which it is connected have protective
relays that require coordination to
prevent the lines from tripping. The
generator needs to coordinate the
protective relays with transmission
operators, otherwise there may not be
adequate information to prevent a fault
on the radial line from causing
cascading outages on the bulk electric
system. The Commission also notes that
the phrase ‘‘adverse reliability impact,’’
which is defined in the NERC Glossary
of Terms as ‘‘the impact of an event that
results in frequency-related instability;
unplanned tripping of load or
generation; or uncontrolled separation
or cascading outages that affects a
Commission Determination
147 PSEG
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thresholds (10 MVA individually, 20
MVA aggregate) to determine the
appropriateness of excluding the power
from components from radial connected
generation. Alameda contends that the
radial systems in these exclusions have
only a minor impact on the bulk electric
system and that system planning and
operation assessments must provide for
reliable operation under N–1
contingency operations including loss of
the exclusion E1(b) and (c)
configurations. WPPC states that the
generator thresholds in these conditions
are a logical cut-off to separate radial
systems with generation that is not
likely to be meaningful to operation of
the bulk electric system.
162. Anaheim urges the Commission
to clarify that the presence of generation
resources connected at voltages below
100 kV ‘‘does not invalidate the
availability of the radial exclusion for
lines that are operated at greater than
100 kV unless the generating unit is
actually connected to the higher voltage
line.’’ 146 PSEG Companies state there is
827
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Federal Register / Vol. 78, No. 3 / Friday, January 4, 2013 / Rules and Regulations
widespread area of the
Interconnection,’’ is an extreme result
that should not occur from the loss of
a single tie-line for any sized
generator.149 A single contingency that
results in an ‘‘adverse reliability
impact’’ violates planning and operating
criteria in Commission approved
Reliability Standards.150 NERC also
does not consider issues, such as the
issue raised by Idaho Power, that the
exclusion is appropriate if the
generation connected to the radial
system is not relied on to meet
reliability performance criteria.
167. Some commenters suggest there
is a conflict between the inclusion I2
and exclusion E1 because they believe
that the 100 kV or greater tie-line and
the generator should remain in the bulk
electric system. We agree that exclusion
E1 as written does not prevent the radial
tie-line operating at or above 100 kV
from the high side of the step-up
transformer to the bulk electric system
from being excluded while the generator
and associated step-up transformer(s)
remain included. Inclusion I2 depends
on the status of the tie-line based on the
core definition’s 100 kV threshold to
determine if a generator and its step-up
transformers are part of the bulk electric
system. Thus, this inclusion results in
most bulk electric system generators
having a contiguous connection to the
interconnected transmission network.
As noted above, we believe that it is
generally appropriate to have the bulk
electric system contiguous. Therefore,
the Commission directs NERC to
implement exclusion E1 so that the
exclusion for radial systems does not
apply to tie-lines for bulk electric
system generators identified in
inclusion I2. This directive provides
consistent application of the entire
definition by not allowing exclusion E1
to override the qualifying tie-lines
pursuant to inclusion I2.
168. The Commission also rejects
NERC’s argument that subjecting the
elements associated with this type of
radial system to all the Reliability
Standards has a limited benefit to the
reliability of the interconnected
transmission network. In cases of radial
tie-lines for bulk electric system
generators where the generator owner
also owns the tie-line, NERC has
exercised discretion, on a case-by-case
basis, in determining which entities
require registration as transmission
owners/operators and identified subsets of applicable reliability standard
requirements for these entities.151 In
other situations, such generator tie-lines
may appropriately be considered an
extension of the generation facility,
which would not subject significant
additional compliance obligations on
the generator owner and/or operator.
169. In response to the question raised
by PSEG Companies about whether the
generation limit specified in exclusion
E1(b) and (c) only applies to generators
connected at 100 kV or higher, we note
that exclusions E1(b) and (c) do not
specify the generation connected to the
radial system or local network to any
voltage.
149 See the NERC Glossary of Terms at http://
www.nerc.com/files/Glossary_of_Terms.pdf.
150 See, e.g., Reliability Standards, TPL–002–0b
and IRO–004–2.
151 E.g., New Harquahala Generating Company,
LLC, 123 FERC ¶ 61,173, order on clarification, 123
FERC ¶ 61,311 (2008).
152 NERC BES Petition at 19.
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f. Normally Open Switches
NOPR Proposal
170. NERC included a note
accompanying the description of
exclusion E1 stating that ‘‘[a] normally
open switching device between radial
systems, as depicted on prints or oneline diagrams for example, does not
affect this exclusion.’’ NERC drafted this
note to address a common network
configuration in which two separate sets
of facilities that, each standing alone,
would be recognized as radial systems
but are connected by a switch that is set
to the open position for reliability
purposes. In its petition, NERC
explained that these switches are
installed by entities to provide greater
reliability to their end-use customers.
NERC also explained that ‘‘a normally
open switch’’ will be identified in
documents such as prints or one-line
diagrams and that ‘‘[t]he concept and
usage of the ‘normally open switch’ in
such configuration is well understood in
the electric utility industry.’’ 152
171. In the NOPR, the Commission
requested comment on NERC’s
characterization and whether the phrase
‘‘normally open’’ is subject to
interpretation or misunderstanding, or
whether a ‘‘normally open’’
configuration is potentially difficult to
oversee. The Commission also requested
comment on the need of transmission
operators or other functional entities to
study the system impacts of the closing
of a ‘‘normally open’’ switch, or to take
other steps to ensure awareness of the
impacts of the loop that is created by the
closing of the switch if the closed loop
is not included as part of the bulk
electric system.
Comments
172. NERC explains that the term
‘‘normally opened’’ is well understood
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and commonly used in industry for a
variety of reasons including public and
personnel safety. NERC also explains
that the purpose of recognizing a
normally open switch in the definition
is to preserve the bright-line so that the
facilities can be characterized as they
are planned to be operated which avoids
the need to constantly reclassify
elements to adjust to the changing
operating conditions that occur on the
system. NERC believes that a normally
open switch is not difficult to oversee.
173. Nearly all commenters that
addressed this issue agree with NERC’s
positions. NRECA highlights NERC’s
explanation that the configuration is so
common that to write the definition to
include radial systems connected by a
normally open switch, with the caveat
that entities can request an exception,
would result in a flood of exception
requests. Steel Manufacturers
Association points out that such a
switch can make a secondary
connection point available to a large
industrial load when needed to improve
service reliability and continuity.
Consumers Energy states that such
switches would only be closed during
emergency conditions and an entity in
that instance would follow contingency
plans and ensure that a proper study is
performed on a normally open switch
that is closed due to the emergency to
avoid related equipment failures. TAPS
agrees with NERC and notes that such
switches are marked as normally open
on one line diagrams.
174. PSEG Companies state that in
effect the switch is irrelevant because if
the normally open switch is open the
systems are radial and therefore
excluded and when the switch is closed
the radial systems are also excluded for
the same reasons figure 3 facilities
should be excluded. Alameda submits it
documents a normally open switch in
operational diagrams and SCADA
applications and its use is coordinated
in advance with its transmission
operator. Alameda also states that the
system impacts of closing a normally
open switch do not need to be required
to be studied since it is the operational
experience and documentation of such
switch that is most important.
175. G&T Cooperatives state that some
operational studies would be useful if
there is an upcoming operational
decision to close the normally open
switch that could parallel the bulk
electric system. However, G&T
Cooperatives explain that the study
would be used to ensure that the system
can operate with the switch closed
without inadvertently tripping one of
the source breakers. G&T Cooperatives
explain that a normally open switch
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would not need to be modeled into any
real-time model or contingency analysis,
nor would it require the interconnecting
radial systems to be incorporated into
the bulk electric system, where such
conditions are managed through quick
changes to the equivalence bus loads or
generation capacities. Similarly, TAPS
states that closing a normally open
switch does not have an impact on the
system that needs to be studied because
it is only close to change a down stream
path on a temporary basis and does not
create a loop.
Commission Determination
176. Upon consideration of
comments, we are persuaded that the
concept of a normally open switch is
well understood, common and not
difficult to oversee. We accept NERC’s
explanation that recognizing a normally
open switch in the definition will
preserve the bright-line so that the
facilities can be characterized as they
are planned to be operated and avoids
the need to constantly reclassify
elements to adjust to the changing
operating conditions that occur on the
system.
177. With regard to the Commission’s
question concerning the need to study
the system impacts of the closing of a
‘‘normally open’’ switch, at this time we
will not require them to be studied. We
are persuaded that the operational
experience and documentation of such
switch is most important and, thus, we
decline to require additional studies.
7. Exclusion E2 (Behind the Meter
Generation)
mstockstill on DSK4VPTVN1PROD with
NOPR Proposal
178. NERC stated in its petition that
the wording of exclusion E2 is extracted
from the Statement of Compliance
Registry Criteria.153 In the NOPR, the
Commission stated that the exclusion of
‘‘[a] generating unit or multiple
generating units on the customer’s side
of the retail meter * * *’’ was an
appropriate exclusion that provides
additional clarity and granularity to the
definition of bulk electric system.154
While the Commission did not ask
specific questions about exclusion E2,
several commenters expressed support
for the inclusion, while others stated
concerns with the exclusion.
Comments
179. NERC and EEI agree with the
Commission that the exclusion provides
additional clarity. ELCON notes that
such configurations are commonly
employed by industrial users of
BES Petition at 22.
154 NOPR, 139 FERC ¶ 61,247 at P 88.
electricity, and they do not affect in any
significant way the bulk power system.
On the other hand, ISO New England
believes that exclusion E2 should be
eliminated because it is contrary to the
reliability of the bulk electric system.
According to ISO New England, a 400
MW generator which is behind the
meter with a 400 MW load could be
excluded even though it could have a
significant impact on the performance of
the bulk electric system. ISO New
England states that the owner of the
generator in this example would not
need to provide generator stability
modeling information nor abide by the
many normally applicable Reliability
Standards. MISO believes that the
exclusion could encourage entities to
move generation capacity behind the
meter which could adversely impact the
bulk electric system.
180. PSEG Companies state that
exclusion E2 could exclude generation
included in inclusion I2. For example,
PSEG Companies contends that, if a
single 200 MVA behind-the-meter
generator is connected to the bulk
electric system at 100 kV or higher, the
net capacity provided to the bulk
electric system does not exceed 75 MVA
and the generator has standby, backup,
and maintenance services, under
exclusion E2 the generator would be
excluded from the bulk electric system,
but it would be included pursuant to
inclusion I2.155
181. Other commenters, such as
Barrick and the IUU, believe additional
clarification is needed for the terms
‘‘retail meter’’ and ‘‘net capacity.’’
Specifically, they question what the
capacity is ‘‘net’’ of or whether it means
the sum of flows at all points of
connection to the bulk electric system.
They also question whether ‘‘net’’
means the capacity of a generator that is
made available for use by someone other
than an owner of the generator or
capacity less parasitic load only.
182. Barrick and IUU believe there is
more than one use for the term ‘‘retail
meter,’’ and it is not clear whether all
situations are covered by the use in the
proposed exclusion E2. Barrick
proposes that the term ‘‘retail meter’’
should include an end-user’s meter at
an end-user’s generator when that meter
is used to measure the end-user’s
generation for consumption.
Commission Determination
183. We find that exclusion E2
provides additional clarity to the
definition of bulk electric system, and
we disagree that exclusion E2 is
contrary to the reliability of the bulk
153 NERC
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155 PSEG
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829
electric system. We agree with ELCON
that such configurations are commonly
employed by industrial users of
electricity. Indeed, this exclusion is
similar to the exclusion for such
facilities in NERC’s Registry Criteria.156
With regard to ISO New England’s and
PSEG Companies specific examples, to
the extent such scenario exists, they
may be eligible for inclusion or
exclusion through use of the exception
process.
184. We decline to define the
additional terms cited by commenters,
such as Barrick and the IUU, who
believe additional clarification is
needed for the terms ‘‘retail meter’’ and
‘‘net capacity.’’ These terms are in
common use in the electric power
industry. Therefore, we do not see a
need to adopt a formal definition.
8. Exclusion E3 (Local Networks)
NOPR Proposal
185. NERC’s proposed exclusion E3
defines the term ‘‘local networks’’ as:
A group of contiguous transmission
Elements operated at or above 100 kV but
less than 300 kV that distribute power to
Load rather than transfer bulk-power across
the interconnected system. LN’s emanate
from multiple points of connection at 100 kV
or higher to improve the level of service to
retail customer Load and not to accommodate
bulk-power transfer across the
interconnected system.
Exclusion E3 also identifies three
criteria that must be satisfied for the
exclusion to apply: (a) Limit on
connected generation to 75 MVA
aggregate capacity of non-retail
generation (gross nameplate rating); (b)
power flows only into the local network
and does not transfer through the local
network; and (c) the local network is not
part of a flowgate or transfer path.
186. In the NOPR, the Commission
requested comment on: (1) Whether
generation resources are excluded by
this exclusion; (2) how the exclusion
applies to a looped lower voltage
system; (3) whether the 300 kV ceiling
is appropriate for the application of the
exclusion; and (4) whether the
prohibition for generation produced
inside a local network is not
transporting power to other markets
outside the local network applies in
both normal and emergency operating
conditions.157 The Commission also
sought further explanation regarding the
design and technical justification of a
local network. These issues are
156 NERC Statement of Compliance Registry
Criteria, section III.c.4.
157 NOPR, 139 FERC ¶ 61,247 at P 89.
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discussed in detail in the following
sections.
a. Local Network Design and Technical
Justification
NOPR Proposal
187. In the NOPR, the Commission
requested explanation and comment on
the statement in NERC’s petition that
‘‘neither will the local network’s
separation or retirement diminish the
reliability of the interconnected electric
transmission network.’’ 158 In its
petition, NERC stated that the design
and operation of local networks is such
that at the point of connection with the
interconnected transmission network is
similar to that of a radial facility, in
particular that power always flows in
the direction from the interconnected
transmission network into the local
network.159 Further, according to NERC,
‘‘[l]ocal networks provide local
electrical distribution service and are
not planned, designed or operated to
benefit or support the balance of the
interconnected transmission
network.’’ 160
188. In the NOPR, the Commission
observed that, while a radial facility
emanates from one point of connection
to the interconnected transmission
network, a local network by definition
has multiple points of connection to the
interconnected transmission network.
Thus, regarding a local network, a
contingency situation may arise where
one of the multiple connections to the
interconnected transmission network
separates, while other local network
connections maintain connectivity with
the bulk electric system. Accordingly,
the Commission requested comments to
better understand how an entity with a
candidate local network would analyze
such contingencies to determine
potential impacts to the reliable
operation of the interconnected
transmission network.
mstockstill on DSK4VPTVN1PROD with
Comments
189. EEI, MISO and other commenters
generally support exclusion E3.161 With
respect to the issue raised by the
Commission regarding how an entity’s
local network separation will not
diminish the reliability of the
interconnected transmission network,
NERC explains that the reliability of the
interconnected transmission network is
not impacted by the existence or
absence of the local network. NERC
158 NERC BES Petition, Exhibit G at 2. (Local
Network Technical Justification).
159 NERC BES Petition at 22.
160 Id.
161 E.g., NRECA, ELCON, BPA, and G&T
Cooperatives.
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maintains that excludable facilities
under exclusion E3 will naturally satisfy
this principle because the exclusion E3
conditions were crafted in such a way
to ensure reliability is not adversely
impacted by the disconnection of the
local network. While specific analyses
are not necessary to support exclusion
of facilities under exclusion E3, NERC
states that transmission operators or
other functional entities need to be
aware of the change of status of all
devices on the system and the impact to
the system from device changes.
According to NERC, exclusion of a local
network does not obviate the
transmission operator or other
functional entity from the responsibility
to assess the system impact on any bulk
electric system facility due to the
separation of one local network
connection while the remainder of the
local network remains connected with
the bulk electric system.162
190. TAPS agrees with NERC stating
‘‘sophisticated engineering analysis
should not be needed to determine the
applicability of [i]nclusions and
[e]xclusions.’’ 163 Likewise, WREA
agrees with NERC’s assertion that the
entity with a local network does not
need to analyze local network
contingencies since this analysis is
already made by the transmission
planner and transmission operator
responsible for the bulk electric system
facilities feeding the local network.
Regarding the transmission planner
responsibilities, WREA states the NERC
Reliability Standard TPL–002 requires
the transmission planner to study N–1
contingencies and prepare plans for
reliable operation. WREA further
explains that the transmission operator
is required to plan to meet unscheduled
changes in system configuration
pursuant to Reliability Standard TOP–
002, R6 and ‘‘if there are non-[bulk
electric system] facilities that are
significant, that have not been properly
represented in a [transmission
operator’s] models, [then] when the
[transmission operator] performs its
required model accuracy validation
(TOP–002, R19), the [transmission
operator] would observe a modeling
inconsistency and would be able to take
steps to correct the modeling error.’’ 164
191. AEP advocates for a baseline or
cut-off point, which would be
determined by the size (in MW) of the
local network. Idaho Power believes that
the statement means that total
separation or loss of the local network
elements does not cause a reliability
Comments at 26.
Comments at 9.
164 WREA Comments at 8–9.
performance impact on the remaining
bulk electric system elements. Idaho
Power explains that it would analyze
such contingencies by evaluating
overload levels and voltage performance
impacts on the remaining bulk electric
system elements as well as overload
levels and voltage performance on the
remaining local network elements.
192. Southern Companies state that
such a contingency would be
incorporated into planning studies
regardless of whether the local network
was part of the bulk electric system.165
BPA believes that before a candidate
local network is excluded, it must be
evaluated by the impacted balancing
authority, transmission operator and
planning authority to ensure the
integrity of the bulk grid is not
compromised.166
Commission Determination
193. The Commission approves
exclusion E3. The Commission accepts
NERC’s explanation about the statement
that ‘‘neither will the local network’s
separation or retirement diminish the
reliability of the interconnected
transmission network.’’ The
Commission also accepts NERC’s
comments relating to how an entity with
a candidate local network would
analyze such contingencies to determine
potential impacts to the reliable
operation of the interconnected
transmission network. In particular, the
Commission agrees that the exclusion of
a local network does not obviate the
transmission operator or other
functional entity from the responsibility
to assess the system impact of
separating one local network connection
while the remainder of the local
network remains connected with the
bulk electric system. We will not direct
NERC to modify the provision as
suggested by AEP and BPA. Rather, as
NERC indicates, AEP and BPA may
raise these suggestions with NERC in
the Phase 2 development effort.
b. Figure 5, Contiguous Transmission
Elements and the 100 kV Lower Limit
194. Exclusion E3 defines local
networks as ‘‘[a] group of contiguous
transmission Elements operated at or
above 100 kV but less than 300 kV that
distribute power to Load rather than
transfer bulk-power across the
interconnected system.’’ While the local
network exclusion applies to contiguous
transmission elements operating at a
minimum of 100 kV, the Commission
stated in the NOPR that it is unclear
how the exclusion applies to a looped
162 NERC
163 TAPS
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166 BPA
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831
depicted in figure 5 in the NOPR which
shows a 69 kV looped system emanating
from two points of connection at 100 kV
or higher.
195. In the NOPR, the Commission
stated that figure 5 depicts a group of
elements that are contiguous through a
69 kV loop and requested comment
whether the configuration in figure 5
qualifies as a local network and, in
particular, whether the configuration
satisfies the conditions that a local
network be contiguous and operated at
or above 100 kV.
single point of interconnection at 230
kV and only serve load. Accordingly,
NERC states that 230 kV lines 1 and 2
are included in the bulk electric system
with the only other included elements
being the lines extending from lines 1
and 2. However, according to NERC, the
elements between 230 kV line 1 and
transformer 2 and between 230 kV line
2 and transformer 1 are each subject to
exclusion E1(a) because each separate
set of elements is contiguous and
emanate from a single point of
connection of 100 kV or higher. NERC
asserts that the elements below the 69
kV side of transformers 1 and 2 are
excluded because they are less than 100
kV. NERC explains that transformers 1
and 2 are excluded because they bridge
voltages of 69 kV and 230 kV and
therefore, inclusion I1 is not applicable
because a transformer must have two
terminals over 100 kV to qualify for
inclusion I1. According to NERC, the
definition should focus on looped or
networked connections at 100 kV or
greater because such connections, when
operated below 100 kV, generally do not
carry significant parallel flow because of
the higher impedance associated with
lower voltage facilities.168
197. Exelon states that the clear intent
of the definition is that configurations
such as shown in figure 5 are radial
systems subject to exclusion E1 (radial
systems). According to Exelon, had this
not been the intent of exclusion E1,
exclusion E3 would have allowed for a
local network where the tie was below
100 kV to avoid a reliability gap. Exelon
believes that the configuration shown in
figure 5, which is identical to figure 3,
does not qualify as a local network
within the terms of exclusion E3 and
supports NERC’s view that figure 5
represents two radial systems that
qualify under exclusion E1. Exelon
cautions that, if the Commission
determines that the systems depicted in
figure 5 do not qualify under exclusion
E1 because of the low voltage tie and
does not qualify under exclusion E3
because the tie is at low voltage and not
a 100 kV or above, such a decision
would leave a gap under which a
substantial number of facilities that are
not part of the bulk electric system
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Comments
196. NERC views figure 5 the same as
figure 3—as a looped system below 100
kV—that is not considered under this
exclusion because the elements below
100 kV are presumed to be not part of
the bulk electric system.167 NERC
maintains that, if it is determined that
the sub-100 kV looped system is
necessary for the reliable operation of
the interconnected transmission
network, the exception process may be
utilized to include the appropriate
elements. NERC states that figure 5
depicts two separate and distinct groups
of elements that each emanate from a
167 Figure 5 and figure 3 set forth in the NOPR
are identical configurations.
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lower voltage system. The Commission
provided an example of its concern
832
Federal Register / Vol. 78, No. 3 / Friday, January 4, 2013 / Rules and Regulations
mstockstill on DSK4VPTVN1PROD with
would be classified as such. Exelon
states that it would have to go through
the separate exception process for
dozens of substations, at great cost and
for no useful purpose. Exelon states that
the Commission should clarify that the
configuration shown in figures 3 and 5
qualifies as a radial system and is
excluded pursuant to exclusion E1.
198. Other commenters disagree with
NERC’s position. Idaho Power believes
the network configuration with a 69 kV
loop belongs to a local network category
pursuant to exclusion E3 and that these
types of networks should be studied to
identify if there is any resulting voltage,
overload, or stability violation that
could propagate and impact the
reliability of the system. Idaho Power
believes that the 69 kV loop can tie the
230 kV systems together; therefore,
outages in the 230 kV system could
cause loop flow in the 69 kV system.
According to Idaho Power, planning
studies would have to be performed to
determine the amount of loop flow and
whether the loop flow could lead to
outages on the 69 kV system, resulting
in further impact to the bulk electric
system.169 WREA also notes figure 5 is
the same as figure 3 and states that the
230 kV elements described in the figure
would not qualify for the radial system
exclusion E1 because the 230 kV
elements are networked via facilities
less than 100 kV. WREA concludes the
elements above 100 kV in the figure
might qualify for the local network
exclusion and the below 100 kV
facilities in this configuration are nonbulk electric system on the basis of the
core definition unless the facilities are
included via the exception process.170
AEP believes that figure 5 could be
considered for exclusion E3, provided
that it is understood that at some point
on the local network, the network could
be of the size that would have a
potential impact on the bulk electric
system and would still need to meet the
parameters of exclusion E3.171
Commission Determination
199. As discussed above, the
Commission is directing a modification
to exclusion E3 to better capture local
networks like those depicted in figure 5.
The Commission notes that Exelon
believes that the configuration shown in
figure 5, which is identical to figure 3,
does not qualify as a local network
within the terms of exclusion E3. While
figures 3 and 5 are a networked
configuration through a 69 kV loop, they
do not qualify for the local network
169 Idaho
Power Comments at 11.
Comments at 9.
171 AEP Comments at 10.
exclusion because exclusion E3 defines
local networks as ‘‘[a] group of
contiguous transmission Elements
operated at or above 100 kV but less
than 300 kV that distribute power to
Load rather than transfer bulk-power
across the interconnected system.’’ The
configuration in figure 5 includes
elements that are below 100 kV, and
does not have contiguous elements
operating at or above 100 kV but less
than 300 kV. As noted above, while the
Commission finds that these
configurations should not be eligible for
exclusion E1, we believe that they
should be eligible for the local network
exclusion. Therefore, we direct NERC to
modify exclusion E3 to remove the 100
kV minimum operating voltage in the
local network definition. Within 30 days
of the effective date of this Final Rule,
we direct NERC to submit a schedule
outlining how and when it will make
the modification to the definition.
c. 300 kV Cap
NOPR Proposal
200. NERC explained the selection of
a 300 kV cap for the applicability of an
exclusion for a local network was based
upon recent NERC standards
development work in Project 2006–02
‘‘Assess Transmission Future Needs and
Develop Transmission Plans’’ which
sets a voltage level of 300 kV to
differentiate extra high voltage (EHV)
facilities from high voltage facilities
acting as a threshold to distinguish
between expected system performance
criteria.172 In the NOPR, the
Commission noted that NERC provided
an example of the electrical interaction
between a typical local network and the
bulk electric system which depicted a
local network operating at 115 kV.
However, the Commission observed that
NERC did not provide examples of a
local network operating within the 200
to 300 kV range. The Commission
expressed concern whether the 300 kV
ceiling is appropriate and reflects actual
system configurations that serve local
distribution, the stated purpose of the
local network exclusion. Thus, the
Commission requested comment
whether the 300 kV ceiling is
appropriate for the application of
exclusion E3 and requested examples of
systems between 200 and 300 kV that
would qualify for this exclusion.
Comments
201. NERC asserts that the 300 kV cap
is appropriate. NERC reiterates that the
voltage cap is consistent with the
distinction being made between extra
170 WREA
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high voltage and high voltage in the
Reliability Standard TPL–001–2. NERC
adds that the important attributes of a
local network are the limit on capacity
of connected non-retail generation,
prohibition of power flow out of, or
through, the local network, and
prohibition of local networks containing
flowgates or major transfer paths. NERC
maintains that these attributes, rather
than the operating voltage of the local
network facilities, assure that local
networks do not impact reliability of the
interconnected transmission network.
202. Most commenters agree that the
300 kV threshold is appropriate.173 With
respect to the Commission’s request for
examples of systems between 200 and
300 kV that would qualify for this
exclusion, ICNU states that, one of its
members operates a large industrial
facility that takes service from the bulk
electric system from two transformers,
both of which operate at 230 kV on the
high side, but step down to 13.5 kV for
distribution within the complex.
According to ICNU, this industrial plant
serves no reliability function and serves
only the retail load, but if the ceiling for
exclusion E3 were lowered to 200 kV,
this network potentially would not be
excluded because it contains some
elements operating between 200–300
kV. ICNU believes that the function of
a local network, rather than its voltage,
is the critical factor in excluding it from
the bulk electric system and therefore,
recommends a local network exclusion
based on function, not voltage.
Nonetheless, to the extent a ceiling is
deemed necessary, ICNU states that the
300 kV threshold is appropriate.
203. WPPC supports the 300 kV
ceiling and WPPC states that the ceiling
reflect industry’s extensive use of 115–
230 kV system to provide distribution
service through a local network. WPPC
points out that in low density areas it is
more economical to serve load using
one 230 kV network rather than four 69
kV networks. WPPC adds that many 55
and 69 kV networks that serve towns
and cities have been upgraded to 115 or
230 kV for economic, technical and
environmental reasons, but raising the
voltage does not change their function.
204. In contrast, BPA, Hydro One, and
WREA express concern regarding the
300 kV cap. BPA states that the 300 kV
ceiling may not ‘‘reflect[] actual system
configurations that serve local
distribution, the stated purpose of the
local network exclusion.’’ 174 BPA
believes that exclusion E3 should not
apply to any facility above 200 kV,
without appropriate review, analysis,
173 E.g.
172 NERC
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Comments at 8.
174 BPA
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and concurrence, from the impacted
transmission operator, planning
authority, and reliability coordinator.
BPA states that fault magnitudes on
systems between 200 kV and 300 kV are
much higher than fault magnitudes on
systems operated below 200 kV.
According to BPA, these systems have a
much higher potential for serious
impacts than networks operating below
200 kV if something fails to operate
properly, including cascading outages,
transient instability, and post transient
voltage instability.
205. Hydro One believes that the 300
kV cap associated with the applicability
of exclusion E3 is not justifiable on
technical grounds, and submits that
certain systems with greater than 300 kV
should be able to qualify for exclusion
E3 based on their own merits. Hydro
One states that a radial or a local
network below 300 kV can have as
much or more impact on the reliability
of the interconnected transmission
network than a local network operating
at 300 kV or above depending upon its
location and configuration. WREA also
disagrees with the 300 kV ceiling and
recommends that the Commission
delete this limitation entirely.
Commission Determination
206. The Commission approves the
300 kV voltage threshold for local
networks for the initial implementation
of the definition. While we approve the
300 kV threshold, the limited number of
examples provided for 200–300 kV
systems cause us to seek additional
information. Thus, following
implementation when actual exclusion
data is available, the Commission
directs NERC to submit a compliance
filing within one year of the
implementation date identifying in
sufficient detail the types of local
network configurations that have been
excluded from the bulk electric system
under this exclusion. This will assist us
in better understanding the type and
magnitude of systems that fall into
above 200 kV category.
d. Criterion (a)—Limits on Connected
Generation
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NOPR Proposal
207. Exclusion E3 criterion (a)
provides that the local network and its
underlying elements do not include the
blackstart resources identified in
inclusion I3 and do not have an
aggregate capacity of non-retail
generation greater than 75 MVA gross
nameplate rating. In addition, criterion
(a) does not limit the amount of
generation besides ‘‘non-retail
generation’’ connected to the local
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network. The Commission stated in the
NOPR that it agrees with NERC that
‘‘local networks’’ do not include
blackstart resources and agrees with the
limits on the connected generation
imposed by this exclusion. The
Commission also stated that similar to
the discussion of the definition of
‘‘radial systems’’ in exclusion E1, the
exclusion E3 local network exclusion
applies to ‘‘transmission Elements,’’ but
does not exclude generation resources
connected to a local network that
otherwise satisfy inclusion I2.
Comments
208. NERC concurs with the
Commission’s statement that ‘‘local
networks’’ do not include blackstart
resources and agrees with the limits on
the connected generation imposed by
this exclusion. NERC, EEI, Alameda,
Hydro One, and WREA state that,
whether or not generation is included in
the bulk electric system is determined
by inclusions I2 through I4 and
exclusion E2. In addition, NERC
confirms that exclusion E3 does not
exclude generation resources.
209. In contrast, some commenters are
concerned about allowing generators
identified in inclusion I2 to be
connected to local networks. Idaho
Power states that it is not appropriate to
exclude a local network if it contains
generation that would normally be
included in the bulk electric system
through inclusion I2.175 PSEG
Companies states that ‘‘there is
confusion created by the fact that
generators included in the [bulk electric
system] definition per [inclusion] I2 are
at the same time excluded under
[exclusions] E2 and E3.’’ 176 According
to PSEG Companies, a generator cannot
be included under one provision of the
bulk electric system definition and
excluded under another provision and
that this issue requires clarification and,
once clarified, the bulk electric system
definition needs to be modified
accordingly.
210. Some commenters seek
clarification of exclusion E3 criterion (a)
regarding the term ‘‘non-retail.’’ 177
Barrick and the IUU raise several
questions about exclusion E3. First, they
claim that the phrase ‘‘not * * * nonretail generation’’ is unclear and
question whether it means generation
used for retail. They also question
whether exclusion E3 excludes
generation resources for an owner’s own
use or generation used for wholesale.
175 Idaho
Power Comments at 10.
Comments at 11.
177 E.g., Barrick, IUU, and PSEG.
176 PSEG
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833
They also ask how the term ‘‘non-retail’’
relates to ‘‘net capacity.’’
211. While Holland supports the
exclusion of local networks from the
bulk electric system, Holland argues
that criteria (a) and (b) should be
eliminated because they limit the
amount of connected generation, even
where the connected generation is
distributed locally. Holland states that
exclusion E3(a) improperly maintains
the aggregate 75 MVA limit for
connected generation. Holland believes
this limit is inconsistent with the
concept of a local network and should
be removed. Holland explains that if the
local network does not accommodate
bulk power transfer across the
interconnected system, then the amount
of generation that exists and is
distributed within that system,
regardless of size, is distributed and
consumed locally, and is therefore
beyond the scope of FPA Section 215.
Holland maintains that, if the
Commission does not remove exclusion
E3(a) in its entirety, it should require
the limitation to be based on the net of
the local network’s total load, rather
than the gross nameplate rating.
212. NESCOE contends that three
conditions in exclusion E3 would
unnecessarily include some New
England networks in the bulk electric
system without any clear reliability
benefit. In particular, NESCOE states
that the limits on connected generation
should be raised to 300 MVA instead of
75 MVA, stating that the northeast
portion of the eastern interconnection
defines a 1200 MVA loss of source as
the largest contingency to which the
control area is designed to operate.
Therefore, NESCOE believes that 25
percent of that contingency at 300 MVA
falls well within typical loss of source
expectations for the northeast. Alameda
suggests that the Commission raise the
connected generation limitation for
local network exclusions to 150 MVA.
According to Alameda, since the local
network is comparable to two radials,
limiting a local network to 75 MVA
could result in entities choosing to
operate two less reliable radial systems,
each with 75 MVA of generation, rather
than one local network with 150 MVA
of generation to avoid a designation as
bulk electric system for their local
network.
Commission Determination
213. We find that the local network
exclusion only applies to ‘‘transmission
Elements’’ and does not allow the
exclusion of generation resources
otherwise included in the bulk electric
system pursuant to inclusion I2, as
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exclusion E1, the Commission directs
NERC to implement exclusion E3 so that
the exclusion for local networks does
not apply to bulk electric system
generator tie-lines operated at or above
100 kV as shown in the figure below.
local network and the local network
does not transfer energy originating
outside the local network for delivery
through the local network. The
Commission noted in the NOPR that,
pursuant to criterion (b), generation
produced inside a local network is not
transporting power to other markets
outside the local network. The
Commission stated in the NOPR that it
understands that criterion (b) applies in
both normal and emergency operating
conditions.178
219. NERC states that prohibitions on
outbound power flow and
transportation of power to other markets
beyond the local network apply in all
conditions, both normal and contingent,
and will eliminate the exclusion of
facilities which may contribute power
flow into the bulk electric system under
contingent or unusual circumstances.
According to NERC, basing the
determination solely on normal
conditions could lead to inconsistent
application of this exclusion and would
introduce subjectivity into the
application of the definition.
220. Duke Energy agrees with NERC’s
comment that prohibitions on outbound
power flow beyond the local network
apply in ‘‘both normal and contingent
conditions,’’ but believes that
‘‘contingent’’ should be further clarified
as limited to N–1 contingencies for the
bright line definition. Idaho Power also
agrees, and comments that additional
clarification is needed to define whether
the meaning of ‘‘emergency conditions’’
includes contingencies within the local
network itself. In contrast, Southern
Companies states that criterion (b)
would apply in normal but not
emergency operating conditions. MISO
cautions against precluding local
e. Criterion (b)—Power Flows Only Into
the Local Network
NOPR Proposal
217. Exclusion E3 criterion (b)
specifies that, to qualify for the
exclusion, power can only flow into the
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Comments
218. NERC confirms, and TAPS, Idaho
Power and others concur with the
Commission’s understanding that,
pursuant to criterion (b), generation
produced inside a local network is not
transporting power to other markets
outside the local network. NERC and
other commenters also agree that
criterion (b) applies in both normal and
emergency operating conditions.
178 See NOPR, 139 FERC ¶ 61,247 at P 98 (citing
NERC BES Petition, Exh. E at 59 (‘‘The Commission
directed NERC to revise its BES definition to ensure
that the definition encompasses all Facilities
necessary for operating an interconnected electric
Transmission network. The SDT interprets this to
include operation under both normal and
Emergency conditions * * *.’’)).
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the inclusion I2 should not qualify for
exclusion as radial systems or local
networks. Rather the tie-lines can be
considered for exclusion under NERC’s
exception process. Accordingly,
consistent with the Commission’s
directive discussed above regarding
215. In response to Barrick’s and
IUU’s requests for clarification, we
decline to clarify the terms/phrases
‘‘non-retail,’’ ‘‘gross plant/facility,’’ ‘‘not
necessary,’’ ‘‘aggregate,’’ ‘‘net capacity,’’
and ‘‘retail meter.’’ We believe the
terms/phrases are sufficiently clear.
However, Barrick and IUU may pursue
further clarification from NERC in an
appropriate forum such as NERC’s
Phase 2 project.
216. With regard to the comments of
Holland, NESCOE and Alameda, we
will not direct any change in the
connected generation limitation for the
local network exclusion. The limit on
connected generation within the local
network is consistent with the existing
threshold above which a generating
plant in aggregate becomes subject to
registration under the NERC Registry
Criteria. Entities may avail themselves
of the exception process to exclude a
local network that otherwise does not
qualify pursuant to exclusion E3.
mstockstill on DSK4VPTVN1PROD with
discussed above in our determination
regarding exclusion E1.
214. Further, as discussed above
regarding exclusion E1, the Commission
agrees with Idaho Power, PSEG
Companies, SmartSenseCom, and AEP
that tie-lines for generators identified in
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networks from sending electricity to the
transmission system in emergency
conditions when doing so could
improve the availability of electricity.
221. Portland notes that the
application of criterion (b) in both
normal and emergency operating
conditions is similar to one element of
the Seven Factor Test that states that
power rarely if ever flows out. Portland
suggests that the Commission should
clarify the relationship between the
Seven Factor Test and the local
distribution exception in the reliability
regulatory context.
222. Alameda believes that the power
flow prohibition should apply only
where the flow from the local network
is necessary for the reliable operation of
the interconnected transmission
network. Alameda contends that these
conditions would typically apply during
peak or near-peak operating conditions
and that it would be inappropriate to
include a local network in the bulk
electric system because generation
flowed outside the local network only
under off peak conditions when these
flows were not vital to reliability.
Alameda suggests that the power flow
prohibition be modified to allow flows
of less than 75 MVA to flow outside the
network, making the local networks
electrically comparable to radial
systems with a 75 MVA generator.
223. ISO New England believes the
NOPR suggests an implicit expectation
regarding the determination of local
networks in that there is no stated
requirement for contingency analyses in
that determination. ISO New England
believes that the Commission
understanding of criterion (b) implies
that criterion (b) needs to be analyzed
both pre- and post-contingency. In such
a case, this issue needs to be defined in
the exclusion. Additionally, ISO New
England requests clarification whether
this indicates that one must apply a first
contingency to the analysis or a second
contingency in determining if the
criterion is met.
224. Dow asserts that the requirement
that power may only flow into a local
network should be clarified to apply
only to power that originates outside of,
and flows through, a local network. Dow
believes that it should not apply to
power generated by non-retail
generation resources meeting applicable
size or export quantity thresholds that
are connected to local networks. Dow
maintains such a clarification is
consistent with other language in the
exclusion specifying that up to 75 MVA
of non-retail generation may be attached
to a local network. Dow views the
reference to non-retail generation as
intended to apply to generation
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resources that are used to make
wholesale sales which requires that
power be able to flow into the bulk
electric system for delivery to
downstream buyers. Dow also states that
exclusion E3 should be clarified to
address situations in which a local
network does not qualify for the local
network exclusion because it is not clear
‘‘whether all facilities rated 100 kV and
above that are part of the local network
would be considered part of the [bulk
electric system] and become subject to
transmission-related reliability
standards * * *.’’ 179
225. Valero contends that criterion (b)
indicates that the existence of a power
flow that ‘‘transfers through the local
network’’ would disqualify an element
from satisfying the exclusion. On the
other hand, Valero points to the excerpt
from the NERC BES Petition which
implies that this meaning of criterion (b)
might not be the appropriate
interpretation.180 Valero requests that
the Commission either clarify as stated
above or modify criterion (b) to allow
for transfers through the local network
if such transfers are not necessary for
the reliability of the interconnected
transmission network.
226. NESCOE and G&T Cooperatives
state that minimal transfers may and do
occur, and local networks should not
necessarily be ineligible for exclusion
E3 simply because some amount of
power may transfer out of the network.
NESCOE states that the Commission
should direct NERC to reevaluate
exclusion E3 to allow these minimal
flows up to a 100 MVA limit.181 G&T
Cooperatives state that even with
optimal load projections, there may be
times when energy flows into the local
network that exceed the load, and in
those cases the local network may need
to export the excess energy back to the
bulk electric system which could create
perverse incentives to restrict flows into
and out of the local network. G&T
Cooperatives suggest that criterion (b)
should be read to allow exclusion E3 to
cover local networks in which
‘‘normally’’ power flows into the local
network and the local network does not
transfer energy originating outside the
local network for delivery through the
local network.
227. Holland states that the exclusion
E3(b) criterion is unnecessary and
179 Dow
Comments at 6.
NERC statement is quoted in the NOPR
at P 81: ‘‘[l]ocal networks provide local electrical
distribution service and are not planned, designed
or operated to benefit or support the balance of the
interconnected transmission network.’’
181 NESCOE states that this represents 25 percent
of the rated value of a typical 345/115 kV
substation.
180 The
PO 00000
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835
should be removed. Holland states that
exclusion E3(b) appears to be concerned
with flows originating from outside of
the local network, coming into the local
network, and then exiting the local
network to loads outside of the local
network. According to Holland,
however, exclusion E3(c) appears to
address this concern because it fails to
recognize that a local network may have
internal generation that is less than its
peak load but in excess of off-peak load
levels. Holland states that, if exclusion
E3(b) is maintained, then the clause,
‘‘[p]ower flows only into the [local
network],’’ should be deleted because it
is inconsistent with the second clause,
‘‘the [local network] does not transfer
energy originating outside the [local
network] for delivery through the [local
network].’’
Commission Determination
228. The Commission finds that: (1)
pursuant to exclusion E3 criterion (b),
generation produced inside a local
network should not transport power to
other markets outside the local network;
and (2) exclusion E3 criterion (b)
applies in both normal and emergency
operating conditions. The Commission
agrees with NERC’s statements that
basing the determination solely on
normal or optimal conditions could lead
to inconsistent application of this
exclusion and hence the definition
itself, and would also introduce a degree
of subjectivity in the application of the
definition that is not in the interest of
reliability.
229. MISO and other commenters
suggest that local networks should be
allowed to deliver power to the bulk
electric system in some
circumstances.182 The Commission
agrees that the facilities should supply
such power if needed, but disagrees that
facilities expected to be needed in this
way should nonetheless be excluded
from the bulk electric system. If a local
network is expected to be needed to
operate the interconnected transmission
network, i.e., to meet reliability
performance criteria in transmission
planning assessments, it should not be
excluded from the bulk electric system
under exclusion E3. The Commission
also rejects Holland’s suggestion to
remove criterion (b) because NERC has
presented an acceptable technical
justification for this and the other
criteria in exclusion E3.183 In response
to Alameda’s comment that some power
should be permitted to flow out of a
local network during off-peak hours, the
182 E.g. Southern Companies, Alameda, Dow,
Valero, NESCOE, Holland and G&T Cooperatives.
183 NERC BES Petition at 22–24.
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Commission disagrees that the brightline definition should be modified for
case-specific circumstances. Entities can
seek to exclude configurations that do
not meet the exclusion E3 criteria
through the exception process on a caseby-case basis. The Commission agrees
with Portland that criterion (b) is similar
to one element of the Seven Factor Test
but otherwise addresses what
constitutes local distribution above.
230. In response to Idaho Power and
ISO New England asking for how
emergency conditions are defined to
determine if a candidate configuration
meets exclusion E3 criterion (b), the
Commission believes that the best way
to show that a local network meets
criterion (b) is through historical power
flow data.
231. We will not direct NERC to allow
minimal flows up to a 100 MVA limit
as NESCOE requests. NESCOE may
choose to pursue this matter further
with NERC, with the Phase 2 project
being one appropriate forum. Similarly,
Dow may raise its contention that
exclusion E3 should not apply to certain
non-retail generation resources during
Phase 2. Regarding Dow’s argument that
exclusion E3 should be further clarified,
we believe our discussion above
regarding figure 5 adequately addresses
Dow’s concern.
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f. Criterion (c)—Not Part of a Flowgate
or Transfer Path
232. Exclusion E3 criterion (c)
specifies a ‘‘local network’’ does not
contain a monitored facility of a
permanent flowgate in the Eastern
Interconnection, a major transfer path
within the Western Interconnection, or
a comparable monitored facility in the
ERCOT or Quebec Interconnections, and
is not a monitored facility included in
an interconnection reliability operating
limit. NERC stated that the presence of
a local network is not for the operability
of the interconnected electric
transmission network; neither will the
local network’s separation or retirement
diminish the reliability of the
interconnected electric transmission
network.’’ 184 The Commission stated in
the NOPR that it believes that this is an
appropriate criterion.
Comments
233. G&T Cooperatives state that
criterion (c) should be clarified to allow
local networks to come under exclusion
E3 even if they are interconnected with
a ‘‘monitored facility of a permanent
Flowgate’’ in the Eastern
Interconnection or a ‘‘major transfer
184 NOPR,
139 FERC ¶ 61,247 at P 93 (citing
NERC BES Petition, Exhibit G at 2).
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path’’ in the Western interconnection.
G&T Cooperatives recognize that such
monitored facilities and major
transmission paths are important to
reliability, but criterion (c) could be
read in a manner that would prevent a
local network interconnected with such
major facilities from qualifying under
exclusion E3. G&T Cooperatives do not
believe that NERC intended such a
broad reading.
Commission Determination
234. The Commission finds that
exclusion E3 criterion (c) is an
appropriate criterion. We agree with
NERC that facilities with, e.g.,
permanent flowgates, cannot be
included in a local network as the
separation of such facilities during a
system event could have an adverse
impact on the operation of the
interconnected transmission network.
The language for criterion (c) only
prohibits flowgates and their associated
monitored elements from being within a
candidate local network. Therefore, we
believe the language is sufficiently clear
and will not direct NERC to modify this
provision in response to G&T
Cooperatives request for clarification.
9. Exclusion E4 (Reactive Power
Devices)
NOPR Proposal
235. Exclusion E4 excludes from the
bulk electric system ‘‘Reactive Power
devices owned and operated by the
retail customer solely for its own use.’’
NERC explained that exclusion E4 is the
technical equivalent of exclusion E2 for
reactive power devices and that the
currently effective bulk electric system
definition is unclear as to how these
devices are to be treated. In the NOPR,
the Commission stated that this is an
appropriate exclusion that provides
additional clarity and granularity to the
definition of bulk electric system.
Comments
236. NERC, ELCON and EEI support
the Commission’s proposal. Steel
Manufacturers Association supports a
definitive exclusion for reactive power
equipment that is installed and used to
benefit end use loads. The exclusion,
however, in the Steel Manufacturers
Association’s opinion, should not be
confined to such devices that are owned
and operated by a retail customer solely
for its own use because there are
instances in which capacitor banks have
been installed for the benefit of a steelmaking facility but, for various reasons,
that equipment is owned, operated and
maintained by its local utility.
Consequently, the Steel Manufacturers
Association suggests that exclusion E4
PO 00000
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Fmt 4701
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be revised to read: ‘‘Reactive Power
devices owned and operated by, or
installed solely for the benefit of, retail
customers.’’
Commission Determination
237. The Commission finds that
exclusion E4 is an appropriate exclusion
that provides additional clarity and
granularity to the definition of bulk
electric system. In response to the Steel
Manufacturers Association, we will not
direct the suggested clarifying change to
exclusion E4 criterion. Rather, Steel
Manufacturers Association may choose
to pursue this matter further with NERC
in its Phase 2 project.
E. The NERC Rules of Procedure
Exception Process, RM12–7–000
NOPR Proposal
238. As described above in section
I.D.2, NERC proposed revisions to its
Rules of Procedure to provide an
‘‘exceptions process’’ to add elements
to, and remove elements from, the bulk
electric system, on a case-by-case basis.
NERC stated, inter alia, that the
exception process decisions to approve
or disapprove exception requests will be
made by NERC, rather than by the
Regional Entities.
239. In the NOPR, the Commission
proposed to find that, pursuant to
section 215(f) of the FPA, the exception
process is just, reasonable, not unduly
discriminatory or preferential, and in
the public interest and satisfies the
requirements of section 215(c). Further,
the Commission proposed to find that
the proposed exception process satisfies
the statement in Order No. 743 that
NERC establish an exception process for
excluding facilities that are not
necessary for the reliable operation of
the interconnected transmission
network from the definition of the bulk
electric system.185
Comments
240. Many commenters support the
exception process as proposed.
Commenters state that the exception
process will be able to handle the more
unusual situations that need to be
addressed on a case-by-case basis,
including sub-100 kV transmission
elements that are necessary for the
reliable operation of the interconnected
transmission network.186 They further
state that the exception process balances
the need for effective and efficient
administration with due process and
clarity of expectations and promotes
consistency in determinations and
185 See NOPR, 139 FERC ¶ 61,247 at PP 103–04
(citing Order No. 743, 133 FERC ¶ 61,150 at P 16).
186 E.g., ELCON, TAPS, and Southern Companies.
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eliminates regional discretion by having
all decisions on exception requests
made at NERC. Southern Companies
support approval of the exception
process and assert that the Commission
should allow time for NERC, Regional
Entities and industry to implement the
definition and exception process and
determine at a later date whether it is
sufficiently capturing the appropriate
facilities.
241. MISO states that RTOs, as
reliability coordinators, planning
coordinators or authorities, and
balancing authorities, should be allowed
to file exception requests. MISO also
states that there should be fewer
requirements for filing exception
requests by RTOs because they have
been assigned substantial authority over
facilities under their authority by their
member transmission owners and
operators, and because they utilize
rigorous stakeholder processes.
Specifically, MISO requests that the
Commission direct NERC to modify the
exception process to recognize RTO
stakeholder processes and their results
as evidence that the RTO as the
submitting entity conferred with the
owner about the reasons for an
exception and either an agreement was
reached between the entities that an
exception should be filed and that the
RTO should submit the exception, or
that the entities could not reach
agreement regarding the submission of
such an exception request.
242. NYISO comments that the
exception process needs to provide
interested parties notice and an
opportunity to be heard. NYISO states
that ISOs and RTOs have an interest in
participating in an exception proceeding
prior to a final determination by the
Regional Entity or NERC because
exception requests may affect them
operationally or in their planning
studies depending upon the final
determination made on the specific
exception request.
243. NYPSC and NESCOE are
concerned that NERC’s proposal does
not give state commissions an
opportunity to participate directly in the
process. NESCOE states that, without
state participation, NERC will not
address the full range of substantive
concerns that may arise in any given
case, and, if the Commission is asked to
review an exemption determination, the
record presented will not reflect the
states’ views. NESCOE is also concerned
that the exceptions process lacks a
mechanism for a state regulatory
authority to initiate review of the
classification of an element. NESCOE
contends that states may have an
interest in the proper classification of
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bulk electric system facilities, but they
are not in a position to submit an
exception request because they lack the
detailed information required for a
submission under the proposal.
NESCOE suggests that this can be
remedied by allowing a state to request
a review from the relevant Regional
Entity and to require the Regional Entity
to submit a formal exception request if
it finds that the classification is
inaccurate. In addition, NESCOE
believes that a state should have a right
to seek review from NERC of the
Regional Entity’s determination.
244. In reply comments, NERC
disagrees with MISO and explains that
the exception process needs to be
applied consistently and that the
required information should be the
same regardless of the identity of the
submitter. NERC states that the Detailed
Information Form is intended to ensure
that a consistent baseline of technical
information is provided to the Regional
Entity and NERC with all exception
requests, in addition to the specific
information and arguments submitted
by the submitting entity in support of its
exception request. The MISO
Transmission Owners and AMP support
NERC’s comments.
245. NERC also explains that RTOs
and ISOs have the ability to file an
exception request where they are acting
in their capacity as planning authorities,
reliability coordinators, transmission
operators, transmission planners, or
balancing authorities. NERC states that
‘‘the exceptions process is technical and
is based on engineering expertise, and
these are the necessary parties with the
required information.’’ 187 NERC also
disagrees regarding a state or third party
role and the need for notice and access
to information. NERC states that state
commissions have other means and
methods at their disposal for working
with entities to identify candidates for
an exception request. NERC notes that
the exception process provides that
detailed notice of any request would be
provided to every registered entity with
reliability oversight obligation (e.g.,
planning authorities, reliability
coordinators, transmission operators,
transmission planners, or balancing
authorities) for the element subject to
the request and that general information
about an exception request will be
publicly posted. NERC also notes that
third parties including state regulatory
agencies will have adequate opportunity
to provide comments regarding the
request without formally participating
in the process.
187 NERC
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837
246. ICNU states that the Commission
should make clear that utilities and
Regional Entities, not end-use customers
should be required to perform the
studies to determine if a facility of an
end-use customer should be included or
excluded. Alameda suggests that the
Commission set forth a future date for
review of the definition seeking both an
effectiveness report from NERC as well
as industry comment.
247. IUU and Barrick believe that
NERC’s explanation that an exception
may be obtained by showing that the
element is ‘‘not necessary’’ for reliable
operation of the interconnected
transmission system is too ambiguous
and does not give adequate information
as to what may or may not be eligible
for an exception. They believe guidance
is necessary as to the types of evidence
that should be presented in an
exception request and the criteria to
which the evidence will be subjected.
248. Redding states that the exception
process provides that entities are not
required to use the exception process to
affirmatively demonstrate they fall
within the general local distribution
carve-out in the core definition or meet
one of the exclusions. Redding notes
that new section 509 of the Rules of
Procedure states that application of the
entire definition will determine what
facilities qualify as bulk electric system
components. Therefore, Redding argues
that section 509 confirms that no
exception request is necessary if the
facility fits within either the local
distribution carve-out language of the
core definition, or the explicitly
identified exclusions. Furthermore,
Redding argues that this is confirmed by
NERC’s statement that the definition
expressly excludes both ‘‘facilities used
in the local distribution of electric
energy,’’ and radial systems as described
in Exclusion E1 of the definition.
Redding believes this statement
recognizes that facilities that are
excluded from the definition at the
outset—through either the core
definition or the specific exclusions—
need not submit any requests through
the exemption process confirming that
exclusion.
249. Holland is concerned that the
exception process is too narrowly
focused on excluding facilities that are
not necessary for the reliable operation
of the interconnected transmission
network. Holland does not believe that
exceptions should be limited to a
demonstration that the facilities lack a
material impact to the bulk electric
system. Holland supports the exception
process for this purpose; however, the
lack of materiality demonstration is
independent of the question of whether
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the facilities should be excluded on the
grounds that they are used in local
distribution. Holland believes the
Commission should clarify that, for
exceptions seeking exclusion based
upon a claim of being local distribution,
NERC must evaluate additional
information submitted, and not merely
rely on the criteria in Exclusions E1
through E4.
250. Steel Manufacturers Association
is concerned that because the Rules of
Procedure provide that only a Regional
Entity may submit an exception request
for the inclusion in the bulk electric
system of an element owned by an
owner that is not a registered entity,
they do not contemplate that the owner
will be notified that its facilities are
being considered for inclusion in the
bulk electric system.
Commission Determination
251. Pursuant to FPA section 215(f),
we approve the NOPR proposal and find
that the exception process is just,
reasonable, not unduly discriminatory
or preferential, and in the public
interest. Further, we find that the
proposal satisfies the statement in Order
No. 743 that NERC establish an
exception process for excluding
facilities that are not necessary for the
reliable operation of the interconnected
transmission network from the
definition of the bulk electric system.188
The exception process balances the
need for effective and efficient
administration with due process and
clarity of expectations and promotes
consistency in determinations and
eliminates regional discretion by having
all decisions on exception requests
made at NERC. The exception process
also provides for involvement of
persons with applicable technical
expertise in making decisions on
exception requests and allows for an
entity to appeal a final NERC decision
to the Commission.
252. The exception process provides a
reasonable mechanism for the ERO to
determine whether a facility or element
should be added to, or removed from,
the bulk electric system on a case-bycase basis. However, for the reasons
explained above in our discussion in
section II.C regarding local distribution,
the case-by-case determination of
whether an element or facility is used in
local distribution will be decided by the
Commission.
253. We also find that NERC’s
explanation, that it was not feasible to
develop a single set of technical criteria
that would be applicable to all
188 See
Order No. 743, 133 FERC ¶ 61,150 at P
16.
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exception requests so it developed the
Detailed Information Form (discussed in
detail below) to ensure that a consistent
baseline of technical information is
provided for NERC to make a decision
on all exception requests, is reasonable.
We find that this information, coupled
with the proposed exception process,
allows NERC to provide consistent
determinations on exception requests
submitted from different regions
involving the same or similar facts and
circumstances, and allows NERC to take
into account the aggregate impact on the
bulk electric system of approving or
denying all the exception requests.
Thus, we find that NERC’s proposal is
clear, transparent, and uniformly
applicable and is as equally efficient
and effective as the Order No. 743
directive to establish an exception
process for excluding facilities that are
not necessary for the reliable operation
of the interconnected transmission
network.
254. We are not persuaded by
Barrick’s and IUU’s comments that more
guidance is necessary. Order No. 743
tasked NERC with developing a revised
definition and exemption process.
NERC noted that it was not feasible to
develop a single set of criteria. The
Commission believes that applying the
100 kV threshold in the definition, the
inclusions and exclusions and the
information required in the Detailed
Information Form will be a sufficient
starting point to enable the ERO to make
determinations as to whether an
element is necessary for reliable
operation of the interconnected
transmission network. The body of
exception decisions that NERC
promulgates will further assist entities
in presenting the relevant facts and
circumstances when seeking an
exception.
255. In response to MISO’s request,
we note that RTOs and ISOs, in their
capacity as planning authorities,
reliability coordinators, transmission
operators, transmission planners, or
balancing authorities, have the ability to
file an exception request.189 We are not
persuaded that fewer requirements
should apply to exception requests
submitted by RTOs and ISOs, and we
agree with NERC, MISO Transmission
Owners and AMP that the exception
process needs to be applied consistently
and that the required information
should be the same regardless of the
identity of the submitter.
256. NYISO comments that the
exception process should provide
interested parties—particularly ISOs
189 See NERC ROP Petition, Attachment 1,
Proposed Appendix 5C, Section 4.1.
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and RTOs—notice and an opportunity
to be heard. As we note above, the
exception process affords ISOs and
RTOs, in their capacity as planning
authorities, reliability coordinators,
transmission operators, transmission
planners, or balancing authorities,
notice and opportunity to comment on
elements within their scope of
responsibility.
257. Similarly, with regard to
NYPSC’s and NESCOE’s comments on
the role of state commissions in the
exception process, we believe that
NERC’s proposal is reasonable and
provides an adequate opportunity for
state regulator participation.
Specifically, NERC explains in its ROP
petition that, in developing the
proposed Rules, state regulators and
others raised concerns about their
ability to participate in the exception
process. NERC responded that ‘‘the
exception process should be one based
on the technical reliability issues of the
specific case presented.* * * [A]
procedure that encouraged or even
invited multi-party filings would
unduly complicate the process without
any concomitant benefit in
reliability.’’ 190 However, to provide
transparency and some opportunity for
participation, the proposed exception
process provides that ‘‘(1) detailed
notice of any request would be provided
to every Registered Entity with
reliability oversight obligation for the
Element subject to the Request and (2)
general information about the request
will be publicly posted,’’ thereby
allowing third parties including state
regulators ‘‘adequate opportunity to
provide comments regarding the request
without formally participating in the
process.’’ 191 We agree that NERC’s
proposal strikes an appropriate balance
between efficient processing of highly
technical decisions and the opportunity
for states and other entities to comment
in the exception process. Nonetheless,
as discussed above, requests for
exclusion from the bulk electric system
on local distribution grounds will be
determined by the Commission on a
case-by-case basis. In such proceedings,
state regulatory authorities will have an
opportunity to intervene and provide
comments.
258. We disagree with Redding’s
characterization of how the exception
process is not necessary for determining
whether an element is used for local
distribution. Redding’s characterization
190 NERC ROP Petition, Att. 9 (‘‘The Development
Process and Basis for the ROP Team’s
Recommended Provisions—How Stakeholder
Comments were Considered and Addressed’’) at 7.
191 Id.
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of the exception process leaves the
determination of whether an element is
used for local distribution in the hands
of registered entities or NERC. However,
as we explain in the local distribution
discussion above, in circumstances
where there is a factual question as to
whether facilities not otherwise
excluded from the bulk electric system
by the core definition and four
exclusions should nonetheless be
excluded because they are used in local
distribution, a determination should be
made by this Commission. In addition,
in our discussion in section II.C above
regarding local distribution, we provide
direction with respect to how an entity
may seek a determination of whether an
element is used in local distribution.
259. Regarding Steel Manufacturers
Association’s concern that the Rules of
Procedure do not contemplate that an
owner of an element that is not a
registered entity will be notified by a
Regional Entity that its facilities are
being considered for inclusion in the
bulk electric system, we note that
section 4.1 of Appendix 5C the Rules of
Procedure states that when a Regional
Entity requests an exception, the
Regional Entity ‘‘shall prepare and
submit copies of its exception request
(or portions thereof) to all applicable
entities* * *.’’ 192 Further, section 4.4
of Appendix 5C provides that, if the
submitting entity is not the owner (i.e.,
is a Regional Entity, planning authority,
balancing authority, etc) it must provide
a copy of the exception request to the
owner. Therefore, if a Regional Entity
submits an exception request for an
element owned by a non-registered
entity, the owner is notified.
260. With respect to Holland’s request
for clarification for what must be
submitted for a claim of being local
distribution, we believe that our
discussion above regarding how local
distribution elements will be
determined addresses Holland’s
concerns.
261. In response to ICNU’s comments,
the Commission notes that NERC has
identified the entities that are
responsible for providing the
information necessary for an exception
request. Section 3.2 of the exception
process states that ‘‘the burden to
provide a sufficient basis for approval of
an exception request in accordance with
the provisions of the exception
procedure is on the submitting entity.’’
Additionally, in section 4.1 of the
exception process, NERC lists the
eligible submitting entities as the owner
of an element, or a Regional Entity,
192 NERC Rules of Procedure, Appendix 5C,
section 4.1.
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planning authority, reliability
coordinator, transmission operator,
transmission planner, or balancing
authority that has (or will have upon
inclusion in the bulk electric system)
the elements covered by an exception
request within its scope of
responsibility.
262. Southern Companies state that
the Commission should allow time for
NERC, Regional Entities and industry to
implement the definition and exception
process and determine at a later date
whether it is sufficiently capturing the
appropriate facilities. Similarly,
Alameda suggests that the Commission
set forth a future date for review of the
definition seeking both an effectiveness
report from NERC as well as industry
comment. First, as discussed below, the
Commission is granting NERC’s request
for a 24 month implementation plan.
The Commission believes that this is
sufficient to implement the definition
and exception process. In addition, the
Commission declines to set a future date
to determine effectiveness of the
definition and the exception process.
1. How Entities Will Review and Seek
Inclusion of Necessary Elements
NOPR Proposal
263. In Order Nos. 743 and 743–A, the
Commission indicated that our goal is
that the definition of bulk electric
system should include all facilities
necessary for the operation of the
interconnected transmission network,
except for local distribution. Further,
while the Commission explained that
one way to meet the goal was to
establish a 100 kV ‘‘bright line’’
threshold, the Commission also made
clear that the ‘‘bright line’’ threshold
would be a ‘‘first step or proxy’’ in
determining what facilities should be
included in the bulk electric system.193
The NOPR reiterated that, in Order Nos.
743 and 743–A, the Commission held
that NERC should not necessarily stop
at 100 kV and should, through the
development of the exception process,
ensure that ‘‘critical facilities operated
at less than 100 kV, and that the
Regional Entities determine [which
facilities] are necessary for operating the
transmission network.’’ 194 The
Commission clarified that the inclusion
of sub-100 kV facilities should be done
in an ‘‘appropriate and consistent’’
manner.195 Finally, in the NOPR, the
Commission noted that the September
2011 Blackout Report reinforced
statements in Order Nos. 743 and 743–
193 Order No. 743–A, 134 FERC ¶ 61,210 at P 40;
see also NOPR, 139 FERC ¶ 61,247 at P 106.
194 Order No. 743, 133 FERC ¶ 61,150 at P 121.
195 Order No. 743–A, 134 FERC ¶ 61,210 at P 103.
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839
A with respect to ensuring that sub-100
kV facilities, as appropriate, are
included in the bulk electric system.196
The Commission further noted that the
NERC proposals at issue in this
rulemaking take steps to address the
treatment of sub-100 kV facilities, as
well as other facilities, necessary for the
operation of the interconnected
transmission network, through the
exception process. However, in light of
the September 2011 Blackout Report,
the Commission requested comment on
how the relevant entities who control
and run facilities on the interconnected
transmission network will seek
inclusion of sub-100 kV facilities, as
well as other facilities, to ensure that all
facilities that are necessary for the
operation of the bulk power system are
designated as bulk electric system
elements.197
Comments
264. NERC proposes that entities can
identify sub-100 kV facilities for
inclusion in a variety of ways: In the
course of performing planning
assessments, from day-to-day operating
experience, or assessment of system
events that indicate facilities not
identified by application of the
definition are necessary for reliable
operation of the interconnected
transmission network. NERC further
states that an entity that requests the
inclusion or exclusion of a facility must
provide certain technical and
engineering support for its request.
NERC also points out that the exception
process provides for the appeal of a
decision to NERC as to whether a
facility is part of the bulk electric
system. NERC believes this process
adequately addresses the issue of
whether certain sub-100 kV facilities are
included in the bulk electric system.
265. ELCON states that the NOPR’s
suggestion that the entities would not
take cognizance of Commission or NERC
findings related to any sub-100 kV
elements that have a material impact on
system reliability would call into
question the efficacy of the entire
construct established by the
Commission to address reliability
issues.
266. APPA believes that it will be
excessively burdensome to industry and
small entities if they have to conduct a
study of all their sub-100 kV elements.
APPA asserts that it would require small
registered entities to hire consultants to
perform studies to assess the impact of
large numbers of non-bulk electric
system facilities.
196 NOPR,
197 NOPR,
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139 FERC ¶ 61,247 at PP 109–10.
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267. Idaho Power believes that
entities could periodically (e.g. every
five years) review the impact of sub-100
kV facilities and verify if any of the
inclusions would require them to be
included and explain why certain sub100 kV facilities are excluded.
268. ISO New England and National
Grid believe that, during the conduct of
transmission planning system
assessments, performed in accordance
with requirements of the NERC
Transmission Planning Reliability
Standards, facilities required for
inclusion in the bulk electric system
may be identified.
Commission Determination
269. As we held in Order Nos. 743
and 743–A, the goal of revising the
definition of bulk electric system is to
ensure that all necessary facilities are
included in the bulk electric system. As
we noted in Order No. 743, applying the
definition of bulk electric system should
be a ‘‘first step or proxy’’ in determining
which facilities should be included in
the bulk electric system.198 The
Commission stated that NERC should
not end the inquiry at 100 kV and
should, through the development of the
exception process, ensure that ‘‘critical’’
facilities operated at less than 100 kV,
and that the Regional Entities determine
are necessary for operating the
interconnection network are
included.199 We continue to expect
entities to identify and include sub-100
kV facilities, as well as other facilities,
necessary for the operation of the
interconnected transmission network. In
the NOPR we asked how the entities
responsible for including elements in
the bulk electric system will assure that
the all facilities, including sub-100 kV
elements, that are necessary for
operating the interconnected
transmission network will be included
in the bulk electric system. We find
NERC’s response to that question
reasonable: That Regional Entities,
planning authorities, reliability
coordinators, transmission operators,
transmission planners, balancing
authorities, and owners of system
elements will include, through the
exception process, facilities identified
in the course of performing planning
assessments, from day-to-day operating
experience, or assessment of system
events that are not included by
application of the definition but are
necessary for reliable operation of the
interconnected transmission network.
We believe that entities, having
198 NOPR, 139 FERC ¶ 61,247 at P 106 (citing
Order No. 743–A, 134 FERC ¶ 61,210 at P 40).
199 Order No. 743, 133 FERC ¶ 61,150 at P 121.
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knowledge of their systems and the
concomitant planning assessments and
system impact studies, will identify an
element that is necessary for reliable
operation of the integrated transmission
network while conducting their day-today operations and planning and
performing studies. If the element does
not fall within the definition, we expect
that the entity will submit the element
for inclusion through the exception
process. Use of this process should
ensure that the all sub-100 kV elements,
as well as other facilities, necessary for
the operation of the interconnected
transmission network are included in an
‘‘appropriate and consistent’’ manner.
By identifying and seeking inclusion of
sub-100 kV facilities, and other
facilities, in the bulk electric system
through performance of these routine
functions, such as those identified by
ISO New England and National Grid, we
do not expect that entities will have to
perform studies indiscriminately to
make such determinations. Indeed,
comments indicate that the
determination of which elements,
including sub 100 kV elements, should
be included in the bulk electric system
is a natural part of an entities’ process
for assuring the reliable operation of the
grid.200 Thus, the Commission believes
that, if a study is needed outside the
ordinary course of operations, it would
be infrequent. By adopting this
approach, we believe that APPA’s
concerns about burdensome tasks are
alleviated.
2. NERC Role in Identifying Necessary
Elements
270. In the NOPR, the Commission
observed that, despite NERC’s statutory
functions to develop and enforce
Reliability Standards, its continent-wide
perspective, and technical
understanding that can provide valuable
assistance in the identification of bulk
electric system facilities, the exception
process does not provide that NERC
may initiate an exception request.
Accordingly, the Commission requested
comments on the role NERC should
have in initiating the designation of or
directing others to initiate the
designation of sub-100 kV facilities, or
any other facilities, necessary for the
operation of the interconnected
transmission network for inclusion in
the bulk electric system.201 The
Commission also requested comment on
the role NERC should have in
designating sub-100 kV facilities, and
other facilities, for inclusion in the bulk
electric system, directing Regional
200 E.g.,
ELCON Comments at 8.
139 FERC ¶ 61,247 at P 111.
201 NOPR,
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Entities or others to conduct such
reviews, or itself nominating an element
to be included in the bulk electric
system.
Comments
271. NERC states that inherent in its
oversight of the Regional Entities is the
ability to request a Regional Entity or
others to propose inclusion of sub-100
kV facilities, and other facilities in the
bulk electric system. NERC further
states that the Rules of Procedure do not
limit its ability to perform this function
and such action is fully consistent with
NERC’s obligations and authority as the
ERO.
272. Dominion believes that if NERC
wants to nominate a sub-100 kV facility,
it could do so through the broad powers
assigned to NERC through its Rules of
Procedure and/or regional delegation
agreements. TAPS maintains that if,
through its investigations, risk
assessments, or analysis of events,
NERC identifies facilities that should be
included in (or excluded from) the bulk
electric system, it would be appropriate
for NERC to have the authority to make
such a proposal through the exception
process, provided that it implements
due process safeguards such as the
designation of decisional and nondecisional staff.
273. Several commenters state that
NERC should have the ability to
nominate a facility for inclusion.
SmartSenseCom believes NERC should
have authority to initiate an exception
request because, even with a bright line
standard, there remains the possibility
of inconsistent interpretation and
application of the definition. ISO–NE
states that NERC should have the ability
to nominate a facility for inclusion, but
the Regional Entities along with
planning authorities, reliability
coordinators, transmission operators,
transmission planners and balancing
authorities should be provided an
opportunity to review and comment on
this nomination.
274. AEP believes that RTOs or
Regional Entities ‘‘are equipped to
facilitate the efforts to be effective with
the exception process.’’ 202 AEP also
suggests that NERC and the Commission
could assign review of sub-100 kV
facilities to the RTOs. AEP states that
the RTO processes could be modified to
address the exceptions. AEP defers to
the judgment of the Commission and
NERC in regions where there are
currently no functioning RTOs.
275. Other commenters do not
support a NERC role as contemplated in
the NOPR. SoCal Edison believes that
202 AEP
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NERC should not initiate exception
requests to include facilities within the
bulk electric system. Rather, SoCal
Edison posits that NERC’s role is to
communicate to the Regional Entities
their obligation to review systems in
their area that operate in parallel with
the bulk electric system and to include
such systems in the bulk electric
system. APPA supports consideration of
a NERC role in Phase 2 of the project to
identify specific reliability gaps but
objects to NERC being able to step into
the shoes of the Regional Entity.
of impropriety, NERC must develop
appropriate safeguards.
278. In response to AEP, the
Commission will not direct
modifications to provide RTOs and ISOs
the authority to address exception
requests. RTOs and ISOs can submit
exception requests in their capacity as
planning authorities, reliability
coordinators, transmission operators,
transmission planners, and/or balancing
authorities.
Commission Determination
276. NERC states that, as the ERO, and
in its oversight of the Regional Entities,
it has the ability to request a Regional
Entity or others to propose inclusion of
sub-100 kV facilities, and other
facilities, in the bulk electric system.
NERC believes that nothing in the
proposed Rules of Procedure limits its
oversight obligations and authority as
the ERO. The Commission finds NERC’s
approach to be reasonable. Section
215(e)(4)(C) of the FPA authorizes the
Commission to issue regulations
authorizing the ERO to enter into an
agreement to delegate authority to
Regional Entities if the agreement
promotes effective and efficient
administration of Bulk-Power System
reliability.203 Subsequently, the
Commission approved delegation
agreements between NERC and the eight
Regional Entities.204 Pursuant to the
delegation agreements, NERC may issue
guidance or directions as to the manner
in which a Regional Entity performs
delegated functions and related
activities.205 Thus, the Commission
agrees with NERC that, as the ERO,
NERC has the authority to request a
Regional Entity or other eligible
submitting entity to propose inclusion
of sub-100 kV facilities, or other
facilities, in the bulk electric system.
277. TAPS supports NERC having the
ability to initiate the designation of
facilities or elements as part of the bulk
electric system, provided that NERC
implements due process safeguards
such as the designation of appropriate
decisional and non-decisional staff. We
agree that, to avoid actual or appearance
NOPR Proposal
279. In the NOPR, the Commission
requested comment on the role the
Commission should have with respect
to the designation of sub-100 kV
facilities, or other facilities, necessary
for the operation of the interconnected
transmission network for inclusion in
the bulk electric system. The
Commission observed that ‘‘there may
be circumstances (like the September
2011 Blackout Report) where the
Commission, through the performance
of its statutory functions, may conclude
that certain sub-100 kV facilities not
already included in the bulk electric
system are necessary for the operation of
the interconnected transmission
network and thus should be included in
the bulk electric system.’’ 206 The
Commission stated that it expected that
Regional Entities and others ‘‘will take
affirmative steps to review and include
sub-100 kV elements and facilities, and
other facilities, necessary for the
operation of the interconnected
transmission system in the bulk electric
system,’’ and requested comment as to
how the Commission could ensure that
such facilities are considered for
inclusion in the bulk electric system.207
The Commission also requested
comment on instances when the
Commission itself should designate or
direct others to designate sub-100 kV
facilities, or other facilities, necessary
for the operation of the interconnected
transmission grid for inclusion in the
bulk electric system.
203 16
U.S.C. 824o (2006).
American Electric Reliability Corp., 119
FERC ¶ 61,060, order on reh’g, 120 FERC ¶ 61,260
(2007).
205 See, e.g., section 8(d) of the Amended and
Restated Delegation Agreement between NERC and
Midwest Reliability Organization (* * * the NERC
Board (or a Board committee to which the Board
has delegated authority) may issue guidance or
directions as to the manner in which Midwest
Reliability Organization and, if applicable, other
Regional Entities, shall perform delegated functions
and related activities.’’).
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204 North
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3. Commission Role in Identifying
Necessary Elements
Comments
280. NERC notes that the Commission
has authority pursuant to FPA section
215(d)(5) to initiate a Reliability
Standards development process that
‘‘addresses a specific matter.’’
According to NERC, for the Commission
to play a more active role in the
designation of such facilities would be
inconsistent with its role as the
adjudicator of disputes.
281. Some commenters assert that the
Commission has the authority to
designate a facility as part of the bulk
electric system.208 SmartSenseCom
states that, if the Commission is
concerned that a facility is necessary for
the operation of the interconnected
transmission system, it possesses
authority to order NERC or a Regional
Entity to address that matter.
Specifically, SmartSenseCom points to
section 215(b) and section 215(d)(5)
where the Commission has plenary
authority over the ERO and ‘‘all users,
owners, and operators of the bulk-power
system’’ for the purposes of approving
reliability standards and enforcing
compliance with those standards.209
SmartSenseCom states that, pursuant to
the statutory authority, the Commission
could, on its own motion, ‘‘order
[NERC] to submit * * * a modification
to a reliability standard that addresses a
specific matter if the Commission
considers such * * * modified
reliability standard appropriate to carry
out this section.’’ 210
282. Furthermore, SmartSenseCom
states that the Commission should be
able to review NERC exceptions
decisions. SmartSenseCom asserts that
NERC decisions should be subject to the
discretionary review of the Commission
and the Commission should retain the
ability to remand or reject an exception
determination, pursuant to the
Commission’s FPA section 215 statutory
authority to approve, disapprove, or
remand NERC-proposed Reliability
Standards. While the Commission
should give NERC’s exception decision
‘‘due weight’’ as required by section
215, SmartSenseCom asserts that the
availability of review would ensure
reliable operation of existing and future
Bulk-Power System facilities.
SmartSenseCom also suggests that
Commission review of exception
decisions would provide industry
stakeholders with valuable precedent
and clarity on the treatment of certain
facilities.
283. Other commenters claim that the
Commission does not possess the
authority to designate elements as part
of the bulk electric system. ISO New
England contends that the Commission,
as the ultimate decision making
authority, should not have a role in
nominating facilities for inclusion in the
bulk electric system. APPA does not
believe that the FPA gives the
Commission authority to designate
specific elements for inclusion in the
208 E.g.,
Dominion and SmartSenseCom.
Comments at 14, quoting 16
U.S.C. 824o(b).
210 Id. at 14, quoting 16 U.S.C. 824o(d)(5).
209 SmartSenseCom
206 NOPR,
207 NOPR,
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139 FERC ¶ 61,247 at P 112.
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bulk electric system. Rather, according
to APPA, the Commission’s role is to
review NERC decisions. APPA states
that policy considerations and
Congressional intent also ‘‘militate
against direct [Commission]
identification of specific facilities or
classes of facilities to be included in the
[bulk electric system] definition.’’ 211
APPA asserts that, during the course of
a Part 1b investigation or other inquiry,
the Commission may identify facts that
indicate that a registered entity has not
properly applied the definition. APPA
points to FPA section 215(e)(3) which
provides that, after notice and
opportunity for hearing, the
Commission may enforce compliance by
a particular user, owner or operator of
the Bulk-Power System with a
Reliability Standard, which could
include application of the definition
within the context of a specific
reliability standard. APPA argues, that
section 215 contemplates a standard
development and enforcement
framework in which rules of general
applicability, i.e., Reliability Standards,
are developed by the ERO on a
continent-wide, and are subject to
Commission approval prior to the
enforcement of such Reliability
Standards. In contrast, APPA argues that
section 215 contemplates the delegation
of enforcement authority by the ERO to
Regional Entities that are organized to
accomplish this specific purpose. APPA
concludes that the Commission, like
NERC, should focus its resources on
ensuring that Regional Entities enforce
compliance with the definition and the
Rules of Procedure.
284. SoCal Edison does not support
active Commission involvement in
designating facilities for inclusion in the
bulk electric system. According to SoCal
Edison, because the Commission has the
authority to review NERC’s decisions in
the exceptions procedure, the
Commission’s role should be limited to
providing to NERC information that the
Commission develops on facility
categories that should potentially be
included in the bulk electric system.
Further, SoCal Edison states that NERC
should be responsible for
communicating that information to
Regional Entities for further action and
ensuring that those Regional Entities
take the appropriate action with respect
to such information, and the
Commission should ensure that NERC
and the regional authorities act upon the
information provided by the
Commission with respect to such
facilities.
Commission Determination
285. For the reasons discussed below,
we conclude that the Commission has
the authority to designate an element as
part of the bulk electric system pursuant
to our authority set forth in sections
215(a)(1) and (b)(1) of the FPA. We are
cognizant of the concerns stated by
SoCal Edison and other commenters
regarding the appellate role of the
Commission, and the desire to allow
registered entities and Regional Entities
to take the lead in identifying sub-100
kV elements, and other elements, that
should be included in the bulk electric
system. As explained above, we expect
entities to identify and include sub-100
kV elements, and other elements, that
are necessary for operating the
interconnected transmission network in
the bulk electric system. Nonetheless,
we believe that in appropriate
circumstances, for example, where an
event analysis of a system disturbance
indicates the operational importance of
sub-100 kV elements, and other
elements, to bulk electric system
reliability, the Commission may find it
necessary for the reliable operation of
the interconnected transmission
network to designate facilities to be
included in the bulk electric system. We
anticipate that such circumstances will
be rare. Consistent with the approach
discussed in the NOPR, the Commission
would provide public notice and
opportunity for public comment before
designating facilities as part of the bulk
electric system.212
286. Commenters are mistaken in
characterizing the Commission’s
designation of facilities as bulk electric
system as a modification to the bulk
electric system definition or other
Reliability Standard. Rather, our
authority to designate facilities is based
on the statutory definition of BulkPower System and the jurisdictional
authority vested in the Commission
pursuant to section 215 of the FPA.
Specifically, section 215(b)(1) of the
FPA provides that ‘‘the Commission
shall have jurisdiction, within the
United States, over * * * all users,
owners and operators of the bulk-power
system * * * for purposes of approving
Reliability Standards established under
this section and enforcing compliance
with this section.’’ 213 Section 215(a)(1)
of the FPA, in turn, defines ‘‘BulkPower System’’ to mean ‘‘facilities and
control systems necessary for operating
an interconnected electric energy
transmission network (or any portion
thereof); and electric energy from
212 NOPR,
211 APPA
Comments at 20.
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U.S.C. 824o(b)(1).
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generation facilities needed to maintain
transmission system reliability.’’ 214 If
an entity owns or operates sub-100 kV
elements, or other elements, ‘‘necessary
for operating an interconnected electric
energy transmission network,’’ the
Commission has jurisdiction pursuant
to FPA section 215(b)(1) to ‘‘enforc[e]
compliance with this section,’’ and to
ensure that the approved definition is
being implemented properly.
287. For example, an entity may
operate sub-100 kV elements, or other
elements, that are, pursuant to the
modified definition approved in this
Final Rule, not treated as part of the
bulk electric system. However, an event
analysis may reveal that such facilities
are ‘‘necessary for operating an
interconnected electric energy
transmission network.’’ As an
appropriate prospective remedy,
pursuant to the FPA section 215(b)(1)
authority to ‘‘enforc[e] compliance with
this section,’’ the Commission could
designate the facilities as part of the
bulk electric system. This approach is
consistent with Commission precedent
regarding unregistered entities whose
facilities are involved in a violation of
Reliability Standards. The Commission
determined that, in such situations, the
appropriate remedy is to register the
entity so that, prospectively, the entity
must comply with the relevant
Reliability Standards based on the
functions performed by that entity.215
288. The Commission would not
modify the language of the definition of
bulk electric system or the specific
inclusions and exclusions. Rather, the
Commission would initiate the
designation of elements to ensure that
the definition is properly applied. To be
clear, when, for example, a system
disturbance or other event demonstrates
the necessity of sub-100 kV elements, or
other elements, for reliable operations,
we expect in the normal course that
registered entities, Regional Entities and
NERC will proactively identify and
include sub-100 kV elements, or other
elements, in the bulk electric system.
The Commission’s strong preference is
that registered entities review their
facilities to determine which are needed
for operating the interconnected
transmission network and include them
in the bulk electric system. However,
when it is recognized that an element is
necessary for the operation of the
interconnected transmission network
and no other entity steps forward to
214 16
U.S.C. 824o(a)(1).
Reliability Standard Compliance and
Enforcement in Regions with Regional Transmission
Organizations or Independent System Operators,
122 FERC ¶ 61,247, at P 19 (2008).
215 See
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designate the element as included in the
bulk electric system for purposes of
section 215, the Commission has the
authority to do so. We anticipate that
such instances will be rare. Should the
Commission find it necessary and
appropriate to exercise this authority,
we anticipate that the Commission
would, for example, issue either a notice
or order proposing to designate a
specific element or elements as part of
the bulk electric system, and explain the
rationale for the proposal. The
Commission would make a final
determination after providing notice
and opportunity for comment by
interested parties.
4. Technical Review Panel
NOPR Proposal
289. NERC’s exception process
provides that the Regional Entity shall
not recommend disapproval of the
exception request without review by a
technical review panel. The Regional
Entity is not bound by the opinion of
the panel, but the panel’s evaluation
becomes part of the record associated
with the exception request and provided
to NERC. In the NOPR, the Commission
stated that it saw value in the Regional
Entity receiving the opinion of a
qualified technical review panel. The
Commission observed that NERC did
not explain why the proposed exception
process only requires a technical review
panel to provide an opinion where the
Regional Entity recommends
disapproval of an exception request.
Accordingly, the Commission requested
comment from NERC explaining why
the review is only required when a
Regional Entity disapproves a request
and whether NERC should modify the
exception process to require Regional
Entities to submit all proposed
determinations to a technical review
panel regardless of the recommendation
and receive the panel’s opinion on each
request.
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Comments
290. NERC stated that it considered
obtaining the opinion of a technical
panel for all Regional Entity
recommendations; however, NERC
concluded that a review should only be
required when a Regional Entity
disapproves a request due to concerns
regarding administrative efficiency.
NERC determined that negative
technical reviews would be sufficient to
promote consistency and that the
additional costs and work of a review of
all proposed determinations would
outweigh the benefits. NERC further
states the record of every request is
reviewed by a panel of experts at the
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NERC level as part of the decision
making process.
291. Several entities support NERC’s
explanation.216 ELCON believes NERC’s
approach will avoid the burden,
inefficiency and delay inherent in
unnecessary referrals to a technical
review panel. ELCON notes that the
exception process already calls for
submission of in-depth technical
information through the Detailed
Information Form, initial review by the
Regional Entity, and subsequent review
and final decision by NERC. ELCON
believes that considerable technical
expertise will, therefore, be available to
both the Regional Entity and to NERC as
they assess exception requests.
292. In contrast, some entities believe
that a technical panel be convened for
either approval or denial of all
exceptions.217 They believe that using a
panel for all requests will ensure that
the requests receive adequate
consideration and vetting before a final
decision is rendered. WPPC requests
that the Commission obtain additional
information from NERC with respect to
why the Technical Review Panels are
not required to review all exception
requests that are rejected on procedural
grounds.
Commission Determination
293. The Commission accepts NERC’s
explanation that requiring a technical
panel review of all Regional Entity
recommendations will likely cause an
additional administrative burden on
Regional Entities, delaying final
recommendations to NERC. While the
Commission sees benefits in utilizing a
technical review panel for all requests,
we are not persuaded that these benefits
will outweigh the costs associated with
the increased administrative burden
likely to be imposed. Additionally, if
the Technical Review Panel does not
provide an opinion on all exception
requests, the exception process is not
without other levels of technical review.
On the contrary, the exceptions process
provides multiple levels of technical
review before a final determination is
made by NERC, including a substantive
review by the Regional Entity and a
subsequent review by a panel of
technical experts at the NERC level. For
these reasons, the Commission approves
the Technical Review Panel as proposed
by NERC.
294. In response to WPPC’s request,
the Commission declines to seek further
information from NERC with respect to
why the Technical Review Panels are
843
not required to review all exception
requests that are rejected on procedural
grounds. Section 5.1.5(a) of Appendix
5C to the Rules of Procedure requires a
Regional Entity to reject an exception
request if it is not from an eligible
submitting entity and/or it does not
contain all the required information
specified in section 4.0. The
Commission does not believe a
Technical Review Panel needs to
determine if an exception request was
properly submitted by an eligible entity
and/or contains all the required
information. Additionally, as WPPC
states in its comments, submitting
entities may appeal Regional Entity
rejections of exception requests to NERC
through the procedure provided in
section 7.0 of the exception process.
Requiring Technical Review Panel
review of all rejections of exception
requests, as well as all
recommendations of disapprovals,
would unnecessarily impose
administrative burdens as if the
Technical Review Panel was required to
review all exception request
recommendations. For these reasons,
the Commission declines WPPC’s
request to obtain further information
from NERC on this matter.
5. Use of Industry Subject Matter
Experts
NOPR Proposal
295. Section 8 of the proposed
exception process sets forth the
procedures for NERC’s review of a
Regional Entity’s recommendation. The
NERC President will appoint a team of
at least three persons with the relevant
technical background to evaluate an
exception request. NERC contemplated
that its review teams would be drawn
from NERC staff resources,
supplemented by contractors as
necessary, but situations may arise in
which NERC may need to call on
industry subject matter experts to
participate as members of review teams.
In the NOPR the Commission supported
NERC’s proposal to use staff resources,
supplemented by contractors as
necessary, to make up the exception
request review teams. We stated that
consistent appointment of the same
NERC staff and contractor resources,
based on subject matter expertise, will
promote a more uniform and consistent
review of the Regional Entities’
exception request recommendations.
Comments
216 E.g.,
Idaho Power, ELCON, and G&T
Cooperatives.
217 E.g., ISO New England and BPA.
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296. No comments were received on
this issue.
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Commission Determination
297. The Commission agrees with
NERC’s proposal to use staff resources,
supplemented by contractors as
necessary, and potentially industry
subject matter experts to make up the
exception request review teams. The
Commission believes that ensuring that
members of the NERC review teams
have the required technical background
necessary to evaluate exception
requests, review supporting technical
documents, and assess technical
recommendations, is essential to
providing consistent technically sound
determinations on exception requests.
The Commission believes that
consistent appointment of the same
NERC staff, contractor resources and
industry subject matter experts, based
on subject matter expertise, will
promote a more uniform and consistent
review of the Regional Entities’
exception request recommendations.
6. NERC’s Detailed Information Form
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NOPR Proposal
298. NERC developed the Detailed
Information Form that the Regional
Entity and NERC can use in evaluating
whether or not the elements that are the
subject of an exception request are
necessary for operating the
interconnected transmission network. In
the NOPR, the Commission stated that
this information will provide
consistency with respect to the
technical information provided with all
exception requests and is an equally
efficient and effective approach to
developing a substantive set of technical
criteria for granting and rejecting
exception requests and proposed to
approve the Detailed Information Form.
Comments
299. ELCON supports the Detailed
Information Form and agrees that it is
‘‘more feasible to develop a common set
of data and information that could be
used by the Regional Entities and NERC
to evaluate exception requests’’ than to
develop the detailed criteria and that
the information specified in the form is
relevant and appropriate for exception
requests.
300. Holland and Alameda state that
there should be some basic guidelines to
evaluate an exception request. Alameda
states that having no technical criteria
provides entities with no guidance
considering a request for exception.
Alameda submits that parties should
have a reasonable basis for determining
the outcome of a potential exception
request in advance of taking the time
and effort to make the request. Alameda
suggests that the Commission direct
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NERC to develop appropriate technical
exception criteria, recognizing that each
criterion may not apply to all requests
and that the criterion may even change
over time as specific requests are
evaluated in detail. Alameda also seeks
clarification that parties may seek
exceptions for proposed facilities, and
not just for existing facilities as allowing
exceptions to be requested for proposed
facilities would provide an opportunity
for entities to make reasoned decisions
about planned system improvements.
Commission Determination
301. We approve the Detailed
Information Form and find that it will
provide consistency with respect to the
technical information provided with all
exception requests and is an equally
efficient and effective approach to
developing a substantive set of technical
criteria for granting and rejecting
exception requests. We decline to adopt
Alameda’s suggestion that the
Commission direct NERC to develop
appropriate technical exception criteria.
We accept NERC’s conclusion that it
was more feasible to develop a common
set of data and information that could be
used by the Regional Entities and NERC
to evaluate exception requests than to
develop the detailed criteria. NERC’s
proposal provides the needed flexibility
to allow Regional Entities to make a
recommendation of whether or not an
element is necessary for the reliable
operation of the interconnected
transmission network. Thus, the
detailed criteria that NERC requires,
plus other information that an entity is
free to include in its submission will
provide applicants a reasonable basis for
determining whether an element is
necessary for the reliable operation of
the interconnected transmission
network. We also decline to direct
NERC to determine how to treat
exceptions for proposed facilities.
7. NERC’s Implementation Plan
NOPR Proposal
302. NERC requests that the effective
date for revised definition should be the
first day of the second calendar quarter
after receiving applicable regulatory
approval, or, in those jurisdictions
where no regulatory approval is
required, the revised bulk electric
system definition should go into effect
on the first day of the second calendar
quarter after its adoption by the NERC
Board. NERC also requested that
compliance obligations for all newlyidentified elements to be included in
the bulk electric system based on the
revised definition should begin twentyfour months after the applicable
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effective date of the revised definition.
NERC stated that sufficient time is
needed to implement transition plans,
for exceptions to be filed and processed,
for owners of newly-included elements
to train their personnel on compliance
with the Reliability Standards. In the
NOPR, the Commission supported
NERC’s justification for its
implementation and proposed to
approve NERC’s implementation plan.
Comments
303. A number of commenters
support the NOPR proposal.218 ELCON
states that the twenty-four month time
period gives sufficient time to
accommodate planning for and changes
resulting from the new definition,
including any exception requests and
compliance obligations, without causing
undue delay. Consumers believes the
twenty-four month period should be
sufficient in most cases but believes that
the Commission should make specific
provision for longer periods to be
allowed on a case-by-case basis under
special circumstances. Barrick and IUU
also support the implementation plan
but believe further clarification is
necessary with respect to an entity’s
status during the exception process.
Commission Determination
304. We agree with commenters that
the twenty-four month time period gives
sufficient time to accommodate
planning for and changes resulting from
the new definition, including any
exception requests and compliance
obligations. Therefore, we approve
NERC’s proposal to implement a
twenty-four month implementation
plan. In response to Consumers’
comment regarding the need for
additional time for special
circumstances, an entity or NERC may
petition for an extension of time. In
response to the comments raised by
Barrick and IUU, we clarify that the
status of an element remains unchanged
during the exception process.
8. NERC List of Facilities Granted
Exceptions
NOPR Proposal
305. In the NOPR, the Commission
noted that the proposed exception
process does not include provisions for
NERC to maintain a list of facilities that
have received exceptions, as requested
in Order No. 743. In its petition, NERC
indicated that this is an internal
administrative matter for NERC to
implement that does not need to be
embedded in the Rules of Procedure.
NERC stated it will develop a specific
218 E.g.,
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internal plan and procedures for
maintaining a list of facilities for which
exceptions have been granted and notes
that Regional Entities will maintain lists
of elements within their regions for
which exceptions have been granted, in
order to monitor compliance with the
requirement to submit periodic
certifications.
306. In the NOPR, the Commission
proposed that NERC make an
informational filing within 90 days of
the effective date of a final rule,
detailing its plans to maintain a list and
how it will make this information
available to the Commission, Regional
Entities, and potentially to other
interested persons.219 The Commission
also requested comment on whether
NERC’s proposal should be modified to
include an obligation for the registered
entity to inform NERC or the Regional
Entity of the entity’s self-determination
through application of the definition
and specific exclusions E1 through E4
that an element is no longer part of the
bulk electric system.
mstockstill on DSK4VPTVN1PROD with
Comments
307. NERC confirms that it is
continuing to develop details regarding
how the list of facilities that have
received exceptions will be maintained.
According to NERC, a 90-day window of
time in which to submit an
informational filing is reasonable.
308. Other entities support NERC’s
plan.220 AEP cautions that the process
of submitting a filing must not overstep
the confidentiality provisions of Critical
Energy Infrastructure Information as
part of the gathering and dissemination
of list(s).
309. The Massachusetts DPU supports
NERC’s keeping a list of exceptions and
requests that the Commission requires
that state regulatory authorities have
appropriate access to the list. ISO New
England proposes that NERC submit a
compliance filing detailing its internal
process for tracking exception requests.
ISO New England also believes that
NERC and/or the Regional Entities
should be required to maintain a
database that lists the bulk electric
system elements within their respective
footprints and should make this data
available for affected entities.
Commission Determination
310. We adopt the NOPR proposal
and direct NERC to make an
informational filing within 90 days of
the effective date of this Final Rule
detailing its plans to maintain a list and
how it will make this information
219 NOPR,
139 FERC ¶ 61,247 at P 123.
and NRECA.
220 ELCON
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available to the Commission, Regional
Entities, and potentially to other
interested persons. We find that the
suggestions of the Massachusetts DPU
and ISO New England are premature as
these comments are more appropriate
for consideration after NERC makes its
compliance filing.
9. Declassification of Facilities
NOPR Proposal
311. In the NOPR, the Commission
observed that, while NERC will
maintain a list of facilities that have
received an exception pursuant to the
case-specific exception process, NERC
does indicate whether it will track an
entity’s ‘‘declassification’’ of current
bulk electric system facilities based on
the entity’s self-application of the bulk
electric system definition.221 The
Commission expressed concern
particularly when an entity selfdetermines that an element is no longer
part of the bulk electric system but the
entity is large enough to otherwise
remain on the NERC Compliance
Registry. Accordingly, the Commission
requested comment on whether NERC’s
proposal should be modified to include
an obligation for the registered entity to
inform NERC or the Regional Entity of
the entity’s self-determination through
application of the definition and
specific exclusions E1 through E4 that
an element is no longer part of the bulk
electric system.
Comments
312. NERC asserts that registered
entities are obligated to inform the
Regional Entity of any selfdetermination that an element is no
longer part of the bulk electric system.
NERC points to section 501 of the
currently-effective Rules of Procedure,
which provides that each registered
entity must notify its Regional Entity of
any matters that affect the registered
entities’ responsibilities with respect to
Reliability Standards. NERC contends
that a determination that an element is
no longer part of the bulk electric
system would necessarily affect an
entity’s responsibilities with respect to
the Reliability Standards. Further, NERC
states that an entity’s failure to notify
would not relieve it of any obligations
it may have associated with such
failure.
313. Idaho Power and National Grid
support that registered entities should
inform NERC or the Regional Entity of
elements that have been declassified.
National Grid supports an obligation for
each registered entity to inform the
respective reliability coordinators and
221 NOPR,
PO 00000
139 FERC ¶ 61,247 at P 123.
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845
Regional Entity of the entity’s selfdetermination through application of
the definition and specific exclusions
that an element is no longer part of the
bulk electric system.
314. PSEG Companies do not support
requiring self reporting. PSEG
Companies point out that when the
NERC Functional Model was first put in
place, registered entities made
determinations of which facilities
should be included and excluded from
the bulk electric system without any
reporting requirements for those
decisions. PSEG Companies assert that a
registered entity should only be
contacting its Regional Entity regarding
status changes if those changes impact
the registered entity’s registration (e.g.,
if a registered Transmission Owner
disposes of all its 100 kV or higher
assets or a generation owner acquires its
first BES generator). According to PSEG
Companies, facility changes that impact
a facility’s bulk electric system status do
not presently require reporting. The
proposed reporting self-determined
exclusions could lead to extensive
facility-by-facility tracking and
reporting of all status changes which
would be overly burdensome to
Registered Entities.
315. AEP believes that it is imperative
to keep the process simple in the
beginning, and thus advocates that no
specific information submission
requirements be implemented at this
time. If NERC or the Regional Entities
determine this approach is problematic
in the future, AEP states that any issues
can be addressed through a change in
the NERC Rules of Procedure.
316. ICNU states that if NERC requires
an end-use retail customer to provide
notice of declassification, such notice
should not involve extensive or
burdensome reporting requirements
because, as noted above, end-use
customers do not have the required
resources or expertise. On the other
hand, ICNU believes that non-registered
end-use retail customers who, based on
the new BES definition, determine that
they remain excluded from the BES
should not be listed or required to
report such determination to NERC or
the appropriate Regional Entity.
Commission Determination
317. We agree with NERC that
registered entities are obligated to
inform the Regional Entity of any selfdetermination that an element is no
longer part of the bulk electric system.
PSEG Companies claim that there is
currently no requirement to report the
change in status of facilities. NERC,
however, cites section 501 of the
currently-effective Rules of Procedure,
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which provides that each registered
entity must notify its Regional Entity of
any matters that affect the registered
entities’ responsibilities with respect to
Reliability Standards. Section 501 also
requires entities to inform the Regional
Entity of any self-determination that an
element is no longer part of the bulk
electric system. Section 501, Part 1.3.5
provides:
Each Registered Entity identified on the
NCR shall notify its corresponding Regional
Entity(s) of any corrections, revisions,
deletions, changes in ownership, corporate
structure, or similar matters that affect the
Registered Entity’s responsibilities with
respect to the Reliability Standards. Failure
to notify will not relieve the Registered Entity
from any responsibility to comply with the
Reliability Standards or shield it from any
Penalties or sanctions associated with failing
to comply with the Reliability Standards
applicable to its associated Registration.
Thus, a registered entity that concludes
that an element is no longer part of the
bulk electric system must notify the
Regional Entity of such change. Further,
we disagree with PSEG Companies that
such notification is unnecessary. PSEG
Companies point out that NERC did not
require such notification when the
Functional Model was first put into
place. Regardless of past practice, we
find that such notification is a necessary
feature of the changes being
implemented by NERC. As explained in
the NOPR:
mstockstill on DSK4VPTVN1PROD with
A large utility with hundreds or thousands
of transmission lines may initially determine
that a configuration on its system does not
qualify for the exclusion E3 local network
exclusion, but subsequently determines that
the configuration can be excluded. NERC’s
petition does not indicate whether an entity
in such circumstance is obligated to inform
NERC or the appropriate Regional Entity of
that self-determination. It appears that NERC
and the Regional Entities would need this
information for their compliance programs,
for audit purposes, and to understand the
contours of the bulk electric system within a
particular region.
Further, the revised definition allows
entities the discretion to ‘‘declassify’’
certain facilities as part of the bulk
electric system, and NERC, Regional
Entities and the Commission need
notification of such instances to assure
that the entities are appropriately
implementing the revised definition.
318. We affirm ICNU’s assertion that
this task does not involve new,
extensive or burdensome reporting
requirements. We view this as an
identification and notification task so
that a Regional Entity and NERC will
know what elements are or not part of
the bulk electric system. This will
provide the entities tasked with
overseeing the reliable operation of the
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interconnected transmission network
with having an adequate level of
information and transparency to fulfill
those obligations. We disagree with
PSEG Companies that this is an overly
burdensome requirement. First, such
information sharing is already
contemplated by the Rules of Procedure.
Second, as noted above, we do not view
this requirement as one that involves
anything more than notification. It does
not require a justification of why the
element is being excluded.
III. Information Collection Statement
319. The Office of Management and
Budget (OMB) requires that OMB
approve certain information collection
and data retention requirements
imposed by agency rules.222 Upon
approval of a collection(s) of
information, OMB will assign an OMB
control number and an expiration date.
Respondents subject to the filing
requirements of a rule will not be
penalized for failing to respond to these
collections of information unless the
collections of information display a
valid OMB control number.
Public Reporting Burden and
Information Collection Costs
320. In the NOPR, the Commission
solicited comment on the need for
collecting the information that is
required to be prepared, maintained
and/or submitted pursuant to this Final
Rule, whether the information will have
practical utility, the accuracy of the
burden estimates, ways to enhance the
quality, utility, and clarity of the
information to be collected or retained,
and any suggested methods for
minimizing respondents’ burden,
including the use of automated
information techniques. The NOPR also
included a chart that identified the
estimated public reporting burdens for
the proposed reporting requirements, as
well as a projection of the costs of
compliance for the reporting
requirements. The Commission asked
that any revised burden estimates
submitted by commenters be supported
by sufficient detail to understand how
the estimates are generated. The
Commission based its burden estimate
on the revised definition of bulk electric
system developed by NERC.
321. In the NOPR, the Commission
stated that the proposal would result in
entities reviewing systems and creating
qualified asset lists, submitting
exception requests where appropriate,
and certain responsible entities having
to comply with requirements to collect
and maintain information in mandatory
222 5
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Reliability Standards with respect to
certain facilities for the first time. The
Commission requested comment on the
estimated number of entities that will
have an increased reporting burden
associated with the identification of
new bulk electric system elements as a
result of the modified definition. In
developing an estimate of the reporting
burden associated with the inclusion of
additional elements, like NERC, the
Commission assumed that entities in the
NPCC Region will be most affected, with
a lesser affect in other regions.
Comments
322. NRECA and APPA do not take a
position on the estimates but observe
that modifications to the proposed
definition or directives to NERC may
result in substantial changes to the
burden estimates and the assessment of
whether the which would require the
Commission to re-assess its burden and
small business impact determinations.
Similarly, APPA and WPPC believe that
any changes to the proposed definition
in the Final Rule that would include
additional facilities would cause a
significant increase in the reporting
burden on the industry. APPA believes
that if the Commission were to direct
NERC to make revisions to the specific
inclusions or exclusions without
technical justification, the exception
process would quickly become
overloaded, with burdens on those
seeking exceptions and those ruling on
them.
323. A number of commenters state
that the NOPR underestimated the
burden of the rulemaking in terms of
hours required to comply. APPA
believes that the Commission
underestimates the information
collection costs and the costs of
compliance for small utilities. For
example, the Commission’s assumption
that utility staff would be used to
conduct an analysis is not merited in
the case of many small entities. APPA
states that many of its smaller members
do not have the in-house employees and
resources to conduct such reliability
analyses and would have to rely on
outside consultants and legal firms.
Therefore, APPA estimates that the fees
small utilities would pay for each of the
services, based on information and
belief, as follows: Consulting Engineer,
$225/hour; Record Keeping, $75/hour;
and Legal, $500/hour.
324. Idaho Power contemplates five
local network exclusions which contain
sixty 100 kV and above lines, and its
estimates for the time involved to
document these exceptions leads it to
believe the Commission is
underestimating the number of engineer
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hours per entity’s responses. According
to Idaho Power, based on an initial
review of potential exceptions, Idaho
Power may seek approximately 9–12
exceptions. Idaho Power agrees with the
estimate that transmission owners,
generator owners, and distribution
providers will experience more
significant reporting burdens than other
categories of registered entities.
325. ISO New England believes that
there could be a significant burden on
planning coordinators and transmission
planners which is not addressed in the
table shown in the NOPR. ISO New
England states that, while it has not
performed a similar analysis, it appears
that the ‘‘Year 1’’ estimates in the table
in the NOPR are significantly
understated in view of the resources
that it believes will be necessary to
establish the initial list. According to
ISO New England, the estimate of
approximately $13 million expended
over the entire system seems overly
optimistic. BPA anticipates, based on
customer feedback, that the BPA
footprint alone will experience several
hundred exception requests in the first
two years. BPA estimates the additional
workload from evaluating the exception
requests will be approximately five to
six full time equivalents which includes
one full time coordinator, a customer
service engineer for system verification,
a planner to run studies, an operations
engineer, and dispatch personnel for
real-time system impacts. NYPSC and
the Massachusetts DPU contend that the
costs of compliance with the definition
will be excessive. NYPSC cites to a 2009
report from NERC and NPCC, that the
compliance costs would exceed $280
million.
mstockstill on DSK4VPTVN1PROD with
Commission Determination
326. Commenters raise concerns that
modifications to the proposed definition
or directives to NERC may result in
substantial changes to the burden
estimates. While the Commission is
requiring one modification to the
language in the NERC proposal, the
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Commission finds that it does not need
to reassess the burden estimates because
the change is intended to simply make
more explicit what NERC and other
commenters indicate is the expected
application of the proposed definition to
a low-voltage, looped system as
depicted in figures 3 and 5 above.
Therefore, we do not anticipate the one
modification to result in a significant
change to what elements are considered
part of the bulk electric system or
applications for case-by-case exceptions.
The burden estimates in this Final Rule
represent the incremental burden
changes related only to increased
reporting burden associated with the
identification of new bulk electric
system elements as a result of the
modified definition. Furthermore, we
acknowledge that NPCC may be subject
to additional reporting requirements,
however, the burden estimates are
averages for all of the filers. Idaho
Power’s observation that the
Commission is underestimating the
number of engineering hours is not
supported by analysis. Similarly, we are
not persuaded by ISO New England’s
position that there may be a significant
burden on planning coordinators and
transmission planners associated with
proposed definition because it does not
offer any analysis to support this
assertion. The Commission expects any
burden for planning coordinators and
transmission planners to be de minimis
or incorporated under their existing
responsibilities. In any event, Idaho
Power and ISO New England did not
provide any estimates of the number of
hours that it would take to determine
exceptions, nor suggest alternative
estimates. In response to APPA’s hourly
estimates that are higher than the
estimates in the NOPR the Commission
notes that its hourly rate estimates for
the burden estimates are averages for all
of the filers and are based on national
wage data for utilities obtained from the
Bureau of Labor Statistics (for engineers
and legal) and NPCC’s assessment of
Bulk Electric System Definition (for
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847
completing implementation plans and
compliance), and Commission staff
outreach (recordkeeping). Thus, the
Commission adopts the burden
estimates that it set forth in the NOPR.
327. The Commission disagrees with
BPA that there may be a large number
of exception requests generated from
entities within its footprint that may
have to be processed and the significant
addition of FTEs. First, BPA has not
provided any analysis or evidence to
support its claim. Nevertheless, the
Commission’s expectation, like NERC’s,
is that application of the definition with
its inclusions and exclusions should not
materially change what is considered
part of the bulk electric system today.
Thus, the number of exception requests
should not be excessive.
328. Some comments address the
potential impact the requirements
would have on small entities but did not
provide specific estimates on this
impact. Because these comments are
also the subject of the analysis
performed under the Regulatory
Flexibility Act, the Commission has
provided a response under that section
of this rulemaking.
329. We are not persuaded by NYPSC
and Massachusetts DPU that the costs
for compliance will be $280 million.
First, NYPSC nor Massachusetts do not
dispute or address the specific
information collection cost estimates in
the NOPR. In addition, the vast majority
(approximately $234 million) of the
costs included in the report to which
the commenters cite appear to be capital
costs which are not applicable to an
information collection estimate. Further,
the report does not account for the
revised language in the definition of
bulk electric system and the specific
inclusions and exclusions that we are
approving in this Final Rule.
330. After consideration of comments,
the Commission adopts the NOPR
proposal for the Public Reporting
Burden and the information collection
costs as follows.
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Number and type of
entity 223
(1)
Number of responses
per entity
(2)
Average number of hours
per response
(3)
333 Transmission Owners
1 response ........................
80 (engineer hours) ..........
26,640 Yr 1.
16 (engineer hours) ..........
24 (engineer hours) ..........
94 (60 engineer hrs, 32
recordkeeping hrs, 2
legal hrs).
13,488 Yr 1.
13,296 Yr 1.
24,393 hrs in Yrs 1 and 2.
1,880 hrs in Yr 3 and ongoing.
1,386.67 hrs ......................
12,480 hrs in Yrs 1 and 2.
77,700 hrs
38,850 hrs
going.
52,500 hrs
26,250 hrs
going.
Requirement
System Review and List
Creation 224.
Regional and ERO Handling of Exception Requests 226.
Implementation Plans and
Compliance 227.
Totals ..........................
.260 responses each in
Yrs 1 and 2.
20 responses in Yr 3 and
ongoing.
1 response ........................
111 NPCC Region Registered Entities 228.
1 response ........................
75 Registered Entities
from 7 other Regions.
Exception Requests 225 .....
843 Generator Owners .....
554 Distribution Providers
1,730 total Transmission
Owners, Generator
Owners and Distribution
Providers.
NERC and 8 Regional Entities.
1 response ........................
700 hrs
350 hrs
ing.
700 hrs
350 hrs
ing.
...........................................
...........................................
...........................................
Costs to Comply
mstockstill on DSK4VPTVN1PROD with
• Year 1: $13,641,200.
• Year 2: $10,435,760.
• Year 3 and ongoing: $4,343,520.
For the first two burden categories
above, the loaded (salary plus benefits)
223 The ‘‘entities’’ listed in this table are
describing a role a company is registered for in the
NERC registry. For example, a single company may
be registered as a transmission owner and generator
owner. The total number of companies applicable
to this rule is 1,522, based on the NERC registry.
The total number of estimated roles is 1,730.
224 This requirement corresponds to Step 1 of
NERC’s proposed transition plan, which requires
each U.S. asset owner to apply the revised bulk
electric system definition to all elements to
determine if those elements are included in the
bulk electric system pursuant to the revised
definition. See NERC BES Petition at 38.
225 We recognize that not all 1,730 transmission
owners, generator owners, and distribution
providers will submit an exception request. Rather,
from the total 1,730 entities, we estimate an average
of 260 requests per year in the first two years, based
on a low to high range of 87 to 433 requests per
year. Therefore, the estimated total number of hours
per year for years 1 and 2, using an average of 260
requests per year, is 24,393 hours. We estimate 20
requests per year in year 3 and ongoing.
226 Based on the assumption of two full-time
equivalent employees added to NERC staff and 0.5
full-time equivalent employees added to each
region’s staff, each full-time equivalent at $120,000/
year (salary + benefits).
227 The Commission does not expect a significant
number of registered entities outside of the NPCC
region to identify new elements under the revised
bulk electric system definition. NERC also states
that the other Regional Entities do not expect an
extensive amount of newly-included facilities. See
NERC BES Petition at 38. ‘‘Compliance’’ refers to
entities with new elements under the new bulk
electric system definition required to comply with
the data collection and retention requirements in
certain Reliability Standards that they did not
previously have to comply with.
228 The estimated range of affected NPCC Region
Registered Entities is from 66 to 155 entities.
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costs are: $60/hour for an engineer; $27/
hour for recordkeeping; and $106/hour
for legal. The breakdown of cost by item
and year follows:
• System Review and List Creation
(year 1 only): (26,640 hrs + 13,488 hrs
+ 13,296 hrs) =53,424 hrs * 60/hr =
$3,205,440.
• Exception Requests (years 1 and 2):
(sum of hourly expense per request *
number of exception requests) = ((60 hrs
* $60/hr) + (32 hrs * $27/hr) + (2hrs *
$106/hr)) * 260 requests) = $1,215,760.
• Exception Requests (year 3): (sum of
hourly expense per request * number of
exception requests) = ((60 hrs * $60/hr)
+ (32 hrs * $27/hr) + (2 hrs * $106/hr))
* 20 requests) = $93,520.
• Regional and ERO handling of
Exception Requests: Between NERC and
Regional Entities we estimate 6 full time
equivalent (FTE) engineers will be
added at an annual cost of $120,000/
FTE ($120,000/FTE * 6 FTE =
$720,000). This cost is only expected in
years 1 and 2.
• Implementation Plans and
Compliance 229 (years 1 and 2): (hourly
expense per entity * hours per response
* sum of NPCC and non-NPCC entities)
= ($64/hour * 700 hours per response *
186 responses) = $8,332,800.
229 The cost and hourly burden calculations for
this category are based on a past assessment (NPCC
Assessment of Bulk Electric System Definition,
September 14, 2009.). In that assessment NPCC
indicated $8.9 million annually for operations,
maintenance and additional costs. We estimated
that roughly half of that cost actually relates to
information collection burden. Using the resulting
figure, we used a composite wage and benefit figure
of $64/hour to estimate the hourly burden figures
presented in the burden table.
PO 00000
Frm 00046
Fmt 4701
Sfmt 4700
in Yrs 1 and 2 ......
in Yr 3 and ongoin Yrs 1 and 2 ......
in Yr 3 and ongo-
Total burden hours
(1)*(2)*(3)
in Yrs 1 and 2.
in Yr 3 and onin Yrs 1 and 2.
in Yr 3 and on-
220,497 hrs in Yr 1.
167,073 hrs in Yr 2.
66,980 hrs in Yr 3 and ongoing.
• Implementation Plans and
Compliance (year 3 and beyond): We
estimate the ongoing cost for year 3 and
beyond, at 50% of the year 1 and 2
costs, to be $4,166,400.
Title: FERC–725–J ‘‘Definition of the
Bulk Electric System’’.230
Action: Proposed Collection of
Information.
OMB Control No: 1902–0259.
Respondents: Business or other for
profit, and not for profit institutions.
Frequency of Responses: On
Occasion.
Necessity of the Information: The
revision to NERC’s definition of the
term bulk electric system implements
the Congressional mandate of the
Energy Policy Act of 2005 to develop
mandatory and enforceable Reliability
Standards to better ensure the reliability
of the nation’s Bulk-Power System.
Specifically, the revised definition
ensures that certain facilities needed for
the operation of the nation’s bulk
electric system are subject to mandatory
and enforceable Reliability Standards.
Internal review: The Commission has
reviewed the proposed definition and
made a determination that its action is
necessary to implement section 215 of
the FPA. The Commission has assured
itself, by means of its internal review,
that there is specific, objective support
for the burden estimate associated with
the information requirements.
331. Interested persons may obtain
information on the reporting
requirements by contacting the Federal
Energy Regulatory Commission, Office
230 All of the information collection requirements
for years 1–3 in the proposed rule are being
accounted for under the new collection FERC–725J.
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of the Executive Director, 888 First
Street NE., Washington, DC 20426
[Attention: Ellen Brown, email:
DataClearance@ferc.gov, phone: (202)
502–8663, fax: (202) 273–0873].
332. For submitting comments
concerning the collection of information
and the associated burden estimate,
please send your comments to the Office
of Management and Budget, Office of
Information and Regulatory Affairs,
Washington, DC 20503 [Attention: Desk
Officer for the Federal Energy
Regulatory Commission, phone: (202)
395–4718, fax: (202) 395–7285]. For
security reasons, comments to OMB
should be submitted by email to:
oira_submission@omb.eop.gov.
Comments submitted to OMB should
include Docket Number RM12–6 and
OMB Control Number 1902–0259.
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IV. Regulatory Flexibility Act Analysis
333. The Regulatory Flexibility Act of
1980 (RFA) 231 generally requires a
description and analysis of Proposed
Rules that will have a significant
economic impact on a substantial
number of small entities. The RFA
mandates consideration of regulatory
alternatives that accomplish the stated
objectives of a proposed rule and that
minimize any significant economic
impact on a substantial number of small
entities. The Small Business
Administration’s (SBA) Office of Size
Standards develops the numerical
definition of a small business.232 The
SBA has established a size standard for
electric utilities, stating that a firm is
small if, including its affiliates, it is
primarily engaged in the transmission,
generation and/or distribution of
electric energy for sale and its total
electric output for the preceding twelve
months did not exceed four million
megawatt hours.233
NOPR Proposal
334. In the NOPR, the Commission
estimated that approximately 418 of the
1,730 registered transmission owners,
generator owners and distribution
service providers may fall within the
definition of small entities. Further, the
Commission estimated that of the 418
small entities affected there are 50
within the NPCC region that would have
to comply with the rulemaking. The
Commission contemplated that the
rulemaking would affect more small
entities in the NPCC Region than those
outside NPCC because there are more
elements in the NPCC region that would
be added to the bulk electric system
231 5
U.S.C. 601–612 (2006).
CFR 121.101.
233 13 CFR 121.201, Sector 22, Utilities & n.1.
232 13
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based on the new definition than
elsewhere. The Commission estimated
the first year affect on small entities
within the NPCC region to be
$39,414.234 This figure is based on
information collection costs plus
additional costs for compliance.235 The
Commission estimated the average
annual affect per small entity outside of
NPCC will be less than for the entities
within NPCC. In the NOPR, the
Commission stated that it did not
consider this to be a significant
economic impact for either class of
entities because it should not represent
a significant percentage of the operating
budget.
Comments
335. APPA asserts that the
Commission underestimates the costs of
compliance for small utilities.
According to APPA, the Commission’s
assumption that utility staff would
conduct an analysis is not merited in
the case of many small entities. APPA
states that many of its smaller members
do not have the in-house employees and
resources to conduct such reliability
analyses and would have to rely on
outside consultants and legal firms.
Therefore, APPA estimates that the fees
small utilities would pay for each of the
services as follows, based on
information and belief: Consulting
Engineer, $225/hour; Record Keeping,
$75/hour; and Legal, $500/hour.
According to APPA, these increased
dollar estimates alone substantially
increase the burden estimates on
smaller utilities to comply with the
Commission’s proposals. WPPC believes
that the cost to satisfy transmission
owner/transmission operator
certification alone would be $80,000.
WPPC points to one small municipallyowned utility paid $40,000 for third
party expertise and review of the
utility’s required compliance. WPPC
adds that the municipality had two staff
members spend a week reviewing a
modifying city policies to ensure
compliance with reliability standards.
WPPC points out that these costs only
represent the initial subject matter
review and do not include subsequent
implementation, training or material
purchase costs. WPPC also states that
234 For companies registered as more than one
entity in the NERC compliance registry this figure
will increase accordingly. That is, if a company is
registered as a transmission owner and generator
owner then the cost burden would be $78,828
($39,414 * 2 = $78,828).
235 We use fifty percent of the first year ‘‘number
of hours per response’’ figure in the information
collection statement for calculation under the
assumption that smaller entities do not have
complicated systems or will not have as many new
elements on average as larger entities do.
PO 00000
Frm 00047
Fmt 4701
Sfmt 4700
849
small entities have to divert employees
from other tasks to compliance tasks
which represents a significant burden
on staffing.
336. ISO New England does not
believe that the NOPR cost estimate
captures the cost of physical upgrades
that might be necessary on the system.
The cost estimates do not reflect the true
financial burden that might be borne by
these smaller entities.
337. BPA is concerned that the
Commission is underestimating the
costs and resources associated with
reliability compliance. BPA disagrees
with the Commission’s estimated
annual costs of $39,414 for entities that
are required to newly comply with
Reliability Standards as a result of
adopting the definition. BPA believes
that the Commission’s figure vastly
underestimates the actual effort and
costs associated with compliance. In
BPA’s experience with its customers,
the smallest customer impact is
equivalent to at least one FTE, and
larger customers have indicated they
have an even higher burden. BPA
asserts that the Commission’s estimates
also overlook indirect compliance costs
and their impact on small and large
entities alike. BPA disagrees with the
Commission’s conclusion that the
compliance burden is not ‘‘a significant
economic impact * * * because it
should not represent a significant
percentage of the operating budget.’’ It
is BPA’s experience that implementing
a fully functioning compliance program
requires committed personnel, budget,
and resources, which is never
insignificant.
Commission Determination
338. The Commission disagrees with
commenters that challenge the
Commission’s conclusion that the rule
will not have a significant economic
impact on a substantial number of small
entities. We are not persuaded by APPA,
BPA and ISO New England’s assertions
regarding how the Commission’s
analysis is erroneous or in what ways
the Final Rule will have a significant
economic impact on a substantial
number of small entities. As the
Commission stated in its NOPR, most
transmission owners, transmission
operators and transmission service
providers do not fall within the
definition of small entities. In addition,
the requirement to comply with the
definition of bulk electric system is not
new. The reason for revising the
definition of bulk electric system is to
comply with the Commission’s
directives and address the technical and
policy concerns expressed in Order Nos.
743 and 743–A, which NERC
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accomplished by eliminating the
explicit basis of authority for Regional
Entity discretion in the current
definition, and establishing specific
threshold criteria rather than general
guidelines of facilities operated or
connected at or above 100 kV. Thus,
while the Commission recognizes that
some small entities within the NPCC
territory may have an increased burden
due to multiple registration
classifications or increased compliance
with the Reliability Standards due to the
elimination of the regional discretion,
the average annual affect per small
entity outside of NPCC will be less than
for the entities within NPCC and should
not materially change. The Commission
also does not consider this to be a
significant economic impact for either
class of entities because our estimated
costs for complying with the revised
definition should not represent a
significant percentage of the operating
budget. Further, while NYPSC and
Massachusetts DPU assert that the costs
for compliance will be $280 million
they make no specific reference to the
cost for small businesses and, as noted
above, their estimate does not account
for the revised language in the
definition of bulk electric system and
the specific inclusions and exclusions
that we are approving in this Final Rule.
Accordingly, the Commission certifies
that this Final Rule will not have a
significant economic impact on a
substantial number of small entities.
mstockstill on DSK4VPTVN1PROD with
V. Environmental Analysis
339. The Commission is required to
prepare an Environmental Assessment
or an Environmental Impact Statement
for any action that may have a
significant adverse effect on the human
environment.236 The Commission has
categorically excluded certain actions
from this requirement as not having a
significant effect on the human
environment. The actions in this rule
fall within the categorical exclusion in
the Commission’s regulations for rules
that are clarifying, corrective or
procedural, for information gathering,
analysis, and dissemination.237
Accordingly, neither an environmental
impact statement nor environmental
assessment is required.
VI. Document Availability
340. In addition to publishing the full
text of this document in the Federal
Register, the Commission provides all
interested persons an opportunity to
236 Regulations Implementing the National
Environmental Policy Act, Order No. 486, 52 FR
47897 (Dec. 17, 1987), FERC Stats. & Regs.
Regulations Preambles 1986–1990 ¶ 30,783 (1987).
237 18 CFR 380.4(a)(5).
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Jkt 229001
view and/or print the contents of this
document via the Internet through
FERC’s Home Page (http://www.ferc.gov)
and in FERC’s Public Reference Room
during normal business hours (8:30 a.m.
to 5:00 p.m. Eastern time) at 888 First
Street NE., Room 2A, Washington, DC
20426.
341. From FERC’s Home Page on the
Internet, this information is available on
eLibrary. The full text of this document
is available on eLibrary in PDF and
Microsoft Word format for viewing,
printing, and/or downloading. To access
this document in eLibrary, type the
docket number excluding the last three
digits of this document in the docket
number field.
342. User assistance is available for
eLibrary and the FERC’s Web site during
normal business hours from FERC
Online Support at (202) 502–6652 (toll
free at 1–866–208–3676) or email at ferc
onlinesupport@ferc.gov, or the Public
Reference Room at (202) 502–8371, TTY
(202) 502–8659. Email the Public
Reference Room at public.
referencerom@ferc.gov.
VII. Effective Date and Congressional
Notification
343. These regulations are effective
March 5, 2013. The Commission has
determined, with the concurrence of the
Administrator of the Office of
Information and Regulatory Affairs of
OMB, that this rule is not a ‘‘major rule
as defined in section 351 of the Small
Business Regulatory Enforcement
Fairness Act of 1996.
By the Commission. Commissioner Clark is
not participating.
Nathaniel J. Davis, Sr.,
Deputy Secretary.
Note: Appendix A will not be published in
the Code of Federal Regulations.
Appendix A—List of Commenters
American Electric Power Service Corporation
(AEP)
American Municipal Power, Inc. (AMP)
American Public Power Association (APPA)
American Wind Energy Association (AWEA)
Arizona Public Service Company (Arizona
Public Service)
Barrick Goldstrike Mines Inc. (Barrick)
Associated Electric Cooperative, Inc., Basin
Electric Power Cooperative, Tri-State
Generation and Transmission Association,
Inc. (the G&T Cooperatives)
Bonneville Power Administration (BPA)
City of Alameda, California (Alameda)
City of Anaheim, California (Anaheim)
City of Redding, California (Redding)
City of Riverside, California (Riverside)
Cogeneration Association of California and
the Energy Producers and Users Coalition
Consumers Energy Company (Consumers)
Dominion Resources Services, Inc.
(Dominion)
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Frm 00048
Fmt 4701
Sfmt 4700
Dow Chemical Company (Dow)
Duke Energy Corporation (Duke Energy)
Edison Electric Institute (EEI)
Electricity Consumers Resource Council
(ELCON)
Exelon Corporation (Exelon)
Florida Reliability Coordinating Council,
Midwest Reliability Organization,
Northeast Power Coordinating Council,
Inc., ReliabilityFirst Corporation,
Southwest Power Pool Regional Entity,
SERC Reliability Corporation, Texas
Reliability Entity, Inc., Western Electricity
Coordinating Council (the Regional
Entities)
City of Holland, Michigan Board of Public
Works (Holland)
Hydro One Networks Inc. and the
Independent Electricity System Operator
(Hydro One)
Hydro Quebec Transenergie (Hydro Quebec)
Idaho Power Company (Idaho Power)
Imperial Irrigation District (IID)
Industrial Customers of Northwest Utilities
(ICNU)
Industrial Users of Utah (IUU)
International Transmission Company
d/b/a ITC Transmission, Michigan Electric
Transmission Company, LLC, ITC Midwest
LLC and ITC Great Plains LLC (ITC)
ISO New England Inc. (ISO New England)
Kansas City Power & Light Company and
KCP&L Greater Missouri (KCP&L)
Large Public Power Council (LPPC)
Massachusetts Department of Public Utilities
(Massachusetts DPU)
Midwest Independent Transmission System
Operator, Inc. (MISO)
MISO Transmission Owners
National Association of Regulatory Utility
Commissioners (NARUC)
National Grid USA (National Grid)
National Rural Electric Cooperative
Association (NRECA)
Nevada Power Company and Sierra Pacific
Power Company (NV Energy)
New England States Committee on Electricity
(NESCOE)
New York Independent System Operator, Inc.
(NYISO)
New York State Public Service Commission
(NYPSC)
North American Electric Reliability
Corporation (NERC)
North Carolina Eastern Municipal Power
Agency (‘‘NCEMPA’’) and North Carolina
Municipal Power Agency Number 1
(‘‘NCMPA1’’) (together ‘‘Power Agencies’’)
Oglethorpe Power Corporation, Georgia
Transmission Corporation and Georgia
System Operations Corporation
Old Dominion Electric Cooperative (ODEC)
Occidental Energy Ventures Corp
Pennsylvania Public Utility Commission
Pepco Holdings, Inc., Potomac Electric Power
Company, Delmarva Power & Light
Company, Atlantic City Electric Company
(PHI Companies)
Portland General Electric Company
(Portland)
Public Service Electric and Gas Company,
PSEG Power LLC, and PSEG Energy
Resources & Trade LLC (PSEG Companies)
SmartSenseCom, Inc. (SmartSenseCom)
Snohomish County PUD No. 1 (Snohomish)
Southern California Edison Company (SoCal
Edison)
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Southern Company Services, Inc. (Southern
Companies)
Springfield Utility Board (Springfield)
Steel Manufacturers Association
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Transmission Access Policy Study Group
(TAPS)
Utility Services, Inc.
Valero Services, Inc (Valero)
Western Public Power Coalition (WPPC)
PO 00000
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White River Electric Association, Inc.
(WREA)
[FR Doc. 2012–31142 Filed 1–3–13; 8:45 am]
BILLING CODE 6717–01–P
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]]>Agencies
[Federal Register Volume 78, Number 3 (Friday, January 4, 2013)]
[Rules and Regulations]
[Pages 803-851]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-31142]
[[Page 803]]
Vol. 78
Friday,
No. 3
January 4, 2013
Part II
Department of Energy
-----------------------------------------------------------------------
Federal Energy Regulatory Commission
-----------------------------------------------------------------------
18 CFR Part 40
Revisions to Electric Reliability Organization Definition of Bulk
Electric System and Rules of Procedure; Final Rule
Federal Register / Vol. 78, No. 3 / Friday, January 4, 2013 / Rules
and Regulations
[[Page 804]]
-----------------------------------------------------------------------
DEPARTMENT OF ENERGY
Federal Energy Regulatory Commission
18 CFR Part 40
[Docket Nos. RM12-6-000 and RM12-7-000; Order No. 773]
Revisions to Electric Reliability Organization Definition of Bulk
Electric System and Rules of Procedure
AGENCY: Federal Energy Regulatory Commission.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: In this Final Rule, pursuant to section 215 of the Federal
Power Act, the Federal Energy Regulatory Commission (Commission)
approves modifications to the currently-effective definition of ``bulk
electric system'' developed by the North American Electric Reliability
Corporation (NERC), the Commission-certified Electric Reliability
Organization. The Commission finds that the modified definition of
``bulk electric system'' removes language allowing for regional
discretion in the currently-effective bulk electric system definition
and establishes a bright-line threshold that includes all facilities
operated at or above 100 kV. The modified definition also identifies
specific categories of facilities and configurations as inclusions and
exclusions to provide clarity in the definition of ``bulk electric
system.''
In this Final Rule, the Commission also approves: NERC's revisions
to its Rules of Procedure, which create an exception process to add
elements to, or remove elements from, the definition of ``bulk electric
system'' on a case-by-case basis; NERC's form entitled ``Detailed
Information To Support an Exception Request'' that entities will use to
support requests for exception from the ``bulk electric system''
definition; and NERC's implementation plan for the revised ``bulk
electric system'' definition.
DATES: This Final Rule will become effective March 5, 2013.
FOR FURTHER INFORMATION CONTACT:
Susan Morris (Technical Information), Office of Electric Reliability,
Division of Reliability Standards, Federal Energy Regulatory
Commission, 888 First Street NE., Washington, DC 20426, Telephone:
(202) 502-6803.
Nicholas Snyder (Technical Information), Office of Energy Market
Regulation, Division of Electric Power Regulation--Central, Federal
Energy Regulatory Commission, 888 First Street NE., Washington, DC
20426, Telephone: (202) 502-6408.
Robert Stroh (Legal Information), Office of the General Counsel,
Federal Energy Regulatory Commission, 888 First Street NE., Washington,
DC 20426, Telephone: (202) 502-8473.
SUPPLEMENTARY INFORMATION:
141 FERC ] 61,236
Before Commissioners: Jon Wellinghoff, Chairman; Philip D. Moeller,
John R. Norris, and Cheryl A. LaFleur.
FINAL RULE
(Issued December 20, 2012)
Table of Contents
I. Background................................................... 5.
A. Section 215 of the FPA................................... 5.
B. Order No. 693............................................ 6.
C. Order No. 743............................................ 8.
D. NERC Petitions........................................... 11.
1. Revised Definition of Bulk Electric System........... 12.
2. NERC Petition for Approval of Revisions to Rules of 26.
Procedure To Adopt an Exception Process................
E. Commission NOPR.......................................... 29.
II. Discussion.................................................. 31.
A. Approval of the Revised Bulk Electric System Definition.. 32.
NOPR Proposal........................................... 32.
Comments................................................ 33.
Commission Determination................................ 38.
B. The Core Definition of Bulk Electric System.............. 45.
NOPR Proposal........................................... 45.
Comments................................................ 46.
C. Local Distribution....................................... 57.
Comments................................................ 58.
Commission Determination................................ 66.
D. Inclusions and Exclusions in the Definition of Bulk 74.
Electric System............................................
1. Inclusion I1 (Transformers).......................... 75.
Commission Determination................................ 80.
2. Inclusion I2 (Generating Resources).................. 83.
3. Inclusion I3 (Blackstart Resources).................. 97.
4. Inclusion I4 (Dispersed Power Producing Resources)... 104.
5. Inclusion I5 (Static or Dynamic Reactive Power 116.
Devices)...............................................
Exclusions.............................................. 125.
6. Exclusion E1 (Radial Systems)........................ 127.
7. Exclusion E2 (Behind the Meter Generation)........... 178.
8. Exclusion E3 (Local Networks)........................ 185.
9. Exclusion E4 (Reactive Power Devices)................ 235.
E. The NERC Rules of Procedure Exception Process, RM12-7-000 238.
NOPR Proposal........................................... 238.
1. How Entities Will Review and Seek Inclusion of 263.
Necessary Elements.....................................
2. NERC Role in Identifying Necessary Elements.......... 270.
3. Commission Role in Identifying Necessary Elements.... 279.
4. Technical Review Panel............................... 289.
NOPR Proposal........................................... 289.
5. Use of Industry Subject Matter Experts............... 295.
6. NERC's Detailed Information Form..................... 298.
7. NERC's Implementation Plan........................... 302.
NOPR Proposal........................................... 302.
8. NERC List of Facilities Granted Exceptions........... 305.
9. Declassification of Facilities....................... 311.
[[Page 805]]
III. Information Collection Statement........................... 319.
IV. Regulatory Flexibility Act Analysis......................... 333.
V. Environmental Analysis....................................... 339.
VI. Document Availability....................................... 340.
VII. Effective Date and Congressional Notification.............. 343.
1. Pursuant to section 215(d) of the Federal Power Act (FPA),\1\
the Commission approves modifications to the currently-effective
definition of ``bulk electric system'' developed by the North American
Electric Reliability Corporation (NERC), the Commission-certified
Electric Reliability Organization (ERO). The Commission finds that the
modified definition of ``bulk electric system'' improves upon the
currently-effective definition by establishing a bright-line threshold
that includes all facilities operated at or above 100 kV and removing
language that allows for broad regional discretion. The modified
definition also provides improved clarity by identifying specific
categories of facilities and configurations as inclusions and
exclusions to the definition of ``bulk electric system.''
---------------------------------------------------------------------------
\1\ 16 U.S.C. 824o(d) (2006).
---------------------------------------------------------------------------
2. We believe that the proposed ``core'' definition, together with
the more granular inclusions and exclusions, should produce consistency
in identifying bulk electric system elements across the reliability
regions. In addition, we find that NERC's proposed case-by-case
exception process to add elements to, and remove elements from, the
definition of the bulk electric system adds transparency and uniformity
to the determination of what constitutes the bulk electric system.
3. We recognize the substantial work invested by NERC and industry
participants in developing the modified bulk electric system
definition. We also appreciate that NERC timely submitted the revised
definition within the twelve month time frame directed by the
Commission in the underlying order, Order No. 743, which tasked NERC
with this project.\2\ We believe that NERC and industry's efforts
provide a technically grounded and legally supportable foundation for
identifying elements and facilities that make up the bulk electric
system. Other highlights of the Final Rule include:
---------------------------------------------------------------------------
\2\ Revision to Electric Reliability Organization Definition of
Bulk Electric System, Order No. 743, 133 FERC ] 61,150 (2010), order
on reh'g, Order No. 743-A, 134 FERC ] 61,210 (2011).
---------------------------------------------------------------------------
Accepts NERC's revisions to its Rules of Procedure, which
creates an exception procedure to add elements to, or remove elements
from, the definition of ``bulk electric system'' on a case-by-case
basis;
approves NERC's implementation plan for the revised ``bulk
electric system'' definition;
approves NERC's form entitled ``Detailed Information to
Support an Exception Request'' that entities will use to support
requests for exception from the ``bulk electric system'' definition;
finds that the Commission can designate sub-100 kV
facilities, or other facilities, as part of the bulk electric system,
provided that the Commission provides opportunity for notice and
comment; and
establishes a process pursuant to which an entity can seek
a determination by the Commission whether facilities are ``used in
local distribution'' as set forth in the Federal Power Act.
4. In the Notice of Proposed Rulemaking (NOPR), the Commission
requested comment on certain aspects of NERC's petition to better
understand the application of the ``core'' definition, as well as the
specific inclusions and exclusions.\3\ The explanations provided by
NERC and other entities in their comments have assisted in our
understanding of the parameters of the definition, and we adopt many of
these explanations in the Final Rule. However, in two particular
circumstances we believe further action is necessary. We direct NERC to
implement the bulk electric system definition consistent with the
Commission determinations below. Specifically, we direct NERC to
implement the exclusions for radial systems and local networks so that
they do not apply to tie-lines for bulk electric system generators. In
addition, we direct NERC to modify the local network exclusion to
remove the 100 kV minimum operating voltage to allow systems that
include one or more looped configurations connected below 100 kV, (as
shown in figures 3 and 5 below) to be eligible for the local network
exclusion. Further explanation of these configurations and the
rationale for our determinations is provided below.
---------------------------------------------------------------------------
\3\ Revision to Electric Reliability Organization Definition of
Bulk Electric System and Rules of Procedure, Notice of Proposed
Rulemaking, 77 FR 39857 (July 5, 2012) 139 FERC ] 61,247 (2012)
(NOPR).
---------------------------------------------------------------------------
I. Background
A. Section 215 of the FPA
5. Section 215 of the FPA requires a Commission-certified ERO to
develop mandatory and enforceable Reliability Standards, subject to
Commission review and approval. Once approved, the Reliability
Standards may be enforced by the ERO, subject to Commission oversight,
or by the Commission independently.\4\ The Commission established a
process to select and certify an ERO \5\ and, subsequently, certified
NERC as the ERO.\6\
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\4\ See 16 U.S.C. 824o(e)(3) (2006).
\5\ 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, order on reh'g, Order No. 672-A, FERC
Stats. & Regs. ] 31,212 (2006).
\6\ North American Electric Reliability Corp., 116 FERC ] 61,062
(2006), order on reh'g and compliance, 117 FERC ] 61,126 (2006)
(certifying NERC as the ERO responsible for the development and
enforcement of mandatory Reliability Standards), aff'd sub nom.
Alcoa Inc. v. FERC, 564 F.3d 1342 (D.C. Cir. 2009).
---------------------------------------------------------------------------
B. Order No. 693
6. On March 16, 2007, in Order No. 693, pursuant to section 215(d)
of the FPA, the Commission approved 83 of 107 proposed Reliability
Standards, six of the eight proposed regional differences, and the NERC
Glossary, which includes NERC's definition of bulk electric system.\7\
That definition provides:
---------------------------------------------------------------------------
\7\ Mandatory Reliability Standards for the Bulk-Power System,
Order No. 693, FERC Stats. & Regs. ] 31,242, order on reh'g, Order
No. 693-A, 120 FERC ] 61,053 (2007).
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.\8\
---------------------------------------------------------------------------
\8\ Order No. 693, FERC Stats. & Regs. ] 31,242 at P 75 n.47.
7. In approving NERC's definition of bulk electric system, the
Commission stated that ``at least for an initial period, the Commission
will rely on the NERC definition of bulk electric system and NERC's
registration process to provide as much certainty as possible regarding
the applicability to and the responsibility of specific entities to
[[Page 806]]
comply with the Reliability Standards.'' \9\ The Commission also stated
that ``[it] remains concerned about the need to address the potential
for gaps in coverage of facilities.'' \10\
---------------------------------------------------------------------------
\9\ Id. P 75; see also Order No. 693-A, 120 FERC ] 61,053 at P
19 (``the Commission will continue to rely on NERC's definition of
bulk electric system, with the appropriate regional differences, and
the registration process until the Commission determines in future
proceedings the extent of the Bulk-Power System'').
\10\ Order No. 693, FERC Stats. & Regs. ] 31,242 at P 77.
---------------------------------------------------------------------------
C. Order No. 743
8. On November 18, 2010, the Commission revisited the definition of
``bulk electric system'' in Order No. 743, which directed NERC, through
NERC's Reliability Standards Development Process, to revise its
definition of the term ``bulk electric system'' to ensure that the
definition encompasses all facilities necessary for operating an
interconnected transmission network.\11\ The Commission also directed
NERC to address the Commission's technical and policy concerns. Among
the Commission's concerns were inconsistencies in the application of
the definition and a lack of oversight and exclusion of facilities from
the bulk electric system required for the operation of the
interconnected transmission network. In Order No. 743, the Commission
concluded that the best way to address these concerns was to eliminate
the Regional Entity discretion to define bulk electric system without
NERC 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
removing from the bulk electric system facilities that are not
necessary for operating the interconnected transmission network. In
Order No. 743, the Commission allowed NERC to ``propose a different
solution that is as effective as, or superior to, the Commission's
proposed approach in addressing the Commission's technical and other
concerns so as to ensure that all necessary facilities are included
within the scope of the definition.'' \12\ The Commission directed NERC
to file the revised definition of bulk electric system and its process
to exempt facilities from inclusion in the bulk electric system within
one year of the effective date of the final rule.\13\
---------------------------------------------------------------------------
\11\ Order No. 743, 133 FERC ] 61,150 at P 16.
\12\ Id.
\13\ Id. P 113.
---------------------------------------------------------------------------
9. In Order No. 743-A, the Commission reaffirmed its determinations
in Order No. 743. In addition, the Commission clarified that the issue
the Commission directed NERC to rectify was the discretion the Regional
Entities have under the current definition to define the bulk electric
system in their regions without any oversight from the Commission or
NERC.\14\ The Commission also clarified that the 100 kV threshold was a
``first step or proxy'' for determining which facilities should be
included in the bulk electric system.\15\
---------------------------------------------------------------------------
\14\ Order No. 743-A, 134 FERC ] 61,210 at P 11.
\15\ Id. PP 40, 67, 102-103.
---------------------------------------------------------------------------
10. The Commission further clarified 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'' was intended to grant discretion to NERC, 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.\16\ The Commission
stated that the ``Seven Factor Test'' adopted in Order No. 888 could be
relevant and possibly a logical starting point for determining which
facilities are local distribution for reliability purposes.\17\
However, the Commission left it to NERC to determine if and how the
Seven Factor Test should be considered in differentiating between local
distribution and transmission facilities for purposes of determining
whether a facility should be classified as part of the bulk electric
system.\18\ Order No. 743-A re-emphasized that local distribution
facilities are excluded from the definition of Bulk-Power System and,
therefore, must be excluded from the definition of bulk electric
system.\19\
---------------------------------------------------------------------------
\16\ Id. P 68. 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 at 31,783-84
(1996), order on reh'g, Order No. 888-A, FERC Stats. & Regs. ]
31,048, order on reh'g, Order No. 888-B, 81 FERC ] 61,248 (1997),
order on reh'g, Order No. 888-C, 82 FERC ] 61,046 (1998), aff'd in
relevant part sub nom. Transmission Access Policy Study Group v.
FERC, 225 F.3d 667 (D.C. Cir. 2000), aff'd sub nom. New York v.
FERC, 535 U.S. 1 (2002).
\17\ Order No. 743-A, 134 FERC ] 61,210 at P 69.
\18\ Id. P 70.
\19\ Id. PP 25, 58.
---------------------------------------------------------------------------
D. NERC Petitions
11. On January 25, 2012, NERC submitted two petitions pursuant to
the directives in Order No. 743: (1) NERC's proposed revision to the
definition of ``bulk electric system'' which includes provisions to
include and exclude facilities from the ``core'' definition; and (2)
revisions to NERC's Rules of Procedure to add a procedure creating an
exception process to classify or de-classify an element as part of the
``bulk electric system.''
1. Revised Definition of Bulk Electric System
12. In Docket No. RM12-6-000, NERC filed a petition requesting
Commission approval of a revised definition of ``bulk electric system''
in the NERC Glossary (NERC BES Petition). The definition consists of a
``core'' definition and a list of facilities configurations that will
be included or excluded from the ``core'' definition. NERC proposed the
following ``core'' definition of bulk electric system:
Unless modified by the [inclusion and exclusion] lists shown
below, all Transmission Elements operated at 100 kV or higher and
Real Power and Reactive Power resources connected at 100 kV or
higher. This does not include facilities used in the local
distribution of electric energy.
NERC also requested approval of the proposed ``Detailed Information
to Support an Exception Request'' form as satisfying the requirement in
Order No. 743 that NERC develop ``technical criteria'' to address
exception requests. Finally, NERC requested Commission approval of its
plan for implementation of the revised definition of ``bulk electric
system.''
a. Inclusions and Exclusions to the Definition of Bulk Electric System
13. As part of the revised definition, NERC developed inclusions
and exclusions to eliminate discretion in application of the revised
``bulk electric system'' definition. The inclusions address five
specific facilities configurations to provide clarity that the
facilities described in these configurations are included in the bulk
electric system.
Inclusions:
I1--Transformers with the primary terminal and at least one
secondary terminal operated at 100 kV or higher unless excluded
under Exclusion E1 or E3.
I2--Generating resource(s) with gross individual nameplate
rating greater than 20 MVA or gross plant/facility aggregate
nameplate rating greater than 75 MVA including the generator
terminals through the high-side of the step-up transformer(s)
connected at a voltage of 100 kV or above.
I3--Blackstart Resources identified in the Transmission
Operator's restoration plan.
I4--Dispersed power producing resources with aggregate capacity
greater than 75 MVA (gross aggregate nameplate rating) utilizing a
system designed primarily for aggregating capacity, connected at a
common point at a voltage of 100 kV or above.
I5--Static or dynamic devices (excluding generators) dedicated
to supplying or absorbing Reactive Power that are connected at 100
kV or higher, or through a dedicated
[[Page 807]]
transformer with a high-side voltage of 100 kV or higher, or through
a transformer that is designated in Inclusion I1.
14. NERC also explained that the facilities described in inclusions
I1, I2, I4, and I5 are each operated or connected at or above 100 kV.
According to NERC, inclusion I3 encompasses blackstart resources
identified in a transmission operator's restoration plan, which are
necessary for the operation of the interconnection transmission system
and should be included in the bulk electric system regardless of their
size (MVA) or the voltage at which they are connected. NERC stated that
the inclusions will further reduce the potential for the exercise of
discretion and subjectivity to exclude such configurations from the
bulk electric system.
15. NERC explained that inclusion I1 includes transformers with the
primary terminal and at least one secondary terminal operated at 100 kV
or higher unless excluded under exclusion E1 or E3. NERC stated that
transformers operating at 100 kV or higher are part of the existing
definition, but since transformers have windings operating at different
voltages, and multiple windings in some circumstances, clarification
was required to explicitly identify which transformers are included in
the bulk electric system.
16. According to NERC, inclusion I2 includes in the bulk electric
system the generator terminals through the high-side of the step-up
transformers connected at a voltage of 100 kV or above. NERC states
that this inclusion mirrors the text of the NERC Registry Criteria
(Appendix 5B of the NERC Rules of Procedure) for generating units.\20\
---------------------------------------------------------------------------
\20\ See section III.c.1 and III.c.2 of Appendix 5B of the NERC
Rules of Procedure.
---------------------------------------------------------------------------
17. As noted above, inclusion I3 includes blackstart resources
identified in the transmission operator's restoration plan in the bulk
electric system. NERC added inclusion I4 to accommodate the effects of
variable generation on the bulk electric system and inclusion I5 to
address static or dynamic devices dedicated to supplying or absorbing
reactive power that are connected at 100 kV or higher.
18. NERC's modified definition of bulk electric system also
provides four exclusions regarding facilities configurations that are
not included in the bulk electric system. Generally, the exclusions
address radial systems, behind-the-meter generation and local networks
that distribute power to load:
Exclusions:
E1--Radial systems: A group of contiguous transmission Elements
that emanates from a single point of connection of 100 kV or higher
and:
(a) Only serves Load. Or,
(b) Only includes generation resources, not identified in
Inclusion I3, with an aggregate capacity less than or equal to 75
MVA (gross nameplate rating). Or,
(c) Where the radial system serves Load and includes generation
resources, not identified in Inclusion I3, with an aggregate
capacity of non-retail generation less than or equal to 75 MVA
(gross nameplate rating).
Note--A normally open switching device between radial systems,
as depicted on prints or one-line diagrams for example, does not
affect this exclusion.
E2--A generating unit or multiple generating units on the
customer's side of the retail meter that serve all or part of the
retail Load with electric energy if: (i) The net capacity provided
to the BES does not exceed 75 MVA; and (ii) standby, back-up, and
maintenance power services are provided to the generating unit or
multiple generating units or to the retail Load by a Balancing
Authority, or provided pursuant to a binding obligation with a
Generator Owner or Generator Operator, or under terms approved by
the applicable regulatory authority.
E3--Local networks (LN): A group of contiguous transmission
Elements operated at or above 100 kV but less than 300 kV that
distribute power to Load rather than transfer bulk-power across the
interconnected system. LN's emanate from multiple points of
connection at 100 kV or higher to improve the level of service to
retail customer Load and not to accommodate bulk-power transfer
across the interconnected system. The LN is characterized by all of
the following:
(a) Limits on connected generation: The LN and its underlying
Elements do not include generation resources identified in Inclusion
I3 and do not have an aggregate capacity of non-retail generation
greater than 75 MVA (gross nameplate rating);
(b) Power flows only into the LN and the LN does not transfer
energy originating outside the LN for delivery through the LN; and
(c) Not part of a Flowgate or transfer path: The LN does not
contain a monitored Facility of a permanent Flowgate in the Eastern
Interconnection, a major transfer path within the Western
Interconnection, or a comparable monitored Facility in the ERCOT or
Quebec Interconnections, and is not a monitored Facility included in
an Interconnection Reliability Operating Limit (IROL).
E4--Reactive Power devices owned and operated by the retail
customer solely for its own use.
Note--Elements may be included or excluded on a case-by-case
basis through the Rules of Procedure exception process.
19. NERC explained that exclusion E1 is intended to enhance the
clarity of the radial facilities exclusion and that criteria ``b'' and
``c'' of exclusion E1 identify the maximum amount of generation allowed
on the radial facility while still qualifying for the radial facilities
exclusion. NERC added the ``normally open switch'' note at the end of
exclusion E1 to address a common network configuration in which two
separate sets of facilities would be recognized as radial systems and
not included in the bulk electric system are connected by a ``normally
open switch'' which is a switch is set to the open position for
reliability purposes.\21\
---------------------------------------------------------------------------
\21\ NOPR, 139 FERC ] 61,247 at P 27 (citing NERC BES Petition
at 19).
---------------------------------------------------------------------------
20. NERC explained that the normally open switch note avoids
numerous exception requests because this configuration is common and
subjecting two sets of radial facilities that are normally unconnected
to each other because the switch between them is open to the
Reliability Standards during the limited time periods when the switch
is closed for maintenance-related or outage-related circumstances is
impractical and unworkable.
21. According to NERC, exclusion E2 excludes a generating unit or
units on the customer's side of the retail meter that serves all or
part of the retail load subject to allowing a limited amount of
generating capacity to be connected and that standby, back-up, and
maintenance power services are provided to the generating unit. NERC
stated that these generating units are not necessary for the operation
of the interconnected transmission network because they serve a single
retail load, provide a limited amount of capacity to the bulk electric
system, and are fully backed up by other resources.
22. With respect to the ``local network'' exclusion (exclusion E3),
NERC explained that it encompasses local networks of transmission
elements operated at between 100 kV and 300 kV that distribute power to
load rather than transfer bulk power across the interconnected system.
NERC further explained that local networks are not intended to provide
transfer capacity for the interconnected transmission network and such
networks should not be included in the bulk electric system, and the
conditions established in exclusion E3 are sufficient to ensure that
such local networks are being used exclusively for local distribution
purposes. NERC adds that facilities used for the local distribution of
electric energy are expressly excluded from the bulk electric system by
the core definition as well as by the local network exclusion.\22\
---------------------------------------------------------------------------
\22\ See NOPR, 139 FERC ] 61,247 at P 30; See also NERC BES
Petition at 22-23.
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[[Page 808]]
b. Detailed Information To Support an Exception Request
23. In response to the Order No. 743 directive to develop technical
criteria to use in addressing requests for exceptions to the definition
of the bulk electric system, NERC developed an alternative approach
because it would be more feasible to develop a common set of data and
information that Regional Entities and NERC could use to evaluate
exception requests rather than to develop the detailed criteria.\23\
The Detailed Information Form contains a common set of data that
entities seeking an exception must submit with every exception request.
According to NERC, the information that an applicant may submit in
support of an exception request is not limited to the Detailed
Information Form. Rather, an applicant is expected to submit all
relevant data, studies and other information that support the exception
request, and the Regional Entity and NERC may ask an applicant to
provide other data and studies in addition to the Detailed Information
Form.
---------------------------------------------------------------------------
\23\ NERC BES Petition at 26.
---------------------------------------------------------------------------
c. Implementation Plan for Revised Definition of ``Bulk Electric
System''
24. NERC requested that the revised definition become effective on
the first day of the second calendar quarter after receiving applicable
regulatory approval, or, in those jurisdictions where no regulatory
approval is required, on the first day of the second calendar quarter
after its adoption by the NERC Board of Trustees. NERC stated that the
proposed effective date is appropriate to provide a reasonable time
between the date of regulatory approval, which is not under the control
of NERC or the industry, and the effective date of the revised
definition of bulk electric system.
25. NERC also requested that compliance obligations for all newly-
identified elements to be included in the bulk electric system should
begin twenty-four months after the applicable effective date of the
revised definition. While the Commission stated in Order Nos. 743 and
743-A that the transition period should not exceed 18 months, NERC
explained that it is requesting a longer transition period in light of
the actions that entities will need to complete in connection with the
revised definition.
2. NERC Petition for Approval of Revisions To Rules of Procedure To
Adopt an Exception Process
26. In Docket No. RM12-7-000, NERC filed proposed revisions to its
Rules of Procedure for the purpose of adopting an ``exception process''
mechanism to add elements to, and remove elements from, the bulk
electric system. NERC stated that decisions to approve or disapprove
exception requests will be made by NERC, rather than by the Regional
Entities, thereby eliminating the potential for inconsistency and
subjectivity. Further NERC explained that the exception process is
``not intended to be used to resolve ambiguous situations,'' i.e., the
exception process is only available after an initial determination has
been made regarding whether an element is part of or not part of the
bulk electric system through the application of the definition to the
element.'' \24\
---------------------------------------------------------------------------
\24\ NOPR, 139 FERC ] 61,247 at P 38, quoting NERC ROP Petition
at 10-11.
---------------------------------------------------------------------------
27. NERC stated that an owner of an element may submit a request to
the applicable Regional Entity to include the element in, or remove it
from, the bulk electric system.\25\ In addition, a Regional Entity,
planning authority, reliability coordinator, transmission operator,
transmission planner, or balancing authority that has the elements
covered by an exception request within its scope of responsibility may
submit an exception request for the inclusion of an element or elements
owned by a registered entity. Upon receiving an exception request, the
applicable Regional Entity will review the exception request and will
issue a recommendation to NERC. NERC will evaluate the Regional Entity
recommendation, the accompanying technical documents, the Technical
Review Panel opinion (if any), and any comments submitted, and will
issue a final determination. Finally, NERC stated that an exception
request will be subject to review to verify continuing justification
for the exception. NERC also stated that an entity must certify every
36 months to the appropriate Regional Entity that the basis for the
exception request remains valid. Further, NERC also included a method
for an entity to challenge the NERC decision on an exception request to
a NERC Compliance Committee. The entity may also appeal the final NERC
decision to the Commission within 30 days following the date of the
Compliance Committee`s decision, or within such time period as the
Commission's legal authority permits.
---------------------------------------------------------------------------
\25\ See NOPR, 139 FERC ] 61,247 at PP 39-45, detailing the
three-step exception process.
---------------------------------------------------------------------------
28. In response to the Order No. 743 Commission statement that NERC
should maintain a list of exempted facilities that can be made
available to the Commission upon request, NERC maintained that the
proposed exception process does not include provisions for such a list,
adding that this is an internal administrative matter for NERC to
implement that does not need to be embedded in the Rules of
Procedure.\26\ NERC stated it will develop a specific internal plan and
procedures for maintaining a list of facilities for which exceptions
have been granted.
---------------------------------------------------------------------------
\26\ NERC ROP Petition at 49.
---------------------------------------------------------------------------
E. Commission NOPR
29. The Commission issued the NOPR on June 22, 2012, and required
that comments be filed within 60 days after publication in the Federal
Register, or September 4, 2012. While seeking comment on various
provisions of NERC's petitions, the NOPR proposed to approve NERC's
modification to the currently-effective definition of bulk electric
system and changes to the Rules of Procedure to add the exception
process. The NOPR also requested comment on the appropriate role for
NERC and the Commission in the identification of bulk electric system
facilities and elements.
30. The Commission received more than sixty comments on the
proposed rulemaking. NERC and other commenters, inter alia, respond to
the Commissions questions regarding the application of the proposed
bulk electric system definition. These comments have assisted us in
developing this Final Rule. A list of commenters appears in Appendix A
to this Final Rule.\27\
---------------------------------------------------------------------------
\27\ Further, NERC, MISO, Consumers, MISO Transmission Owners,
Barrick, ITC Companies, and AMP filed reply comments. Although the
NOPR did not allow for reply comments, we will accept these
pleadings because they have assisted our understanding of NERC's
proposal in this Final Rule.
---------------------------------------------------------------------------
II. Discussion
31. For the reasons discussed below, the Commission adopts the NOPR
proposal and approves NERC's revised definition of bulk electric system
and the specific inclusions and exclusions set forth in the definition,
as just, reasonable, not unduly discriminatory or preferential, and in
the public interest. Likewise, the Commission approves NERC's revised
Rules of Procedure that set forth an exceptions process for determining
whether elements and facilities are included in the bulk electric
system on a case-by-case basis. While we discuss below specific
provisions of the NERC proposal, provisions of the modified bulk
electric system definition and related Rules of Procedures not
specifically mentioned are approved in
[[Page 809]]
this Final Rule. Below, we address the following matters: (A) Approval
of the NERC definition; (B) issues concerning the ``core'' bulk
electric system definition; (C) local distribution; (D) exclusions and
inclusions in the bulk electric system definition; and (E) NERC's Rules
of Procedures exceptions process.
A. Approval of the Revised Bulk Electric System Definition NOPR
Proposal
32. In the NOPR, the Commission proposed to approve a modification
to the currently-effective definition of ``bulk electric system''
because it removes language allowing for regional discretion in the
currently-effective bulk electric system definition, establishes a
bright-line threshold that includes all facilities operated at or above
100 kV and identifies specific categories of facilities and
configurations as inclusions and exclusions to provide clarity in the
definition of bulk electric system.\28\
---------------------------------------------------------------------------
\28\ NOPR, 139 FERC ] 61,247 at P 18.
---------------------------------------------------------------------------
Comments
33. NERC, Regional Entities, trade organizations and a majority of
commenters from various industry segments support the Commission's
proposal to approve NERC's proposals. APPA ``strongly support[s]''
NERC's proposed definition.\29\ EEI supports NERC's proposals and
states that any changes to the definition should be made through the
standard development process, not through directives. LPPC, NRECA, and
WPPC also support approval of the definition and urge the Commission to
adopt the NERC proposal and to refrain from pursuing additional
regulatory mandates. Snohomish and WPPC agree that NERC has developed a
``clear and workable definition'' of the bulk electric system that
markedly improves the existing definition. They also opine that the
definition creates a foundation for reliability that focuses on core
elements of the interconnected bulk transmission system, and provides a
means for lower-voltage or peripheral elements of the electric system
to be excluded from the bulk electric system. Other commenters state
that the definition is consistent, repeatable and verifiable and will
provide clarity that will assist NERC and affected entities in
implementing Reliability Standards.
---------------------------------------------------------------------------
\29\ APPA Comments at 7.
---------------------------------------------------------------------------
34. Other commenters, while noting that the NOPR represents a
``positive development,'' believe additional modifications are
necessary ``to achieve consistency within the limitations'' of section
215 of the FPA and the Commission's directives in Order Nos. 743 and
743-A.\30\
---------------------------------------------------------------------------
\30\ Holland Comments at 2.
---------------------------------------------------------------------------
35. Some commenters oppose approval on various grounds. For
example, NARUC is concerned that, even though the definition appears to
honor the exclusion of local distribution from the bulk electric
system, the definition does not go far enough to ensure ``that a costly
analysis * * * is not required to be performed with regard to local
distribution elements that are by law excluded.'' \31\ NARUC is also
concerned that exclusion E3 (local networks) will exclude some, but not
all, local distribution elements. According to NARUC, this could cause
confusion as to the status of local distribution elements that are not
also described in exclusion E3. Consequently, NARUC believes that the
definition does not appropriately reflect the statutory limits of the
Commission's authority under FPA section 215 and its implementation
could unnecessarily overreach into state jurisdictional local
distribution facilities.
---------------------------------------------------------------------------
\31\ NARUC Comments at 4.
---------------------------------------------------------------------------
36. NYPSC believes that the proposed definition will likely result
in classifying certain facilities as part of the bulk electric system
despite their being unnecessary for operating an interconnected
transmission network. NYPSC states that the majority of the 138 kV
lines within New York City serve as direct feeders to the networked
distribution system serving load. NYPSC also states that there is no
technical justification for a 100 kV bright-line definition.\32\ NYPSC
contends that, even with the exclusions and the exception process, it
is uncertain whether an exclusion or exception would apply to the 138
kV lines noted above. NYPSC believes that this approach presumes the
Commission has jurisdiction over all facilities operated at 100 kV or
above, unless proven otherwise, which inappropriately shifts the legal
and technical burdens to the states.
---------------------------------------------------------------------------
\32\ NYPSC Comments at 3. See also Massachusetts DPU Comments at
6-7.
---------------------------------------------------------------------------
37. NYPSC, NARUC, and the Massachusetts DPU argue that the revised
definition does not include a cost impact analysis that weighs costs
related to the modified definition against the reliability benefits
that the new definition would achieve. They contend that the lack of a
cost-benefit analysis accompanying the revised definition represents an
additional gap in the process for developing this Reliability Standard.
NYPSC and the Massachusetts DPU contend that the costs of compliance
with the definition will be excessive. NYPSC states that, according to
NERC and the Northeast Power Coordinating Council, Inc. (NPCC), it
would exceed $280 million. Thus, they advocate that, given the
significant costs that the revised definition could impose on
consumers, the Commission should reject NERC's proposed modifications
until they are supported by a cost-benefit analysis.
Commission Determination
38. Pursuant to section 215(d)(2) of the FPA, we approve NERC's
revised definition of bulk electric system and the specific inclusions
and exclusions set forth in the definition, as just, reasonable, not
unduly discriminatory or preferential, and in the public interest.
NERC's proposal provides additional clarity and granularity that will
allow for greater transparency and consistency in the identification of
elements and facilities that make up the bulk electric system and is
responsive to the technical and policy concerns discussed in Order No.
743.
39. NERC's proposal adequately ensures that all facilities
necessary for operating an interconnected electric energy transmission
network are included under the bulk electric system. As we observed in
Order No. 743,
``[U]niform Reliability Standards, and uniform implementation,
should be the goal and the practice, the rule rather than the
exception, absent a showing that a regional variation is superior or
necessary due to regional differences. Consistency is important as
it sets a common bar for transmission planning, operation, and
maintenance necessary to achieve reliable operation * * * . [W]e
have found several reliability issues with allowing Regional
Entities broad discretion without ERO or Commission oversight.\33\
---------------------------------------------------------------------------
\33\ Order No. 743, 133 FERC ] 61,150 at P 82 (footnote
omitted).
The core definition eliminates the provision that allows broad
regional discretion, and establishes a 100 kV bright-line threshold for
determining, in the first instance, those elements and facilities that
are included in the bulk electric system. The definition also includes
specific inclusions and exclusions that address typical system
facilities and configurations such as generation and radial systems,
providing additional granularity that improves consistency and provides
a practical means to determine the status of common system
configurations. Thus, we agree with commenters that the modified
definition is consistent, repeatable and verifiable and will provide
clarity that will assist NERC
[[Page 810]]
and affected entities in implementing Reliability Standards.
40. Accordingly, the Commission finds that NERC's proposal
satisfies the directives of Order No. 743 to develop modifications to
the currently-effective definition of bulk electric system to ensure
that the definition encompasses all facilities necessary for operating
an interconnected transmission network and remove the Regional Entity
discretion that currently allows for regional variations without review
or oversight. We also find that NERC's definition satisfies the
Commission's technical concerns in Order No. 743 through the use of a
bright-line 100 kV threshold, with specific inclusions and exclusions
within the definition, for identifying bulk electric system elements
and the establishment of an exception process for facilities that are
not necessary for operating the interconnected transmission network.
41. Moreover, we are not persuaded by the rationale of the
commenters who advocate that we remand the NERC proposal. We disagree
with NYPSC that the proposed definition will likely result in
classifying certain facilities as part of the bulk electric system
despite their being unnecessary for operating an interconnected
transmission network. An entity that believes its facility is
improperly classified as part of the bulk electric system by
application of the definition may avail itself of the exception process
to have the facility removed from inclusion in the definition. With
regard to NYPSC's claim that there is no technical justification for
the 100 kV threshold, in Order No. 743, the Commission found ``that
many facilities operated at 100 kV and above have a significant effect
on the overall functioning of the grid and that the majority of 100 kV
and above facilities in the United States operate in parallel with
other high voltage and extra high voltage facilities, interconnect
significant amounts of generation sources and operate as part of a
defined flowgate.'' The Commission explained that this ``illustrates
their parallel nature and therefore their necessity to the reliable
operation of the interconnected transmission system'' and that
``[p]arallel facilities operated at 100-200 kV will experience similar
loading as higher voltage parallel facilities at any given time and the
lower voltage facilities will be relied upon during contingency
scenarios.'' \34\ In addition, in Order No. 743 the Commission
identified the reliability concerns created by the current definition
and a method to ensure that certain facilities needed for the reliable
operation of the nation's bulk electric system are subject to mandatory
and enforceable Reliability Standards. The Commission noted that the
material impact assessments implemented, for example, by NPCC ``are
subjective in nature, and results from such tests are inconsistent in
application, as shown through the exclusion of facilities that clearly
are needed for reliable operation.'' \35\ The Commission also found
that the vast majority of 100 kV and above facilities are part of
parallel networks with high voltage and extra high voltage facilities
and are necessary for reliable operation.\36\ Thus, the Commission
found that NERC should ``establish a uniform definition that eliminates
subjectivity and regional variation in order to ensure reliable
operation of the bulk electric system'' and that ``the existing NPCC
impact test is not a consistent, repeatable, and comprehensive
alternative to the bright-line, 100kV definition we prefer.'' \37\
---------------------------------------------------------------------------
\34\ Order No. 743, 133 FERC ] 61,150 at P 73.
\35\ Order No. 743, 133 FERC ] 61,150 at P 96.
\36\ Id.
\37\ Id.
---------------------------------------------------------------------------
42. NERC already applies a general 100 kV threshold, and today all
regions, with the exception of NPCC, also apply a 100 kV threshold. We
also note NYPSC cites to the same methodology that the Commission found
dubious in Order No. 743-A where the Commission explained that it had:
serious concerns about NPCC's [] 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. 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.\38\
---------------------------------------------------------------------------
\38\ Order No. 743-A, 134 FERC ] 61,210 at P 47 (footnotes
omitted) (citing Order No. 743, 133 FERC ] 61,150 at PP 74, 76 and
85).
43. We also disagree with NYPSC's contention that this approach
presumes the Commission has jurisdiction over all facilities operated
at 100 kV or above, unless proven otherwise, which inappropriately
shifts the legal and technical burdens to the states. As noted above
and in Order No. 743-A, the 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.'' \39\ Thus, we are
not persuaded that NERC's proposal inappropriately shifts legal or
technical burdens. In addition, the Commission has maintained that the
bright-line threshold would be a ``first step or proxy'' in determining
which facilities should be included in the bulk electric system. The
definition, coupled with the exception process will ensure that
facilities not necessary for the operation of the interconnected
transmission network will be properly categorized. Further, the
Commission's approach for determining whether elements are used for
local distribution on a case-by-case basis, as discussed more fully
below, addresses NARUC's concerns as to the status of local
distribution elements that are not also described in exclusion E3 and
that the definition does not appropriately reflect the statutory limits
of the Commission's authority under FPA section 215 as well as NYPSC's
concern about the Commission having jurisdiction over all facilities
operated at 100 kV or above. With regard to the specific examples cited
by NYPSC, we find that such determinations are more appropriate for the
exception process and beyond the scope of this proceeding.
---------------------------------------------------------------------------
\39\ Order No. 743-A, 134 FERC ] 61,210 at P 36.
---------------------------------------------------------------------------
44. We also disagree with NYPSC and Massachusetts DPU that NERC's
proposal is flawed because NERC's petition did not include a formal
cost analysis. Order No. 743 did not require such an analysis. Rather,
Order No. 743 tasked NERC with certain directives and NERC's petitions
are intended to comply with those directives. In addition, while cost
of implementation can be relevant in Commission review of a proposed
Reliability Standard, the foremost concern is the reliability of the
interconnected transmission network.\40\ Therefore, we find that NERC's
petition adequately addresses the Commission's Order No. 743
directives.
---------------------------------------------------------------------------
\40\ See Order No. 672, FERC Stats. & Regs. ] 31,204 at P 330.
---------------------------------------------------------------------------
B. The Core Definition of Bulk Electric System
NOPR Proposal
45. In the NOPR, the Commission proposed to approve the bulk
electric system ``core'' definition developed by NERC which states as
follows:
Unless modified by the lists shown below, all Transmission
Elements operated at 100 kV or higher and Real Power and Reactive
Power resources connected at 100 kV or higher. This does not include
facilities used in the local distribution of electric energy.
In the NOPR, the Commission noted that NERC's proposal appears to
satisfy the objectives set forth in Order No. 743.
[[Page 811]]
The Commission also stated that NERC's ``core'' definition establishes
the fundamental threshold for inclusion of facilities in the bulk
electric system as those that are operated at 100 kV or higher, if they
are transmission elements, or are connected at 100 kV or higher, if
they are real power or reactive power resources. In addition, the
Commission stated that the core definition also establishes a 100 kV
criterion as a bright-line threshold, rather than as a general
guideline as in the current definition, i.e., the phrase ``generally
operated at'' in the current definition is eliminated.
Comments
46. NERC and a majority of commenters including most trade
organizations believe that the core definition satisfies the Order No.
743 directives. By eliminating the language ``as defined by the
Regional Reliability Organization'' and ``generally operated at,'' they
state that the revised definition eliminates the subjectivity and
regional variations that are possible under the current definition.\41\
WPPC supports the NERC proposals but is concerned that the NOPR could
be read as attempting to impose nationally uniform standards without
allowing regional variation. WPPC believes that FPA section 215
requires deference to Regional Entities in developing Reliability
Standards and is concerned that the NOPR's references to uniformity of
the definition of bulk electric system must be limited by the deference
accorded to Regional Entities in the statute.
---------------------------------------------------------------------------
\41\ See e.g., NERC, APPA, EEI, NRECA, ELCON, the Regional
Entities, NV Energy, National Grid, Southern Companies, Duke Energy,
International Transmission Company, TAPS, BPA, Hydro One and IESO,
and Snohomish.
---------------------------------------------------------------------------
47. Other commenters seek modification of the core definition. For
example, PSEG Companies believe that the core definition will introduce
subjectivity because it omits facilities and systems necessary to
operate the facilities above 100 kV, such as protection systems,
underfrequency load shedding systems and control centers.\42\ PSEG
Companies suggest the addition of demand response above 75 MW within a
balancing authority into the definition. In the same vein, ISO New
England suggests including capacity resources connected below 100 kV
and identifies protection systems, under-frequency and under-voltage
load shedding systems, inclusion of non-bulk electric system facilities
into transmission and operational planning, and control rooms as items
that are important to operating the bulk electric system but not in the
definition. ISO New England, therefore, believes that NERC should make
the determination whether or not these facilities and control systems
must comply with Reliability Standards independent of their
designation. Valero seeks clarification that the core definition
excludes elements ``that are owned and used by an industrial end-user
to serve its load.'' \43\
---------------------------------------------------------------------------
\42\ PSEG Comments at 4-6.
\43\ Valero Comments at 3.
---------------------------------------------------------------------------
48. Similarly, IUU and Barrick state that industrial generators are
intrastate facilities that serve only the owner's load and believe that
they are excluded from the jurisdiction of the Commission.\44\ IUU and
Barrick believe that some of the Reliability Standards appear to reach
beyond the limits imposed by Congress and into these intrastate
industrial generator facilities. According to IUU and Barrick, the
definition needs an additional exclusion that excludes these intrastate
facilities.
---------------------------------------------------------------------------
\44\ See also Barrick Reply Comments at 2-3.
---------------------------------------------------------------------------
49. Several commenters that support the NERC proposal also comment
on matters not specifically raised in the NOPR. APPA recommends that
the Commission state that it expects NERC will continue to treat the
Phase 2 bulk electric system definition project as a priority in the
2013 budget year. APPA also requests that the Commission direct NERC to
expedite the deregistration process for those entities or facilities
that are no longer designated as part of the bulk electric system under
the new definition or through application of the Rules of Procedure
exception process. APPA believes that an expedited deregistration
process would reduce the associated burden on entities that are no
longer required to document compliance due to the revisions in the bulk
electric system definition and the exception process.
50. Redding requests that, due to the connection between the
definition and the NERC Functional Model, the Commission should direct
revisions to the NERC Functional Model to accommodate entities that own
or operate facilities that technically qualify as transmission but that
have a limited, if any, impact on reliability.
Commission Determination
51. We find that the ``core'' definition satisfies the Order No.
743 directives to remove the subjectivity and regional variations that
are possible under the current definition by eliminating the language
``as defined by the Regional Reliability Organization'' and ``generally
operated at,'' in the revised definition. The ``core'' definition,
quoted above, establishes the fundamental threshold for inclusion of
facilities in the bulk electric system as those that are operated at
100 kV or higher, if they are transmission elements, or are connected
at 100 kV or higher, if they are real power or reactive power
resources. The core definition also establishes a 100 kV criterion as a
bright-line threshold, rather than as a general guideline as in the
current definition, i.e., the phrase ``generally operated at'' in the
current definition is eliminated. The core definition also continues to
capture equipment associated with the facilities included in the bulk
electric system.
52. Other than the directive to modify exclusion E3 as discussed
below, the Commission declines to direct NERC to further modify the
definition or the specified inclusions and exclusions. Specifically, we
will not direct further revisions to address demand response,
protection systems and other facilities or equipment as separate
inclusions or exclusions as advocated by ISO New England, PSEG
Companies, IUU or Barrick.\45\ Rather, NERC has indicated that it has
initiated a Phase 2 of the development project for the definition of
bulk electric system, and interested stakeholders have the opportunity
in the first instance to raise their ideas in that forum regarding
possible additions, inclusions and exclusion set forth in the bulk
electric system definition.\46\
---------------------------------------------------------------------------
\45\ We note that, in Order No. 693, the Commission recognized
demand side management as a type of resource for contingency reserve
that should be treated on a comparable basis with other resources;
and must meet similar technical requirements as other resources
providing this service. Order No. 693, FERC Stats. & Regs. ] 31,242
at PP 330-335.
\46\ According to NERC, due to time constraints in meeting the
compliance deadline set in Order No. 743, NERC separated the
development of the revised definition into two phases. See NERC
Petition at 46. NERC stated that Phase 1 culminated in the language
of the proposed modified definition that is the primary subject of
this Final Rule. Phase 2, which is ongoing, intends to focus on
other industry concerns raised during Phase 1.
---------------------------------------------------------------------------
53. Moreover, in the NOPR we acknowledged NERC's statement that the
core definition also continues to capture equipment associated with the
facilities included in the bulk electric system.\47\ In the NOPR we
agreed with NERC that while the new definition does not use the term
``associated equipment,'' the phrase is included in the definition
through the defined term ``Transmission Elements.'' \48\ We adopt the
NOPR proposal that the term ``associated equipment,'' is included in
the definition through the defined term ``Transmission Elements'' which
could
[[Page 812]]
include the facilities identified by PSEG Companies.
---------------------------------------------------------------------------
\47\ NOPR, 139 FERC ] 61,247 at PP 16, 55.
\48\ NOPR, 139 FERC ] 61,247 at P 55 n.69.
---------------------------------------------------------------------------
54. With regard to Valero's clarification, that the core definition
excludes elements ``that are owned and used by an industrial end-user
to serve its load,'' Valero can either seek to have this matter
addressed generically, if appropriate, in NERC's Phase 2, or seek to
have this addressed on a case-by-case basis in the exception process
that we approve in this Final Rule.
55. We decline, as APPA requests, to direct NERC to expedite the
deregistration process for those entities who own or operate facilities
that are no longer designated as part of the bulk electric system. We
do not expect there to be significant numbers of entities either
needing to register or deregister due to the change in definition.\49\
To the extent entities seek to deregister, NERC, as the ERO, can
determine the appropriate timeframe for making such a determination. We
also decline to order NERC to modify the Functional Model as Redding
requests as the issues Redding raises are outside the scope of this
proceeding. In response to WPPC's concern, this Final Rule adopts the
revised definition which eliminates regional discretion for determining
whether an element is part of the bulk electric system. It does not
address or subsume the ability of Regional Entities to develop
Reliability Standards for their regions that meet criteria for regional
Reliability Standards.
---------------------------------------------------------------------------
\49\ See NOPR, 139 FERC ] 61,247 at P 132.
---------------------------------------------------------------------------
56. In summary, the Commission finds that NERC's proposal
adequately addresses the concerns articulated in Order No. 743
regarding regional discretion and the need for a consistent approach
and satisfies the concerns regarding the elimination of inconsistencies
across regions.
C. Local Distribution
NOPR Proposal
57. The NOPR noted that, although Order No. 743 acknowledged that
``Congress has specifically exempted `facilities used in the local
distribution of electric energy' '' it still is necessary to determine
which facilities are local distribution, and which are
transmission.\50\ The NOPR observed that Order No. 743-A stated that
``[w]hether facilities are used in local distribution will in certain
instances raise a question of fact, which the Commission has
jurisdiction to determine.'' \51\ In addressing what constitutes local
distribution, NERC stated in its petition that facilities used for the
local distribution of electric energy are expressly excluded from the
bulk electric system by the core definition as well as by the local
network exclusion, exclusion E3.\52\ In the NOPR, the Commission
requested comment regarding how NERC's proposed definition is
responsive to the Commission's directives in Order Nos. 743 and 743-A.
Specifically, the Commission requested comment on how NERC's proposal
adequately differentiates between local distribution and transmission
facilities in an objective, consistent, and transparent manner.
---------------------------------------------------------------------------
\50\ Order No. 743-A, 134 FERC ] 61,210 at P. 67.
\51\ NOPR, 139 FERC ] 61,247 at P. 58, quoting Order No. 743-A,
134 FERC ] 61,210 at P. 67.
\52\ NOPR, 139 FERC ] 61,247 at P. 59, (citing NERC BES Petition
at 16).
---------------------------------------------------------------------------
Comments
58. NERC and numerous commenters state that the definition
adequately differentiates between local distribution and
transmission.\53\ NERC states that the revised definition distinguishes
between bulk electric system facilities and non-bulk electric system
facilities and local distribution facilities fall into the latter
category.\54\ NERC adds that, by applying the definition, facilities
used for local distribution will not be included due to their specific
exclusion in the core definition. NERC and others also state that the
exception process can be used to determine whether facilities are used
for local distribution when an entity believes such facilities have
been improperly included.\55\
---------------------------------------------------------------------------
\53\ See e.g., APPA Comments at 8-9, EEI Comments at 4, NRECA
Comments at 7, Hydro One Comments at 3, NV Energy Comments at 3-4,
PHI Companies Comments at 3, TAPS Comments at 3, BPA Comments at 3,
WPPC Comments at 27-30.
\54\ NERC Comments at 6.
\55\ See e.g. WPPC Comments at 28.
---------------------------------------------------------------------------
59. While ELCON generally agrees with NERC's position, ELCON
comments that NERC's proposal does not fully respond to the
Commission's directive in Order Nos. 743 and 743-A. ELCON maintains
that a definition of ``local distribution'' is necessary to avoid
including assets that are clearly used for the local distribution as
part of the bulk electric system. ELCON expresses concern that
industrial consumers' equipment that is rated 100 kV or above will be
designated as a component of the bulk electric system, irrespective of
whether such elements are material for the reliable operation of the
interconnected Bulk-Power System. ELCON recommends that the Commission
address this issue by establishing a joint working group with NARUC to
draft a proposed definition of local distribution to exclude certain
facilities from the scope of the definition of bulk electric system.
60. Some entities that generally agree with NERC also suggest
clarifications to improve the distinction between local distribution
and transmission. MISO suggests that, to identify local distribution
facilities, the Commission direct NERC to clarify the last sentence of
the core definition by ``cross-referencing'' the exclusion criteria in
the definition.\56\ Snohomish requests that the Commission clarify that
the Seven Factor Test established in Order No. 888 is one element that
can be used to evaluate an exception request in addition to other
engineering and technical considerations.\57\
---------------------------------------------------------------------------
\56\ MISO Comments at 4.
\57\ Snohomish Comments at 3.
---------------------------------------------------------------------------
61. Other commenters contend that NERC's proposal does not
adequately differentiate between local distribution and transmission
facilities or reflect the statutory limits of the Commission's
authority under FPA section 215.\58\ As noted above, NARUC states that
the NERC definition does not appropriately reflect the statutory limits
of the Commission's authority under Federal Power Act Section 215 and
its implementation could unnecessarily overreach into state
jurisdictional local distribution facilities. NARUC maintains that,
while the definition of bulk electric system appears to exclude local
distribution by restating the law, the definition does not go far
enough to ensure that a costly analysis applying for an ``exception''
is not required to be performed with regard to local distribution
elements that are by law ``excluded.'' NARUC contends that the mere
fact that a subset of local distribution elements expressly excluded
from the bulk electric system by the core definition are specifically
identified in exclusion E3 could cause confusion as to the status of
local distribution elements that are not also described in E3.
Similarly, the Steel Manufacturers Association states that the
Commission cannot allow NERC's exception process to determine the
boundaries of the Commission's jurisdiction.
---------------------------------------------------------------------------
\58\ E.g., NARUC, Holland, NYPSC, and SmartSenseCom.
---------------------------------------------------------------------------
62. Consumers Energy believes that the definition does not
differentiate between transmission and local distribution because
``Transmission Elements'' and ``local distribution'' are undefined.
Consumers Energy states that the Commission should clarify that any
facilities that have been found by the Commission to be local
distribution pursuant to the Seven Factor Test are
[[Page 813]]
also local distribution under FPA section 215 and therefore outside the
bulk electric system.\59\ Consumers references a prior Commission
declaratory order accepting the Michigan Public Service Commission's
determination of transmission and local distribution facilities.\60\
Consumers notes that it sold all of its ``bulk electric system
elements'' to Michigan Electric Transmission Company, who is the
registered transmission owner. ITC Companies and MISO filed reply
comments requesting that the Commission reject the coordination and
continuity aspect of Consumers' proposal to automatically exclude from
the definition those facilities that are ``in series'' with
transmission facilities that are included in the bulk electric system
definition.\61\ In addition, they state that this is not the proper
proceeding to address whether specific facilities may or may not be
part of the bulk electric system. Consumers filed a motion to strike
the MISO reply comments.
---------------------------------------------------------------------------
\59\ Consumers Comments at 3-8.
\60\ Consumers Comments at 4 (citing July 29, 1998 letter order
in Docket No. EL98-21-000).
\61\ ITC Reply Comments at 6-7.
---------------------------------------------------------------------------
63. Portland is concerned that the Commission is assessing its
reliability jurisdiction without addressing ``the inconsistency between
its reliability jurisdiction and its traditional `transmission'
jurisdiction under FPA section 201(b).'' Portland states that the
Commission could clarify that for entities who apply the local
distribution exception in good faith, any future regulatory
determination that such distribution facilities are to be treated as
part of the bulk electric system within the scope of FPA section 215
regulation will be prospective only.\62\
---------------------------------------------------------------------------
\62\ Portland Comments at 4.
---------------------------------------------------------------------------
64. Holland argues that, aside from the exclusions in the core
definition, there are no criteria or guidelines that exclude local
distribution facilities from the bulk electric system. Holland also
argues that if an entity challenges a registration, there is no
guidance as to what information NERC will consider whether to recognize
the facilities in question as local distribution and exclude them from
the bulk electric system. Holland contends that the proposed Rules of
Procedure fail to provide any distinction between those facilities that
must be excluded because they are local distribution versus those that
should be excluded because, although they meet the [bulk electric
system] bright-line criteria, they are not necessary for the reliable
operation of the interconnected transmission system. Holland claims
that the exception process does not make ``any distinction between
criteria necessary for determining those facilities that must be
excluded because they are local distribution versus those that should
be excluded because they [ ] meet the [bulk electric system] criteria,
but are not material.'' \63\ Holland adds that ``because the exclusions
are not comprehensive, and because the `exceptions' process provides no
further guidance on the proper exclusion of these facilities, there
would be no basis to support a conclusion that the NOPR has effectively
and transparently identified, let alone justified, a second class or
test for identifying local distribution for purposes of Section 215 of
the FPA.'' \64\ Similarly, Massachusetts DPU comments that exception
requests will inevitably involve difficult questions regarding whether
a facility is ``used in the local distribution of electric energy,'' an
area over which states have exclusive authority under the FPA.\65\
---------------------------------------------------------------------------
\63\ Holland Comments at 6.
\64\ Holland Comments at 9. See also Barrick Reply Comments at
2.
\65\ Massachusetts DPU Comments at 10.
---------------------------------------------------------------------------
65. Valero requests that the Commission direct NERC to develop
criteria based on a ``primary function test'' to exclude facilities
used in local distribution. In addition, Valero states that the
Commission should ``provide guidance to NERC by [ ] stating that, to
constitute distribution, a facility need not be used exclusively for
distribution purposes.\66\ Further, Valero contends that NERC's
``distribution use only'' position contradicts the plain language of
sections 201 and 215 of the FPA. Valero states that its ``discrete on-
site electrical equipment'' is designed only to serve load at its
refineries. While the facilities may enhance the reliability of
electric service, Valero asserts they are only used by an industrial
end-user of electricity for ``the local distribution of electric
energy'' and must be excluded from the bulk electric system. The Power
Agencies ask for clarification of footnote 79 in the NOPR and assume
that the Commission is clarifying that certain facilities may not
satisfy the revised definition, but may constitute transmission
facilities for purposes other than applying FPA section 215.\67\
---------------------------------------------------------------------------
\66\ Valero Comments at 8-12 (emphasis in original) (citing
Detroit Edison v. FERC, 334 F.3d 48, 54 (D.C. Cir. 2003)).
\67\ See NOPR, 139 FERC ] 61,247 at P 60 n.79 stating that ``an
element that falls outside of the definition of bulk electric system
is not necessarily local distribution.''
---------------------------------------------------------------------------
Commission Determination
66. For the reasons discussed below, we find that NERC's ``core''
definition of bulk electric system definition, together with exclusion
E3 (local networks), is consistent with the section 215 exclusion of
local distribution facilities. We also find that, while NERC's case-by-
case exceptions process is appropriate to determine the technical issue
of whether facilities are part of the bulk electric system, the
jurisdictional question of whether facilities are used in local
distribution should be decided by the Commission.
67. NERC's ``core'' definition provides a 100 kV threshold for
determining whether elements or facilities are included in the bulk
electric system. As we indicated in Order No. 743, the 100 kV threshold
is a reasonable ``first step or proxy'' for determining which
facilities should be included in the bulk electric system. Indeed, it
is reasonable to anticipate that this threshold will remove from the
bulk electric system the vast majority of facilities that are used in
local distribution, which tend to be operated at lower, sub-100 kV
voltages. Moreover, applying the four exclusions in NERC's proposed
definition should serve to further exclude facilities used in local
distribution from the bulk electric system. In particular, as NERC
indicates, exclusion E3 (local networks)--although not synonymous with
local distribution--should serve to reasonably exclude many above-100
kV facilities that are used in local distribution. Based on the
information provided in NERC's petition, as well as the supporting
comments of EEI and others, we anticipate that the ``core'' definition
together with exclusion E3 should provide a reasonable means to
accurately and consistently determine on a generic basis whether
facilities are part of the bulk electric system. In other words, most
local distribution facilities will be excluded by the 100 kV threshold
or exclusion E3 without needing to seek a Commission jurisdictional
determination. Accordingly, we find this aspect of NERC's petition
reasonable.
68. In addition to the definition, NERC also submitted revisions to
the Rules of Procedure (discussed below in greater detail) that allow
for a case-by-case exception process. Included in this process is an
opportunity for entities to seek to exclude facilities from the bulk
electric system because they are used in local distribution. NERC's
petition does not provide criteria or guidance that it would apply in
the case-by-case exception process to determine whether
[[Page 814]]
an element above 100 kV should be excluded as local distribution, as
directed in Order No. 743.\68\ Thus, we cannot conclude that the case-
by-case exception process will ``adequately differentiate[] between
local distribution and transmission facilities in an objective,
consistent, and transparent manner.'' \69\
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\68\ The Commission, in Order No. 743-A, explained 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 applying the test or developing an alternative
approach as it deems necessary.'' Order No. 743-A, 134 FERC ] 61,210
at P 69. NERC, in its petition, did not adopt a specific test or
criteria for determining whether a facility is local distribution,
but indicated that an entity seeking an exception for local
distribution facilities could provide a ``seven factor'' analysis as
one means to support the petition. NERC BES Petition at 49.
\69\ See NOPR, 139 FERC 61,247 at P 59.
---------------------------------------------------------------------------
69. In Order No. 743, the Commission stated that determining the
line between transmission and local distribution should be part of the
exception process and left it to NERC in the first instance to
determine how to make such a determination.\70\
---------------------------------------------------------------------------
\70\ Order No. 743, 133 FERC ] 61,150 at P 38.
---------------------------------------------------------------------------
After further review of NERC's proposal in this proceeding, and
upon consideration of the comments submitted, we believe that it is
more appropriate that the Commission make such case-by-case
jurisdictional determinations when necessary, and to apply the Seven
Factor Test set forth in Order No. 888 to make such determinations. The
determination whether an element or facility is ``used in local
distribution,'' as the phrase is used in the FPA, requires a
jurisdictional analysis that is more appropriately performed by the
Commission.\71\ Further, Commission review of whether a facility is
used in local distribution comports with relevant legal precedent. As
we explained in Order No. 743-A, ``[w]hether facilities are used in
local distribution will in certain instances raise a question of fact,
which the Commission has jurisdiction to determine.'' \72\
---------------------------------------------------------------------------
\71\ Standardization of Generator Interconnection Agreements and
Procedures, Order No. 2003, FERC Stats. & Regs. ] 31,146, at P 803
(2003), order on reh'g, Order No. 2003-A, FERC Stats. & Regs. ]
31,160, order on reh'g, Order No. 2003-B, FERC Stats. & Regs. ]
31,171 (2004), order on reh'g, Order No. 2003-C, FERC Stats. & Regs.
] 31,190 (2005), aff'd sub nom. Nat'l Ass'n of Regulatory Util.
Comm'rs v. FERC, 475 F.3d 1277 (D.C. Cir. 2007), cert. denied, 552
U.S. 1230 (2008) (```Local distribution' is a legal term; under FPA
Section 201(b)(1), the Commission lacks jurisdiction over local
distribution facilities.'').
\72\ Order No. 743-A, 134 FERC ] 61,210 at P 67 and n.78,
(citing California Pacific Electric Co., LLC, 133 FERC ] 61,018 at
n.59 (2010) (citing FPC v. Southern California Edison Co., 376 U.S.
205, 210 n.6 (1964) (asserting that ``the Supreme Court has
determined that whether facilities are used in local distribution
involves a question of fact to be decided by the [Commission] as an
original matter.''))). See also Connecticut Light & Power Co. v.
Federal Power Commission, 324 U.S. 515, 534-35 (1945).
---------------------------------------------------------------------------
70. As noted above, application of the ``core'' definition and the
four exclusions should serve to exclude most facilities used in local
distribution from the bulk electric system. However, there may be
certain circumstances that present a factual question as to whether a
facility that remains in the bulk electric system after applying the
``core'' definition and the four exclusions should nonetheless be
excluded because it is used in local distribution. In such
circumstances, which we expect will be infrequent, an entity must
petition the Commission seeking a determination that the facility is
used in local distribution.\73\ Such petitions should include
information that will assist the Commission in making such
determination, and notice of the petition must be provided to NERC and
relevant Regional Entities.
---------------------------------------------------------------------------
\73\ Such petitions will be assigned an ``RC'' docket prefix.
The determinations would be public proceedings subject to notice and
comment requirements which will allow NERC and interested parties
(including state regulators) to provide input on a petition.
---------------------------------------------------------------------------
71. In addressing such petitions, the Commission will apply the
Seven Factor Test set forth in Order No. 888. In Order No. 888, the
Commission articulated the Seven Factor Test to determine, on a case-
by-case basis, whether a facility is a local distribution facility or a
transmission facility.\74\ However, the Commission has found that the
factors identified in the Seven Factor Test are not exclusive when
determining whether an element is used for local distribution.
Specifically, the Commission recognized that the Seven Factor Test does
not resolve all possible issues and that ``there may be other factors
that should be taken into account in particular situations.'' \75\ The
Commission will apply a similar analysis in determining in the context
of FPA section 215 whether a facility is used in local distribution. In
other words, while the starting point for the Commission's analysis
will be an analysis based on the Seven Factor Test, the Commission will
consider other factors that should be taken into account in particular
situations.
---------------------------------------------------------------------------
\74\ Order No. 888, FERC Stats. & Regs. ] 31,036 at 31,771,
31,783-84, Appendix G.
\75\ Order No. 888-A, FERC Stats. & Regs. ] 31,048 at 30,242.
---------------------------------------------------------------------------
72. To reiterate, we expect that the 100 kV threshold as a ``first
step or proxy'' for determining which facilities should be included in
the bulk electric system, plus the four exclusions (in particular the
local network exclusion E3), will exclude many facilities that are used
in local distribution and thus should be excluded from the bulk
electric system. This approach recognizes that, although local
distribution facilities are excluded from the definition, it still may
be necessary to determine which facilities are local distribution, and
which are transmission. Whether facilities are used in local
distribution will in certain instances raise a question of fact, which
the Commission has jurisdiction to determine. We decline to clarify, as
Portland requests, that for entities who apply the local distribution
exception in good faith, any future regulatory determination that such
distribution facilities are to be treated as part of the bulk electric
system within the scope of FPA section 215 regulation will be
prospective only. As explained above, in circumstances where a factual
question remains after applying the ``core'' definition and the
exclusions, entities must apply to the Commission for a determination
of whether an element is used in local distribution. We believe this
approach provides a means to maintain consistency and transparency
across the various reliability regions but still have the necessary
flexibility to make case-by-case determinations appropriate for
reliability.
73. To the extent the various reply comments by ITC Companies, MISO
and Consumers raise questions about the status of specific facilities,
we decline to address them in this Final Rule as this rulemaking
proceeding is not the proper forum to decide such matters.
D. Inclusions and Exclusions in the Definition of Bulk Electric System
NOPR Proposal
74. In the NOPR, the Commission proposed to approve, in addition to
the core definition, specific inclusions and exclusions because the
inclusions and exclusions provide added clarity regarding which
elements are part of the bulk electric system as compared to the
existing definition. In the NOPR, the Commission also posed questions
about how some of the inclusions and exclusions will be applied to
better understand potential applications of the inclusions and
exclusions, their effect on identifying the facilities or elements for
bulk electric system reliability, and whether possible gaps exist. We
address these questions below.
[[Page 815]]
1. Inclusion I1 (Transformers)
NOPR Proposal
75. Inclusion I1 includes as part of the bulk electric system
``[t]ransformers with the primary terminal and at least one secondary
terminal operated at 100 kV or higher unless excluded under [the radial
system or local network exclusion].'' In its petition, NERC explained
that, due to transformers having multiple windings operating at
differing voltages, the intent of inclusion I1 includes transformers
operating at 100 kV or higher on the primary winding and at least one
secondary winding.\76\
---------------------------------------------------------------------------
\76\ NERC BES Petition at 17.
---------------------------------------------------------------------------
76. In the NOPR, the Commission stated that NERC's approach to
inclusion I1 ``is a reasonable approach to identifying transformers
that are appropriately included as part of the bulk electric system.''
\77\ However, the Commission expressed concern whether a particular
transformer--operated at 100 kV or higher on the primary winding but
all secondary terminals are operated below 100 kV--should be part of
the bulk electric system or whether the exception process would be
sufficient to include these transformers.\78\ The Commission also
requested comment on whether transformers that have a terminal operated
at 100 kV or above on the high side and below 100 kV on the low side
should be designated as part of the bulk electric system.
---------------------------------------------------------------------------
\77\ NOPR, 139 FERC ] 61,247 at P 63.
\78\ In the NOPR the Commission noted that the joint NERC and
Commission staff report on the September 8, 2011, Arizona-Southern
California blackout explains how transformers of this type were not
monitored or analyzed by the reliability coordinator, transmission
operators and balancing authorities. NOPR, 139 FERC ] 61,247 at P
63.
---------------------------------------------------------------------------
Comments
77. NERC supports allowing the exception process to include the
transformers described by the Commission. NERC states that the ``vast
majority'' of transformers with low side voltages step down to a
voltage class that is designed for distribution to load. NERC adds that
the 100 kV threshold for secondary windings provides a ``clear
demarcation'' between facilities used to transfer power as opposed to
those that serve load. According to NERC, while there are instances
where transformers with secondary windings below 100 kV are connected
in parallel with high voltage transmission lines, it is not possible to
craft a bright-line inclusion of such transformers because the
distinction may hinge on function as opposed to the physical
characteristics of the transformer. NERC states that the exception
process can evaluate whether such transformers should be included in
the bulk electric system. A majority of commenters share NERC's
position and believe that most transformers with the configuration
described by the Commission in the NOPR do not impact the bulk electric
system and those that do can be classified as part of the bulk electric
system through the exception process.\79\
---------------------------------------------------------------------------
\79\ E.g. APPA, EEI, ELCON, WREA, Anaheim, Riverside, Imperial
Irrigation District, G&T Cooperatives, NV Energy, NESCOE, and TAPS.
---------------------------------------------------------------------------
78. SoCal Edison agrees with NERC, but identifies transformers
operated in parallel with the bulk electric system as those that should
be designated as part of the bulk electric system irrespective of the
operational voltage of the transformer. SoCal Edison argues that
information regarding such transformers should be provided to the
impacted entities, e.g., reliability coordinators and neighboring
regional entities. SoCal Edison contends that including these types of
transformers in the bulk electric system would have made the Regional
Entities, reliability coordinators, transmission operators and
balancing authorities aware of the contingencies of the transformers
and their impact on the bulk electric system in the September 2011
blackout.
79. SmartSenseCom states that transformers that operate at 100 kV
or above with any secondary windings below 100 kV should be included.
On the other hand, Consumers does not support inclusion I1 because it
goes beyond the Commission's jurisdiction and would confuse the
distinction between the bulk electric system and local distribution.
Consumers argues that inclusion I1 may create a ``moving registration
target'' if related facilities are added to the bulk electric
system.\80\
---------------------------------------------------------------------------
\80\ Consumers Comments at 9-10.
---------------------------------------------------------------------------
Commission Determination
80. We find that inclusion I1 is a reasonable approach to
identifying transformers that are appropriately included as part of the
bulk electric system. We agree with NERC that inclusion I1 includes
transformers operating at 100 kV or higher on the primary winding and
at 100 kV or higher on at least one secondary winding. With regard to
the Commission's concern in the NOPR about inclusion of a transformer
that is operated at 100 kV or higher on the primary winding but all
secondary terminals are operated below 100 kV, we agree with NERC that
it is appropriate for such transformers to be considered for inclusion
through the exception process. We are persuaded that transformers with
low side voltages stepped down to a voltage class that is designed to
distribute power to load and, therefore, the 100 kV threshold for
secondary windings provides an initial screening between facilities
used to transfer power as opposed to those that serve load. We agree
with NERC's assessment that crafting an inclusion for transformers
described by the Commission is difficult because the distinction may
hinge on function as opposed to the physical characteristics of the
transformer. Therefore, we decline to include such transformers in
inclusion I1.
81. With regard to the specific configurations identified by SoCal
Edison (transformers that operate in parallel with the bulk electric
system irrespective of the operational voltage of the transformer), we
will not make a determination of general application. Rather, such
matters should be addressed in the case-by-case exception process.
82. We do not agree with Consumers that inclusion I1 would be
ineffective because it would include lower voltage distribution
facilities that were not designed to provide reliability to the bulk
electric system or prevent cascading outages. The 100 kV threshold for
secondary windings provides a bright line between facilities used to
transfer power as opposed to those that serve load, and if a
transformer is included pursuant to inclusion I1, but an entity
believes it is not necessary for operation of the interconnected
transmission network, it may be considered for exclusion through the
exception process.
2. Inclusion I2 (Generating Resources)
NOPR Proposal
83. Inclusion I2 of the bulk electric system definition provides
for specific inclusion of generating resources with gross individual
nameplate rating greater than 20 MVA or gross plant/facility aggregate
nameplate rating greater than 75 MVA. NERC developed this inclusion
based on the text of the Registry Criteria for generating units while
providing clarity by including ``the generator terminals through the
high-side of the step-up transformer connected at a voltage of 100 kV
or above.'' \81\
---------------------------------------------------------------------------
\81\ NERC BES Petition at 17.
---------------------------------------------------------------------------
84. In the NOPR, the Commission agreed that inclusion I2 is
consistent with the individual and aggregate nameplate rating
thresholds set forth in
[[Page 816]]
the Registry Criteria but noted the differing descriptions of the
connection point of the generating resources.\82\ Inclusion I2
specifies ``generator terminals through the high-side of the step-up
transformer(s) connected at a voltage of 100 kV or above,'' and the
Registry Criteria specifies a ``direct connection'' to the Bulk-Power
System. Accordingly, the Commission requested comment whether inclusion
I2 will result in a material change to registration of existing
generating units due to the difference in the language regarding the
connection point. The Commission also requested comment if a generating
unit, with a gross individual nameplate rating greater than 20 MVA
connected through the high-side of the step-up transformer connected at
a voltage of 100 kV or above when the low side of the transformer is
less than 100 kV, is included in the bulk electric system pursuant to
inclusion I2. Further, the Commission asked how this result differs for
a generation resource with two or more step-up transformers where the
last transformer in the series operates at 100 kV or above.
---------------------------------------------------------------------------
\82\ NOPR, 139 FERC ] 61,247 at P 65.
---------------------------------------------------------------------------
Comments
85. Most commenters do not believe that inclusion I2 will
materially change registration of generating resources. NERC states
that inclusion I2 connection point language merely clarifies the
``directly connected'' language in the Registry Criteria. NERC explains
that while most generation is connected through a unit transformer on
the high voltage bus within a facility, there are instances where
generators are connected to lower voltages within a facility. NERC adds
that most of these types of configurations are in older facilities
where the higher voltage bus was added after the original generators.
NERC confirms that the specific scenario described by the Commission
would result in the generator being included in the bulk electric
system provided that the transformers reside within a single site
boundary and are used only to step-up the output voltage of the
generator.\83\ APPA and others agree with NERC's view. APPA adds that,
if the transformers in question are also used to deliver power to serve
local load, the generation resources and transformers should be
excluded from the bulk electric system.\84\ PSEG Companies believe that
inclusion I2 addresses the issue regarding two step-up transformers in
series. PSEG Companies explain that both step-up transformers are part
of the generator per inclusion I2 if the purpose of the transformers is
to solely step-up the output voltage.
---------------------------------------------------------------------------
\83\ NERC Comments at 9-10. See also comments of EEI.
\84\ APPA Comments at 14-15. See also comments of National Grid,
TAPS, NESCOE, and G&T Cooperatives.
---------------------------------------------------------------------------
86. Arizona Public Service requests that the Commission clarify
whether the voltage connection language in inclusion I2 applies only to
the aggregated 75 MVA threshold or also to the 20 MVA threshold for
individual generating units. Southern Companies believe that there are
instances where generators may be connected to lower voltages that may
fit under inclusion I2 but would not necessarily fit in the Registry
Criteria.
87. Some commenters do not support inclusion I2 for varying
reasons. Dominion opposes inclusion of elements such as those provided
for in inclusion I2 that are already subject to reliability standards
because the element meets the criteria in the NERC Compliance Registry.
ISO New England states that the connection language in inclusion I2
should be eliminated. ISO New England maintains that interpreting
inclusion I2 to be based on generator plant size, independent of the
voltage connection, is important from a generator stability modeling
view point. This is because generators connected at voltages less than
100 kV can have a significant impact on system stability.\85\ ISO New
England supports adding generators connected at lower voltages but not
the system to which the generators are connected. ISO New England
believes that adding generators, regardless of their connection voltage
levels, would increase the universe of registered generators and would
enhance reliability.
---------------------------------------------------------------------------
\85\ ISO New England Comments at 4.
---------------------------------------------------------------------------
88. MISO recommends that the Commission clarify that operators of
generating resources included through inclusion I2 will only be subject
to Reliability Standards for generators unless a specific determination
is made that other standards should apply to a particular piece of
equipment. MISO believes that, without this clarification, inclusion I2
could increase the number of transmission operators by including
generation equipment.
89. Barrick believes that the term ``gross plant/facility'' in
inclusion I2 needs to be clarified. Barrick states that it is not clear
whether the terms are based on geographic proximity or structural
definition. Barrick is also concerned that inclusion I2 is based on
``gross'' rating while exclusion E2 is based on net capacity and
exclusion E3(a) is based on a non-retail basis, and that read together
inclusion I2 and exclusions E2 and E3(a) appear to be in conflict.\86\
In reply comments, Barrick suggests that, instead of focusing on
nameplate ratings, the focus should be on the normal configuration and
operation of generation.
---------------------------------------------------------------------------
\86\ Barrick Comments at 10.
---------------------------------------------------------------------------
90. SmartSenseCom states that the Commission should direct NERC to
modify inclusion I2 to include generating units that are stepped up to
100 kV or above containing a transformer with a low side below 100 kV
because, at these levels, generating resources should be presumed to
impact reliability. SmartSenseCom contends that Reliability Standards
should apply to such facilities ``in light of their potential impact to
system reliability, especially given the increasing levels of
distributed generation penetration that is expected in the near
future.'' \87\ Springfield questions whether multiple individual units
are considered one unit if they have a shared bus. Springfield believes
that such instances should not be considered individually.
---------------------------------------------------------------------------
\87\ SmartSenseCom Comments at 12.
---------------------------------------------------------------------------
Commission Determination
91. The Commission approves inclusion I2. Based on the language of
inclusion I2, its derivation from the Registry Criteria and the
statements from NERC and commenters, the Commission concludes that
application of inclusion I2 will not materially change registration of
generating resources. The Commission accepts NERC's explanation that
the inclusion I2 connection point language merely clarifies the
``directly connected'' language in the NERC Registry Criteria, section
III.c.1. Further, the Commission agrees with NERC and other commenters
that multiple step-up transformers that are solely used to deliver the
generation to the bulk electric system at 100 kV or above qualify the
generator and the step-up transformers pursuant to inclusion I2.
92. APPA and commenters claim that, if a transformer is also used
to deliver power to serve local load, through, for example a 69 kV
network, the generation resources and transformers should be excluded
from the bulk electric system. The Commission agrees with the specific
example. In such cases, local load refers to end-user load and not
generator-specific station service load. This example depicts a
generator whose step-up transformer delivers the generation to a
voltage level of 69 kV and thus does not meet the criteria in inclusion
I2. A second
[[Page 817]]
transformer in this example that connects the 69 kV network to the bulk
electric system is not solely delivering the generation to the bulk
electric system but also delivers power from the bulk electric system
to the 69 kV network.
93. Regarding Arizona Public Service's request for clarification,
the Commission finds that the voltage connection language in inclusion
I2 applies to both the aggregated 75 MVA threshold for a plant/facility
and the 20 MVA threshold for individual units.
94. The Commission disagrees with Dominion's contention that
inclusion I2 is not needed because the elements identified in inclusion
I2 already meet the Registry Criteria. The NERC registration process
uses element criteria to identify and register functional entities, not
the actual equipment. In contrast, the focus of the bright-line
definition is the facilities, not the owners or operators of the
facilities. Similarly, with regard to Southern Companies' belief that
there are instances where generators may be connected to lower voltages
that may fit under inclusion I2 but would not necessarily fit in the
Registry Criteria, the Commission agrees that the Registry Criteria
allows the Regional Entities and NERC to consider other factors
regarding entity registration which may result in cases where the bulk
electric system status and registry status differs for certain
equipment owners and operators.
95. Regarding ISO New England's assertion that generators that
connect to the bulk electric system via transmission facilities with
voltages below 100 kV are needed for reliability, the Commission
believes these generators can be added to the bulk electric system
through the exception process, and if registration is warranted for the
owners and operators of these generators, the Registry Criteria
provides NERC and the Regional Entities the option of registering
``[a]ny generator, regardless of size, that is material to the
reliability of the Bulk Power System.'' \88\ Aggregate stability
impacts of generation below 100 kV could fall into this category of
``material to the reliability of the Bulk Power System.''
---------------------------------------------------------------------------
\88\ NERC Statement of Compliance Registry Criteria, section
III.c.4.
---------------------------------------------------------------------------
96. With respect to the suggestions and requests for clarification
submitted by MISO, Barrick, SmartSenseCom and Springfield, commenters
may raise these suggestions in NERC's Phase 2 development effort.
3. Inclusion I3 (Blackstart Resources)
NOPR Proposal
97. NERC included as part of the bulk electric system definition
``Blackstart Resources identified in a Transmission Operator's
restoration plan.'' In the NOPR, the Commission agreed with NERC that
inclusion of blackstart resources in the definition is vital to
reliability and is an improvement to the definition. The Commission
requested clarification whether the term ``restoration plan'' refers to
the system restoration plans required in the Emergency Preparedness and
Operations (EOP) Reliability Standards or included in a Commission
approved tariff.\89\ The Commission also expressed concern whether a
reliability gap exists with regard to cranking paths. The Commission
explained that cranking paths are an important element of system
restoration, and questioned ``whether reliability can be adequately
maintained when blackstart generators are defined as part of the bulk
electric system but not the transmission paths that are used to deliver
the energy from blackstart generators to the integrated transmission
system.'' \90\ Accordingly, the Commission requested comment on whether
a reliability gap exists and also requested comment on the appropriate
role, if any, of state regulators in ensuring that energy from
blackstart generation is reliably delivered through cranking paths to
restart the system after an event.
---------------------------------------------------------------------------
\89\ NOPR, 139 FERC ] 61,247 at P 67. Reliability Standard EOP-
005-1, System Restoration Plans, requires a transmission operator to
create ``a restoration plan to reestablish its electric system in a
stable and orderly manner in the event of a partial or total
shutdown of its system.''
\90\ NOPR, 139 FERC ] 61,247 at P 68.
---------------------------------------------------------------------------
Comments
98. NERC confirms that the ``restoration plan'' in inclusion I3
refers to the restoration plans in the EOP Reliability Standards. Other
commenters support NERC's explanation.\91\ With regard to cranking
paths, NERC explains that cranking paths above 100 kV are included in
the bulk electric system by the core definition. NERC states that some
cranking paths identified in a restoration plan ``are composed of
distribution system elements.'' \92\ NERC adds that certain Reliability
Standards, such as Reliability Standards CIP-002-4 and EOP-005-2,
address reliability of cranking paths without regard to voltage which
demonstrates there are other ways to ensure reliable operation of the
bulk electric system without including non-bulk electric system
cranking paths within the definition. In contrast, PSEG Companies
request that, if the Commission supports NERC's exclusion of cranking
paths below 100 kV, the Commission confirm that below 100 kV cranking
paths would be excluded from being enforced in Reliability Standards
that address cranking paths unless they are added to the bulk electric
system by the exception process.\93\
---------------------------------------------------------------------------
\91\ E.g. EEI, APPA, Southern Companies, SoCal Edison, PSEG
Companies, and NV Energy.
\92\ NERC Comments at 11.
\93\ PSEG Comments at 10.
---------------------------------------------------------------------------
99. Other commenters agree that no reliability gap exists and that
the Commission correctly noted that including cranking paths may
improperly bring distribution level elements into the bulk electric
system. Southern Companies and others contend that if a cranking path
that does not fall within the definition of bulk electric system but is
needed for reliability, the exception process would be the place to
make that determination.\94\ NESCOE states that cranking paths are
generally part of the distribution system and state regulators have the
responsibility to ensure the reliability of these lower voltage
facilities and are acutely aware of the importance of effective
blackstart capability. NESCOE adds that these facilities are needed for
restoration not for continuous operation.\95\ ODEC is concerned that
including cranking paths will create an incentive for generators not
making their units available for blackstart services. Alameda suggests
that ``any potential gap can be closed by requiring [t]ransmission
[o]perators (``TOPs'') that identify blackstart generation and a
related cranking path or paths in their system restoration plans to
analyze and enter into an operating agreement with the owner of
identified cranking path facilities not owned by the [transmission
operator].'' \96\
---------------------------------------------------------------------------
\94\ Southern Companies Comments at 7. See also TAPS Comments at
5.
\95\ NESCOE Comments at 10.
\96\ Alameda Comments at 6.
---------------------------------------------------------------------------
100. While other commenters agree that the term ``restoration
plan'' refers to the EOP Reliability Standards, they assert that
cranking paths should be included in the bulk electric system. Idaho
Power, ITC Companies and BPA assert that cranking paths are crucial to
system restoration and implicate reliability even if they are local
distribution or below 100 kV facilities.\97\ ITC Companies state that
not including cranking paths will cause regional differences and
inconsistent application resulting in some owners electing to
[[Page 818]]
exclude such assets. Without cranking paths included in the definition,
ITC Companies state that they will be ``required to ensure its
blackstart plan does not include blackstart generators connected to
transmission facilities at voltages below 100 kV since [they] could not
be assured that the proper standards are being followed for these
blackstart cranking paths.'' \98\
---------------------------------------------------------------------------
\97\ Idaho Power Comments at 4, ITC Companies at 3-4. See also
BPA Comments at 3-4.
\98\ ITC Comments at 5.
---------------------------------------------------------------------------
101. MISO recommends that the Commission clarify that the term
``restoration plan'' refers to the EOP Reliability Standards but not
include all blackstart resources in a Commission-approved tariff. MISO
is concerned that including blackstart resources from sources other
than the EOP Reliability Standards is not necessary for reliability and
could encourage generators to remove blackstart resources in order to
avoid being subject to ``unduly complex requirements.'' \99\
---------------------------------------------------------------------------
\99\ MISO Comments at 6.
---------------------------------------------------------------------------
Commission Determination
102. We find that NERC's inclusion of blackstart resources in the
definition is an improvement to the definition. We also agree with
NERC's statement that the ``restoration plan'' in inclusion I3 refers
to the restoration plans in the EOP Reliability Standards. With regard
to cranking paths, the Commission declines to include all cranking
paths regardless of voltage level. The Commission finds that cranking
paths operating at or above 100 kV are included in the bulk electric
system by the core definition, and if a cranking path that does not
fall within the definition of bulk electric system, (i.e. operating at
or above 100 kV) but is needed for reliability, such elements can be
included in the bulk electric system through the exception process. We
also disagree that not including cranking paths will cause regional
differences and inconsistent application resulting in some owners
electing to exclude such assets. The revised definition includes all
Transmission Elements at or above 100 kV. Thus, to the extent a
cranking path is operating at or above 100 kV and a ``Transmission
Element,'' it would be included in the bulk electric system. If a
cranking path is below 100 kV and is necessary for operation of the
interconnected transmission network or operates at or above 100 kV and
is not necessary for the operation of the interconnected transmission
network, the status of the cranking path may be determined in the
exception process. These steps will ensure consistent treatment across
the regions. In response to ITC Companies' concern that, without
cranking paths included in the definition it will be required to ensure
its blackstart plan does not include blackstart generators connected to
transmission facilities at voltages below 100 kV, we note that such
elements can be considered for inclusion through the exception process.
Similarly, with regard to NESCOE's statement that lower voltage
cranking paths are generally part of the distribution system, we note
that facilities operating below 100 kV would be excluded as part of
applying of the core definition. In addition, as we discuss above, in
certain instances the Commission will make determinations as to which
facilities are used in local distribution and thus should be excluded
from the bulk electric system.\100\
---------------------------------------------------------------------------
\100\ See supra PP 66-73.
---------------------------------------------------------------------------
103. With regard to PSEG Companies' request that the Commission
confirm that Reliability Standards do not apply to below 100 kV
cranking paths unless they are added to the bulk electric system by the
exception process, we find that PSEG Companies' request is outside the
scope of this proceeding but note that Reliability Standard EOP-005-2
addresses cranking paths with no voltage limits.\101\
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\101\ Reliability Standard EOP-005-2, Requirement R6 states
``[e]ach [t]ransmission [o]perator shall verify through analysis of
actual events, steady state and dynamic simulations, or testing that
its restoration plan accomplishes its intended function. This shall
be completed every five years at a minimum.'' Requirement R6.1
states that the transmission operator shall verify ``[t]he
capability of [b]lackstart [r]esources to meet the [r]eal and
[r]eactive [p]ower requirements of the [c]ranking [p]aths and the
dynamic capability to supply initial [l]oads.''
---------------------------------------------------------------------------
4. Inclusion I4 (Dispersed Power Producing Resources)
NOPR Proposal
104. NERC asserts inclusion I4, dispersed power producing resources
with aggregate capacity greater than 75 MVA (gross aggregate nameplate
rating), is needed ``to accommodate the effects of variable
generation'' on the bulk electric system.\102\ NERC further stated that
even though inclusion I4 could be considered subsumed in inclusion I2
(generating resources), NERC believes it is appropriate ``to expressly
cover dispersed power producing resources utilizing a system designed
primarily for aggregating capacity.'' \103\
---------------------------------------------------------------------------
\102\ NERC BES Petition at 18.
\103\ Id.
---------------------------------------------------------------------------
105. In the NOPR the Commission stated that inclusion I4 provides
``useful granularity'' in the bulk electric system definition, but
requested comment whether inclusion I4 includes ``the individual
elements (from each energy-producing resource at the site through the
collector system to the common point at a voltage of 100 kV or above)
used to aggregate the capacity and any step-up transformers used to
connect the system to a common point at a voltage of 100 kV or above.''
\104\
---------------------------------------------------------------------------
\104\ NOPR, 139 FERC ] 61,247 at P 71.
---------------------------------------------------------------------------
Comments
106. NERC states that the inclusion is meant to address the
dispersed power producing resources themselves, not the individual
elements of the collector systems operated below 100 kV. With regard to
energy delivery elements in collector systems and interconnection
facilities, NERC states these items were specifically not included in
inclusion I4. According to NERC, this decision was intended to avoid
categorically including as part of the bulk electric system assets that
may include local distribution facilities. EEI believes that inclusion
I4 applies to generating resources meeting the threshold in the
aggregate, not the individual generating units. EEI agrees with NERC
that the inclusion does not include individual elements of the
collector systems operated below 100 kV. LPPC believes that generating
units aggregating to 75 MVA are often very small and non-dispatchable,
and the reliability implications of these units will be negligible but
the compliance burden would be quite high.
107. Several commenters urge the Commission to not interpret
inclusion I4 as including wind turbines and electrical collector
systems within a wind plant and only include the electrical equipment
at the point of interconnection with the bulk electric system.\105\
AWEA believes that including all this equipment will potentially burden
the owners with NERC compliance processes that were intended for large
scale generators. AWEA argues that the ``main transformer's high-side
terminal and the generator lead/tie line'' should also be excluded
unless another generator connects to the initial generator's
facilities.\106\ AWEA asserts that no one has demonstrated that there
is any material reliability benefit from including resources envisioned
by inclusion I4. AWEA and others state that if the Commission believes
such resources should be included, such inclusion should be done on a
case-by-case basis rather than generically.\107\
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\105\ See, e.g., AWEA, Southern Companies, Consumer Energy, BPA.
Hydro One, G&T Cooperatives, and ISO New England.
\106\ AWEA Comments at 2.
\107\ E.g., Idaho Power.
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[[Page 819]]
108. Along the same lines, NESCOE believes that, absent a
reliability risk a generic inclusion could adversely impact state
policies to encourage renewable generation development by imposing
additional costs. NESCOE states that setting the line for inclusion at
75 MVA is not supported by technical analysis since intermittent
sources of power deliver only a fraction of their nameplate rating.
NESCOE believes 300 MVA is a better threshold.
109. ISO New England contends that the term ``common point'' is
unclear and notes that the inclusion could be interpreted to mean that
if the individual generating units are ``all collected at 34.5 kV, the
`common point' is at 34.5 kV and the entire group of resources should
be found to be [not part of the bulk electric system].'' \108\ ISO New
England believes this is not an appropriate interpretation because it
would defeat the intent of the inclusion which is to classify large
aggregated generating stations as part of the bulk electric system.
Similarly, Springfield questions the meaning of ``collector system''
and proposes language to define it.\109\
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\108\ ISO New England Comments at 7.
\109\ Springfield proposes to add the following sentence at the
end of inclusion I4: ``For purposes of this inclusion, a Collector
System is any infrastructure not connected to load--where parasitic
load associated with a generation unit or units is not considered
load.''
---------------------------------------------------------------------------
110. SmartSenseCom states that facilities over a certain
significant nameplate rating that are stepped up to over 100 kV should
be subject to Reliability Standards in light of their potential impact
to system reliability. SmartSenseCom suggests that the Commission
direct NERC to modify inclusions I2 and I4 in order to ensure that
generating units that are stepped up to 100 kV or above by the use of a
transformer with a low side of less than 100 kV (or multiple contiguous
transformers of less than 100 kV on the low side) are also included
within this definition.\110\
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\110\ SmartSenseCom Comments at 12.
---------------------------------------------------------------------------
111. MISO recommends that the Commission withdraw its proposal to
approve inclusion I4. MISO believes inclusion I4 is unnecessary given
the criteria in inclusion I2. MISO states that elements meeting the
criteria in inclusion I2 would be considered part of the bulk electric
system, irrespective of whether it is considered a dispersed power
producing resource. MISO adds that a specific inclusion for dispersed
power producing resources could subject the collector systems to
unnecessary monitoring by the reliability coordinator or other
registered entities as collector systems at dispersed power producing
facilities generally do not affect the reliability of the bulk electric
system.
Commission Determination
112. The Commission finds that inclusion I4 provides useful
granularity in the bulk electric system definition. The clarifying
language in inclusion I4 regarding the collector system language is
consistent with language in the Registry Criteria, section III.c.2. The
Commission agrees that it is appropriate ``to expressly cover dispersed
power producing resources utilizing a system designed primarily for
aggregating capacity.'' \111\
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\111\ NERC BES Petition at 18.
---------------------------------------------------------------------------
113. As the Commission previously stated in the inclusion I2
discussion, multiple step-up transformers that are solely used to
deliver the generation to the bulk electric system at 100 kV or above
qualify the generator or plant/facility and the step-up transformers
for inclusion in the bulk electric system.
114. Similarly, the collector system in inclusion I4, described by
NERC and others as being designed for aggregating capacity and solely
used to deliver the aggregated capacity to the bulk electric system at
100 kV and above, falls into the category of multiple step-up
transformers through the high side of the main transformer that
connects to 100 kV or above. NERC reasons that proposed inclusion I4
was intended to avoid categorically including assets that may include
local distribution facilities. While we believe most collector systems
operate below 100 kV, the Commission disagrees that collector systems
described in inclusion I4 that solely deliver aggregated generation to
the bulk electric system contain local distribution facilities because
power is delivered from the collector system to the bulk electric
system. However, the Commission will not direct NERC to categorically
include collector systems pursuant to inclusion I4.
115. We disagree with AWEA and other commenters that contend that
inclusion I4 should be interpreted to not include the dispersed power
producing resources within a wind plant in the bulk electric system. We
agree with NERC's statement that the purpose of this inclusion is to
include such variable generation (e.g., wind and solar resources). NERC
noted that, while such generation could be considered subsumed in
inclusion I2 (because the gross aggregate nameplate rating of the power
producing resources must be greater than 75 MVA), NERC considered it
appropriate for clarity to add this separately-stated inclusion to
expressly cover dispersed power producing resources using a system
designed primarily for aggregating capacity. In addition, although
dispersed power producing resources (wind, solar, etc.) are typically
variable suppliers of electrical generation to the interconnected
transmission network, there are geographical areas that depend on these
types of generation resources for the reliable operation of the
interconnected transmission network. The Commission believes that
owners and operators of these resources that meet the 75 MVA gross
aggregate nameplate rating threshold are, in some cases, already
registered and have compliance responsibilities as generator owners and
generator operators. Regarding AWEA's request that a transformer's
high-side terminal and the generator lead line should also be excluded,
such determinations may be made on a case-by-case basis in the
exception process. With regard to commenters who believe that dispersed
power producing resources should be included on a case-by-case basis
rather than generically, this would be inconsistent with the bright-
line concept that NERC developed to have consistent application of the
definition across the country. If such generating resources are
included through inclusion I4, they are eligible for exclusion through
use of the exception process. With respect to the concern raised by ISO
New England regarding the term ``common point,'' ISO New England may
raise this concern in NERC's Phase 2 development effort.
5. Inclusion I5 (Static or Dynamic Reactive Power Devices)
NOPR Proposal
116. Inclusion I5 identifies as part of the bulk electric system
``[s]tatic or dynamic devices (excluding generators) dedicated to
supplying or absorbing Reactive Power that are connected at 100 kV or
higher, or through a dedicated transformer with a high-side voltage of
100 kV or higher, or through a transformer that is designated in
Inclusion I1.'' In its petition, NERC explained that this inclusion is
the technical equivalent of inclusion I2 (generating resources), for
reactive power devices and points out that the existing definition is
unclear as to how these devices are treated.\112\ NERC stated inclusion
I5 provides clarity by ``providing specific criteria for Reactive Power
devices, thereby further limiting subjectivity and the potential for
[[Page 820]]
discretion'' in the application of the revised definition.\113\
---------------------------------------------------------------------------
\112\ NERC BES Petition at 18.
\113\ Id.
---------------------------------------------------------------------------
117. In the NOPR, the Commission agreed with NERC that inclusion I5
adds clarity to the application of the bulk electric system definition
by providing specific criteria for reactive power devices. For cases
where the reactive power device is connected through a transformer
designated in inclusion I1, the Commission requested comment whether
both the reactive power device and the transmission elements connecting
the reactive power device to the transformer are included as part of
the bulk electric system pursuant to inclusion I5.\114\
---------------------------------------------------------------------------
\114\ NOPR, 139 FERC ] 61,247 at P 73.
---------------------------------------------------------------------------
Comments
118. NERC and other commenters note that inclusion I5 is intended
to include the reactive resource itself and the other portions of the
definition are intended to designate whether the remaining electrical
components are part of the bulk electric system.\115\ NERC, EEI,
National Grid, Utility Services and G&T Cooperatives refer to inclusion
I1 as the proper place to determine whether transformers connected to
reactive devices are included as part of the bulk electric system.
---------------------------------------------------------------------------
\115\ E.g., EEI.
---------------------------------------------------------------------------
119. BPA and WPPC support excluding both the reactive device and
the transformer from the bulk electric system if the device supports
local distribution. Conversely, if the facilities provide reactive and
voltage support to the bulk electric system, the reactive device and
associated equipment, such as the transformer, should be classified as
a bulk electric system facility.
120. AEP considers the transmission elements connecting the
reactive power device to the transformer to be included in the bulk
electric system definition and should be deemed part of inclusion
I5.\116\ Idaho Power contends that both the reactive device and the
transformer should be included in the bulk electric system. Idaho Power
states that if the transformer is included as part of inclusion I1,
then it should be included.\117\
---------------------------------------------------------------------------
\116\ AEP Comments at 4.
\117\ Idaho Power Comments at 5.
---------------------------------------------------------------------------
121. PSEG Companies view the issue as one of ``bulk electric system
contiguity'' and therefore should be addressed during Phase 2. MISO
recommends that the Commission require NERC to include a size threshold
or an impact test. According to MISO, this will avoid creating
incentives to owners of small reactive devices to disconnect them to
avoid being classified as transmission owners or operators. With regard
to transformers, MISO states that both the reactive power device and
the transmission elements are included, but because these facilities
have a generally localized impact on reliability, MISO recommends that
the Commission clarify that they are not transmission equipment that
subjects their owners and operators to the requirements applicable to
registered transmission operators under the NERC Reliability Standards.
122. G&T Cooperatives suggest two clarifications. First, inclusion
I5 should not apply to reactive power devices that are connected to the
bulk electric system by a radial line excluded by exclusion E1 or a
local network excluded by exclusion E3. G&T Cooperatives view this
exclusion as implicit in inclusion I5, which references devices
``connected at 100 kV or higher, or through a dedicated transformer
with a high-side voltage of 100 kV or higher, or through a transformer
that is designated in [i]nclusion I1.'' Second, G&T Cooperatives
believe that inclusion I5 should be clarified to include a minimum size
threshold similar to the size threshold for generating resources under
Inclusion I2. According to G&T Cooperatives because inclusion I2 does
not apply to all generating resources and inclusion I5 is the
``technical equivalent'' of inclusion I2, a size threshold comparable
to that found in inclusion I2 is implicit for reactive power devices.
Commission Determination
123. The Commission approves inclusion I5 and finds that the
inclusion adds clarity to the application of the bulk electric system
definition by providing specific criteria for reactive power devices.
The Commission also accepts NERC's response for cases where the
reactive power device is connected through a transformer designated in
inclusion I1--that the reactive resource itself is included in the bulk
electric system pursuant to inclusion I5 and the transmission elements
connecting the reactive power device to the transformer are addressed
in other portions of the definition. The Commission notes that this
interpretation is different from inclusion I2 because inclusion I2
specifies including the equipment (step-up transformers) that connects
generators to the bulk electric system. Nonetheless inclusion I5
provides criteria for reactive power devices that are not explicitly
addressed in the existing definition. The Commission does not agree
with G&T Cooperatives that exclusions E1 and E3 override inclusion I5
and exclude the reactive power devices. Exclusions E1 and E3 exclude
transmission elements only and not resources.
124. The Commission agrees with PSEG Companies that issues, such as
whether the connecting equipment for reactive devices should be
included pursuant to inclusion I5, can be raised in Phase 2. Similarly,
the issues raised by AEP, Idaho Power, MISO and G&T Cooperatives may be
raised in NERC's Phase 2 effort.
Exclusions
125. The proposed definition identifies four facilities
configurations that should not be included in the bulk electric system:
(1) Radial systems; (2) behind-the-meter generating units; (3) local
networks; and (4) retail customer reactive power devices.
126. We agree that the proposed exclusions provide clarity and
granularity. For example, the exclusion of generating units on the
customer's side of the retail meter that serves all or part of the
retail load (exclusion E2) and the exclusion for reactive power devices
owned and operated by a retail customer for its own use (exclusion E4)
provide reasonable limitations on bulk electric system elements. While
we approve in the Final Rule the language of exclusions E1, E2 and E4,
we have concerns with regard to the application of exclusions E1 and E3
in specific situations and, thus, direct NERC to implement or apply
these exclusions consistent with the determinations set forth below. In
addition, we direct NERC to remove the 100 kV minimum operating
threshold language from exclusion E3.
6. Exclusion E1 (Radial Systems)
127. Exclusion E1 provides as follows:
Radial systems: A group of contiguous transmission Elements that
emanates from a single point of connection of 100 kV or higher and:
(a) Only serves Load. Or,
(b) Only includes generation resources, not identified in
Inclusion I3, with an aggregate capacity less than or equal to 75
MVA (gross nameplate rating). Or,
(c) Where the radial system serves Load and includes generation
resources, not identified in Inclusion I3, with an aggregate
capacity of non-retail generation less than or equal to 75 MVA
(gross nameplate rating).
Note--A normally open switching device between radial systems,
as depicted on prints or one-line diagrams for example, does not
affect this exclusion.
[[Page 821]]
In its petition, NERC explained that radial facilities are excluded
under the currently effective bulk electric system definition, and the
detailed criteria in the revised definition provide enhanced
clarity.\118\
---------------------------------------------------------------------------
\118\ NERC BES Petition at 18.
---------------------------------------------------------------------------
Commission Determination
128. The Commission approves exclusion E1. We agree with NERC that
the currently-effective definition of bulk electric system excludes
radial facilities, and the modifications provide additional granularity
regarding the radial exclusion. In the NOPR, the Commission requested
comment regarding specific applications of the E1 radial system
exclusion. Below, we discuss these applications and comments received,
and provide further explanation or direction as we deem appropriate.
a. Exclusion E1 Does Not Apply to Whether Generation Is Included or
Excluded
NOPR Proposal
129. In the NOPR, the Commission requested comment on whether
exclusion E1 removes from the bulk electric system ``generation
connected to a radial system that otherwise satisfies inclusion I2.''
\119\ The Commission sought to ensure that the conditions in exclusion
E1 would not ``lead to conflicting results when applying inclusion I2
and exclusion E1.\120\ The Commission noted that exclusion E1 applies
to ``a group of contiguous transmission Elements that emanates from a
single point of connection of 100 kV or higher * * *.'' \121\ The
Commission observed that the term ``Elements'' includes the term
generator, and that the use of the term ``transmission'' before
``Elements'' indicates that exclusion E1 applies only to transmission
elements.\122\ Thus, the Commission stated that ``transmission
Elements'' do not include generating resources that are bulk electric
system resources pursuant to the generating resources included in
inclusion I2 connected to a radial line operated at 100 kV above.\123\
---------------------------------------------------------------------------
\119\ NOPR, 139 FERC ] 61,247 at P 76.
\120\ Id.
\121\ NOPR, 139 FERC ] 61,247 at P 77.
\122\ ``Element'' is defined in the NERC Glossary as ``[a]ny
electrical device with terminals that may be connected to other
electrical devices such as a generator, transformer, circuit
breaker, bus section, or transmission line. An element may be
comprised of one or more components.'' (emphasis added).
\123\ See NOPR, 139 FERC ] 61,247 at P 77 and n.100 (citing NERC
BES Petition, Exh. D, Consideration of Comments Report, at 223
(``Exclusion E1 is an exclusion for the contiguous transmission
Elements connected at or above 100 kV.'')).
---------------------------------------------------------------------------
Comments
130. NERC confirms that exclusion E1 does not apply to nor is it
determinative of whether any generation is included or excluded from
the bulk electric system. NERC states that, whether or not generation
is included in the bulk electric system is determined by inclusions I2
through I4 and exclusion E2. Other commenters, including EEI, SoCal
Edison, TAPS, Hydro One, and Alameda, also state that exclusion E1 does
not apply to generating resources. Southern Companies suggest that the
use of the term ``includes'' in subparts (b) and (c) could lead to some
ambiguity because the implication is that a radial system includes
generating resources. Southern Companies suggests that, the word
``serves'' should replace the word ``include'' to better reflect the
intent of the provision.
131. PSEG Companies state there is confusion created by the fact
that generators included in one provision of the definition (inclusion
I2) are excluded under others (exclusions E1 through E3). According to
PSEG Companies, a generator cannot be included under one provision of
the bulk electric system definition and excluded under another
provision and that this issue requires clarification and, once
clarified, the bulk electric system definition needs to be modified
accordingly.\124\
---------------------------------------------------------------------------
\124\ PSEG Comments at 11-13.
---------------------------------------------------------------------------
132. SmartSenseCom states that in the event of a conflict between
an inclusion and exclusion, ``there should exist a presumption that the
[e]lement be considered included, absent an [e]xception'' and asks that
the Commission direct NERC to include a provision that states this
presumption.\125\
---------------------------------------------------------------------------
\125\ SmartSenseCom Comments at 13.
---------------------------------------------------------------------------
Commission Determination
133. The Commission finds that the radial system exclusion only
applies to ``transmission Elements'' and does not apply to nor is it
determinative of whether any generation is included or excluded from
the bulk electric system. This understanding is consistent with NERC's
defined terms, and consistent with the comment of NERC and other
commenters. Further, in response to Southern Companies, AEP and PSEG
Companies, we believe that the language of exclusion E1 is sufficiently
clear that it does not exclude generation facilities that are otherwise
included as part of the bulk electric system pursuant to inclusion I2.
Thus, we will not direct NERC to modify exclusion E1 to state this more
explicitly. We agree with SmartSenseCom that exclusion E1 should not
lead to conflicting results when applying inclusion I2, but we decline
to direct NERC to include a provision that specifically states this
presumption.
b. Definition of ``Radial Systems,'' Figure 1 and Condition (a) Radials
Only Serving Load
NOPR Proposal
134. Exclusion E1 defines the term ``radial systems'' as ``a group
of contiguous transmission Elements that emanates from a single point
of connection of 100 kV or higher.'' In the NOPR, the Commission
requested comment on how NERC's proposal would be applied in the three
scenarios. Figure 1 in the NOPR depicted facilities configurations in
which all of the 230 kV and 69 kV transmission elements emanate from a
single point of connection of 100 kV or higher. The Commission
requested comment on whether each of the radial systems shown in figure
1, the 230 kV elements above each transformer to the point of
connection to each 230 kV line, respectively, are excluded from the
bulk electric system pursuant to exclusion E1.
[[Page 822]]
[GRAPHIC] [TIFF OMITTED] TR04JA13.000
Comments
135. NERC and other commenters state that both radial systems
depicted in figure 1 would be subject to exclusion E1(a) because they
each only serve load.\126\ ELCON agrees with NERC adding that these
types of radial systems pose no reliability risk to the interconnected
transmission network if the system is lost due to a fault condition.
Similarly, SoCal Edison states that the figure 1 facilities would
either be excluded or not part of the bulk electric system. SoCal
Edison asserts that, because transformers 1 and 2 each have secondary
voltages that are less than 100 kV, they do not meet the inclusion I1
requirements and, thus, are not included in the bulk electric system.
In other words, SoCal Edison believes exclusion E1 should exclude all
radial facilities that are greater than 100 kV up to the point where
``the system is no longer radial, as indicated in figure 1 by the
brackets where the 230 kV lines meet [lines 1 and 2].'' \127\ APPA
believes that all the scenarios described by the Commission could
create reliability concerns ``if taken in isolation and operated in a
certain matter'' and believes that the exception process can capture
configurations that pose a significant risk to the reliable operation
of the interconnected transmission network. Idaho Power maintains that
it is inappropriate to apply exclusion E1 for 230 kV elements in the
scenarios if the breakers are part of the protection scheme for a three
terminal 230 kV line. Idaho Power adds that if either breaker only
opens for transformer protection, the exclusion would be applicable.
---------------------------------------------------------------------------
\126\ E.g., Southern Companies, AEP, National Grid, TAPS, ISO
New England, Barrick, IUU, and WPPC.
\127\ SoCal Edison Comments at 5.
---------------------------------------------------------------------------
136. Anaheim agrees that the radials shown in figure 1 should be
excluded and requests clarification that the associated bus work and
protection system equipment installed on those radial lines are also
excluded. Anaheim advocates that the exclusion should also apply to
protection system equipment on the excluded facilities that provide
backup protection for devices that are part of the bulk electric
system, i.e. lines 1 and 2 in figure 1.
137. BPA is concerned about excluding the 230 kV lines without
review by a planning authority or transmission operator because the
fault magnitude on voltages above 200 kV are much higher than below 200
kV lines. BPA states that since actual power flows on systems above 200
kV are much higher, these systems have a higher risk for serious
impacts on the interconnected transmission system.
138. Holland supports the exclusion of radial systems but contends
that the phrase ``emanates from a single point of connection'' could be
too narrowly interpreted. According to Holland, multiple buses within a
single substation could be viewed as multiple points of connections.
Holland believes that an entity whose connection emanates from a single
substation should not be denied an exclusion solely because it connects
to multiple buses at the single substation.
139. Consumers argues that the exclusion of 100 kV radial systems
that only serve load exceeds the Commission's jurisdiction and the
Seven Factor Test.\128\ Consumers believes that exclusion E1(a) would
exclude radials that only serve load and this phrase expands the
Commission's jurisdiction by classifying 100 kV distribution systems
that primarily serve load but could also have a secondary purpose.
Consumers also argues that this exclusion is inconsistent with the
Seven Factor Test which examines
[[Page 823]]
whether local distribution facilities are ``primarily'' radial in
character. Further, Consumers argues that the Commission should not
adopt a rule that exceeds its jurisdiction or constitutes a collateral
attack on the local distribution findings of the Seven Factor Test.
---------------------------------------------------------------------------
\128\ Consumers cites to Detroit Edison Co. v. FERC, 334 F.3d 48
(D.C. Cir 2003) as support for its belief that the Commission cannot
rewrite the FPA to exclude only facilities used exclusively in local
distribution. See Consumers comments at 7.
---------------------------------------------------------------------------
Commission Determination
140. The Commission agrees with NERC that the radial systems shown
in figure 1 meet the definition of ``radial system'' in exclusion E1.
This configuration would result in the 230 kV lines between
transformers 1 and 2 to the two 230 kV lines, respectfully, being
excluded from the bulk electric system. The Commission agrees with NERC
and other commenters that both radial systems depicted in figure 1
would be subject to exclusion E1 condition (a) because they each only
serve load.
141. Idaho Power, BPA and Anaheim raise concerns about protection
system equipment and design, needed for analysis by the planning
authority and transmission operator, while APPA states that all
scenarios described by the Commission could create reliability
concerns. Regarding these concerns, the Commission agrees with APPA
that the exception process can be used to add to the bulk electric
system specific configurations that pose a significant risk to the
operation of the interconnected transmission network.
142. The Commission disagrees with Holland's interpretation that
the phrase ``emanates from a single point of connection'' can refer to
multiple buses. The phrase refers to a single point, and if there is
more than one point of connection the configuration does not meet the
radial system definition as stated in exclusion E1. NERC, in the
standard development process, emphasized that radial systems cannot
have multiple connections at 100 kV or higher. Networks that have
multiple connections at 100 kV or higher may qualify under exclusion
E3.\129\
---------------------------------------------------------------------------
\129\ NERC BES Petition, Exhibit E, ``Complete Development
Record of the Proposed Revised Definition of ``Bulk Electric
System,'' Consideration of Comments on Initial Ballot--Definition of
BES,'' at 259.
---------------------------------------------------------------------------
143. The Commission also disagrees with Consumers that the
exclusion of 100 kV radial systems that only serve load expands the
Commission's jurisdiction by classifying 100 kV distribution systems
that primarily serve load, but may also have a secondary purpose, as
transmission. First, exclusion E1 condition (a) reflects the language
contained in the current bulk electric system definition and therefore,
is itself not an expansion from the existing definition. In addition,
as NERC stated, application of the definition is a three-step process.
In step 1, the core definition is used to establish the bright line of
100 kV, the overall demarcation point between bulk electric system and
non-bulk electric system elements. Step 2, applying the specific
inclusions, provides additional clarification for the purposes of
identifying specific elements that are included in the bulk electric
system. Step 3 is to evaluate specific situations for potential
exclusion from the bulk electric system. Further, an entity may seek a
case-specific exception if it believes that facilities with radial
qualities that are not excluded pursuant to exclusion E1 or petition
the Commission when seeking a determination whether a facility,
otherwise included in the bulk electric system, is used in local
distribution. Thus, merely applying the definition, and the inclusions
or exclusions is not necessarily the end of the inquiry regarding
whether an element is part of the bulk electric system.
c. Figure 2 and Condition (a) Radials Serving Only Load
NOPR Proposal
144. In the NOPR, the Commission requested comment on the scenario
shown in figure 2 which shows a 115 kV loop, with the configuration
emanating from two points of connection of 100 kV or higher.
Specifically, the Commission requested comment on whether ``the 115 kV
and 230 kV elements above Transformers 1 and 2 to the points of
connection to the two 230 kV lines would be excluded from the bulk
electric system pursuant to exclusion E1.'' \130\ The Commission asked
for comment on whether it is more appropriate to analyze figure 2
pursuant to the ``local network'' exclusion E3 and, if so, what if any
elements operated at or above 100 kV would be excluded pursuant to
exclusion E3.
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\130\ NOPR, 139 FERC ] 61,247 at P 80.
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[[Page 824]]
[GRAPHIC] [TIFF OMITTED] TR04JA13.001
Comments
145. NERC states that figure 2 is a non-radial loop on the 115 kV
system. According to NERC, the 115 kV elements above transformers 1 and
2 to the point of interconnection with lines 1 and 2 would not be
eligible for exclusion E1 because they do not emanate from a single
point of connection. NERC also states that it would be appropriate to
evaluate figure 2 under exclusion E3 as a potential local network.\131\
For such a candidate local network to qualify for exclusion, NERC
states that additional technical analysis is needed to determine if all
the exclusion E3 criteria are satisfied.\132\ NERC asserts that without
such a technical analysis, the 115 kV elements above transformers 1 and
2 should be considered part of the bulk electric system.
---------------------------------------------------------------------------
\131\ See also Comments of NESCOE, BPA, Idaho Power, ITC
Companies, and National Grid.
\132\ E.g., ISO New England Comments at 10, MISO Comments at 7.
---------------------------------------------------------------------------
146. Likewise, Idaho Power, ITC Companies, and National Grid
contend that the figure 2 configuration should be included in the bulk
electric system. Southern Companies believe exclusion E1 may apply from
the breakers down and that the configuration may belong to exclusion
E3. AEP assumes that each of the facilities below the 115 kV loop shown
in figure 2, and including breaker 1 and breaker 2, are radial and
excluded pursuant to exclusion E1. According to AEP, the facilities
above breakers 1 and 2 may be excluded pursuant to exclusion E3
depending on the circumstances.\133\
---------------------------------------------------------------------------
\133\ AEP Comments at 7.
---------------------------------------------------------------------------
147. Valero states that the figure 2 configuration is very similar
to common facilities configurations employed in many industrial
facilities involving the interconnection of the industrial facility to
the utility through two high voltage feeder lines that originate at
different utility owned and operated substations. Valero requests that
the Commission include in the final rule an additional exclusion that
would ``categorically exclude from the [bulk electric system] any on-
site high voltage switchyard facilities (less than 300 kV) owned by the
industrial end-user where the predominant function of the facilities is
to distribute electricity in an inward direction to the end-user's
load.'' \134\ WPPC argues that figure 2 shows both radial and network
systems and that the system from the 115 kV loop upwards would be
assessed under exclusion E3 and below that point would be assessed by
exclusion E1.
---------------------------------------------------------------------------
\134\ Valero Comments at 8.
---------------------------------------------------------------------------
Commission Determination
148. The Commission affirms NERC's statement that figure 2 is a
non-radial loop and thus would not be eligible for exclusion E1 because
it does not emanate from a single point of connection. The Commission
agrees with commenters that the elements below the 115 kV loop should
be assessed as two separate radial systems pursuant to exclusion E1.
The remaining elements (the 115 kV loop, transformers 3 and 4 and the
230 kV tie lines above the transformers to the two 230 lines 1 and 2)
should be assessed pursuant to exclusion E3 and if the configuration
meets the criteria of exclusion E3, the elements could be excluded.
149. Regarding Valero's request for an additional exclusion if
equipment owners' configurations cannot meet the exclusion E3 criteria,
Valero can request that the elements be excluded through the exception
process. The exception process allows equipment owners to request an
exception regardless of the owner's registration status.
[[Page 825]]
d. Figure 3 and Condition (a) Radials Only Serving Load
NOPR Proposal
150. In the NOPR, the Commission agreed with NERC's proposal that
radial systems only serving load and emanating from a single point of
connection of 100 kV or higher should be excluded from the bulk
electric system. However, the Commission expressed concern ``that the
exclusion could allow elements operating at 100 kV or higher in a
configuration that emanates from two or more points of connection ``to
be deemed ``radial'' even though the configuration remains contiguous
through elements that are operated below 100 kV.'' \135\ Figure 3 in
the NOPR illustrated this concern, and the Commission asked for comment
on how to evaluate the configuration relative to the radial system
definition. The Commission also requested comment on the
appropriateness of examining elements below 100 kV to determine if the
configuration meets exclusion E1, i.e., whether figure 3 depicts ``a
system emanating from two points of connection at 230 kV and,
therefore, the 230 kV elements above the transformers to the points of
connection to the two 230 kV lines would not be eligible for the
exclusion E1 notwithstanding the connection below 100 kV.'' \136\
---------------------------------------------------------------------------
\135\ NOPR, 139 FERC ] 61,247 at P 81.
\136\ Id.
[GRAPHIC] [TIFF OMITTED] TR04JA13.002
Comments
151. NERC disagrees with the Commission's characterization of
figure 3 in the NOPR. NERC states that figure 3 does not depict a
configuration with two points of 100 kV or higher or a system emanating
from two points of connection at 230 kV. According to NERC, except for
lines 1 and 2, all the other elements depicted in figure 3 are excluded
from the bulk electric system. NERC explains that the elements between
line 1 and transformer 2 and from line 2 to transformer 1 are excluded
by exclusion E1(a) because ``each separate set of [e]lements [described
above] is contiguous and emanate from a single point of connection of
100 kV or higher.'' \137\ NERC states that the elements below the 69 kV
side of transformers 1 and 2 are excluded from the definition because
they are less than 100 kV, and transformers 1 and 2 are excluded
because they ``bridge voltages of 69 kV and 230 kV'' and therefore do
not meet inclusion I1.
---------------------------------------------------------------------------
\137\ NERC Comments at 19.
---------------------------------------------------------------------------
152. NERC further explains that the focus of the definition of bulk
electric system is on looped or networked connections at or above 100
kV. According to NERC, connections operated below 100 kV, generally do
not carry significant parallel flow due to the higher impedance of
lower voltage facilities. If such facilities are necessary for the
reliable operation of the interconnected transmission network, NERC
states that the exception process can be used to include such
facilities.
153. Exelon agrees with NERC and explains that it has many
connections similar to the one shown in figure 3 and provides a
specific example where a 138 kV substation is fed by two radially
connected 138 kV lines which in turn are connected through 40 MVA
transformers to a 12 kV bus section. Exelon states that in its example
the 40 MVA transformers cross bus sections so that if one of the 138 kV
lines is out of service, each side of the 12 kV bus retains service.
Exelon believes that due to the high impedance of the transformers,
little energy flows between the buses in Exelon's
[[Page 826]]
example.\138\ Exelon states that owners and operators of these
configurations would be required to go through the exception process.
---------------------------------------------------------------------------
\138\ Exelon Comments at 6. TAPS states that impedance is
inversely proportional to the square of the voltage of the network
and power flow is inversely proportional to the impedance. According
to TAPS, impedance factors are very significant in limiting the
amount of parallel path flows. TAPS Comments at 7.
---------------------------------------------------------------------------
154. Other commenters believe that the figure 3 configuration may
not be eligible for exclusion E1. SoCal Edison explains that the 69 kV
loop is not open and therefore is a parallel path to the 230 kV system.
BPA, Alameda and WREA do not view the figure 3 system as eligible for
exclusion E1 because the system is networked. Idaho Power states that
the 230 kV lines would be included only if there is a protection system
in place for the 230 kV lines. According to Idaho Power, the elements
above the transformers in figure 3 would not be excluded from the bulk
electric system. Idaho Power believes this configuration should be
evaluated under exclusion E3.
Commission Determination
155. The Commission finds figure 3, which is identical to figure 5,
is a networked configuration through a 69 kV loop and does not qualify
for exclusion E1. The Commission also finds that, because the load in
figure 3 can be served by either 230 kV line, it does not depict a
``radial system.'' However, the facilities below 100 kV may or may not
be necessary for the operation of the interconnected transmission
network, and this decision can be made case-by-case in the exception
process. In other words, such facilities below 100 kV depicted in
figure 3 would be excluded under the general threshold of the core
definition unless found on a case-specific basis as necessary for the
reliable operation of the interconnected transmission network. Thus,
the Commission, while disagreeing with NERC's interpretation, does not
propose to include the below 100 kV elements in figure 3 in the bulk
electric system, unless determined otherwise in the exception process.
Further, as we discuss below in connection with exclusion E3 and figure
5, while we find that the configuration shown in figures 3 and 5 would
not be eligible for exclusion E1, we believe that such configurations
should be eligible for exclusion E3 for local networks. However,
exclusion E3 as written requires the candidate local network to be
contiguous and above 100 kV, thus, the exclusion E3 language as written
does not allow for figures 3 and 5 to be eligible for the local network
exclusion because they are not contiguous and include facilities that
are not above 100 kV. Therefore, we direct NERC to modify exclusion E3
to remove the 100 kV minimum operating voltage in the local network
definition. This modification will enable configurations similar to
figures 3 and 5 to be assessed for the local network exclusion. The
Commission believes this modification, together with satisfying the
criteria outlined in exclusion E3, will appropriately exclude local
network configurations that are not necessary to the reliable operation
of the interconnected transmission network.\139\
---------------------------------------------------------------------------
\139\ NERC and Exelon contend that looped or networked
connections operating below 100 kV generally do not carry
significant parallel flow because of higher impedance
characteristics and thus need not be evaluated as part of a radial
system. However, the Commission believes that excluding these
configurations solely on the level of impedance does not consider
other factors, including voltage, the system configuration, type of
conductors, length of conductors, and proximity of the networked
system in the interconnected transmission network. Regardless of our
disagreement with NERC and Exelon regarding the consideration of
impedance, however, as we discuss above, configurations such as
those described by Exelon may be assessed for exclusion through
exclusion E3, which apply criteria to determine whether such
facilities are necessary for reliable operation of the
interconnected transmission network. Accordingly, the inclusion or
exclusion of such facilities is better determined through
application of exclusion E3, or case-by-case in the exception
process.
---------------------------------------------------------------------------
e. Condition (b)--Radials With Limited Generation and Condition (c)--
Radials With Limited Generation and Load
NOPR Proposal
156. Exclusion E1, condition (b) describes generation connected to
a radial system with no load, and condition (c) describes generation
connected to a radial system with generation and load. In its petition,
NERC stated that conditions (b) and (c) are ``intended to address the
circumstances of small utilities (including municipal utilities and
cooperatives).'' \140\
---------------------------------------------------------------------------
\140\ NERC BES Petition at 19.
---------------------------------------------------------------------------
157. In the NOPR, the Commission requested comment regarding the
specific circumstances that conditions (b) and (c) are intended to
address. In addition, the Commission observed that the power generated
on these radial systems would be ``delivered or injected to the bulk
electric system and transported to other markets.'' \141\ The
Commission noted that it appeared that a line 100 kV or above connected
to a generator with a capacity 75 MVA or below would not be included in
the bulk electric system. The Commission requested comment on the
appropriateness of excluding such radial facilities.
---------------------------------------------------------------------------
\141\ NOPR, 139 FERC ] 61,247 at P 83.
---------------------------------------------------------------------------
Comments
158. With respect to applicability to small utilities, NERC states
that exclusion E1, conditions (b) and (c) are not intended solely for
such entities. According to NERC, these conditions are intended to
exclude radial systems that have limited benefit to the reliability of
the interconnected transmission network. NERC states that the
configurations described in exclusion E1(b) and (c) ``pose no
reliability risk to the interconnected transmission network when the
radial system is lost due to a failure or fault condition.'' \142\
---------------------------------------------------------------------------
\142\ NERC Comments at 20.
---------------------------------------------------------------------------
159. NERC states that the basis for exclusion E1(b) ``is dependent
on a single point of failure causing the radial system to separate''
from the bulk electric system, which will result in a limited loss of
generation without an adverse reliability impact to the interconnected
transmission network.'' \143\ NERC explains that exclusion E1(c)
addresses the installation of limited amounts of generation that are
installed within a radial system and are intended to serve local load
within that radial system.
---------------------------------------------------------------------------
\143\ NERC Comments at 20.
---------------------------------------------------------------------------
160. In response to the Commission's question about the delivery or
injection of power from the radial systems described in these
exclusions, NERC states that because of the limitation of the
generation in exclusion E1(b) and (c), the power generated on the
radial system would be delivered to the embedded load within the radial
system and injected into the bulk electric system in very limited
quantities. NERC argues that subjecting the elements associated with
this type of radial system to all the Reliability Standards has limited
benefit to the reliability of the interconnected transmission network.
NERC believes it is more appropriate to identify these elements through
the ``the applicability in specific standards where a reliability
benefit can be identified.'' \144\
---------------------------------------------------------------------------
\144\ NERC Comments at 21-22.
---------------------------------------------------------------------------
161. A number of commenters agree with NERC.\145\ Idaho Power
states that the exclusion is appropriate if the generation connected to
the radials is not relied on to meet reliability performance criteria
on bulk electric system elements. Idaho Power indicates that it follows
the WECC guidelines and
[[Page 827]]
thresholds (10 MVA individually, 20 MVA aggregate) to determine the
appropriateness of excluding the power from components from radial
connected generation. Alameda contends that the radial systems in these
exclusions have only a minor impact on the bulk electric system and
that system planning and operation assessments must provide for
reliable operation under N-1 contingency operations including loss of
the exclusion E1(b) and (c) configurations. WPPC states that the
generator thresholds in these conditions are a logical cut-off to
separate radial systems with generation that is not likely to be
meaningful to operation of the bulk electric system.
---------------------------------------------------------------------------
\145\ E.g. Idaho Power, National Grid, AEP, Hydro One, ISO New
England, and BPA.
---------------------------------------------------------------------------
162. Anaheim urges the Commission to clarify that the presence of
generation resources connected at voltages below 100 kV ``does not
invalidate the availability of the radial exclusion for lines that are
operated at greater than 100 kV unless the generating unit is actually
connected to the higher voltage line.'' \146\ PSEG Companies state
there is confusion regarding the generation limits in exclusion E1(b)
and (c) and in exclusion E3. They contend that it is not clear if the
generation limit only applies to generators connected at 100 kV or
higher. PSEG Companies also ask for clarification regarding the
definition of the phrase ``non-retail generation.'' \147\
---------------------------------------------------------------------------
\146\ Anaheim Comments at 7.
\147\ PSEG Comments at 3.
---------------------------------------------------------------------------
163. AEP does not believe that the three conditions of exclusion E1
would remove the generation connected to the radial system from the
bulk electric system definition but states that the conditions may have
the consequence of removing the radial line itself from the definition
in error. According to AEP, this would be in cases of a 25 MVA
generator (meeting I2 properties) but less than 75 MVA aggregate. AEP
suggests that the conditions in (b) and (c) be revised to reference
non-bulk electric system generation.\148\
---------------------------------------------------------------------------
\148\ AEP Comments at 5.
---------------------------------------------------------------------------
Commission Determination
164. We approve exclusion E1 conditions (b) and (c). However, we
direct NERC to implement exclusion E1 so that the exclusions for radial
systems do not apply to tie-lines for bulk electric system generators
identified in inclusion I2. If the generator is necessary for the
operation of the interconnected transmission network, the Commission
believes that it is generally appropriate to have the radial tie-line
operating at or above 100 kV that delivers the generation to the bulk
electric system included as well.
165. In general, we believe that it is appropriate to have the bulk
electric system contiguous, without facilities or elements ``stranded''
or ``cut-off'' from the remainder of the bulk electric system as shown
in the figure below. However, the contiguous quality of the bulk
electric system is lost in exclusion E1, condition (b), because it
removes from the bulk electric system the 100 kV or greater generator
tie-line that connects the bulk electric system generator to the
interconnected transmission network. Such tie-lines should be subject
to appropriate Reliability Standards.
[GRAPHIC] [TIFF OMITTED] TR04JA13.003
166. NERC explains that the exclusion of radial systems pursuant to
conditions (b) and (c) is based on the premise that a single point of
failure causing the radial system to separate from the bulk electric
system, resulting in the loss of a limited amount of generation will
not have an adverse reliability impact. However, there are other
reliability concerns that NERC does not address. For example, both the
radial line emanating from a generator and the portion of the bulk
electric system to which it is connected have protective relays that
require coordination to prevent the lines from tripping. The generator
needs to coordinate the protective relays with transmission operators,
otherwise there may not be adequate information to prevent a fault on
the radial line from causing cascading outages on the bulk electric
system. The Commission also notes that the phrase ``adverse reliability
impact,'' which is defined in the NERC Glossary of Terms as ``the
impact of an event that results in frequency-related instability;
unplanned tripping of load or generation; or uncontrolled separation or
cascading outages that affects a
[[Page 828]]
widespread area of the Interconnection,'' is an extreme result that
should not occur from the loss of a single tie-line for any sized
generator.\149\ A single contingency that results in an ``adverse
reliability impact'' violates planning and operating criteria in
Commission approved Reliability Standards.\150\ NERC also does not
consider issues, such as the issue raised by Idaho Power, that the
exclusion is appropriate if the generation connected to the radial
system is not relied on to meet reliability performance criteria.
---------------------------------------------------------------------------
\149\ See the NERC Glossary of Terms at http://www.nerc.com/files/Glossary_of_Terms.pdf.
\150\ See, e.g., Reliability Standards, TPL-002-0b and IRO-004-
2.
---------------------------------------------------------------------------
167. Some commenters suggest there is a conflict between the
inclusion I2 and exclusion E1 because they believe that the 100 kV or
greater tie-line and the generator should remain in the bulk electric
system. We agree that exclusion E1 as written does not prevent the
radial tie-line operating at or above 100 kV from the high side of the
step-up transformer to the bulk electric system from being excluded
while the generator and associated step-up transformer(s) remain
included. Inclusion I2 depends on the status of the tie-line based on
the core definition's 100 kV threshold to determine if a generator and
its step-up transformers are part of the bulk electric system. Thus,
this inclusion results in most bulk electric system generators having a
contiguous connection to the interconnected transmission network. As
noted above, we believe that it is generally appropriate to have the
bulk electric system contiguous. Therefore, the Commission directs NERC
to implement exclusion E1 so that the exclusion for radial systems does
not apply to tie-lines for bulk electric system generators identified
in inclusion I2. This directive provides consistent application of the
entire definition by not allowing exclusion E1 to override the
qualifying tie-lines pursuant to inclusion I2.
168. The Commission also rejects NERC's argument that subjecting
the elements associated with this type of radial system to all the
Reliability Standards has a limited benefit to the reliability of the
interconnected transmission network. In cases of radial tie-lines for
bulk electric system generators where the generator owner also owns the
tie-line, NERC has exercised discretion, on a case-by-case basis, in
determining which entities require registration as transmission owners/
operators and identified sub-sets of applicable reliability standard
requirements for these entities.\151\ In other situations, such
generator tie-lines may appropriately be considered an extension of the
generation facility, which would not subject significant additional
compliance obligations on the generator owner and/or operator.
---------------------------------------------------------------------------
\151\ E.g., New Harquahala Generating Company, LLC, 123 FERC ]
61,173, order on clarification, 123 FERC ] 61,311 (2008).
---------------------------------------------------------------------------
169. In response to the question raised by PSEG Companies about
whether the generation limit specified in exclusion E1(b) and (c) only
applies to generators connected at 100 kV or higher, we note that
exclusions E1(b) and (c) do not specify the generation connected to the
radial system or local network to any voltage.
f. Normally Open Switches
NOPR Proposal
170. NERC included a note accompanying the description of exclusion
E1 stating that ``[a] normally open switching device between radial
systems, as depicted on prints or one-line diagrams for example, does
not affect this exclusion.'' NERC drafted this note to address a common
network configuration in which two separate sets of facilities that,
each standing alone, would be recognized as radial systems but are
connected by a switch that is set to the open position for reliability
purposes. In its petition, NERC explained that these switches are
installed by entities to provide greater reliability to their end-use
customers. NERC also explained that ``a normally open switch'' will be
identified in documents such as prints or one-line diagrams and that
``[t]he concept and usage of the `normally open switch' in such
configuration is well understood in the electric utility industry.''
\152\
---------------------------------------------------------------------------
\152\ NERC BES Petition at 19.
---------------------------------------------------------------------------
171. In the NOPR, the Commission requested comment on NERC's
characterization and whether the phrase ``normally open'' is subject to
interpretation or misunderstanding, or whether a ``normally open''
configuration is potentially difficult to oversee. The Commission also
requested comment on the need of transmission operators or other
functional entities to study the system impacts of the closing of a
``normally open'' switch, or to take other steps to ensure awareness of
the impacts of the loop that is created by the closing of the switch if
the closed loop is not included as part of the bulk electric system.
Comments
172. NERC explains that the term ``normally opened'' is well
understood and commonly used in industry for a variety of reasons
including public and personnel safety. NERC also explains that the
purpose of recognizing a normally open switch in the definition is to
preserve the bright-line so that the facilities can be characterized as
they are planned to be operated which avoids the need to constantly
reclassify elements to adjust to the changing operating conditions that
occur on the system. NERC believes that a normally open switch is not
difficult to oversee.
173. Nearly all commenters that addressed this issue agree with
NERC's positions. NRECA highlights NERC's explanation that the
configuration is so common that to write the definition to include
radial systems connected by a normally open switch, with the caveat
that entities can request an exception, would result in a flood of
exception requests. Steel Manufacturers Association points out that
such a switch can make a secondary connection point available to a
large industrial load when needed to improve service reliability and
continuity. Consumers Energy states that such switches would only be
closed during emergency conditions and an entity in that instance would
follow contingency plans and ensure that a proper study is performed on
a normally open switch that is closed due to the emergency to avoid
related equipment failures. TAPS agrees with NERC and notes that such
switches are marked as normally open on one line diagrams.
174. PSEG Companies state that in effect the switch is irrelevant
because if the normally open switch is open the systems are radial and
therefore excluded and when the switch is closed the radial systems are
also excluded for the same reasons figure 3 facilities should be
excluded. Alameda submits it documents a normally open switch in
operational diagrams and SCADA applications and its use is coordinated
in advance with its transmission operator. Alameda also states that the
system impacts of closing a normally open switch do not need to be
required to be studied since it is the operational experience and
documentation of such switch that is most important.
175. G&T Cooperatives state that some operational studies would be
useful if there is an upcoming operational decision to close the
normally open switch that could parallel the bulk electric system.
However, G&T Cooperatives explain that the study would be used to
ensure that the system can operate with the switch closed without
inadvertently tripping one of the source breakers. G&T Cooperatives
explain that a normally open switch
[[Page 829]]
would not need to be modeled into any real-time model or contingency
analysis, nor would it require the interconnecting radial systems to be
incorporated into the bulk electric system, where such conditions are
managed through quick changes to the equivalence bus loads or
generation capacities. Similarly, TAPS states that closing a normally
open switch does not have an impact on the system that needs to be
studied because it is only close to change a down stream path on a
temporary basis and does not create a loop.
Commission Determination
176. Upon consideration of comments, we are persuaded that the
concept of a normally open switch is well understood, common and not
difficult to oversee. We accept NERC's explanation that recognizing a
normally open switch in the definition will preserve the bright-line so
that the facilities can be characterized as they are planned to be
operated and avoids the need to constantly reclassify elements to
adjust to the changing operating conditions that occur on the system.
177. With regard to the Commission's question concerning the need
to study the system impacts of the closing of a ``normally open''
switch, at this time we will not require them to be studied. We are
persuaded that the operational experience and documentation of such
switch is most important and, thus, we decline to require additional
studies.
7. Exclusion E2 (Behind the Meter Generation)
NOPR Proposal
178. NERC stated in its petition that the wording of exclusion E2
is extracted from the Statement of Compliance Registry Criteria.\153\
In the NOPR, the Commission stated that the exclusion of ``[a]
generating unit or multiple generating units on the customer's side of
the retail meter * * *'' was an appropriate exclusion that provides
additional clarity and granularity to the definition of bulk electric
system.\154\ While the Commission did not ask specific questions about
exclusion E2, several commenters expressed support for the inclusion,
while others stated concerns with the exclusion.
---------------------------------------------------------------------------
\153\ NERC BES Petition at 22.
\154\ NOPR, 139 FERC ] 61,247 at P 88.
---------------------------------------------------------------------------
Comments
179. NERC and EEI agree with the Commission that the exclusion
provides additional clarity. ELCON notes that such configurations are
commonly employed by industrial users of electricity, and they do not
affect in any significant way the bulk power system. On the other hand,
ISO New England believes that exclusion E2 should be eliminated because
it is contrary to the reliability of the bulk electric system.
According to ISO New England, a 400 MW generator which is behind the
meter with a 400 MW load could be excluded even though it could have a
significant impact on the performance of the bulk electric system. ISO
New England states that the owner of the generator in this example
would not need to provide generator stability modeling information nor
abide by the many normally applicable Reliability Standards. MISO
believes that the exclusion could encourage entities to move generation
capacity behind the meter which could adversely impact the bulk
electric system.
180. PSEG Companies state that exclusion E2 could exclude
generation included in inclusion I2. For example, PSEG Companies
contends that, if a single 200 MVA behind-the-meter generator is
connected to the bulk electric system at 100 kV or higher, the net
capacity provided to the bulk electric system does not exceed 75 MVA
and the generator has standby, backup, and maintenance services, under
exclusion E2 the generator would be excluded from the bulk electric
system, but it would be included pursuant to inclusion I2.\155\
---------------------------------------------------------------------------
\155\ PSEG Comments at 14.
---------------------------------------------------------------------------
181. Other commenters, such as Barrick and the IUU, believe
additional clarification is needed for the terms ``retail meter'' and
``net capacity.'' Specifically, they question what the capacity is
``net'' of or whether it means the sum of flows at all points of
connection to the bulk electric system. They also question whether
``net'' means the capacity of a generator that is made available for
use by someone other than an owner of the generator or capacity less
parasitic load only.
182. Barrick and IUU believe there is more than one use for the
term ``retail meter,'' and it is not clear whether all situations are
covered by the use in the proposed exclusion E2. Barrick proposes that
the term ``retail meter'' should include an end-user's meter at an end-
user's generator when that meter is used to measure the end-user's
generation for consumption.
Commission Determination
183. We find that exclusion E2 provides additional clarity to the
definition of bulk electric system, and we disagree that exclusion E2
is contrary to the reliability of the bulk electric system. We agree
with ELCON that such configurations are commonly employed by industrial
users of electricity. Indeed, this exclusion is similar to the
exclusion for such facilities in NERC's Registry Criteria.\156\ With
regard to ISO New England's and PSEG Companies specific examples, to
the extent such scenario exists, they may be eligible for inclusion or
exclusion through use of the exception process.
---------------------------------------------------------------------------
\156\ NERC Statement of Compliance Registry Criteria, section
III.c.4.
---------------------------------------------------------------------------
184. We decline to define the additional terms cited by commenters,
such as Barrick and the IUU, who believe additional clarification is
needed for the terms ``retail meter'' and ``net capacity.'' These terms
are in common use in the electric power industry. Therefore, we do not
see a need to adopt a formal definition.
8. Exclusion E3 (Local Networks)
NOPR Proposal
185. NERC's proposed exclusion E3 defines the term ``local
networks'' as:
A group of contiguous transmission Elements operated at or above
100 kV but less than 300 kV that distribute power to Load rather
than transfer bulk-power across the interconnected system. LN's
emanate from multiple points of connection at 100 kV or higher to
improve the level of service to retail customer Load and not to
accommodate bulk-power transfer across the interconnected system.
Exclusion E3 also identifies three criteria that must be satisfied for
the exclusion to apply: (a) Limit on connected generation to 75 MVA
aggregate capacity of non-retail generation (gross nameplate rating);
(b) power flows only into the local network and does not transfer
through the local network; and (c) the local network is not part of a
flowgate or transfer path.
186. In the NOPR, the Commission requested comment on: (1) Whether
generation resources are excluded by this exclusion; (2) how the
exclusion applies to a looped lower voltage system; (3) whether the 300
kV ceiling is appropriate for the application of the exclusion; and (4)
whether the prohibition for generation produced inside a local network
is not transporting power to other markets outside the local network
applies in both normal and emergency operating conditions.\157\ The
Commission also sought further explanation regarding the design and
technical justification of a local network. These issues are
[[Page 830]]
discussed in detail in the following sections.
---------------------------------------------------------------------------
\157\ NOPR, 139 FERC ] 61,247 at P 89.
---------------------------------------------------------------------------
a. Local Network Design and Technical Justification
NOPR Proposal
187. In the NOPR, the Commission requested explanation and comment
on the statement in NERC's petition that ``neither will the local
network's separation or retirement diminish the reliability of the
interconnected electric transmission network.'' \158\ In its petition,
NERC stated that the design and operation of local networks is such
that at the point of connection with the interconnected transmission
network is similar to that of a radial facility, in particular that
power always flows in the direction from the interconnected
transmission network into the local network.\159\ Further, according to
NERC, ``[l]ocal networks provide local electrical distribution service
and are not planned, designed or operated to benefit or support the
balance of the interconnected transmission network.'' \160\
---------------------------------------------------------------------------
\158\ NERC BES Petition, Exhibit G at 2. (Local Network
Technical Justification).
\159\ NERC BES Petition at 22.
\160\ Id.
---------------------------------------------------------------------------
188. In the NOPR, the Commission observed that, while a radial
facility emanates from one point of connection to the interconnected
transmission network, a local network by definition has multiple points
of connection to the interconnected transmission network. Thus,
regarding a local network, a contingency situation may arise where one
of the multiple connections to the interconnected transmission network
separates, while other local network connections maintain connectivity
with the bulk electric system. Accordingly, the Commission requested
comments to better understand how an entity with a candidate local
network would analyze such contingencies to determine potential impacts
to the reliable operation of the interconnected transmission network.
Comments
189. EEI, MISO and other commenters generally support exclusion
E3.\161\ With respect to the issue raised by the Commission regarding
how an entity's local network separation will not diminish the
reliability of the interconnected transmission network, NERC explains
that the reliability of the interconnected transmission network is not
impacted by the existence or absence of the local network. NERC
maintains that excludable facilities under exclusion E3 will naturally
satisfy this principle because the exclusion E3 conditions were crafted
in such a way to ensure reliability is not adversely impacted by the
disconnection of the local network. While specific analyses are not
necessary to support exclusion of facilities under exclusion E3, NERC
states that transmission operators or other functional entities need to
be aware of the change of status of all devices on the system and the
impact to the system from device changes. According to NERC, exclusion
of a local network does not obviate the transmission operator or other
functional entity from the responsibility to assess the system impact
on any bulk electric system facility due to the separation of one local
network connection while the remainder of the local network remains
connected with the bulk electric system.\162\
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\161\ E.g., NRECA, ELCON, BPA, and G&T Cooperatives.
\162\ NERC Comments at 26.
---------------------------------------------------------------------------
190. TAPS agrees with NERC stating ``sophisticated engineering
analysis should not be needed to determine the applicability of
[i]nclusions and [e]xclusions.'' \163\ Likewise, WREA agrees with
NERC's assertion that the entity with a local network does not need to
analyze local network contingencies since this analysis is already made
by the transmission planner and transmission operator responsible for
the bulk electric system facilities feeding the local network.
Regarding the transmission planner responsibilities, WREA states the
NERC Reliability Standard TPL-002 requires the transmission planner to
study N-1 contingencies and prepare plans for reliable operation. WREA
further explains that the transmission operator is required to plan to
meet unscheduled changes in system configuration pursuant to
Reliability Standard TOP-002, R6 and ``if there are non-[bulk electric
system] facilities that are significant, that have not been properly
represented in a [transmission operator's] models, [then] when the
[transmission operator] performs its required model accuracy validation
(TOP-002, R19), the [transmission operator] would observe a modeling
inconsistency and would be able to take steps to correct the modeling
error.'' \164\
---------------------------------------------------------------------------
\163\ TAPS Comments at 9.
\164\ WREA Comments at 8-9.
---------------------------------------------------------------------------
191. AEP advocates for a baseline or cut-off point, which would be
determined by the size (in MW) of the local network. Idaho Power
believes that the statement means that total separation or loss of the
local network elements does not cause a reliability performance impact
on the remaining bulk electric system elements. Idaho Power explains
that it would analyze such contingencies by evaluating overload levels
and voltage performance impacts on the remaining bulk electric system
elements as well as overload levels and voltage performance on the
remaining local network elements.
192. Southern Companies state that such a contingency would be
incorporated into planning studies regardless of whether the local
network was part of the bulk electric system.\165\ BPA believes that
before a candidate local network is excluded, it must be evaluated by
the impacted balancing authority, transmission operator and planning
authority to ensure the integrity of the bulk grid is not
compromised.\166\
---------------------------------------------------------------------------
\165\ Southern Companies Comments at 13.
\166\ BPA Comments at 7-8.
---------------------------------------------------------------------------
Commission Determination
193. The Commission approves exclusion E3. The Commission accepts
NERC's explanation about the statement that ``neither will the local
network's separation or retirement diminish the reliability of the
interconnected transmission network.'' The Commission also accepts
NERC's comments relating to how an entity with a candidate local
network would analyze such contingencies to determine potential impacts
to the reliable operation of the interconnected transmission network.
In particular, the Commission agrees that the exclusion of a local
network does not obviate the transmission operator or other functional
entity from the responsibility to assess the system impact of
separating one local network connection while the remainder of the
local network remains connected with the bulk electric system. We will
not direct NERC to modify the provision as suggested by AEP and BPA.
Rather, as NERC indicates, AEP and BPA may raise these suggestions with
NERC in the Phase 2 development effort.
b. Figure 5, Contiguous Transmission Elements and the 100 kV Lower
Limit
194. Exclusion E3 defines local networks as ``[a] group of
contiguous transmission Elements operated at or above 100 kV but less
than 300 kV that distribute power to Load rather than transfer bulk-
power across the interconnected system.'' While the local network
exclusion applies to contiguous transmission elements operating at a
minimum of 100 kV, the Commission stated in the NOPR that it is unclear
how the exclusion applies to a looped
[[Page 831]]
lower voltage system. The Commission provided an example of its concern
depicted in figure 5 in the NOPR which shows a 69 kV looped system
emanating from two points of connection at 100 kV or higher.
[GRAPHIC] [TIFF OMITTED] TR04JA13.004
195. In the NOPR, the Commission stated that figure 5 depicts a
group of elements that are contiguous through a 69 kV loop and
requested comment whether the configuration in figure 5 qualifies as a
local network and, in particular, whether the configuration satisfies
the conditions that a local network be contiguous and operated at or
above 100 kV.
Comments
196. NERC views figure 5 the same as figure 3--as a looped system
below 100 kV--that is not considered under this exclusion because the
elements below 100 kV are presumed to be not part of the bulk electric
system.\167\ NERC maintains that, if it is determined that the sub-100
kV looped system is necessary for the reliable operation of the
interconnected transmission network, the exception process may be
utilized to include the appropriate elements. NERC states that figure 5
depicts two separate and distinct groups of elements that each emanate
from a single point of interconnection at 230 kV and only serve load.
Accordingly, NERC states that 230 kV lines 1 and 2 are included in the
bulk electric system with the only other included elements being the
lines extending from lines 1 and 2. However, according to NERC, the
elements between 230 kV line 1 and transformer 2 and between 230 kV
line 2 and transformer 1 are each subject to exclusion E1(a) because
each separate set of elements is contiguous and emanate from a single
point of connection of 100 kV or higher. NERC asserts that the elements
below the 69 kV side of transformers 1 and 2 are excluded because they
are less than 100 kV. NERC explains that transformers 1 and 2 are
excluded because they bridge voltages of 69 kV and 230 kV and
therefore, inclusion I1 is not applicable because a transformer must
have two terminals over 100 kV to qualify for inclusion I1. According
to NERC, the definition should focus on looped or networked connections
at 100 kV or greater because such connections, when operated below 100
kV, generally do not carry significant parallel flow because of the
higher impedance associated with lower voltage facilities.\168\
---------------------------------------------------------------------------
\167\ Figure 5 and figure 3 set forth in the NOPR are identical
configurations.
\168\ NERC Comments at 27-28.
---------------------------------------------------------------------------
197. Exelon states that the clear intent of the definition is that
configurations such as shown in figure 5 are radial systems subject to
exclusion E1 (radial systems). According to Exelon, had this not been
the intent of exclusion E1, exclusion E3 would have allowed for a local
network where the tie was below 100 kV to avoid a reliability gap.
Exelon believes that the configuration shown in figure 5, which is
identical to figure 3, does not qualify as a local network within the
terms of exclusion E3 and supports NERC's view that figure 5 represents
two radial systems that qualify under exclusion E1. Exelon cautions
that, if the Commission determines that the systems depicted in figure
5 do not qualify under exclusion E1 because of the low voltage tie and
does not qualify under exclusion E3 because the tie is at low voltage
and not a 100 kV or above, such a decision would leave a gap under
which a substantial number of facilities that are not part of the bulk
electric system
[[Page 832]]
would be classified as such. Exelon states that it would have to go
through the separate exception process for dozens of substations, at
great cost and for no useful purpose. Exelon states that the Commission
should clarify that the configuration shown in figures 3 and 5
qualifies as a radial system and is excluded pursuant to exclusion E1.
198. Other commenters disagree with NERC's position. Idaho Power
believes the network configuration with a 69 kV loop belongs to a local
network category pursuant to exclusion E3 and that these types of
networks should be studied to identify if there is any resulting
voltage, overload, or stability violation that could propagate and
impact the reliability of the system. Idaho Power believes that the 69
kV loop can tie the 230 kV systems together; therefore, outages in the
230 kV system could cause loop flow in the 69 kV system. According to
Idaho Power, planning studies would have to be performed to determine
the amount of loop flow and whether the loop flow could lead to outages
on the 69 kV system, resulting in further impact to the bulk electric
system.\169\ WREA also notes figure 5 is the same as figure 3 and
states that the 230 kV elements described in the figure would not
qualify for the radial system exclusion E1 because the 230 kV elements
are networked via facilities less than 100 kV. WREA concludes the
elements above 100 kV in the figure might qualify for the local network
exclusion and the below 100 kV facilities in this configuration are
non-bulk electric system on the basis of the core definition unless the
facilities are included via the exception process.\170\ AEP believes
that figure 5 could be considered for exclusion E3, provided that it is
understood that at some point on the local network, the network could
be of the size that would have a potential impact on the bulk electric
system and would still need to meet the parameters of exclusion
E3.\171\
---------------------------------------------------------------------------
\169\ Idaho Power Comments at 11.
\170\ WREA Comments at 9.
\171\ AEP Comments at 10.
---------------------------------------------------------------------------
Commission Determination
199. As discussed above, the Commission is directing a modification
to exclusion E3 to better capture local networks like those depicted in
figure 5. The Commission notes that Exelon believes that the
configuration shown in figure 5, which is identical to figure 3, does
not qualify as a local network within the terms of exclusion E3. While
figures 3 and 5 are a networked configuration through a 69 kV loop,
they do not qualify for the local network exclusion because exclusion
E3 defines local networks as ``[a] group of contiguous transmission
Elements operated at or above 100 kV but less than 300 kV that
distribute power to Load rather than transfer bulk-power across the
interconnected system.'' The configuration in figure 5 includes
elements that are below 100 kV, and does not have contiguous elements
operating at or above 100 kV but less than 300 kV. As noted above,
while the Commission finds that these configurations should not be
eligible for exclusion E1, we believe that they should be eligible for
the local network exclusion. Therefore, we direct NERC to modify
exclusion E3 to remove the 100 kV minimum operating voltage in the
local network definition. Within 30 days of the effective date of this
Final Rule, we direct NERC to submit a schedule outlining how and when
it will make the modification to the definition.
c. 300 kV Cap
NOPR Proposal
200. NERC explained the selection of a 300 kV cap for the
applicability of an exclusion for a local network was based upon recent
NERC standards development work in Project 2006-02 ``Assess
Transmission Future Needs and Develop Transmission Plans'' which sets a
voltage level of 300 kV to differentiate extra high voltage (EHV)
facilities from high voltage facilities acting as a threshold to
distinguish between expected system performance criteria.\172\ In the
NOPR, the Commission noted that NERC provided an example of the
electrical interaction between a typical local network and the bulk
electric system which depicted a local network operating at 115 kV.
However, the Commission observed that NERC did not provide examples of
a local network operating within the 200 to 300 kV range. The
Commission expressed concern whether the 300 kV ceiling is appropriate
and reflects actual system configurations that serve local
distribution, the stated purpose of the local network exclusion. Thus,
the Commission requested comment whether the 300 kV ceiling is
appropriate for the application of exclusion E3 and requested examples
of systems between 200 and 300 kV that would qualify for this
exclusion.
---------------------------------------------------------------------------
\172\ NERC BES Petition at 23.
---------------------------------------------------------------------------
Comments
201. NERC asserts that the 300 kV cap is appropriate. NERC
reiterates that the voltage cap is consistent with the distinction
being made between extra high voltage and high voltage in the
Reliability Standard TPL-001-2. NERC adds that the important attributes
of a local network are the limit on capacity of connected non-retail
generation, prohibition of power flow out of, or through, the local
network, and prohibition of local networks containing flowgates or
major transfer paths. NERC maintains that these attributes, rather than
the operating voltage of the local network facilities, assure that
local networks do not impact reliability of the interconnected
transmission network.
202. Most commenters agree that the 300 kV threshold is
appropriate.\173\ With respect to the Commission's request for examples
of systems between 200 and 300 kV that would qualify for this
exclusion, ICNU states that, one of its members operates a large
industrial facility that takes service from the bulk electric system
from two transformers, both of which operate at 230 kV on the high
side, but step down to 13.5 kV for distribution within the complex.
According to ICNU, this industrial plant serves no reliability function
and serves only the retail load, but if the ceiling for exclusion E3
were lowered to 200 kV, this network potentially would not be excluded
because it contains some elements operating between 200-300 kV. ICNU
believes that the function of a local network, rather than its voltage,
is the critical factor in excluding it from the bulk electric system
and therefore, recommends a local network exclusion based on function,
not voltage. Nonetheless, to the extent a ceiling is deemed necessary,
ICNU states that the 300 kV threshold is appropriate.
---------------------------------------------------------------------------
\173\ E.g. National Grid, AEP, ICNU, and WPPC.
---------------------------------------------------------------------------
203. WPPC supports the 300 kV ceiling and WPPC states that the
ceiling reflect industry's extensive use of 115-230 kV system to
provide distribution service through a local network. WPPC points out
that in low density areas it is more economical to serve load using one
230 kV network rather than four 69 kV networks. WPPC adds that many 55
and 69 kV networks that serve towns and cities have been upgraded to
115 or 230 kV for economic, technical and environmental reasons, but
raising the voltage does not change their function.
204. In contrast, BPA, Hydro One, and WREA express concern
regarding the 300 kV cap. BPA states that the 300 kV ceiling may not
``reflect[] actual system configurations that serve local distribution,
the stated purpose of the local network exclusion.'' \174\ BPA believes
that exclusion E3 should not apply to any facility above 200 kV,
without appropriate review, analysis,
[[Page 833]]
and concurrence, from the impacted transmission operator, planning
authority, and reliability coordinator. BPA states that fault
magnitudes on systems between 200 kV and 300 kV are much higher than
fault magnitudes on systems operated below 200 kV. According to BPA,
these systems have a much higher potential for serious impacts than
networks operating below 200 kV if something fails to operate properly,
including cascading outages, transient instability, and post transient
voltage instability.
---------------------------------------------------------------------------
\174\ BPA Comments at 8.
---------------------------------------------------------------------------
205. Hydro One believes that the 300 kV cap associated with the
applicability of exclusion E3 is not justifiable on technical grounds,
and submits that certain systems with greater than 300 kV should be
able to qualify for exclusion E3 based on their own merits. Hydro One
states that a radial or a local network below 300 kV can have as much
or more impact on the reliability of the interconnected transmission
network than a local network operating at 300 kV or above depending
upon its location and configuration. WREA also disagrees with the 300
kV ceiling and recommends that the Commission delete this limitation
entirely.
Commission Determination
206. The Commission approves the 300 kV voltage threshold for local
networks for the initial implementation of the definition. While we
approve the 300 kV threshold, the limited number of examples provided
for 200-300 kV systems cause us to seek additional information. Thus,
following implementation when actual exclusion data is available, the
Commission directs NERC to submit a compliance filing within one year
of the implementation date identifying in sufficient detail the types
of local network configurations that have been excluded from the bulk
electric system under this exclusion. This will assist us in better
understanding the type and magnitude of systems that fall into above
200 kV category.
d. Criterion (a)--Limits on Connected Generation
NOPR Proposal
207. Exclusion E3 criterion (a) provides that the local network and
its underlying elements do not include the blackstart resources
identified in inclusion I3 and do not have an aggregate capacity of
non-retail generation greater than 75 MVA gross nameplate rating. In
addition, criterion (a) does not limit the amount of generation besides
``non-retail generation'' connected to the local network. The
Commission stated in the NOPR that it agrees with NERC that ``local
networks'' do not include blackstart resources and agrees with the
limits on the connected generation imposed by this exclusion. The
Commission also stated that similar to the discussion of the definition
of ``radial systems'' in exclusion E1, the exclusion E3 local network
exclusion applies to ``transmission Elements,'' but does not exclude
generation resources connected to a local network that otherwise
satisfy inclusion I2.
Comments
208. NERC concurs with the Commission's statement that ``local
networks'' do not include blackstart resources and agrees with the
limits on the connected generation imposed by this exclusion. NERC,
EEI, Alameda, Hydro One, and WREA state that, whether or not generation
is included in the bulk electric system is determined by inclusions I2
through I4 and exclusion E2. In addition, NERC confirms that exclusion
E3 does not exclude generation resources.
209. In contrast, some commenters are concerned about allowing
generators identified in inclusion I2 to be connected to local
networks. Idaho Power states that it is not appropriate to exclude a
local network if it contains generation that would normally be included
in the bulk electric system through inclusion I2.\175\ PSEG Companies
states that ``there is confusion created by the fact that generators
included in the [bulk electric system] definition per [inclusion] I2
are at the same time excluded under [exclusions] E2 and E3.'' \176\
According to PSEG Companies, a generator cannot be included under one
provision of the bulk electric system definition and excluded under
another provision and that this issue requires clarification and, once
clarified, the bulk electric system definition needs to be modified
accordingly.
---------------------------------------------------------------------------
\175\ Idaho Power Comments at 10.
\176\ PSEG Comments at 11.
---------------------------------------------------------------------------
210. Some commenters seek clarification of exclusion E3 criterion
(a) regarding the term ``non-retail.'' \177\ Barrick and the IUU raise
several questions about exclusion E3. First, they claim that the phrase
``not * * * non-retail generation'' is unclear and question whether it
means generation used for retail. They also question whether exclusion
E3 excludes generation resources for an owner's own use or generation
used for wholesale. They also ask how the term ``non-retail'' relates
to ``net capacity.''
---------------------------------------------------------------------------
\177\ E.g., Barrick, IUU, and PSEG.
---------------------------------------------------------------------------
211. While Holland supports the exclusion of local networks from
the bulk electric system, Holland argues that criteria (a) and (b)
should be eliminated because they limit the amount of connected
generation, even where the connected generation is distributed locally.
Holland states that exclusion E3(a) improperly maintains the aggregate
75 MVA limit for connected generation. Holland believes this limit is
inconsistent with the concept of a local network and should be removed.
Holland explains that if the local network does not accommodate bulk
power transfer across the interconnected system, then the amount of
generation that exists and is distributed within that system,
regardless of size, is distributed and consumed locally, and is
therefore beyond the scope of FPA Section 215. Holland maintains that,
if the Commission does not remove exclusion E3(a) in its entirety, it
should require the limitation to be based on the net of the local
network's total load, rather than the gross nameplate rating.
212. NESCOE contends that three conditions in exclusion E3 would
unnecessarily include some New England networks in the bulk electric
system without any clear reliability benefit. In particular, NESCOE
states that the limits on connected generation should be raised to 300
MVA instead of 75 MVA, stating that the northeast portion of the
eastern interconnection defines a 1200 MVA loss of source as the
largest contingency to which the control area is designed to operate.
Therefore, NESCOE believes that 25 percent of that contingency at 300
MVA falls well within typical loss of source expectations for the
northeast. Alameda suggests that the Commission raise the connected
generation limitation for local network exclusions to 150 MVA.
According to Alameda, since the local network is comparable to two
radials, limiting a local network to 75 MVA could result in entities
choosing to operate two less reliable radial systems, each with 75 MVA
of generation, rather than one local network with 150 MVA of generation
to avoid a designation as bulk electric system for their local network.
Commission Determination
213. We find that the local network exclusion only applies to
``transmission Elements'' and does not allow the exclusion of
generation resources otherwise included in the bulk electric system
pursuant to inclusion I2, as
[[Page 834]]
discussed above in our determination regarding exclusion E1.
214. Further, as discussed above regarding exclusion E1, the
Commission agrees with Idaho Power, PSEG Companies, SmartSenseCom, and
AEP that tie-lines for generators identified in the inclusion I2 should
not qualify for exclusion as radial systems or local networks. Rather
the tie-lines can be considered for exclusion under NERC's exception
process. Accordingly, consistent with the Commission's directive
discussed above regarding exclusion E1, the Commission directs NERC to
implement exclusion E3 so that the exclusion for local networks does
not apply to bulk electric system generator tie-lines operated at or
above 100 kV as shown in the figure below.
[GRAPHIC] [TIFF OMITTED] TR04JA13.005
215. In response to Barrick's and IUU's requests for clarification,
we decline to clarify the terms/phrases ``non-retail,'' ``gross plant/
facility,'' ``not necessary,'' ``aggregate,'' ``net capacity,'' and
``retail meter.'' We believe the terms/phrases are sufficiently clear.
However, Barrick and IUU may pursue further clarification from NERC in
an appropriate forum such as NERC's Phase 2 project.
216. With regard to the comments of Holland, NESCOE and Alameda, we
will not direct any change in the connected generation limitation for
the local network exclusion. The limit on connected generation within
the local network is consistent with the existing threshold above which
a generating plant in aggregate becomes subject to registration under
the NERC Registry Criteria. Entities may avail themselves of the
exception process to exclude a local network that otherwise does not
qualify pursuant to exclusion E3.
e. Criterion (b)--Power Flows Only Into the Local Network
NOPR Proposal
217. Exclusion E3 criterion (b) specifies that, to qualify for the
exclusion, power can only flow into the local network and the local
network does not transfer energy originating outside the local network
for delivery through the local network. The Commission noted in the
NOPR that, pursuant to criterion (b), generation produced inside a
local network is not transporting power to other markets outside the
local network. The Commission stated in the NOPR that it understands
that criterion (b) applies in both normal and emergency operating
conditions.\178\
---------------------------------------------------------------------------
\178\ See NOPR, 139 FERC ] 61,247 at P 98 (citing NERC BES
Petition, Exh. E at 59 (``The Commission directed NERC to revise its
BES definition to ensure that the definition encompasses all
Facilities necessary for operating an interconnected electric
Transmission network. The SDT interprets this to include operation
under both normal and Emergency conditions * * *.'')).
---------------------------------------------------------------------------
Comments
218. NERC confirms, and TAPS, Idaho Power and others concur with
the Commission's understanding that, pursuant to criterion (b),
generation produced inside a local network is not transporting power to
other markets outside the local network. NERC and other commenters also
agree that criterion (b) applies in both normal and emergency operating
conditions.
219. NERC states that prohibitions on outbound power flow and
transportation of power to other markets beyond the local network apply
in all conditions, both normal and contingent, and will eliminate the
exclusion of facilities which may contribute power flow into the bulk
electric system under contingent or unusual circumstances. According to
NERC, basing the determination solely on normal conditions could lead
to inconsistent application of this exclusion and would introduce
subjectivity into the application of the definition.
220. Duke Energy agrees with NERC's comment that prohibitions on
outbound power flow beyond the local network apply in ``both normal and
contingent conditions,'' but believes that ``contingent'' should be
further clarified as limited to N-1 contingencies for the bright line
definition. Idaho Power also agrees, and comments that additional
clarification is needed to define whether the meaning of ``emergency
conditions'' includes contingencies within the local network itself. In
contrast, Southern Companies states that criterion (b) would apply in
normal but not emergency operating conditions. MISO cautions against
precluding local
[[Page 835]]
networks from sending electricity to the transmission system in
emergency conditions when doing so could improve the availability of
electricity.
221. Portland notes that the application of criterion (b) in both
normal and emergency operating conditions is similar to one element of
the Seven Factor Test that states that power rarely if ever flows out.
Portland suggests that the Commission should clarify the relationship
between the Seven Factor Test and the local distribution exception in
the reliability regulatory context.
222. Alameda believes that the power flow prohibition should apply
only where the flow from the local network is necessary for the
reliable operation of the interconnected transmission network. Alameda
contends that these conditions would typically apply during peak or
near-peak operating conditions and that it would be inappropriate to
include a local network in the bulk electric system because generation
flowed outside the local network only under off peak conditions when
these flows were not vital to reliability. Alameda suggests that the
power flow prohibition be modified to allow flows of less than 75 MVA
to flow outside the network, making the local networks electrically
comparable to radial systems with a 75 MVA generator.
223. ISO New England believes the NOPR suggests an implicit
expectation regarding the determination of local networks in that there
is no stated requirement for contingency analyses in that
determination. ISO New England believes that the Commission
understanding of criterion (b) implies that criterion (b) needs to be
analyzed both pre- and post-contingency. In such a case, this issue
needs to be defined in the exclusion. Additionally, ISO New England
requests clarification whether this indicates that one must apply a
first contingency to the analysis or a second contingency in
determining if the criterion is met.
224. Dow asserts that the requirement that power may only flow into
a local network should be clarified to apply only to power that
originates outside of, and flows through, a local network. Dow believes
that it should not apply to power generated by non-retail generation
resources meeting applicable size or export quantity thresholds that
are connected to local networks. Dow maintains such a clarification is
consistent with other language in the exclusion specifying that up to
75 MVA of non-retail generation may be attached to a local network. Dow
views the reference to non-retail generation as intended to apply to
generation resources that are used to make wholesale sales which
requires that power be able to flow into the bulk electric system for
delivery to downstream buyers. Dow also states that exclusion E3 should
be clarified to address situations in which a local network does not
qualify for the local network exclusion because it is not clear
``whether all facilities rated 100 kV and above that are part of the
local network would be considered part of the [bulk electric system]
and become subject to transmission-related reliability standards * *
*.'' \179\
---------------------------------------------------------------------------
\179\ Dow Comments at 6.
---------------------------------------------------------------------------
225. Valero contends that criterion (b) indicates that the
existence of a power flow that ``transfers through the local network''
would disqualify an element from satisfying the exclusion. On the other
hand, Valero points to the excerpt from the NERC BES Petition which
implies that this meaning of criterion (b) might not be the appropriate
interpretation.\180\ Valero requests that the Commission either clarify
as stated above or modify criterion (b) to allow for transfers through
the local network if such transfers are not necessary for the
reliability of the interconnected transmission network.
---------------------------------------------------------------------------
\180\ The NERC statement is quoted in the NOPR at P 81:
``[l]ocal networks provide local electrical distribution service and
are not planned, designed or operated to benefit or support the
balance of the interconnected transmission network.''
---------------------------------------------------------------------------
226. NESCOE and G&T Cooperatives state that minimal transfers may
and do occur, and local networks should not necessarily be ineligible
for exclusion E3 simply because some amount of power may transfer out
of the network. NESCOE states that the Commission should direct NERC to
reevaluate exclusion E3 to allow these minimal flows up to a 100 MVA
limit.\181\ G&T Cooperatives state that even with optimal load
projections, there may be times when energy flows into the local
network that exceed the load, and in those cases the local network may
need to export the excess energy back to the bulk electric system which
could create perverse incentives to restrict flows into and out of the
local network. G&T Cooperatives suggest that criterion (b) should be
read to allow exclusion E3 to cover local networks in which
``normally'' power flows into the local network and the local network
does not transfer energy originating outside the local network for
delivery through the local network.
---------------------------------------------------------------------------
\181\ NESCOE states that this represents 25 percent of the rated
value of a typical 345/115 kV substation.
---------------------------------------------------------------------------
227. Holland states that the exclusion E3(b) criterion is
unnecessary and should be removed. Holland states that exclusion E3(b)
appears to be concerned with flows originating from outside of the
local network, coming into the local network, and then exiting the
local network to loads outside of the local network. According to
Holland, however, exclusion E3(c) appears to address this concern
because it fails to recognize that a local network may have internal
generation that is less than its peak load but in excess of off-peak
load levels. Holland states that, if exclusion E3(b) is maintained,
then the clause, ``[p]ower flows only into the [local network],''
should be deleted because it is inconsistent with the second clause,
``the [local network] does not transfer energy originating outside the
[local network] for delivery through the [local network].''
Commission Determination
228. The Commission finds that: (1) pursuant to exclusion E3
criterion (b), generation produced inside a local network should not
transport power to other markets outside the local network; and (2)
exclusion E3 criterion (b) applies in both normal and emergency
operating conditions. The Commission agrees with NERC's statements that
basing the determination solely on normal or optimal conditions could
lead to inconsistent application of this exclusion and hence the
definition itself, and would also introduce a degree of subjectivity in
the application of the definition that is not in the interest of
reliability.
229. MISO and other commenters suggest that local networks should
be allowed to deliver power to the bulk electric system in some
circumstances.\182\ The Commission agrees that the facilities should
supply such power if needed, but disagrees that facilities expected to
be needed in this way should nonetheless be excluded from the bulk
electric system. If a local network is expected to be needed to operate
the interconnected transmission network, i.e., to meet reliability
performance criteria in transmission planning assessments, it should
not be excluded from the bulk electric system under exclusion E3. The
Commission also rejects Holland's suggestion to remove criterion (b)
because NERC has presented an acceptable technical justification for
this and the other criteria in exclusion E3.\183\ In response to
Alameda's comment that some power should be permitted to flow out of a
local network during off-peak hours, the
[[Page 836]]
Commission disagrees that the bright-line definition should be modified
for case-specific circumstances. Entities can seek to exclude
configurations that do not meet the exclusion E3 criteria through the
exception process on a case-by-case basis. The Commission agrees with
Portland that criterion (b) is similar to one element of the Seven
Factor Test but otherwise addresses what constitutes local distribution
above.
---------------------------------------------------------------------------
\182\ E.g. Southern Companies, Alameda, Dow, Valero, NESCOE,
Holland and G&T Cooperatives.
\183\ NERC BES Petition at 22-24.
---------------------------------------------------------------------------
230. In response to Idaho Power and ISO New England asking for how
emergency conditions are defined to determine if a candidate
configuration meets exclusion E3 criterion (b), the Commission believes
that the best way to show that a local network meets criterion (b) is
through historical power flow data.
231. We will not direct NERC to allow minimal flows up to a 100 MVA
limit as NESCOE requests. NESCOE may choose to pursue this matter
further with NERC, with the Phase 2 project being one appropriate
forum. Similarly, Dow may raise its contention that exclusion E3 should
not apply to certain non-retail generation resources during Phase 2.
Regarding Dow's argument that exclusion E3 should be further clarified,
we believe our discussion above regarding figure 5 adequately addresses
Dow's concern.
f. Criterion (c)--Not Part of a Flowgate or Transfer Path
232. Exclusion E3 criterion (c) specifies a ``local network'' does
not contain a monitored facility of a permanent flowgate in the Eastern
Interconnection, a major transfer path within the Western
Interconnection, or a comparable monitored facility in the ERCOT or
Quebec Interconnections, and is not a monitored facility included in an
interconnection reliability operating limit. NERC stated that the
presence of a local network is not for the operability of the
interconnected electric transmission network; neither will the local
network's separation or retirement diminish the reliability of the
interconnected electric transmission network.'' \184\ The Commission
stated in the NOPR that it believes that this is an appropriate
criterion.
---------------------------------------------------------------------------
\184\ NOPR, 139 FERC ] 61,247 at P 93 (citing NERC BES Petition,
Exhibit G at 2).
---------------------------------------------------------------------------
Comments
233. G&T Cooperatives state that criterion (c) should be clarified
to allow local networks to come under exclusion E3 even if they are
interconnected with a ``monitored facility of a permanent Flowgate'' in
the Eastern Interconnection or a ``major transfer path'' in the Western
interconnection. G&T Cooperatives recognize that such monitored
facilities and major transmission paths are important to reliability,
but criterion (c) could be read in a manner that would prevent a local
network interconnected with such major facilities from qualifying under
exclusion E3. G&T Cooperatives do not believe that NERC intended such a
broad reading.
Commission Determination
234. The Commission finds that exclusion E3 criterion (c) is an
appropriate criterion. We agree with NERC that facilities with, e.g.,
permanent flowgates, cannot be included in a local network as the
separation of such facilities during a system event could have an
adverse impact on the operation of the interconnected transmission
network. The language for criterion (c) only prohibits flowgates and
their associated monitored elements from being within a candidate local
network. Therefore, we believe the language is sufficiently clear and
will not direct NERC to modify this provision in response to G&T
Cooperatives request for clarification.
9. Exclusion E4 (Reactive Power Devices)
NOPR Proposal
235. Exclusion E4 excludes from the bulk electric system ``Reactive
Power devices owned and operated by the retail customer solely for its
own use.'' NERC explained that exclusion E4 is the technical equivalent
of exclusion E2 for reactive power devices and that the currently
effective bulk electric system definition is unclear as to how these
devices are to be treated. In the NOPR, the Commission stated that this
is an appropriate exclusion that provides additional clarity and
granularity to the definition of bulk electric system.
Comments
236. NERC, ELCON and EEI support the Commission's proposal. Steel
Manufacturers Association supports a definitive exclusion for reactive
power equipment that is installed and used to benefit end use loads.
The exclusion, however, in the Steel Manufacturers Association's
opinion, should not be confined to such devices that are owned and
operated by a retail customer solely for its own use because there are
instances in which capacitor banks have been installed for the benefit
of a steel-making facility but, for various reasons, that equipment is
owned, operated and maintained by its local utility. Consequently, the
Steel Manufacturers Association suggests that exclusion E4 be revised
to read: ``Reactive Power devices owned and operated by, or installed
solely for the benefit of, retail customers.''
Commission Determination
237. The Commission finds that exclusion E4 is an appropriate
exclusion that provides additional clarity and granularity to the
definition of bulk electric system. In response to the Steel
Manufacturers Association, we will not direct the suggested clarifying
change to exclusion E4 criterion. Rather, Steel Manufacturers
Association may choose to pursue this matter further with NERC in its
Phase 2 project.
E. The NERC Rules of Procedure Exception Process, RM12-7-000
NOPR Proposal
238. As described above in section I.D.2, NERC proposed revisions
to its Rules of Procedure to provide an ``exceptions process'' to add
elements to, and remove elements from, the bulk electric system, on a
case-by-case basis. NERC stated, inter alia, that the exception process
decisions to approve or disapprove exception requests will be made by
NERC, rather than by the Regional Entities.
239. In the NOPR, the Commission proposed to find that, pursuant to
section 215(f) of the FPA, the exception process is just, reasonable,
not unduly discriminatory or preferential, and in the public interest
and satisfies the requirements of section 215(c). Further, the
Commission proposed to find that the proposed exception process
satisfies the statement in Order No. 743 that NERC establish an
exception process for excluding facilities that are not necessary for
the reliable operation of the interconnected transmission network from
the definition of the bulk electric system.\185\
---------------------------------------------------------------------------
\185\ See NOPR, 139 FERC ] 61,247 at PP 103-04 (citing Order No.
743, 133 FERC ] 61,150 at P 16).
---------------------------------------------------------------------------
Comments
240. Many commenters support the exception process as proposed.
Commenters state that the exception process will be able to handle the
more unusual situations that need to be addressed on a case-by-case
basis, including sub-100 kV transmission elements that are necessary
for the reliable operation of the interconnected transmission
network.\186\ They further state that the exception process balances
the need for effective and efficient administration with due process
and clarity of expectations and promotes consistency in determinations
and
[[Page 837]]
eliminates regional discretion by having all decisions on exception
requests made at NERC. Southern Companies support approval of the
exception process and assert that the Commission should allow time for
NERC, Regional Entities and industry to implement the definition and
exception process and determine at a later date whether it is
sufficiently capturing the appropriate facilities.
---------------------------------------------------------------------------
\186\ E.g., ELCON, TAPS, and Southern Companies.
---------------------------------------------------------------------------
241. MISO states that RTOs, as reliability coordinators, planning
coordinators or authorities, and balancing authorities, should be
allowed to file exception requests. MISO also states that there should
be fewer requirements for filing exception requests by RTOs because
they have been assigned substantial authority over facilities under
their authority by their member transmission owners and operators, and
because they utilize rigorous stakeholder processes. Specifically, MISO
requests that the Commission direct NERC to modify the exception
process to recognize RTO stakeholder processes and their results as
evidence that the RTO as the submitting entity conferred with the owner
about the reasons for an exception and either an agreement was reached
between the entities that an exception should be filed and that the RTO
should submit the exception, or that the entities could not reach
agreement regarding the submission of such an exception request.
242. NYISO comments that the exception process needs to provide
interested parties notice and an opportunity to be heard. NYISO states
that ISOs and RTOs have an interest in participating in an exception
proceeding prior to a final determination by the Regional Entity or
NERC because exception requests may affect them operationally or in
their planning studies depending upon the final determination made on
the specific exception request.
243. NYPSC and NESCOE are concerned that NERC's proposal does not
give state commissions an opportunity to participate directly in the
process. NESCOE states that, without state participation, NERC will not
address the full range of substantive concerns that may arise in any
given case, and, if the Commission is asked to review an exemption
determination, the record presented will not reflect the states' views.
NESCOE is also concerned that the exceptions process lacks a mechanism
for a state regulatory authority to initiate review of the
classification of an element. NESCOE contends that states may have an
interest in the proper classification of bulk electric system
facilities, but they are not in a position to submit an exception
request because they lack the detailed information required for a
submission under the proposal. NESCOE suggests that this can be
remedied by allowing a state to request a review from the relevant
Regional Entity and to require the Regional Entity to submit a formal
exception request if it finds that the classification is inaccurate. In
addition, NESCOE believes that a state should have a right to seek
review from NERC of the Regional Entity's determination.
244. In reply comments, NERC disagrees with MISO and explains that
the exception process needs to be applied consistently and that the
required information should be the same regardless of the identity of
the submitter. NERC states that the Detailed Information Form is
intended to ensure that a consistent baseline of technical information
is provided to the Regional Entity and NERC with all exception
requests, in addition to the specific information and arguments
submitted by the submitting entity in support of its exception request.
The MISO Transmission Owners and AMP support NERC's comments.
245. NERC also explains that RTOs and ISOs have the ability to file
an exception request where they are acting in their capacity as
planning authorities, reliability coordinators, transmission operators,
transmission planners, or balancing authorities. NERC states that ``the
exceptions process is technical and is based on engineering expertise,
and these are the necessary parties with the required information.''
\187\ NERC also disagrees regarding a state or third party role and the
need for notice and access to information. NERC states that state
commissions have other means and methods at their disposal for working
with entities to identify candidates for an exception request. NERC
notes that the exception process provides that detailed notice of any
request would be provided to every registered entity with reliability
oversight obligation (e.g., planning authorities, reliability
coordinators, transmission operators, transmission planners, or
balancing authorities) for the element subject to the request and that
general information about an exception request will be publicly posted.
NERC also notes that third parties including state regulatory agencies
will have adequate opportunity to provide comments regarding the
request without formally participating in the process.
---------------------------------------------------------------------------
\187\ NERC Reply Comments at 5.
---------------------------------------------------------------------------
246. ICNU states that the Commission should make clear that
utilities and Regional Entities, not end-use customers should be
required to perform the studies to determine if a facility of an end-
use customer should be included or excluded. Alameda suggests that the
Commission set forth a future date for review of the definition seeking
both an effectiveness report from NERC as well as industry comment.
247. IUU and Barrick believe that NERC's explanation that an
exception may be obtained by showing that the element is ``not
necessary'' for reliable operation of the interconnected transmission
system is too ambiguous and does not give adequate information as to
what may or may not be eligible for an exception. They believe guidance
is necessary as to the types of evidence that should be presented in an
exception request and the criteria to which the evidence will be
subjected.
248. Redding states that the exception process provides that
entities are not required to use the exception process to affirmatively
demonstrate they fall within the general local distribution carve-out
in the core definition or meet one of the exclusions. Redding notes
that new section 509 of the Rules of Procedure states that application
of the entire definition will determine what facilities qualify as bulk
electric system components. Therefore, Redding argues that section 509
confirms that no exception request is necessary if the facility fits
within either the local distribution carve-out language of the core
definition, or the explicitly identified exclusions. Furthermore,
Redding argues that this is confirmed by NERC's statement that the
definition expressly excludes both ``facilities used in the local
distribution of electric energy,'' and radial systems as described in
Exclusion E1 of the definition. Redding believes this statement
recognizes that facilities that are excluded from the definition at the
outset--through either the core definition or the specific exclusions--
need not submit any requests through the exemption process confirming
that exclusion.
249. Holland is concerned that the exception process is too
narrowly focused on excluding facilities that are not necessary for the
reliable operation of the interconnected transmission network. Holland
does not believe that exceptions should be limited to a demonstration
that the facilities lack a material impact to the bulk electric system.
Holland supports the exception process for this purpose; however, the
lack of materiality demonstration is independent of the question of
whether
[[Page 838]]
the facilities should be excluded on the grounds that they are used in
local distribution. Holland believes the Commission should clarify
that, for exceptions seeking exclusion based upon a claim of being
local distribution, NERC must evaluate additional information
submitted, and not merely rely on the criteria in Exclusions E1 through
E4.
250. Steel Manufacturers Association is concerned that because the
Rules of Procedure provide that only a Regional Entity may submit an
exception request for the inclusion in the bulk electric system of an
element owned by an owner that is not a registered entity, they do not
contemplate that the owner will be notified that its facilities are
being considered for inclusion in the bulk electric system.
Commission Determination
251. Pursuant to FPA section 215(f), we approve the NOPR proposal
and find that the exception process is just, reasonable, not unduly
discriminatory or preferential, and in the public interest. Further, we
find that the proposal satisfies the statement in Order No. 743 that
NERC establish an exception process for excluding facilities that are
not necessary for the reliable operation of the interconnected
transmission network from the definition of the bulk electric
system.\188\ The exception process balances the need for effective and
efficient administration with due process and clarity of expectations
and promotes consistency in determinations and eliminates regional
discretion by having all decisions on exception requests made at NERC.
The exception process also provides for involvement of persons with
applicable technical expertise in making decisions on exception
requests and allows for an entity to appeal a final NERC decision to
the Commission.
---------------------------------------------------------------------------
\188\ See Order No. 743, 133 FERC ] 61,150 at P 16.
---------------------------------------------------------------------------
252. The exception process provides a reasonable mechanism for the
ERO to determine whether a facility or element should be added to, or
removed from, the bulk electric system on a case-by-case basis.
However, for the reasons explained above in our discussion in section
II.C regarding local distribution, the case-by-case determination of
whether an element or facility is used in local distribution will be
decided by the Commission.
253. We also find that NERC's explanation, that it was not feasible
to develop a single set of technical criteria that would be applicable
to all exception requests so it developed the Detailed Information Form
(discussed in detail below) to ensure that a consistent baseline of
technical information is provided for NERC to make a decision on all
exception requests, is reasonable. We find that this information,
coupled with the proposed exception process, allows NERC to provide
consistent determinations on exception requests submitted from
different regions involving the same or similar facts and
circumstances, and allows NERC to take into account the aggregate
impact on the bulk electric system of approving or denying all the
exception requests. Thus, we find that NERC's proposal is clear,
transparent, and uniformly applicable and is as equally efficient and
effective as the Order No. 743 directive to establish an exception
process for excluding facilities that are not necessary for the
reliable operation of the interconnected transmission network.
254. We are not persuaded by Barrick's and IUU's comments that more
guidance is necessary. Order No. 743 tasked NERC with developing a
revised definition and exemption process. NERC noted that it was not
feasible to develop a single set of criteria. The Commission believes
that applying the 100 kV threshold in the definition, the inclusions
and exclusions and the information required in the Detailed Information
Form will be a sufficient starting point to enable the ERO to make
determinations as to whether an element is necessary for reliable
operation of the interconnected transmission network. The body of
exception decisions that NERC promulgates will further assist entities
in presenting the relevant facts and circumstances when seeking an
exception.
255. In response to MISO's request, we note that RTOs and ISOs, in
their capacity as planning authorities, reliability coordinators,
transmission operators, transmission planners, or balancing
authorities, have the ability to file an exception request.\189\ We are
not persuaded that fewer requirements should apply to exception
requests submitted by RTOs and ISOs, and we agree with NERC, MISO
Transmission Owners and AMP that the exception process needs to be
applied consistently and that the required information should be the
same regardless of the identity of the submitter.
---------------------------------------------------------------------------
\189\ See NERC ROP Petition, Attachment 1, Proposed Appendix 5C,
Section 4.1.
---------------------------------------------------------------------------
256. NYISO comments that the exception process should provide
interested parties--particularly ISOs and RTOs--notice and an
opportunity to be heard. As we note above, the exception process
affords ISOs and RTOs, in their capacity as planning authorities,
reliability coordinators, transmission operators, transmission
planners, or balancing authorities, notice and opportunity to comment
on elements within their scope of responsibility.
257. Similarly, with regard to NYPSC's and NESCOE's comments on the
role of state commissions in the exception process, we believe that
NERC's proposal is reasonable and provides an adequate opportunity for
state regulator participation. Specifically, NERC explains in its ROP
petition that, in developing the proposed Rules, state regulators and
others raised concerns about their ability to participate in the
exception process. NERC responded that ``the exception process should
be one based on the technical reliability issues of the specific case
presented.* * * [A] procedure that encouraged or even invited multi-
party filings would unduly complicate the process without any
concomitant benefit in reliability.'' \190\ However, to provide
transparency and some opportunity for participation, the proposed
exception process provides that ``(1) detailed notice of any request
would be provided to every Registered Entity with reliability oversight
obligation for the Element subject to the Request and (2) general
information about the request will be publicly posted,'' thereby
allowing third parties including state regulators ``adequate
opportunity to provide comments regarding the request without formally
participating in the process.'' \191\ We agree that NERC's proposal
strikes an appropriate balance between efficient processing of highly
technical decisions and the opportunity for states and other entities
to comment in the exception process. Nonetheless, as discussed above,
requests for exclusion from the bulk electric system on local
distribution grounds will be determined by the Commission on a case-by-
case basis. In such proceedings, state regulatory authorities will have
an opportunity to intervene and provide comments.
---------------------------------------------------------------------------
\190\ NERC ROP Petition, Att. 9 (``The Development Process and
Basis for the ROP Team's Recommended Provisions--How Stakeholder
Comments were Considered and Addressed'') at 7.
\191\ Id.
---------------------------------------------------------------------------
258. We disagree with Redding's characterization of how the
exception process is not necessary for determining whether an element
is used for local distribution. Redding's characterization
[[Page 839]]
of the exception process leaves the determination of whether an element
is used for local distribution in the hands of registered entities or
NERC. However, as we explain in the local distribution discussion
above, in circumstances where there is a factual question as to whether
facilities not otherwise excluded from the bulk electric system by the
core definition and four exclusions should nonetheless be excluded
because they are used in local distribution, a determination should be
made by this Commission. In addition, in our discussion in section II.C
above regarding local distribution, we provide direction with respect
to how an entity may seek a determination of whether an element is used
in local distribution.
259. Regarding Steel Manufacturers Association's concern that the
Rules of Procedure do not contemplate that an owner of an element that
is not a registered entity will be notified by a Regional Entity that
its facilities are being considered for inclusion in the bulk electric
system, we note that section 4.1 of Appendix 5C the Rules of Procedure
states that when a Regional Entity requests an exception, the Regional
Entity ``shall prepare and submit copies of its exception request (or
portions thereof) to all applicable entities* * *.'' \192\ Further,
section 4.4 of Appendix 5C provides that, if the submitting entity is
not the owner (i.e., is a Regional Entity, planning authority,
balancing authority, etc) it must provide a copy of the exception
request to the owner. Therefore, if a Regional Entity submits an
exception request for an element owned by a non-registered entity, the
owner is notified.
---------------------------------------------------------------------------
\192\ NERC Rules of Procedure, Appendix 5C, section 4.1.
---------------------------------------------------------------------------
260. With respect to Holland's request for clarification for what
must be submitted for a claim of being local distribution, we believe
that our discussion above regarding how local distribution elements
will be determined addresses Holland's concerns.
261. In response to ICNU's comments, the Commission notes that NERC
has identified the entities that are responsible for providing the
information necessary for an exception request. Section 3.2 of the
exception process states that ``the burden to provide a sufficient
basis for approval of an exception request in accordance with the
provisions of the exception procedure is on the submitting entity.''
Additionally, in section 4.1 of the exception process, NERC lists the
eligible submitting entities as the owner of an element, or a Regional
Entity, planning authority, reliability coordinator, transmission
operator, transmission planner, or balancing authority that has (or
will have upon inclusion in the bulk electric system) the elements
covered by an exception request within its scope of responsibility.
262. Southern Companies state that the Commission should allow time
for NERC, Regional Entities and industry to implement the definition
and exception process and determine at a later date whether it is
sufficiently capturing the appropriate facilities. Similarly, Alameda
suggests that the Commission set forth a future date for review of the
definition seeking both an effectiveness report from NERC as well as
industry comment. First, as discussed below, the Commission is granting
NERC's request for a 24 month implementation plan. The Commission
believes that this is sufficient to implement the definition and
exception process. In addition, the Commission declines to set a future
date to determine effectiveness of the definition and the exception
process.
1. How Entities Will Review and Seek Inclusion of Necessary Elements
NOPR Proposal
263. In Order Nos. 743 and 743-A, the Commission indicated that our
goal is that the definition of bulk electric system should include all
facilities necessary for the operation of the interconnected
transmission network, except for local distribution. Further, while the
Commission explained that one way to meet the goal was to establish a
100 kV ``bright line'' threshold, the Commission also made clear that
the ``bright line'' threshold would be a ``first step or proxy'' in
determining what facilities should be included in the bulk electric
system.\193\ The NOPR reiterated that, in Order Nos. 743 and 743-A, the
Commission held that NERC should not necessarily stop at 100 kV and
should, through the development of the exception process, ensure that
``critical facilities operated at less than 100 kV, and that the
Regional Entities determine [which facilities] are necessary for
operating the transmission network.'' \194\ The Commission clarified
that the inclusion of sub-100 kV facilities should be done in an
``appropriate and consistent'' manner.\195\ Finally, in the NOPR, the
Commission noted that the September 2011 Blackout Report reinforced
statements in Order Nos. 743 and 743-A with respect to ensuring that
sub-100 kV facilities, as appropriate, are included in the bulk
electric system.\196\ The Commission further noted that the NERC
proposals at issue in this rulemaking take steps to address the
treatment of sub-100 kV facilities, as well as other facilities,
necessary for the operation of the interconnected transmission network,
through the exception process. However, in light of the September 2011
Blackout Report, the Commission requested comment on how the relevant
entities who control and run facilities on the interconnected
transmission network will seek inclusion of sub-100 kV facilities, as
well as other facilities, to ensure that all facilities that are
necessary for the operation of the bulk power system are designated as
bulk electric system elements.\197\
---------------------------------------------------------------------------
\193\ Order No. 743-A, 134 FERC ] 61,210 at P 40; see also NOPR,
139 FERC ] 61,247 at P 106.
\194\ Order No. 743, 133 FERC ] 61,150 at P 121.
\195\ Order No. 743-A, 134 FERC ] 61,210 at P 103.
\196\ NOPR, 139 FERC ] 61,247 at P 107.
\197\ NOPR, 139 FERC ] 61,247 at PP 109-10.
---------------------------------------------------------------------------
Comments
264. NERC proposes that entities can identify sub-100 kV facilities
for inclusion in a variety of ways: In the course of performing
planning assessments, from day-to-day operating experience, or
assessment of system events that indicate facilities not identified by
application of the definition are necessary for reliable operation of
the interconnected transmission network. NERC further states that an
entity that requests the inclusion or exclusion of a facility must
provide certain technical and engineering support for its request. NERC
also points out that the exception process provides for the appeal of a
decision to NERC as to whether a facility is part of the bulk electric
system. NERC believes this process adequately addresses the issue of
whether certain sub-100 kV facilities are included in the bulk electric
system.
265. ELCON states that the NOPR's suggestion that the entities
would not take cognizance of Commission or NERC findings related to any
sub-100 kV elements that have a material impact on system reliability
would call into question the efficacy of the entire construct
established by the Commission to address reliability issues.
266. APPA believes that it will be excessively burdensome to
industry and small entities if they have to conduct a study of all
their sub-100 kV elements. APPA asserts that it would require small
registered entities to hire consultants to perform studies to assess
the impact of large numbers of non-bulk electric system facilities.
[[Page 840]]
267. Idaho Power believes that entities could periodically (e.g.
every five years) review the impact of sub-100 kV facilities and verify
if any of the inclusions would require them to be included and explain
why certain sub-100 kV facilities are excluded.
268. ISO New England and National Grid believe that, during the
conduct of transmission planning system assessments, performed in
accordance with requirements of the NERC Transmission Planning
Reliability Standards, facilities required for inclusion in the bulk
electric system may be identified.
Commission Determination
269. As we held in Order Nos. 743 and 743-A, the goal of revising
the definition of bulk electric system is to ensure that all necessary
facilities are included in the bulk electric system. As we noted in
Order No. 743, applying the definition of bulk electric system should
be a ``first step or proxy'' in determining which facilities should be
included in the bulk electric system.\198\ The Commission stated that
NERC should not end the inquiry at 100 kV and should, through the
development of the exception process, ensure that ``critical''
facilities operated at less than 100 kV, and that the Regional Entities
determine are necessary for operating the interconnection network are
included.\199\ We continue to expect entities to identify and include
sub-100 kV facilities, as well as other facilities, necessary for the
operation of the interconnected transmission network. In the NOPR we
asked how the entities responsible for including elements in the bulk
electric system will assure that the all facilities, including sub-100
kV elements, that are necessary for operating the interconnected
transmission network will be included in the bulk electric system. We
find NERC's response to that question reasonable: That Regional
Entities, planning authorities, reliability coordinators, transmission
operators, transmission planners, balancing authorities, and owners of
system elements will include, through the exception process, facilities
identified in the course of performing planning assessments, from day-
to-day operating experience, or assessment of system events that are
not included by application of the definition but are necessary for
reliable operation of the interconnected transmission network. We
believe that entities, having knowledge of their systems and the
concomitant planning assessments and system impact studies, will
identify an element that is necessary for reliable operation of the
integrated transmission network while conducting their day-to-day
operations and planning and performing studies. If the element does not
fall within the definition, we expect that the entity will submit the
element for inclusion through the exception process. Use of this
process should ensure that the all sub-100 kV elements, as well as
other facilities, necessary for the operation of the interconnected
transmission network are included in an ``appropriate and consistent''
manner. By identifying and seeking inclusion of sub-100 kV facilities,
and other facilities, in the bulk electric system through performance
of these routine functions, such as those identified by ISO New England
and National Grid, we do not expect that entities will have to perform
studies indiscriminately to make such determinations. Indeed, comments
indicate that the determination of which elements, including sub 100 kV
elements, should be included in the bulk electric system is a natural
part of an entities' process for assuring the reliable operation of the
grid.\200\ Thus, the Commission believes that, if a study is needed
outside the ordinary course of operations, it would be infrequent. By
adopting this approach, we believe that APPA's concerns about
burdensome tasks are alleviated.
---------------------------------------------------------------------------
\198\ NOPR, 139 FERC ] 61,247 at P 106 (citing Order No. 743-A,
134 FERC ] 61,210 at P 40).
\199\ Order No. 743, 133 FERC ] 61,150 at P 121.
\200\ E.g., ELCON Comments at 8.
---------------------------------------------------------------------------
2. NERC Role in Identifying Necessary Elements
270. In the NOPR, the Commission observed that, despite NERC's
statutory functions to develop and enforce Reliability Standards, its
continent-wide perspective, and technical understanding that can
provide valuable assistance in the identification of bulk electric
system facilities, the exception process does not provide that NERC may
initiate an exception request. Accordingly, the Commission requested
comments on the role NERC should have in initiating the designation of
or directing others to initiate the designation of sub-100 kV
facilities, or any other facilities, necessary for the operation of the
interconnected transmission network for inclusion in the bulk electric
system.\201\ The Commission also requested comment on the role NERC
should have in designating sub-100 kV facilities, and other facilities,
for inclusion in the bulk electric system, directing Regional Entities
or others to conduct such reviews, or itself nominating an element to
be included in the bulk electric system.
---------------------------------------------------------------------------
\201\ NOPR, 139 FERC ] 61,247 at P 111.
---------------------------------------------------------------------------
Comments
271. NERC states that inherent in its oversight of the Regional
Entities is the ability to request a Regional Entity or others to
propose inclusion of sub-100 kV facilities, and other facilities in the
bulk electric system. NERC further states that the Rules of Procedure
do not limit its ability to perform this function and such action is
fully consistent with NERC's obligations and authority as the ERO.
272. Dominion believes that if NERC wants to nominate a sub-100 kV
facility, it could do so through the broad powers assigned to NERC
through its Rules of Procedure and/or regional delegation agreements.
TAPS maintains that if, through its investigations, risk assessments,
or analysis of events, NERC identifies facilities that should be
included in (or excluded from) the bulk electric system, it would be
appropriate for NERC to have the authority to make such a proposal
through the exception process, provided that it implements due process
safeguards such as the designation of decisional and non-decisional
staff.
273. Several commenters state that NERC should have the ability to
nominate a facility for inclusion. SmartSenseCom believes NERC should
have authority to initiate an exception request because, even with a
bright line standard, there remains the possibility of inconsistent
interpretation and application of the definition. ISO-NE states that
NERC should have the ability to nominate a facility for inclusion, but
the Regional Entities along with planning authorities, reliability
coordinators, transmission operators, transmission planners and
balancing authorities should be provided an opportunity to review and
comment on this nomination.
274. AEP believes that RTOs or Regional Entities ``are equipped to
facilitate the efforts to be effective with the exception process.''
\202\ AEP also suggests that NERC and the Commission could assign
review of sub-100 kV facilities to the RTOs. AEP states that the RTO
processes could be modified to address the exceptions. AEP defers to
the judgment of the Commission and NERC in regions where there are
currently no functioning RTOs.
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\202\ AEP Comments at page 11.
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275. Other commenters do not support a NERC role as contemplated in
the NOPR. SoCal Edison believes that
[[Page 841]]
NERC should not initiate exception requests to include facilities
within the bulk electric system. Rather, SoCal Edison posits that
NERC's role is to communicate to the Regional Entities their obligation
to review systems in their area that operate in parallel with the bulk
electric system and to include such systems in the bulk electric
system. APPA supports consideration of a NERC role in Phase 2 of the
project to identify specific reliability gaps but objects to NERC being
able to step into the shoes of the Regional Entity.
Commission Determination
276. NERC states that, as the ERO, and in its oversight of the
Regional Entities, it has the ability to request a Regional Entity or
others to propose inclusion of sub-100 kV facilities, and other
facilities, in the bulk electric system. NERC believes that nothing in
the proposed Rules of Procedure limits its oversight obligations and
authority as the ERO. The Commission finds NERC's approach to be
reasonable. Section 215(e)(4)(C) of the FPA authorizes the Commission
to issue regulations authorizing the ERO to enter into an agreement to
delegate authority to Regional Entities if the agreement promotes
effective and efficient administration of Bulk-Power System
reliability.\203\ Subsequently, the Commission approved delegation
agreements between NERC and the eight Regional Entities.\204\ Pursuant
to the delegation agreements, NERC may issue guidance or directions as
to the manner in which a Regional Entity performs delegated functions
and related activities.\205\ Thus, the Commission agrees with NERC
that, as the ERO, NERC has the authority to request a Regional Entity
or other eligible submitting entity to propose inclusion of sub-100 kV
facilities, or other facilities, in the bulk electric system.
---------------------------------------------------------------------------
\203\ 16 U.S.C. 824o (2006).
\204\ North American Electric Reliability Corp., 119 FERC ]
61,060, order on reh'g, 120 FERC ] 61,260 (2007).
\205\ See, e.g., section 8(d) of the Amended and Restated
Delegation Agreement between NERC and Midwest Reliability
Organization (* * * the NERC Board (or a Board committee to which
the Board has delegated authority) may issue guidance or directions
as to the manner in which Midwest Reliability Organization and, if
applicable, other Regional Entities, shall perform delegated
functions and related activities.'').
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277. TAPS supports NERC having the ability to initiate the
designation of facilities or elements as part of the bulk electric
system, provided that NERC implements due process safeguards such as
the designation of appropriate decisional and non-decisional staff. We
agree that, to avoid actual or appearance of impropriety, NERC must
develop appropriate safeguards.
278. In response to AEP, the Commission will not direct
modifications to provide RTOs and ISOs the authority to address
exception requests. RTOs and ISOs can submit exception requests in
their capacity as planning authorities, reliability coordinators,
transmission operators, transmission planners, and/or balancing
authorities.
3. Commission Role in Identifying Necessary Elements
NOPR Proposal
279. In the NOPR, the Commission requested comment on the role the
Commission should have with respect to the designation of sub-100 kV
facilities, or other facilities, necessary for the operation of the
interconnected transmission network for inclusion in the bulk electric
system. The Commission observed that ``there may be circumstances (like
the September 2011 Blackout Report) where the Commission, through the
performance of its statutory functions, may conclude that certain sub-
100 kV facilities not already included in the bulk electric system are
necessary for the operation of the interconnected transmission network
and thus should be included in the bulk electric system.'' \206\ The
Commission stated that it expected that Regional Entities and others
``will take affirmative steps to review and include sub-100 kV elements
and facilities, and other facilities, necessary for the operation of
the interconnected transmission system in the bulk electric system,''
and requested comment as to how the Commission could ensure that such
facilities are considered for inclusion in the bulk electric
system.\207\ The Commission also requested comment on instances when
the Commission itself should designate or direct others to designate
sub-100 kV facilities, or other facilities, necessary for the operation
of the interconnected transmission grid for inclusion in the bulk
electric system.
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\206\ NOPR, 139 FERC ] 61,247 at P 112.
\207\ NOPR, 139 FERC ] 61,247 at P 112.
---------------------------------------------------------------------------
Comments
280. NERC notes that the Commission has authority pursuant to FPA
section 215(d)(5) to initiate a Reliability Standards development
process that ``addresses a specific matter.'' According to NERC, for
the Commission to play a more active role in the designation of such
facilities would be inconsistent with its role as the adjudicator of
disputes.
281. Some commenters assert that the Commission has the authority
to designate a facility as part of the bulk electric system.\208\
SmartSenseCom states that, if the Commission is concerned that a
facility is necessary for the operation of the interconnected
transmission system, it possesses authority to order NERC or a Regional
Entity to address that matter. Specifically, SmartSenseCom points to
section 215(b) and section 215(d)(5) where the Commission has plenary
authority over the ERO and ``all users, owners, and operators of the
bulk-power system'' for the purposes of approving reliability standards
and enforcing compliance with those standards.\209\ SmartSenseCom
states that, pursuant to the statutory authority, the Commission could,
on its own motion, ``order [NERC] to submit * * * a modification to a
reliability standard that addresses a specific matter if the Commission
considers such * * * modified reliability standard appropriate to carry
out this section.'' \210\
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\208\ E.g., Dominion and SmartSenseCom.
\209\ SmartSenseCom Comments at 14, quoting 16 U.S.C. 824o(b).
\210\ Id. at 14, quoting 16 U.S.C. 824o(d)(5).
---------------------------------------------------------------------------
282. Furthermore, SmartSenseCom states that the Commission should
be able to review NERC exceptions decisions. SmartSenseCom asserts that
NERC decisions should be subject to the discretionary review of the
Commission and the Commission should retain the ability to remand or
reject an exception determination, pursuant to the Commission's FPA
section 215 statutory authority to approve, disapprove, or remand NERC-
proposed Reliability Standards. While the Commission should give NERC's
exception decision ``due weight'' as required by section 215,
SmartSenseCom asserts that the availability of review would ensure
reliable operation of existing and future Bulk-Power System facilities.
SmartSenseCom also suggests that Commission review of exception
decisions would provide industry stakeholders with valuable precedent
and clarity on the treatment of certain facilities.
283. Other commenters claim that the Commission does not possess
the authority to designate elements as part of the bulk electric
system. ISO New England contends that the Commission, as the ultimate
decision making authority, should not have a role in nominating
facilities for inclusion in the bulk electric system. APPA does not
believe that the FPA gives the Commission authority to designate
specific elements for inclusion in the
[[Page 842]]
bulk electric system. Rather, according to APPA, the Commission's role
is to review NERC decisions. APPA states that policy considerations and
Congressional intent also ``militate against direct [Commission]
identification of specific facilities or classes of facilities to be
included in the [bulk electric system] definition.'' \211\ APPA asserts
that, during the course of a Part 1b investigation or other inquiry,
the Commission may identify facts that indicate that a registered
entity has not properly applied the definition. APPA points to FPA
section 215(e)(3) which provides that, after notice and opportunity for
hearing, the Commission may enforce compliance by a particular user,
owner or operator of the Bulk-Power System with a Reliability Standard,
which could include application of the definition within the context of
a specific reliability standard. APPA argues, that section 215
contemplates a standard development and enforcement framework in which
rules of general applicability, i.e., Reliability Standards, are
developed by the ERO on a continent-wide, and are subject to Commission
approval prior to the enforcement of such Reliability Standards. In
contrast, APPA argues that section 215 contemplates the delegation of
enforcement authority by the ERO to Regional Entities that are
organized to accomplish this specific purpose. APPA concludes that the
Commission, like NERC, should focus its resources on ensuring that
Regional Entities enforce compliance with the definition and the Rules
of Procedure.
---------------------------------------------------------------------------
\211\ APPA Comments at 20.
---------------------------------------------------------------------------
284. SoCal Edison does not support active Commission involvement in
designating facilities for inclusion in the bulk electric system.
According to SoCal Edison, because the Commission has the authority to
review NERC's decisions in the exceptions procedure, the Commission's
role should be limited to providing to NERC information that the
Commission develops on facility categories that should potentially be
included in the bulk electric system. Further, SoCal Edison states that
NERC should be responsible for communicating that information to
Regional Entities for further action and ensuring that those Regional
Entities take the appropriate action with respect to such information,
and the Commission should ensure that NERC and the regional authorities
act upon the information provided by the Commission with respect to
such facilities.
Commission Determination
285. For the reasons discussed below, we conclude that the
Commission has the authority to designate an element as part of the
bulk electric system pursuant to our authority set forth in sections
215(a)(1) and (b)(1) of the FPA. We are cognizant of the concerns
stated by SoCal Edison and other commenters regarding the appellate
role of the Commission, and the desire to allow registered entities and
Regional Entities to take the lead in identifying sub-100 kV elements,
and other elements, that should be included in the bulk electric
system. As explained above, we expect entities to identify and include
sub-100 kV elements, and other elements, that are necessary for
operating the interconnected transmission network in the bulk electric
system. Nonetheless, we believe that in appropriate circumstances, for
example, where an event analysis of a system disturbance indicates the
operational importance of sub-100 kV elements, and other elements, to
bulk electric system reliability, the Commission may find it necessary
for the reliable operation of the interconnected transmission network
to designate facilities to be included in the bulk electric system. We
anticipate that such circumstances will be rare. Consistent with the
approach discussed in the NOPR, the Commission would provide public
notice and opportunity for public comment before designating facilities
as part of the bulk electric system.\212\
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\212\ NOPR, 139 FERC ] 61,247 at P 112, n.127.
---------------------------------------------------------------------------
286. Commenters are mistaken in characterizing the Commission's
designation of facilities as bulk electric system as a modification to
the bulk electric system definition or other Reliability Standard.
Rather, our authority to designate facilities is based on the statutory
definition of Bulk-Power System and the jurisdictional authority vested
in the Commission pursuant to section 215 of the FPA. Specifically,
section 215(b)(1) of the FPA provides that ``the Commission shall have
jurisdiction, within the United States, over * * * all users, owners
and operators of the bulk-power system * * * for purposes of approving
Reliability Standards established under this section and enforcing
compliance with this section.'' \213\ Section 215(a)(1) of the FPA, in
turn, defines ``Bulk-Power System'' to mean ``facilities and control
systems necessary for operating an interconnected electric energy
transmission network (or any portion thereof); and electric energy from
generation facilities needed to maintain transmission system
reliability.'' \214\ If an entity owns or operates sub-100 kV elements,
or other elements, ``necessary for operating an interconnected electric
energy transmission network,'' the Commission has jurisdiction pursuant
to FPA section 215(b)(1) to ``enforc[e] compliance with this section,''
and to ensure that the approved definition is being implemented
properly.
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\213\ 16 U.S.C. 824o(b)(1).
\214\ 16 U.S.C. 824o(a)(1).
---------------------------------------------------------------------------
287. For example, an entity may operate sub-100 kV elements, or
other elements, that are, pursuant to the modified definition approved
in this Final Rule, not treated as part of the bulk electric system.
However, an event analysis may reveal that such facilities are
``necessary for operating an interconnected electric energy
transmission network.'' As an appropriate prospective remedy, pursuant
to the FPA section 215(b)(1) authority to ``enforc[e] compliance with
this section,'' the Commission could designate the facilities as part
of the bulk electric system. This approach is consistent with
Commission precedent regarding unregistered entities whose facilities
are involved in a violation of Reliability Standards. The Commission
determined that, in such situations, the appropriate remedy is to
register the entity so that, prospectively, the entity must comply with
the relevant Reliability Standards based on the functions performed by
that entity.\215\
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\215\ See Reliability Standard Compliance and Enforcement in
Regions with Regional Transmission Organizations or Independent
System Operators, 122 FERC ] 61,247, at P 19 (2008).
---------------------------------------------------------------------------
288. The Commission would not modify the language of the definition
of bulk electric system or the specific inclusions and exclusions.
Rather, the Commission would initiate the designation of elements to
ensure that the definition is properly applied. To be clear, when, for
example, a system disturbance or other event demonstrates the necessity
of sub-100 kV elements, or other elements, for reliable operations, we
expect in the normal course that registered entities, Regional Entities
and NERC will proactively identify and include sub-100 kV elements, or
other elements, in the bulk electric system. The Commission's strong
preference is that registered entities review their facilities to
determine which are needed for operating the interconnected
transmission network and include them in the bulk electric system.
However, when it is recognized that an element is necessary for the
operation of the interconnected transmission network and no other
entity steps forward to
[[Page 843]]
designate the element as included in the bulk electric system for
purposes of section 215, the Commission has the authority to do so. We
anticipate that such instances will be rare. Should the Commission find
it necessary and appropriate to exercise this authority, we anticipate
that the Commission would, for example, issue either a notice or order
proposing to designate a specific element or elements as part of the
bulk electric system, and explain the rationale for the proposal. The
Commission would make a final determination after providing notice and
opportunity for comment by interested parties.
4. Technical Review Panel
NOPR Proposal
289. NERC's exception process provides that the Regional Entity
shall not recommend disapproval of the exception request without review
by a technical review panel. The Regional Entity is not bound by the
opinion of the panel, but the panel's evaluation becomes part of the
record associated with the exception request and provided to NERC. In
the NOPR, the Commission stated that it saw value in the Regional
Entity receiving the opinion of a qualified technical review panel. The
Commission observed that NERC did not explain why the proposed
exception process only requires a technical review panel to provide an
opinion where the Regional Entity recommends disapproval of an
exception request. Accordingly, the Commission requested comment from
NERC explaining why the review is only required when a Regional Entity
disapproves a request and whether NERC should modify the exception
process to require Regional Entities to submit all proposed
determinations to a technical review panel regardless of the
recommendation and receive the panel's opinion on each request.
Comments
290. NERC stated that it considered obtaining the opinion of a
technical panel for all Regional Entity recommendations; however, NERC
concluded that a review should only be required when a Regional Entity
disapproves a request due to concerns regarding administrative
efficiency. NERC determined that negative technical reviews would be
sufficient to promote consistency and that the additional costs and
work of a review of all proposed determinations would outweigh the
benefits. NERC further states the record of every request is reviewed
by a panel of experts at the NERC level as part of the decision making
process.
291. Several entities support NERC's explanation.\216\ ELCON
believes NERC's approach will avoid the burden, inefficiency and delay
inherent in unnecessary referrals to a technical review panel. ELCON
notes that the exception process already calls for submission of in-
depth technical information through the Detailed Information Form,
initial review by the Regional Entity, and subsequent review and final
decision by NERC. ELCON believes that considerable technical expertise
will, therefore, be available to both the Regional Entity and to NERC
as they assess exception requests.
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\216\ E.g., Idaho Power, ELCON, and G&T Cooperatives.
---------------------------------------------------------------------------
292. In contrast, some entities believe that a technical panel be
convened for either approval or denial of all exceptions.\217\ They
believe that using a panel for all requests will ensure that the
requests receive adequate consideration and vetting before a final
decision is rendered. WPPC requests that the Commission obtain
additional information from NERC with respect to why the Technical
Review Panels are not required to review all exception requests that
are rejected on procedural grounds.
---------------------------------------------------------------------------
\217\ E.g., ISO New England and BPA.
---------------------------------------------------------------------------
Commission Determination
293. The Commission accepts NERC's explanation that requiring a
technical panel review of all Regional Entity recommendations will
likely cause an additional administrative burden on Regional Entities,
delaying final recommendations to NERC. While the Commission sees
benefits in utilizing a technical review panel for all requests, we are
not persuaded that these benefits will outweigh the costs associated
with the increased administrative burden likely to be imposed.
Additionally, if the Technical Review Panel does not provide an opinion
on all exception requests, the exception process is not without other
levels of technical review. On the contrary, the exceptions process
provides multiple levels of technical review before a final
determination is made by NERC, including a substantive review by the
Regional Entity and a subsequent review by a panel of technical experts
at the NERC level. For these reasons, the Commission approves the
Technical Review Panel as proposed by NERC.
294. In response to WPPC's request, the Commission declines to seek
further information from NERC with respect to why the Technical Review
Panels are not required to review all exception requests that are
rejected on procedural grounds. Section 5.1.5(a) of Appendix 5C to the
Rules of Procedure requires a Regional Entity to reject an exception
request if it is not from an eligible submitting entity and/or it does
not contain all the required information specified in section 4.0. The
Commission does not believe a Technical Review Panel needs to determine
if an exception request was properly submitted by an eligible entity
and/or contains all the required information. Additionally, as WPPC
states in its comments, submitting entities may appeal Regional Entity
rejections of exception requests to NERC through the procedure provided
in section 7.0 of the exception process. Requiring Technical Review
Panel review of all rejections of exception requests, as well as all
recommendations of disapprovals, would unnecessarily impose
administrative burdens as if the Technical Review Panel was required to
review all exception request recommendations. For these reasons, the
Commission declines WPPC's request to obtain further information from
NERC on this matter.
5. Use of Industry Subject Matter Experts
NOPR Proposal
295. Section 8 of the proposed exception process sets forth the
procedures for NERC's review of a Regional Entity's recommendation. The
NERC President will appoint a team of at least three persons with the
relevant technical background to evaluate an exception request. NERC
contemplated that its review teams would be drawn from NERC staff
resources, supplemented by contractors as necessary, but situations may
arise in which NERC may need to call on industry subject matter experts
to participate as members of review teams. In the NOPR the Commission
supported NERC's proposal to use staff resources, supplemented by
contractors as necessary, to make up the exception request review
teams. We stated that consistent appointment of the same NERC staff and
contractor resources, based on subject matter expertise, will promote a
more uniform and consistent review of the Regional Entities' exception
request recommendations.
Comments
296. No comments were received on this issue.
[[Page 844]]
Commission Determination
297. The Commission agrees with NERC's proposal to use staff
resources, supplemented by contractors as necessary, and potentially
industry subject matter experts to make up the exception request review
teams. The Commission believes that ensuring that members of the NERC
review teams have the required technical background necessary to
evaluate exception requests, review supporting technical documents, and
assess technical recommendations, is essential to providing consistent
technically sound determinations on exception requests. The Commission
believes that consistent appointment of the same NERC staff, contractor
resources and industry subject matter experts, based on subject matter
expertise, will promote a more uniform and consistent review of the
Regional Entities' exception request recommendations.
6. NERC's Detailed Information Form
NOPR Proposal
298. NERC developed the Detailed Information Form that the Regional
Entity and NERC can use in evaluating whether or not the elements that
are the subject of an exception request are necessary for operating the
interconnected transmission network. In the NOPR, the Commission stated
that this information will provide consistency with respect to the
technical information provided with all exception requests and is an
equally efficient and effective approach to developing a substantive
set of technical criteria for granting and rejecting exception requests
and proposed to approve the Detailed Information Form.
Comments
299. ELCON supports the Detailed Information Form and agrees that
it is ``more feasible to develop a common set of data and information
that could be used by the Regional Entities and NERC to evaluate
exception requests'' than to develop the detailed criteria and that the
information specified in the form is relevant and appropriate for
exception requests.
300. Holland and Alameda state that there should be some basic
guidelines to evaluate an exception request. Alameda states that having
no technical criteria provides entities with no guidance considering a
request for exception. Alameda submits that parties should have a
reasonable basis for determining the outcome of a potential exception
request in advance of taking the time and effort to make the request.
Alameda suggests that the Commission direct NERC to develop appropriate
technical exception criteria, recognizing that each criterion may not
apply to all requests and that the criterion may even change over time
as specific requests are evaluated in detail. Alameda also seeks
clarification that parties may seek exceptions for proposed facilities,
and not just for existing facilities as allowing exceptions to be
requested for proposed facilities would provide an opportunity for
entities to make reasoned decisions about planned system improvements.
Commission Determination
301. We approve the Detailed Information Form and find that it will
provide consistency with respect to the technical information provided
with all exception requests and is an equally efficient and effective
approach to developing a substantive set of technical criteria for
granting and rejecting exception requests. We decline to adopt
Alameda's suggestion that the Commission direct NERC to develop
appropriate technical exception criteria. We accept NERC's conclusion
that it was more feasible to develop a common set of data and
information that could be used by the Regional Entities and NERC to
evaluate exception requests than to develop the detailed criteria.
NERC's proposal provides the needed flexibility to allow Regional
Entities to make a recommendation of whether or not an element is
necessary for the reliable operation of the interconnected transmission
network. Thus, the detailed criteria that NERC requires, plus other
information that an entity is free to include in its submission will
provide applicants a reasonable basis for determining whether an
element is necessary for the reliable operation of the interconnected
transmission network. We also decline to direct NERC to determine how
to treat exceptions for proposed facilities.
7. NERC's Implementation Plan
NOPR Proposal
302. NERC requests that the effective date for revised definition
should be the first day of the second calendar quarter after receiving
applicable regulatory approval, or, in those jurisdictions where no
regulatory approval is required, the revised bulk electric system
definition should go into effect on the first day of the second
calendar quarter after its adoption by the NERC Board. NERC also
requested that compliance obligations for all newly-identified elements
to be included in the bulk electric system based on the revised
definition should begin twenty-four months after the applicable
effective date of the revised definition. NERC stated that sufficient
time is needed to implement transition plans, for exceptions to be
filed and processed, for owners of newly-included elements to train
their personnel on compliance with the Reliability Standards. In the
NOPR, the Commission supported NERC's justification for its
implementation and proposed to approve NERC's implementation plan.
Comments
303. A number of commenters support the NOPR proposal.\218\ ELCON
states that the twenty-four month time period gives sufficient time to
accommodate planning for and changes resulting from the new definition,
including any exception requests and compliance obligations, without
causing undue delay. Consumers believes the twenty-four month period
should be sufficient in most cases but believes that the Commission
should make specific provision for longer periods to be allowed on a
case-by-case basis under special circumstances. Barrick and IUU also
support the implementation plan but believe further clarification is
necessary with respect to an entity's status during the exception
process.
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\218\ E.g., Consumers Energy, ELCON, and NYISO.
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Commission Determination
304. We agree with commenters that the twenty-four month time
period gives sufficient time to accommodate planning for and changes
resulting from the new definition, including any exception requests and
compliance obligations. Therefore, we approve NERC's proposal to
implement a twenty-four month implementation plan. In response to
Consumers' comment regarding the need for additional time for special
circumstances, an entity or NERC may petition for an extension of time.
In response to the comments raised by Barrick and IUU, we clarify that
the status of an element remains unchanged during the exception
process.
8. NERC List of Facilities Granted Exceptions
NOPR Proposal
305. In the NOPR, the Commission noted that the proposed exception
process does not include provisions for NERC to maintain a list of
facilities that have received exceptions, as requested in Order No.
743. In its petition, NERC indicated that this is an internal
administrative matter for NERC to implement that does not need to be
embedded in the Rules of Procedure. NERC stated it will develop a
specific
[[Page 845]]
internal plan and procedures for maintaining a list of facilities for
which exceptions have been granted and notes that Regional Entities
will maintain lists of elements within their regions for which
exceptions have been granted, in order to monitor compliance with the
requirement to submit periodic certifications.
306. In the NOPR, the Commission proposed that NERC make an
informational filing within 90 days of the effective date of a final
rule, detailing its plans to maintain a list and how it will make this
information available to the Commission, Regional Entities, and
potentially to other interested persons.\219\ The Commission also
requested comment on whether NERC's proposal should be modified to
include an obligation for the registered entity to inform NERC or the
Regional Entity of the entity's self-determination through application
of the definition and specific exclusions E1 through E4 that an element
is no longer part of the bulk electric system.
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\219\ NOPR, 139 FERC ] 61,247 at P 123.
---------------------------------------------------------------------------
Comments
307. NERC confirms that it is continuing to develop details
regarding how the list of facilities that have received exceptions will
be maintained. According to NERC, a 90-day window of time in which to
submit an informational filing is reasonable.
308. Other entities support NERC's plan.\220\ AEP cautions that the
process of submitting a filing must not overstep the confidentiality
provisions of Critical Energy Infrastructure Information as part of the
gathering and dissemination of list(s).
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\220\ ELCON and NRECA.
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309. The Massachusetts DPU supports NERC's keeping a list of
exceptions and requests that the Commission requires that state
regulatory authorities have appropriate access to the list. ISO New
England proposes that NERC submit a compliance filing detailing its
internal process for tracking exception requests. ISO New England also
believes that NERC and/or the Regional Entities should be required to
maintain a database that lists the bulk electric system elements within
their respective footprints and should make this data available for
affected entities.
Commission Determination
310. We adopt the NOPR proposal and direct NERC to make an
informational filing within 90 days of the effective date of this Final
Rule detailing its plans to maintain a list and how it will make this
information available to the Commission, Regional Entities, and
potentially to other interested persons. We find that the suggestions
of the Massachusetts DPU and ISO New England are premature as these
comments are more appropriate for consideration after NERC makes its
compliance filing.
9. Declassification of Facilities
NOPR Proposal
311. In the NOPR, the Commission observed that, while NERC will
maintain a list of facilities that have received an exception pursuant
to the case-specific exception process, NERC does indicate whether it
will track an entity's ``declassification'' of current bulk electric
system facilities based on the entity's self-application of the bulk
electric system definition.\221\ The Commission expressed concern
particularly when an entity self-determines that an element is no
longer part of the bulk electric system but the entity is large enough
to otherwise remain on the NERC Compliance Registry. Accordingly, the
Commission requested comment on whether NERC's proposal should be
modified to include an obligation for the registered entity to inform
NERC or the Regional Entity of the entity's self-determination through
application of the definition and specific exclusions E1 through E4
that an element is no longer part of the bulk electric system.
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\221\ NOPR, 139 FERC ] 61,247 at P 123.
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Comments
312. NERC asserts that registered entities are obligated to inform
the Regional Entity of any self-determination that an element is no
longer part of the bulk electric system. NERC points to section 501 of
the currently-effective Rules of Procedure, which provides that each
registered entity must notify its Regional Entity of any matters that
affect the registered entities' responsibilities with respect to
Reliability Standards. NERC contends that a determination that an
element is no longer part of the bulk electric system would necessarily
affect an entity's responsibilities with respect to the Reliability
Standards. Further, NERC states that an entity's failure to notify
would not relieve it of any obligations it may have associated with
such failure.
313. Idaho Power and National Grid support that registered entities
should inform NERC or the Regional Entity of elements that have been
declassified. National Grid supports an obligation for each registered
entity to inform the respective reliability coordinators and Regional
Entity of the entity's self-determination through application of the
definition and specific exclusions that an element is no longer part of
the bulk electric system.
314. PSEG Companies do not support requiring self reporting. PSEG
Companies point out that when the NERC Functional Model was first put
in place, registered entities made determinations of which facilities
should be included and excluded from the bulk electric system without
any reporting requirements for those decisions. PSEG Companies assert
that a registered entity should only be contacting its Regional Entity
regarding status changes if those changes impact the registered
entity's registration (e.g., if a registered Transmission Owner
disposes of all its 100 kV or higher assets or a generation owner
acquires its first BES generator). According to PSEG Companies,
facility changes that impact a facility's bulk electric system status
do not presently require reporting. The proposed reporting self-
determined exclusions could lead to extensive facility-by-facility
tracking and reporting of all status changes which would be overly
burdensome to Registered Entities.
315. AEP believes that it is imperative to keep the process simple
in the beginning, and thus advocates that no specific information
submission requirements be implemented at this time. If NERC or the
Regional Entities determine this approach is problematic in the future,
AEP states that any issues can be addressed through a change in the
NERC Rules of Procedure.
316. ICNU states that if NERC requires an end-use retail customer
to provide notice of declassification, such notice should not involve
extensive or burdensome reporting requirements because, as noted above,
end-use customers do not have the required resources or expertise. On
the other hand, ICNU believes that non-registered end-use retail
customers who, based on the new BES definition, determine that they
remain excluded from the BES should not be listed or required to report
such determination to NERC or the appropriate Regional Entity.
Commission Determination
317. We agree with NERC that registered entities are obligated to
inform the Regional Entity of any self-determination that an element is
no longer part of the bulk electric system. PSEG Companies claim that
there is currently no requirement to report the change in status of
facilities. NERC, however, cites section 501 of the currently-effective
Rules of Procedure,
[[Page 846]]
which provides that each registered entity must notify its Regional
Entity of any matters that affect the registered entities'
responsibilities with respect to Reliability Standards. Section 501
also requires entities to inform the Regional Entity of any self-
determination that an element is no longer part of the bulk electric
system. Section 501, Part 1.3.5 provides:
Each Registered Entity identified on the NCR shall notify its
corresponding Regional Entity(s) of any corrections, revisions,
deletions, changes in ownership, corporate structure, or similar
matters that affect the Registered Entity's responsibilities with
respect to the Reliability Standards. Failure to notify will not
relieve the Registered Entity from any responsibility to comply with
the Reliability Standards or shield it from any Penalties or
sanctions associated with failing to comply with the Reliability
Standards applicable to its associated Registration.
Thus, a registered entity that concludes that an element is no longer
part of the bulk electric system must notify the Regional Entity of
such change. Further, we disagree with PSEG Companies that such
notification is unnecessary. PSEG Companies point out that NERC did not
require such notification when the Functional Model was first put into
place. Regardless of past practice, we find that such notification is a
necessary feature of the changes being implemented by NERC. As
explained in the NOPR:
A large utility with hundreds or thousands of transmission lines
may initially determine that a configuration on its system does not
qualify for the exclusion E3 local network exclusion, but
subsequently determines that the configuration can be excluded.
NERC's petition does not indicate whether an entity in such
circumstance is obligated to inform NERC or the appropriate Regional
Entity of that self-determination. It appears that NERC and the
Regional Entities would need this information for their compliance
programs, for audit purposes, and to understand the contours of the
bulk electric system within a particular region.
Further, the revised definition allows entities the discretion to
``declassify'' certain facilities as part of the bulk electric system,
and NERC, Regional Entities and the Commission need notification of
such instances to assure that the entities are appropriately
implementing the revised definition.
318. We affirm ICNU's assertion that this task does not involve
new, extensive or burdensome reporting requirements. We view this as an
identification and notification task so that a Regional Entity and NERC
will know what elements are or not part of the bulk electric system.
This will provide the entities tasked with overseeing the reliable
operation of the interconnected transmission network with having an
adequate level of information and transparency to fulfill those
obligations. We disagree with PSEG Companies that this is an overly
burdensome requirement. First, such information sharing is already
contemplated by the Rules of Procedure. Second, as noted above, we do
not view this requirement as one that involves anything more than
notification. It does not require a justification of why the element is
being excluded.
III. Information Collection Statement
319. The Office of Management and Budget (OMB) requires that OMB
approve certain information collection and data retention requirements
imposed by agency rules.\222\ Upon approval of a collection(s) of
information, OMB will assign an OMB control number and an expiration
date. Respondents subject to the filing requirements of a rule will not
be penalized for failing to respond to these collections of information
unless the collections of information display a valid OMB control
number.
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\222\ 5 CFR 1320.11 (2011).
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Public Reporting Burden and Information Collection Costs
320. In the NOPR, the Commission solicited comment on the need for
collecting the information that is required to be prepared, maintained
and/or submitted pursuant to this Final Rule, whether the information
will have practical utility, the accuracy of the burden estimates, ways
to enhance the quality, utility, and clarity of the information to be
collected or retained, and any suggested methods for minimizing
respondents' burden, including the use of automated information
techniques. The NOPR also included a chart that identified the
estimated public reporting burdens for the proposed reporting
requirements, as well as a projection of the costs of compliance for
the reporting requirements. The Commission asked that any revised
burden estimates submitted by commenters be supported by sufficient
detail to understand how the estimates are generated. The Commission
based its burden estimate on the revised definition of bulk electric
system developed by NERC.
321. In the NOPR, the Commission stated that the proposal would
result in entities reviewing systems and creating qualified asset
lists, submitting exception requests where appropriate, and certain
responsible entities having to comply with requirements to collect and
maintain information in mandatory Reliability Standards with respect to
certain facilities for the first time. The Commission requested comment
on the estimated number of entities that will have an increased
reporting burden associated with the identification of new bulk
electric system elements as a result of the modified definition. In
developing an estimate of the reporting burden associated with the
inclusion of additional elements, like NERC, the Commission assumed
that entities in the NPCC Region will be most affected, with a lesser
affect in other regions.
Comments
322. NRECA and APPA do not take a position on the estimates but
observe that modifications to the proposed definition or directives to
NERC may result in substantial changes to the burden estimates and the
assessment of whether the which would require the Commission to re-
assess its burden and small business impact determinations. Similarly,
APPA and WPPC believe that any changes to the proposed definition in
the Final Rule that would include additional facilities would cause a
significant increase in the reporting burden on the industry. APPA
believes that if the Commission were to direct NERC to make revisions
to the specific inclusions or exclusions without technical
justification, the exception process would quickly become overloaded,
with burdens on those seeking exceptions and those ruling on them.
323. A number of commenters state that the NOPR underestimated the
burden of the rulemaking in terms of hours required to comply. APPA
believes that the Commission underestimates the information collection
costs and the costs of compliance for small utilities. For example, the
Commission's assumption that utility staff would be used to conduct an
analysis is not merited in the case of many small entities. APPA states
that many of its smaller members do not have the in-house employees and
resources to conduct such reliability analyses and would have to rely
on outside consultants and legal firms. Therefore, APPA estimates that
the fees small utilities would pay for each of the services, based on
information and belief, as follows: Consulting Engineer, $225/hour;
Record Keeping, $75/hour; and Legal, $500/hour.
324. Idaho Power contemplates five local network exclusions which
contain sixty 100 kV and above lines, and its estimates for the time
involved to document these exceptions leads it to believe the
Commission is underestimating the number of engineer
[[Page 847]]
hours per entity's responses. According to Idaho Power, based on an
initial review of potential exceptions, Idaho Power may seek
approximately 9-12 exceptions. Idaho Power agrees with the estimate
that transmission owners, generator owners, and distribution providers
will experience more significant reporting burdens than other
categories of registered entities.
325. ISO New England believes that there could be a significant
burden on planning coordinators and transmission planners which is not
addressed in the table shown in the NOPR. ISO New England states that,
while it has not performed a similar analysis, it appears that the
``Year 1'' estimates in the table in the NOPR are significantly
understated in view of the resources that it believes will be necessary
to establish the initial list. According to ISO New England, the
estimate of approximately $13 million expended over the entire system
seems overly optimistic. BPA anticipates, based on customer feedback,
that the BPA footprint alone will experience several hundred exception
requests in the first two years. BPA estimates the additional workload
from evaluating the exception requests will be approximately five to
six full time equivalents which includes one full time coordinator, a
customer service engineer for system verification, a planner to run
studies, an operations engineer, and dispatch personnel for real-time
system impacts. NYPSC and the Massachusetts DPU contend that the costs
of compliance with the definition will be excessive. NYPSC cites to a
2009 report from NERC and NPCC, that the compliance costs would exceed
$280 million.
Commission Determination
326. Commenters raise concerns that modifications to the proposed
definition or directives to NERC may result in substantial changes to
the burden estimates. While the Commission is requiring one
modification to the language in the NERC proposal, the Commission finds
that it does not need to reassess the burden estimates because the
change is intended to simply make more explicit what NERC and other
commenters indicate is the expected application of the proposed
definition to a low-voltage, looped system as depicted in figures 3 and
5 above. Therefore, we do not anticipate the one modification to result
in a significant change to what elements are considered part of the
bulk electric system or applications for case-by-case exceptions. The
burden estimates in this Final Rule represent the incremental burden
changes related only to increased reporting burden associated with the
identification of new bulk electric system elements as a result of the
modified definition. Furthermore, we acknowledge that NPCC may be
subject to additional reporting requirements, however, the burden
estimates are averages for all of the filers. Idaho Power's observation
that the Commission is underestimating the number of engineering hours
is not supported by analysis. Similarly, we are not persuaded by ISO
New England's position that there may be a significant burden on
planning coordinators and transmission planners associated with
proposed definition because it does not offer any analysis to support
this assertion. The Commission expects any burden for planning
coordinators and transmission planners to be de minimis or incorporated
under their existing responsibilities. In any event, Idaho Power and
ISO New England did not provide any estimates of the number of hours
that it would take to determine exceptions, nor suggest alternative
estimates. In response to APPA's hourly estimates that are higher than
the estimates in the NOPR the Commission notes that its hourly rate
estimates for the burden estimates are averages for all of the filers
and are based on national wage data for utilities obtained from the
Bureau of Labor Statistics (for engineers and legal) and NPCC's
assessment of Bulk Electric System Definition (for completing
implementation plans and compliance), and Commission staff outreach
(recordkeeping). Thus, the Commission adopts the burden estimates that
it set forth in the NOPR.
327. The Commission disagrees with BPA that there may be a large
number of exception requests generated from entities within its
footprint that may have to be processed and the significant addition of
FTEs. First, BPA has not provided any analysis or evidence to support
its claim. Nevertheless, the Commission's expectation, like NERC's, is
that application of the definition with its inclusions and exclusions
should not materially change what is considered part of the bulk
electric system today. Thus, the number of exception requests should
not be excessive.
328. Some comments address the potential impact the requirements
would have on small entities but did not provide specific estimates on
this impact. Because these comments are also the subject of the
analysis performed under the Regulatory Flexibility Act, the Commission
has provided a response under that section of this rulemaking.
329. We are not persuaded by NYPSC and Massachusetts DPU that the
costs for compliance will be $280 million. First, NYPSC nor
Massachusetts do not dispute or address the specific information
collection cost estimates in the NOPR. In addition, the vast majority
(approximately $234 million) of the costs included in the report to
which the commenters cite appear to be capital costs which are not
applicable to an information collection estimate. Further, the report
does not account for the revised language in the definition of bulk
electric system and the specific inclusions and exclusions that we are
approving in this Final Rule.
330. After consideration of comments, the Commission adopts the
NOPR proposal for the Public Reporting Burden and the information
collection costs as follows.
[[Page 848]]
----------------------------------------------------------------------------------------------------------------
Number of Average number of
Requirement Number and type of responses per hours per response Total burden hours
entity \223\ (1) entity (2) (3) (1)*(2)*(3)
----------------------------------------------------------------------------------------------------------------
System Review and List Creation 333 Transmission 1 response........ 80 (engineer 26,640 Yr 1.
\224\. Owners. hours).
843 Generator 16 (engineer 13,488 Yr 1.
Owners. hours).
554 Distribution 24 (engineer 13,296 Yr 1.
Providers. hours).
Exception Requests \225\........ 1,730 total .260 responses 94 (60 engineer 24,393 hrs in Yrs
Transmission each in Yrs 1 and hrs, 32 1 and 2.
Owners, Generator 2. recordkeeping 1,880 hrs in Yr 3
Owners and 20 responses in Yr hrs, 2 legal hrs). and ongoing.
Distribution 3 and ongoing.
Providers.
Regional and ERO Handling of NERC and 8 1 response........ 1,386.67 hrs...... 12,480 hrs in Yrs
Exception Requests \226\. Regional Entities. 1 and 2.
Implementation Plans and 111 NPCC Region 1 response........ 700 hrs in Yrs 1 77,700 hrs in Yrs
Compliance \227\. Registered and 2. 1 and 2.
Entities \228\. 350 hrs in Yr 3 38,850 hrs in Yr 3
and ongoing. and ongoing.
75 Registered 1 response........ 700 hrs in Yrs 1 52,500 hrs in Yrs
Entities from 7 and 2. 1 and 2.
other Regions. 350 hrs in Yr 3 26,250 hrs in Yr 3
and ongoing. and ongoing.
-------------------
Totals...................... .................. .................. .................. 220,497 hrs in Yr
1.
167,073 hrs in Yr
2.
66,980 hrs in Yr 3
and ongoing.
----------------------------------------------------------------------------------------------------------------
Costs to Comply
Year 1: $13,641,200.
Year 2: $10,435,760.
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\223\ The ``entities'' listed in this table are describing a
role a company is registered for in the NERC registry. For example,
a single company may be registered as a transmission owner and
generator owner. The total number of companies applicable to this
rule is 1,522, based on the NERC registry. The total number of
estimated roles is 1,730.
\224\ This requirement corresponds to Step 1 of NERC's proposed
transition plan, which requires each U.S. asset owner to apply the
revised bulk electric system definition to all elements to determine
if those elements are included in the bulk electric system pursuant
to the revised definition. See NERC BES Petition at 38.
\225\ We recognize that not all 1,730 transmission owners,
generator owners, and distribution providers will submit an
exception request. Rather, from the total 1,730 entities, we
estimate an average of 260 requests per year in the first two years,
based on a low to high range of 87 to 433 requests per year.
Therefore, the estimated total number of hours per year for years 1
and 2, using an average of 260 requests per year, is 24,393 hours.
We estimate 20 requests per year in year 3 and ongoing.
---------------------------------------------------------------------------
Year 3 and ongoing: $4,343,520.
For the first two burden categories above, the loaded (salary plus
benefits) costs are: $60/hour for an engineer; $27/hour for
recordkeeping; and $106/hour for legal. The breakdown of cost by item
and year follows:
---------------------------------------------------------------------------
\226\ Based on the assumption of two full-time equivalent
employees added to NERC staff and 0.5 full-time equivalent employees
added to each region's staff, each full-time equivalent at $120,000/
year (salary + benefits).
\227\ The Commission does not expect a significant number of
registered entities outside of the NPCC region to identify new
elements under the revised bulk electric system definition. NERC
also states that the other Regional Entities do not expect an
extensive amount of newly-included facilities. See NERC BES Petition
at 38. ``Compliance'' refers to entities with new elements under the
new bulk electric system definition required to comply with the data
collection and retention requirements in certain Reliability
Standards that they did not previously have to comply with.
\228\ The estimated range of affected NPCC Region Registered
Entities is from 66 to 155 entities.
---------------------------------------------------------------------------
System Review and List Creation (year 1 only): (26,640 hrs
+ 13,488 hrs + 13,296 hrs) =53,424 hrs * 60/hr = $3,205,440.
Exception Requests (years 1 and 2): (sum of hourly expense
per request * number of exception requests) = ((60 hrs * $60/hr) + (32
hrs * $27/hr) + (2hrs * $106/hr)) * 260 requests) = $1,215,760.
Exception Requests (year 3): (sum of hourly expense per
request * number of exception requests) = ((60 hrs * $60/hr) + (32 hrs
* $27/hr) + (2 hrs * $106/hr)) * 20 requests) = $93,520.
Regional and ERO handling of Exception Requests: Between
NERC and Regional Entities we estimate 6 full time equivalent (FTE)
engineers will be added at an annual cost of $120,000/FTE ($120,000/FTE
* 6 FTE = $720,000). This cost is only expected in years 1 and 2.
Implementation Plans and Compliance \229\ (years 1 and 2):
(hourly expense per entity * hours per response * sum of NPCC and non-
NPCC entities) = ($64/hour * 700 hours per response * 186 responses) =
$8,332,800.
---------------------------------------------------------------------------
\229\ The cost and hourly burden calculations for this category
are based on a past assessment (NPCC Assessment of Bulk Electric
System Definition, September 14, 2009.). In that assessment NPCC
indicated $8.9 million annually for operations, maintenance and
additional costs. We estimated that roughly half of that cost
actually relates to information collection burden. Using the
resulting figure, we used a composite wage and benefit figure of
$64/hour to estimate the hourly burden figures presented in the
burden table.
---------------------------------------------------------------------------
Implementation Plans and Compliance (year 3 and beyond):
We estimate the ongoing cost for year 3 and beyond, at 50% of the year
1 and 2 costs, to be $4,166,400.
Title: FERC-725-J ``Definition of the Bulk Electric System''.\230\
---------------------------------------------------------------------------
\230\ All of the information collection requirements for years
1-3 in the proposed rule are being accounted for under the new
collection FERC-725J.
---------------------------------------------------------------------------
Action: Proposed Collection of Information.
OMB Control No: 1902-0259.
Respondents: Business or other for profit, and not for profit
institutions.
Frequency of Responses: On Occasion.
Necessity of the Information: The revision to NERC's definition of
the term bulk electric system implements the Congressional mandate of
the Energy Policy Act of 2005 to develop mandatory and enforceable
Reliability Standards to better ensure the reliability of the nation's
Bulk-Power System. Specifically, the revised definition ensures that
certain facilities needed for the operation of the nation's bulk
electric system are subject to mandatory and enforceable Reliability
Standards.
Internal review: The Commission has reviewed the proposed
definition and made a determination that its action is necessary to
implement section 215 of the FPA. The Commission has assured itself, by
means of its internal review, that there is specific, objective support
for the burden estimate associated with the information requirements.
331. Interested persons may obtain information on the reporting
requirements by contacting the Federal Energy Regulatory Commission,
Office
[[Page 849]]
of the Executive Director, 888 First Street NE., Washington, DC 20426
[Attention: Ellen Brown, email: DataClearance@ferc.gov, phone: (202)
502-8663, fax: (202) 273-0873].
332. For submitting comments concerning the collection of
information and the associated burden estimate, please send your
comments to the Office of Management and Budget, Office of Information
and Regulatory Affairs, Washington, DC 20503 [Attention: Desk Officer
for the Federal Energy Regulatory Commission, phone: (202) 395-4718,
fax: (202) 395-7285]. For security reasons, comments to OMB should be
submitted by email to: oira_submission@omb.eop.gov. Comments submitted
to OMB should include Docket Number RM12-6 and OMB Control Number 1902-
0259.
IV. Regulatory Flexibility Act Analysis
333. The Regulatory Flexibility Act of 1980 (RFA) \231\ generally
requires a description and analysis of Proposed Rules that will have a
significant economic impact on a substantial number of small entities.
The RFA mandates consideration of regulatory alternatives that
accomplish the stated objectives of a proposed rule and that minimize
any significant economic impact on a substantial number of small
entities. The Small Business Administration's (SBA) Office of Size
Standards develops the numerical definition of a small business.\232\
The SBA has established a size standard for electric utilities, stating
that a firm is small if, including its affiliates, it is primarily
engaged in the transmission, generation and/or distribution of electric
energy for sale and its total electric output for the preceding twelve
months did not exceed four million megawatt hours.\233\
---------------------------------------------------------------------------
\231\ 5 U.S.C. 601-612 (2006).
\232\ 13 CFR 121.101.
\233\ 13 CFR 121.201, Sector 22, Utilities & n.1.
---------------------------------------------------------------------------
NOPR Proposal
334. In the NOPR, the Commission estimated that approximately 418
of the 1,730 registered transmission owners, generator owners and
distribution service providers may fall within the definition of small
entities. Further, the Commission estimated that of the 418 small
entities affected there are 50 within the NPCC region that would have
to comply with the rulemaking. The Commission contemplated that the
rulemaking would affect more small entities in the NPCC Region than
those outside NPCC because there are more elements in the NPCC region
that would be added to the bulk electric system based on the new
definition than elsewhere. The Commission estimated the first year
affect on small entities within the NPCC region to be $39,414.\234\
This figure is based on information collection costs plus additional
costs for compliance.\235\ The Commission estimated the average annual
affect per small entity outside of NPCC will be less than for the
entities within NPCC. In the NOPR, the Commission stated that it did
not consider this to be a significant economic impact for either class
of entities because it should not represent a significant percentage of
the operating budget.
---------------------------------------------------------------------------
\234\ For companies registered as more than one entity in the
NERC compliance registry this figure will increase accordingly. That
is, if a company is registered as a transmission owner and generator
owner then the cost burden would be $78,828 ($39,414 * 2 = $78,828).
\235\ We use fifty percent of the first year ``number of hours
per response'' figure in the information collection statement for
calculation under the assumption that smaller entities do not have
complicated systems or will not have as many new elements on average
as larger entities do.
---------------------------------------------------------------------------
Comments
335. APPA asserts that the Commission underestimates the costs of
compliance for small utilities. According to APPA, the Commission's
assumption that utility staff would conduct an analysis is not merited
in the case of many small entities. APPA states that many of its
smaller members do not have the in-house employees and resources to
conduct such reliability analyses and would have to rely on outside
consultants and legal firms. Therefore, APPA estimates that the fees
small utilities would pay for each of the services as follows, based on
information and belief: Consulting Engineer, $225/hour; Record Keeping,
$75/hour; and Legal, $500/hour. According to APPA, these increased
dollar estimates alone substantially increase the burden estimates on
smaller utilities to comply with the Commission's proposals. WPPC
believes that the cost to satisfy transmission owner/transmission
operator certification alone would be $80,000. WPPC points to one small
municipally-owned utility paid $40,000 for third party expertise and
review of the utility's required compliance. WPPC adds that the
municipality had two staff members spend a week reviewing a modifying
city policies to ensure compliance with reliability standards. WPPC
points out that these costs only represent the initial subject matter
review and do not include subsequent implementation, training or
material purchase costs. WPPC also states that small entities have to
divert employees from other tasks to compliance tasks which represents
a significant burden on staffing.
336. ISO New England does not believe that the NOPR cost estimate
captures the cost of physical upgrades that might be necessary on the
system. The cost estimates do not reflect the true financial burden
that might be borne by these smaller entities.
337. BPA is concerned that the Commission is underestimating the
costs and resources associated with reliability compliance. BPA
disagrees with the Commission's estimated annual costs of $39,414 for
entities that are required to newly comply with Reliability Standards
as a result of adopting the definition. BPA believes that the
Commission's figure vastly underestimates the actual effort and costs
associated with compliance. In BPA's experience with its customers, the
smallest customer impact is equivalent to at least one FTE, and larger
customers have indicated they have an even higher burden. BPA asserts
that the Commission's estimates also overlook indirect compliance costs
and their impact on small and large entities alike. BPA disagrees with
the Commission's conclusion that the compliance burden is not ``a
significant economic impact * * * because it should not represent a
significant percentage of the operating budget.'' It is BPA's
experience that implementing a fully functioning compliance program
requires committed personnel, budget, and resources, which is never
insignificant.
Commission Determination
338. The Commission disagrees with commenters that challenge the
Commission's conclusion that the rule will not have a significant
economic impact on a substantial number of small entities. We are not
persuaded by APPA, BPA and ISO New England's assertions regarding how
the Commission's analysis is erroneous or in what ways the Final Rule
will have a significant economic impact on a substantial number of
small entities. As the Commission stated in its NOPR, most transmission
owners, transmission operators and transmission service providers do
not fall within the definition of small entities. In addition, the
requirement to comply with the definition of bulk electric system is
not new. The reason for revising the definition of bulk electric system
is to comply with the Commission's directives and address the technical
and policy concerns expressed in Order Nos. 743 and 743-A, which NERC
[[Page 850]]
accomplished by eliminating the explicit basis of authority for
Regional Entity discretion in the current definition, and establishing
specific threshold criteria rather than general guidelines of
facilities operated or connected at or above 100 kV. Thus, while the
Commission recognizes that some small entities within the NPCC
territory may have an increased burden due to multiple registration
classifications or increased compliance with the Reliability Standards
due to the elimination of the regional discretion, the average annual
affect per small entity outside of NPCC will be less than for the
entities within NPCC and should not materially change. The Commission
also does not consider this to be a significant economic impact for
either class of entities because our estimated costs for complying with
the revised definition should not represent a significant percentage of
the operating budget. Further, while NYPSC and Massachusetts DPU assert
that the costs for compliance will be $280 million they make no
specific reference to the cost for small businesses and, as noted
above, their estimate does not account for the revised language in the
definition of bulk electric system and the specific inclusions and
exclusions that we are approving in this Final Rule. Accordingly, the
Commission certifies that this Final Rule will not have a significant
economic impact on a substantial number of small entities.
V. Environmental Analysis
339. The Commission is required to prepare an Environmental
Assessment or an Environmental Impact Statement for any action that may
have a significant adverse effect on the human environment.\236\ The
Commission has categorically excluded certain actions from this
requirement as not having a significant effect on the human
environment. The actions in this rule fall within the categorical
exclusion in the Commission's regulations for rules that are
clarifying, corrective or procedural, for information gathering,
analysis, and dissemination.\237\ Accordingly, neither an environmental
impact statement nor environmental assessment is required.
---------------------------------------------------------------------------
\236\ Regulations Implementing the National Environmental Policy
Act, Order No. 486, 52 FR 47897 (Dec. 17, 1987), FERC Stats. & Regs.
Regulations Preambles 1986-1990 ] 30,783 (1987).
\237\ 18 CFR 380.4(a)(5).
---------------------------------------------------------------------------
VI. Document Availability
340. In addition to publishing the full text of this document in
the Federal Register, the Commission provides all interested persons an
opportunity to view and/or print the contents of this document via the
Internet through FERC's Home Page (http://www.ferc.gov) and in FERC's
Public Reference Room during normal business hours (8:30 a.m. to 5:00
p.m. Eastern time) at 888 First Street NE., Room 2A, Washington, DC
20426.
341. From FERC's Home Page on the Internet, this information is
available on eLibrary. The full text of this document is available on
eLibrary in PDF and Microsoft Word format for viewing, printing, and/or
downloading. To access this document in eLibrary, type the docket
number excluding the last three digits of this document in the docket
number field.
342. User assistance is available for eLibrary and the FERC's Web
site during normal business hours from FERC Online Support at (202)
502-6652 (toll free at 1-866-208-3676) or email at
ferconlinesupport@ferc.gov, or the Public Reference Room at (202) 502-
8371, TTY (202) 502-8659. Email the Public Reference Room at
public.referencerom@ferc.gov.
VII. Effective Date and Congressional Notification
343. These regulations are effective March 5, 2013. The Commission
has determined, with the concurrence of the Administrator of the Office
of Information and Regulatory Affairs of OMB, that this rule is not a
``major rule as defined in section 351 of the Small Business Regulatory
Enforcement Fairness Act of 1996.
By the Commission. Commissioner Clark is not participating.
Nathaniel J. Davis, Sr.,
Deputy Secretary.
Note: Appendix A will not be published in the Code of Federal
Regulations.
Appendix A--List of Commenters
American Electric Power Service Corporation (AEP)
American Municipal Power, Inc. (AMP)
American Public Power Association (APPA)
American Wind Energy Association (AWEA)
Arizona Public Service Company (Arizona Public Service)
Barrick Goldstrike Mines Inc. (Barrick)
Associated Electric Cooperative, Inc., Basin Electric Power
Cooperative, Tri-State Generation and Transmission Association, Inc.
(the G&T Cooperatives)
Bonneville Power Administration (BPA)
City of Alameda, California (Alameda)
City of Anaheim, California (Anaheim)
City of Redding, California (Redding)
City of Riverside, California (Riverside)
Cogeneration Association of California and the Energy Producers and
Users Coalition
Consumers Energy Company (Consumers)
Dominion Resources Services, Inc. (Dominion)
Dow Chemical Company (Dow)
Duke Energy Corporation (Duke Energy)
Edison Electric Institute (EEI)
Electricity Consumers Resource Council (ELCON)
Exelon Corporation (Exelon)
Florida Reliability Coordinating Council, Midwest Reliability
Organization, Northeast Power Coordinating Council, Inc.,
ReliabilityFirst Corporation, Southwest Power Pool Regional Entity,
SERC Reliability Corporation, Texas Reliability Entity, Inc.,
Western Electricity Coordinating Council (the Regional Entities)
City of Holland, Michigan Board of Public Works (Holland)
Hydro One Networks Inc. and the Independent Electricity System
Operator (Hydro One)
Hydro Quebec Transenergie (Hydro Quebec)
Idaho Power Company (Idaho Power)
Imperial Irrigation District (IID)
Industrial Customers of Northwest Utilities (ICNU)
Industrial Users of Utah (IUU)
International Transmission Company d/b/a ITC Transmission, Michigan
Electric Transmission Company, LLC, ITC Midwest LLC and ITC Great
Plains LLC (ITC)
ISO New England Inc. (ISO New England)
Kansas City Power & Light Company and KCP&L Greater Missouri (KCP&L)
Large Public Power Council (LPPC)
Massachusetts Department of Public Utilities (Massachusetts DPU)
Midwest Independent Transmission System Operator, Inc. (MISO)
MISO Transmission Owners
National Association of Regulatory Utility Commissioners (NARUC)
National Grid USA (National Grid)
National Rural Electric Cooperative Association (NRECA)
Nevada Power Company and Sierra Pacific Power Company (NV Energy)
New England States Committee on Electricity (NESCOE)
New York Independent System Operator, Inc. (NYISO)
New York State Public Service Commission (NYPSC)
North American Electric Reliability Corporation (NERC)
North Carolina Eastern Municipal Power Agency (``NCEMPA'') and North
Carolina Municipal Power Agency Number 1 (``NCMPA1'') (together
``Power Agencies'')
Oglethorpe Power Corporation, Georgia Transmission Corporation and
Georgia System Operations Corporation
Old Dominion Electric Cooperative (ODEC)
Occidental Energy Ventures Corp
Pennsylvania Public Utility Commission
Pepco Holdings, Inc., Potomac Electric Power Company, Delmarva Power
& Light Company, Atlantic City Electric Company (PHI Companies)
Portland General Electric Company (Portland)
Public Service Electric and Gas Company, PSEG Power LLC, and PSEG
Energy Resources & Trade LLC (PSEG Companies)
SmartSenseCom, Inc. (SmartSenseCom)
Snohomish County PUD No. 1 (Snohomish)
Southern California Edison Company (SoCal Edison)
[[Page 851]]
Southern Company Services, Inc. (Southern Companies)
Springfield Utility Board (Springfield)
Steel Manufacturers Association
Transmission Access Policy Study Group (TAPS)
Utility Services, Inc.
Valero Services, Inc (Valero)
Western Public Power Coalition (WPPC)
White River Electric Association, Inc. (WREA)
[FR Doc. 2012-31142 Filed 1-3-13; 8:45 am]
BILLING CODE 6717-01-P
