[Federal Register Volume 78, Number 3 (Friday, January 4, 2013)]
[Rules and Regulations]
[Pages 804-851]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-31142]
[[Page 803]]
Vol. 78
Friday,
No. 3
January 4, 2013
Part II
Department of Energy
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Federal Energy Regulatory Commission
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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]]
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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.
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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.
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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.''
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\1\ 16 U.S.C. 824o(d) (2006).
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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:
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\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).
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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.
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\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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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).
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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:
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\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\
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\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\
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\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.
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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\
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\11\ Order No. 743, 133 FERC ] 61,150 at P 16.
\12\ Id.
\13\ Id. P 113.
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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\
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\14\ Order No. 743-A, 134 FERC ] 61,210 at P 11.
\15\ Id. PP 40, 67, 102-103.
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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\
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\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.
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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\
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\20\ See section III.c.1 and III.c.2 of Appendix 5B of the NERC
Rules of Procedure.
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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\
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\21\ NOPR, 139 FERC ] 61,247 at P 27 (citing NERC BES Petition
at 19).
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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\
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\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.
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\23\ NERC BES Petition at 26.
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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\
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\24\ NOPR, 139 FERC ] 61,247 at P 38, quoting NERC ROP Petition
at 10-11.
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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.
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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\
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\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\
---------------------------------------------------------------------------
\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\
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\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\
---------------------------------------------------------------------------
\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\
---------------------------------------------------------------------------
\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\
---------------------------------------------------------------------------
\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\
---------------------------------------------------------------------------
\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\
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
\130\ NOPR, 139 FERC ] 61,247 at P 80.
---------------------------------------------------------------------------
[[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\
---------------------------------------------------------------------------
\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.
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\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.
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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.
---------------------------------------------------------------------------
\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\
---------------------------------------------------------------------------
\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\
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
\218\ E.g., Consumers Energy, ELCON, and NYISO.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
\220\ ELCON and NRECA.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\221\ NOPR, 139 FERC ] 61,247 at P 123.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\222\ 5 CFR 1320.11 (2011).
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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: [email protected], 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: [email protected]. 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.
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\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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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
[email protected], or the Public Reference Room at (202) 502-
8371, TTY (202) 502-8659. Email the Public Reference Room at
[email protected].
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