[Federal Register Volume 78, Number 247 (Tuesday, December 24, 2013)]
[Rules and Regulations]
[Pages 77574-77585]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-30628]


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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 40

[Docket No. RM13-7-000; Order No. 793]


Protection System Maintenance Reliability Standard

AGENCY: Federal Energy Regulatory Commission.

[[Page 77575]]


ACTION: Final rule.

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SUMMARY: Under section 215 of the Federal Power Act (FPA), the Federal 
Energy Regulatory Commission (Commission) approves a revised 
Reliability Standard, PRC-005-2--Protection System Maintenance, to 
supersede four existing Reliability Standards, PRC-005-1.1b 
(Transmission and Generation Protection System Maintenance and 
Testing), PRC-008-0 (Underfrequency Load Shedding Equipment 
Maintenance), PRC-011-0 (Undervoltage Load Shedding Equipment 
Maintenance) and PRC-017-0 (Special Protection System Maintenance and 
Testing).

DATES: Effective Date: This rule will become effective February 24, 
2014.

FOR FURTHER INFORMATION CONTACT: 

Tom Bradish (Technical Information), Office of Electric Reliability, 
Federal Energy Regulatory Commission, 888 First Street NE., Washington, 
DC 20426, (301) 665-1391, tom.bradish@ferc.gov.
Julie Greenisen (Legal Information), Office of the General Counsel, 
Federal Energy Regulatory Commission, 888 First Street NE., Washington, 
DC 20426, (202) 502-6362, julie.greenisen@ferc.gov.

SUPPLEMENTARY INFORMATION: 

Final Rule

(Issued December 19, 2013)

    1. Pursuant to section 215 of the Federal Power Act (FPA),\1\ the 
Commission approves a revised Reliability Standard, PRC-005-2--
Protection System Maintenance, to supersede four existing Reliability 
Standards, PRC-005-1.1b (Transmission and Generation Protection System 
Maintenance and Testing), PRC-008-0 (Underfrequency Load Shedding 
Equipment Maintenance), PRC-011-0 (Undervoltage Load Shedding Equipment 
Maintenance) and PRC-017-0 (Special Protection System Maintenance and 
Testing), and six associated definitions. The modifications, in part, 
respond to certain Commission directives issued in Order No. 693,\2\ in 
which the Commission approved initial versions of these four 
Reliability Standards governing maintenance and testing of protection 
systems, and maintenance of underfrequency and undervoltage load 
shedding equipment.
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    \1\ 16 U.S.C. 824o (2012).
    \2\ Mandatory Reliability Standards for the Bulk Power System, 
Order No. 693, 72 FR 16,416 (April 4, 2007), FERC Stats. & Regs. ] 
31,242 (2007), order on reh'g, Order No. 693-A, 120 FERC ] 61,053 
(2007).
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    2. Reliability Standard PRC-005-2 represents an improvement over 
the four existing standards covering protection system maintenance and 
testing, by incorporating specific, required minimum maintenance 
activities and maximum time intervals for maintenance of individual 
components of protection systems and load shedding equipment affecting 
the bulk electric system. While the proposed Reliability Standard also 
gives responsible entities the option of developing their own, 
performance-based maintenance intervals for most components, the 
intervals must be designed to achieve a minimum performance level, and 
must be adjusted if that target performance level is not actually 
achieved. In addition, the proposed Reliability Standard combines the 
maintenance and testing requirements for protection systems into one 
comprehensive Reliability Standard, as was suggested by the Commission 
in Order No. 693.\3\
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    \3\ Order No. 693, FERC Stats. & Regs. ] 31,242 at P 1475.
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    3. While the revised Reliability Standard contains overall 
improvements over the four existing Reliability Standards, as discussed 
below, we are directing NERC to submit an informational filing on the 
development of a guidance report concerning the commissioning of power 
system protection systems.
    4. The Commission approves the violation risk factors and all but 
one violation severity level for the revised Reliability Standard. The 
Commission directs NERC to modify the violation severity level assigned 
to certain failures to comply with Requirement R1. We also approve the 
six new definitions associated with proposed Reliability Standard PRC-
005-2, i.e., Component, Component Type, Countable Event, Protection 
System Maintenance Program, Segment, and Unresolved Maintenance Issue. 
Of these newly defined terms, only the term Protection System 
Maintenance Program will be incorporated into NERC's Glossary of Terms, 
with the remainder applying only to Reliability Standard PRC-005-2.
    5. Finally, we approve NERC's proposed implementation plan for 
Reliability Standard PRC-005-2 (as corrected in NERC's October 30, 2013 
Errata filing), which requires entities to develop a compliant 
protection system maintenance program within twelve months, but allows 
for the transition over time of maintenance activities and 
documentation to conform to the new minimum maintenance activities and 
maximum maintenance intervals.

I. Background

A. Regulatory Background

    6. Section 215 of the FPA requires a Commission-certified Electric 
Reliability Organization (ERO) to develop mandatory and enforceable 
Reliability Standards, subject to Commission review and approval.\4\ 
Once approved, the Reliability Standards may be enforced by the ERO 
subject to Commission oversight, or by the Commission independently.\5\
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    \4\ 16 U.S.C. 824o(c) and (d).
    \5\ See id. at 824o(e).
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    7. In 2006, the Commission certified NERC as the ERO pursuant to 
FPA section 215.\6\ In 2007, in Order No. 693, the Commission approved 
an initial set of Reliability Standards submitted by NERC, including 
initial versions of four protection system and load-shedding-related 
maintenance standards, i.e., PRC-005-1, PRC-008-0, PRC-011-0, and PRC-
017-0.\7\
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    \6\ North American Electric Reliability Corp., 116 FERC ] 
61,062, order on reh'g & compliance, 117 FERC ] 61,126 (2006), aff'd 
sub nom., Alcoa, Inc. v. FERC, 564 F.3d 1342 (D.C. Cir. 2009).
    \7\ Order No. 693, FERC Stats. & Regs. ] 31,242 at PP 1474, 
1492, 1497, and 1514.
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    8. In approving these protection system-related Reliability 
Standards, the Commission directed NERC to develop or to consider a 
number of modifications. Specifically, the Commission directed NERC (1) 
to develop a revision to PRC-005-1 incorporating a maximum time 
interval during which to conduct maintenance and testing of protection 
systems, and (2) to consider combining into one standard the various 
maintenance and testing requirements for all of the maintenance and 
testing-related Reliability Standards for protection systems, Special 
Protection Systems (SPS), underfrequency load shedding (UFLS) 
equipment, and undervoltage load shedding (UVLS) equipment.\8\
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    \8\ In Order No 763, the Commission approved Reliability 
Standard PRC-006-1 pertaining to ``underfrequency load shedding,'' 
which also encompasses ``undervoltage load shedding.'' Automatic 
Underfrequency Load Shedding and Load Shedding Plans Reliability 
Standards, Order No. 763, 139 FERC ] 61,098 (2012).
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    9. Subsequently, in Order No. 758, issued in response to NERC's 
request for approval of its interpretation of PRC-005-1, the Commission 
issued three additional directives addressing deficiencies in the 
existing version of Reliability Standard PRC-005.\9\ The Commission 
directed NERC to modify

[[Page 77576]]

Reliability Standard PRC-005-1 through its standards development 
process to (1) identify and include the auxiliary relays and non-
electrical sensing devices designed to sense or take action against any 
abnormal system condition that will affect reliable operation (such as 
sudden pressure relays); (2) include specific requirements for 
maintenance and testing of reclosing relays that affect the reliable 
operation of the bulk-power system; and (3) include specific 
requirements for maintenance and testing of DC control circuitry.
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    \9\ Interpretation of Protection System Reliability Standard, 
Order No. 758, 138 FERC ] 61,094, order denying clarification, 139 
FERC ] 61,227 (2012).
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B. Existing Protection System-Related Maintenance Standards

    10. Under currently-effective Reliability Standard PRC-005-1b, 
transmission owners, generator owners, and applicable distribution 
providers are required to have ``a Protection System maintenance and 
testing program for Protection Systems that affect the reliability of 
the BES,'' and must document their compliance with that program.\10\ 
The program must include maintenance and testing intervals and their 
basis, and a summary of maintenance and testing procedures. However, 
Reliability Standard PRC-005-1b does not impose any specific 
requirements regarding maintenance activities, standards or intervals. 
Similarly, Reliability Standards PRC-008-0, PRC-011-0, and PRC-017-0 
require applicable transmission owners, distribution providers, and 
generator owners to have a maintenance and testing program in place for 
UFLS equipment, UVLS equipment, and special protection systems, 
respectively, and to document their compliance with their program. 
These Reliability Standards, like PRC-005-1b, do not impose any 
specific requirements regarding maintenance activities, standards or 
intervals.
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    \10\ NERC Reliability Standard PRC-005-1b, Requirements R1 and 
R2.
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C. NERC Petition and Reliability Standard PRC-005-2

    11. On February 26, 2013, NERC submitted a petition seeking 
approval of Reliability Standard PRC-005-2, six new definitions 
associated with that standard, and an implementation plan that includes 
retirement of the four currently-effective Reliability Standards that 
address maintenance and testing of transmission and generation 
protection systems, UFLS and UVLS equipment, and special protection 
systems.\11\ NERC maintained that the Reliability Standard not only 
consolidates the four currently-effective standards into a single 
standard, but also addresses the directives in Order No. 693 related to 
those standards.\12\
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    \11\ PRC-005-2 is not attached to this Final Rule. The complete 
text of the Reliability Standard is available on the Commission's 
eLibrary document retrieval system in Docket No. RM13-7 and is 
posted on NERC's Web site, available at: http://www.nerc.com.
    \12\ NERC Petition at 2. NERC states that while the Commission 
issued additional directives related to the PRC-005 Reliability 
Standard in Order No. 758, NERC will address these remaining 
directives in future versions of PRC-005, and is currently 
addressing the maintenance and testing of reclosing relays in a new 
phase of Project 2007-17. See NERC Petition at 7-8.
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    12. The Reliability Standard includes five requirements. Under 
Requirement R1, each responsible entity must establish a protection 
system maintenance program that: (1) identifies which method (time-
based or performance-based) will be used for each protection system 
component type, except that the maintenance program for all batteries 
associated with the station DC supply of a protection system must be 
time-based, and (2) identifies monitored component attributes for each 
component type where monitoring is used as a basis for extending 
maintenance intervals.
    13. Under Requirement R2, any responsible entity that uses 
performance-based maintenance intervals must follow the procedures set 
out in Attachment A of the Reliability Standard to set and to adjust, 
as necessary, appropriate maintenance intervals. The Attachment A 
procedures allow a responsible entity to establish maintenance 
intervals for a given population of similar components based on 
historical performance, as long as there is a statistically significant 
population of components for which performance can be examined and 
monitored. For example, under the Attachment A procedures, a 
responsible entity can only use a performance-based interval for 
``segments'' with a component population of at least 60 components.\13\ 
The maximum allowable maintenance interval for a given segment is 
required to be set such that the segment will experience ``countable 
events'' of no more than four percent of the components within that 
segment, for the greater of either the last 30 components maintained or 
all components maintained in the previous year.\14\
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    \13\ NERC defines ``segment'' for purposes of PRC-005-2 as 
``Protection Systems or components of a consistent design standard, 
or a particular model or type from a single manufacturer that 
typically share other common elements. Consistent performance is 
expected across the entire population of a Segment.'' NERC Petition, 
Ex. B (PRC-005-2) at 26.
    \14\ NERC defines ``countable event'' as ``a failure of a 
component requiring repair or replacement, any condition discovered 
during the maintenance activities in Tables 1-1 through 1-5 and 
Table 3 which requires corrective action, or a Misoperation 
attributed to hardware failure or calibration failure.'' NERC 
Petition, Ex. B (PRC-005-2) at 26.
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    14. In addition, to continue to utilize a performance-based 
interval, the responsible entity must update its list of components and 
segments annually (or whenever a change occurs within a segment), must 
maintain a minimum number or percentage of components a year, and must 
analyze a given segment's maintenance record to determine the 
percentage of countable events. If the percentage of countable events 
for the last 30 components maintained or the number of components 
maintained over the last year (whichever is larger) exceeds four 
percent, the responsible entity must implement an action plan to reduce 
the expected countable events to less than four percent for that 
segment within the next three years.
    15. Requirements R3 and R4 require a responsible entity to adhere 
to the requirements of its protection system maintenance program, 
including performance of minimum maintenance activities. Under 
Requirement R3, which governs time-based maintenance, the activities 
must be performed in accordance with the intervals prescribed in the 
tables attached to PRC-005-2. Under Requirement R4, the activities must 
be carried out in accordance with the performance-based intervals 
established under Requirement R2 and Attachment A.
    16. Under Requirement R5, responsible entities must ``demonstrate 
efforts to correct identified Unresolved Maintenance Issues,'' which 
are defined as ``deficienc[ies] identified during a maintenance 
activity that cause[] the component to not meet the intended 
performance, cannot be corrected during the maintenance interval, and 
require[] follow-up corrective action.'' NERC explained that the intent 
of Requirement R5 is ``to assure that Protection System components are 
returned to working order following the discovery of failures or 
malfunctions during scheduled maintenance.'' \15\
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    \15\ NERC Petition at 18.
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    17. With respect to implementation, NERC proposed to require 
entities to fully comply with Requirements R1, R2, and R5 within 12 
months of regulatory approval (or 24 months from the date of NERC Board 
approval where no regulatory approval is required).\16\ Accordingly, 
applicable entities in the United States must develop their revised 
protection system maintenance

[[Page 77577]]

program within one year after regulatory approval.\17\ NERC's proposed 
implementation plan would allow a longer implementation period with 
respect to achieving full compliance with the newly-prescribed 
maintenance activities and documentation, permitting a transition of 
maintenance activities and documentation over time, with the compliance 
period scaled to the length of the applicable maximum maintenance 
interval.\18\ Thus, for component types with the shortest allowable 
maintenance interval (i.e., less than one year, or between one and two 
years), entities would be required to fully comply with the new 
requirements within 18 months of regulatory approval, and 36 months of 
regulatory approval, respectively.\19\ For components types with longer 
maintenance intervals (3, 6, and 12 years), NERC proposed to require 
compliance over the applicable maintenance interval in equally 
distributed steps. For component types with the longest maximum 
allowable maintenance interval (i.e., 12 years), entities must be 30 
percent compliant within 5 years, 60 percent compliant within 9 years, 
and fully compliant within 13 years after regulatory approval.\20\
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    \16\ NERC Petition, Ex. C (Implementation Plan) at 2, 4.
    \17\ See id.
    \18\ Id. at 1-2.
    \19\ Id. at 4.
    \20\ Id. at 5. NERC notes, however, that ``[o]nce an entity has 
designated PRC-005-2 as its maintenance program for specific 
Protection System components, they cannot revert to the original 
program for those components.'' Id. at 2.
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    18. NERC explained that this implementation program takes into 
consideration that certain entities may not currently be performing all 
required maintenance activities specified in proposed PRC-005-2, and 
may not have all the documentation necessary to demonstrate 
compliance.\21\ NERC further stated that ``it is unrealistic for those 
entities to be immediately compliant with the new activities or 
intervals,'' and that ``entities should be allowed to become compliant 
in such a way as to facilitate a continuing maintenance program.'' \22\ 
Finally, NERC explained that it developed this step-wise implementation 
plan ``in order that entities may implement this standard in a 
systematic method that facilitates an effective ongoing Protection 
System Maintenance Program.'' \23\
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    \21\ Id. at 1.
    \22\ Id.
    \23\ Id. at 2.
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D. Notice of Proposed Rulemaking and Subsequent Filings

    19. On July 18, 2013, the Commission issued a Notice of Proposed 
Rulemaking (NOPR) proposing to approve Reliability Standard PRC-005-
2.\24\ The Commission explained that the revised standard represents an 
improvement over the four existing standards covering protection system 
maintenance and testing, because it incorporates specific, required 
minimum maintenance activities and maximum time intervals for 
maintenance of individual components of protection systems and load 
shedding equipment affecting the bulk electric system.\25\ The 
Commission further noted that although the proposed Reliability 
Standard would give entities the option of developing performance-based 
maintenance intervals for eligible components, those intervals have to 
be designed to achieve a minimum performance level and must be adjusted 
if the target performance level is not achieved.\26\
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    \24\ Notice of Proposed Rulemaking, Protection System 
Maintenance Reliability Standard, 144 FERC ] 61,055 (2013) (NOPR).
    \25\ Id. P 2.
    \26\ Id.
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    20. The Commission requested additional information and comment on 
three topics pertaining to PRC-005-2: (1) Verification of operability 
and settings upon placement in-service of new or modified protection 
systems; (2) use of a four percent target for countable events in 
performance-based programs; and (3) violation severity levels for 
certain Requirement R1 violations.
    21. Comments were due on the NOPR on September 23, 2013. Seven sets 
of comments were received, as identified in Appendix A to this Final 
Rule.
    22. On October 30, 2013, NERC submitted an errata to its February 
26, 2013 petition, stating that certain procedural language regarding 
the process for approval of the standard was inadvertently omitted. 
NERC submitted a revised Implementation Plan as part of that errata, 
asking the Commission to consider the revised plan for purposes of 
proposed PRC-005-2 and this proceeding.

II. Discussion

    23. Pursuant to section 215(d)(2) of the FPA, we approve 
Reliability Standard PRC-005-2, the six associated definitions 
referenced in the proposed standard, and NERC's proposed implementation 
plan, as just, reasonable, not unduly discriminatory or preferential, 
and in the public interest. As discussed in section A below, we believe 
Reliability Standard PRC-005-2 will enhance reliability through 
reducing the risk of protection system misoperations by establishing 
minimum maintenance activities and maximum maintenance time intervals. 
The Reliability Standard will also reduce the risk of protection system 
misoperations by establishing requirements for condition-based and 
performance-based maintenance programs where hands-on maintenance 
intervals are adjusted to reflect the known and reported condition or 
the historical performance of the relevant devices.
    24. Below, we discuss the matters raised by the Commission in the 
NOPR or raised by commenters in response to the NOPR, as follows: (A) 
Approval of PRC-005-2; (B) application of PRC-005-2 to newly-
commissioned or modified components; (C) four percent target for 
countable events; (D) correcting unresolved maintenance issues; (E) the 
Violation Severity Level assignment for Requirement R1; and (F) 
definitions.

A. Approval of PRC-005-2

NERC Petition
    25. In its petition seeking approval of PRC-005-2, NERC maintained 
that the proposed standard will improve reliability by:

(i) Defining and establishing criteria for a Protection System 
Maintenance Program; (ii) reducing the risk of Protection System 
Misoperations; (iii) clearly stating the applicability of the 
Requirements in proposed PRC-005-2 to certain Functional Entities 
and Facilities; (iv) establishing Requirements for time-based 
maintenance programs that include maximum allowable maintenance 
intervals for all relevant devices; and (v) establishing 
Requirements for condition-based and performance-based maintenance 
programs where hands-on maintenance intervals are adjusted to 
reflect the known and reported condition or the historical 
performance, respectively, of the relevant devices.\27\
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    \27\ NERC Petition at 3.

    26. NERC asserted that the Reliability Standard not only represents 
a comprehensive approach to documenting and implementing programs for 
maintenance of all protection systems affecting the reliability of the 
bulk electric system, but also reduces the risk of misoperations ``by 
applying consistent, best practice maintenance and inspection 
activities of Protection System Components in accordance with the 
maximum intervals established in the proposed Reliability Standard.'' 
\28\

[[Page 77578]]

NERC maintained that the proposed Reliability Standard represents an 
improvement over the four standards that would be superseded, because 
none of the existing standards contain technical requirements for any 
of the maintenance programs, but merely specify that a program be in 
place and that each responsible entity comply with the requirements of 
its own program.\29\
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    \28\ Id. at 11.
    \29\ Id.
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    27. NERC also maintained that PRC-005-2 satisfies three outstanding 
directives from Order No. 693 related to the PRC maintenance standards. 
First, NERC explained that the Reliability Standard includes maximum 
allowable intervals for maintenance of protection system components (as 
set out in Tables 1-1 through 1-5, Table 2, and Table 3 of Reliability 
Standard PRC-005-2).\30\ Second, Reliability Standard PRC-005-2 
combines the requirements for PRC-005, PRC-008, PRC-011 and PRC-017 
into one new, revised standard, addressing maintenance for transmission 
and generation protection systems, for special protection systems, and 
for UFLS and UVLS equipment.\31\ Finally, in Order No. 693, the 
Commission directed NERC to consider whether load serving entities and 
transmission operators should be included in the applicability of PRC-
004.\32\ NERC maintained that it considered whether load-serving 
entities and transmission operators should be subject to any of the PRC 
maintenance and testing requirements, but determined that the 
applicable maintenance requirements need only apply to equipment owners 
such as generation owners, transmission owners, and certain 
distribution providers.\33\ NERC explained that ``[w]hile an equipment 
owner may need to coordinate with the operating entities in order to 
schedule the actual maintenance, the responsibility resides with the 
equipment owners to complete the required maintenance.'' \34\
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    \30\ Id. at 12.
    \31\ Id. at 12-13.
    \32\ Order No. 693, FERC Stats & Regs. ] 31,242 at P 1469.
    \33\ NERC Petition at 13.
    \34\ Id.
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NOPR Proposal
    28. In the NOPR, the Commission proposed to approve Reliability 
Standard PRC-005-2, finding that it would enhance reliability by 
incorporating specific, required minimum activities and maximum time 
intervals for maintenance of individual components of protection 
systems and load shedding equipment affecting the bulk electric 
system.\35\ The Commission further noted that the proposed Reliability 
Standard would give entities the option of developing performance-based 
maintenance intervals for eligible components, but that those intervals 
had to be designed to achieve a minimum performance level and must be 
adjusted if the target performance level is not achieved.\36\ Finally, 
in the NOPR the Commission stated that Reliability Standard PRC-005-2 
``appears to adequately address the Commission directives from Order 
No. 693 with respect to: (1) Including maximum allowable intervals in 
PRC-005; (2) combining PRC-005, PRC-008, PRC-011, and PRC-017; and (3) 
considering whether load serving entities and transmission operators 
should be included in the applicability of the PRC-005 Reliability 
Standard.''\37\
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    \35\ NOPR, 144 FERC ] 61,055 at P 2.
    \36\ Id.
    \37\ Id. P 22.
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Comments
    29. Most commenters generally support the Commission's proposed 
approval of PRC-005-2. ITC ``supports NERC's proposal as improving Bulk 
Electric System reliability and promoting efficiency through 
consolidation [of protection system-related standards] into a single 
Standard.'' \38\ The Bureau of Reclamation states that the revised 
standard ``is a significant improvement over the current PRC-005-1 
standard because the current standard is more likely to penalize an 
entity that develops an ambitious maintenance program than an entity 
that has a less robust maintenance program. . . .'' \39\
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    \38\ ITC Comments at 4.
    \39\ Bureau of Reclamation Comments at 1.
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    30. Duke Energy, however, asks that the Commission reject the 
revised standard. Duke Energy argues that PRC-005-2 improperly expands 
the applicability of the protection system maintenance standard 
because, ``as written, it could also apply to Protection Systems which 
detect faults on the Bulk Electric System (BES), but which don't affect 
the reliable operation of the BES.'' \40\ Duke Energy argues that the 
Reliability Standard, as written, would apply to one of Duke Energy's 
typical protection schemes for dispersed, non-BES generation at 
distribution stations, because the relays involved are designed to 
detect faults on the BES although these particular protection schemes 
do not operate BES elements or interrupt network current flow from the 
BES.\41\ Duke Energy maintains that these protection schemes initiate 
shutdown of non-BES generation only, and should not properly be covered 
under a protection system maintenance Reliability Standard. Duke Energy 
accordingly requests that the Commission remand the standard to NERC 
with a directive to limit applicability of the standard to protection 
systems and elements thereof ``which affect the reliable operation of 
those BES Elements'' on which they detect faults.\42\
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    \40\ Duke Energy Comments at 2. In particular, Duke Energy cites 
to applicability section 4.2.1, which pertains to ``protection 
systems that are installed for the purpose of detecting Faults on 
BES Elements (lines, buses, transformers, etc.).''
    \41\ Id. at 3-4.
    \42\ Id. at 5.
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Commission Determination
    31. We find that Reliability Standard PRC-005-2 will enhance 
reliability as compared to the currently existing standards, and agree 
with ITC that PRC-005-2 promotes efficiency by consolidating protection 
system maintenance requirements into a single standard. Consistent with 
the NOPR, we believe that Reliability Standard PRC-005-2 should reduce 
the risk of protection system misoperations by setting out minimum 
maintenance activities and maximum maintenance time intervals for 
individual components of protection systems.\43\ In addition, we 
believe that PRC-005-2 will improve reliability by establishing 
requirements for condition-based and performance-based maintenance 
programs where maintenance intervals are adjusted to reflect the known 
and reported condition or the historical performance of the relevant 
devices. Finally, we agree with the Bureau of Reclamation that the 
revised standard removes the potential disincentive, inherent in the 
existing protection system maintenance standards, to adopt more 
aggressive maintenance programs because compliance is currently 
measured against each individual company's adopted program rather than 
against industry standards or minimums.
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    \43\ See NOPR, 144 FERC ] 61,055 at P 2.
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    32. We are not persuaded by Duke Energy that remand of the 
Reliability Standard is required. Duke Energy argues that PRC-005-2 
will bring a new set of protection system schemes under NERC's 
protection system maintenance standard requirements. We decline to make 
any specific determination about the applicability of this standard to 
specific elements or types of elements. Rather, Duke Energy may seek to 
raise concerns regarding applicability of the Reliability Standard to 
specific system

[[Page 77579]]

elements with NERC or the relevant Regional Entity.

B. Verification of Operability and Settings Upon Placement In-Service 
NERC Petition

    33. Reliability Standard PRC-005-2 does not include separate 
requirements for protection system commissioning testing for new or 
modified equipment (i.e., testing activities necessary to ensure that 
new or modified equipment has been built and will function in 
accordance with its design). NERC maintained in its petition that such 
testing is often performed by a different organization (such as a 
start-up or commissioning group of the organization, or a contractor 
hired to construct and start-up or commission the facility) than the 
organization responsible for the on-going maintenance of the protection 
system, and that the activities required for such testing will not 
necessarily correlate to the maintenance activities required by the 
proposed standard.\44\ At the same time, NERC acknowledged that ``a 
thorough commission testing program would include, either directly or 
indirectly, the verification of all those Protection System attributes 
addressed by the maintenance activities specified in the Tables of PRC-
005-2,'' and that ``an entity would be wise to retain commissioning 
records to show a maintenance start date.'' \45\

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    \44\ NERC Petition, Ex. E (Supplementary Reference and FAQ) at 
35.
    \45\ Id. NERC also noted that an entity ``that requires that 
their commissioning tests have, at a minimum, the requirements of 
PRC-005-2 would help that entity prove time interval maximums by 
setting the initial time clock.'' Id.
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NOPR Proposal
    34. In the NOPR, the Commission noted its concern that PRC-005-2 
does not include a requirement to verify that protection system 
equipment and components operate at least as accurately as required 
under the PRC-005-2 maintenance standards when those components are 
first placed in service or are modified, even though NERC has stated 
that such placement into service can be used as the starting point for 
the maintenance interval and even though a failure to verify the 
accurate functioning of protection system components when placed in 
service or when subsequently modified has contributed to misoperations 
in the past.\46\ The Commission accordingly asked for an explanation of 
``whether and if so, how [NERC] intends to interpret and enforce 
Reliability Standard PRC-005-2 to require that newly installed or 
modified protection system equipment or components perform at the same 
level as is required for subsequent compliance, including verification 
of applicable settings as specified whenever a relay is repaired, 
replaced, or upgraded with a new firmware version.'' \47\
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    \46\ See NOPR, 144 FERC ] 61,055 at PP 25-27.
    \47\ Id. P 27.
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    35. In addition, if NERC did not believe it could interpret PRC-
005-2 to require verification of operability and settings of protection 
system components at commissioning to the same performance level as is 
required for subsequent compliance with PRC-005-2, the Commission 
requested comment on whether such a modification to the standard should 
be made.\48\
---------------------------------------------------------------------------

    \48\ Id. P 28.
---------------------------------------------------------------------------

Comments
    36. NERC, the Cooperatives, ITC and Oncor all object to the 
application of PRC-005-2 to newly-commissioned or newly-modified 
protection systems or components. NERC maintains that the proposed 
standard was not ``designed to establish requirements for commission 
testing and such testing would go beyond the maintenance activities 
identified in proposed PRC-005-2.'' \49\ NERC accordingly asserts that 
it ``cannot interpret and enforce proposed PRC-005-2 to require that 
newly installed or modified protection system equipment or components 
perform at the same level as is required for subsequent compliance.'' 
\50\
---------------------------------------------------------------------------

    \49\ NERC Comments at 3.
    \50\ Id. However, NERC states in its comments, as it did in its 
petition, that ``the date of completion of the commission testing of 
the Protection System component and its placement into service can 
be used by an entity as the starting point in determining first 
maintenance due dates.'' Id. at 3-4 (citing to NERC Petition at 35-
36).
---------------------------------------------------------------------------

    37. NERC also provides information about its efforts to reduce 
protection system misoperations through improved commissioning testing 
practices, and asks that the Commission refrain from issuing a 
directive to modify PRC-005-2 to address commissioning testing until 
NERC completes that work and can determine whether it is sufficient to 
address commissioning testing.\51\ NERC states that these efforts 
include development of a report by the System Protection and Control 
Subcommittee (SPCS), recently approved by the NERC Planning Committee, 
in which the SPCS ``suggested improving commissioning practices through 
(1) analysis of protection system Misoperations; (2) sharing of lessons 
learned; and (3) development of an industry reference document on 
protection system commissioning practices.'' \52\ With respect to the 
first recommendation, NERC suggests it is being addressed as part of 
entities' ongoing obligations under PRC-004-2a (Analysis and Mitigation 
of Transmission and Generation Protection System Misoperations).\53\ As 
for the second recommendation, NERC notes that the SPCS is working on a 
lessons learned document.\54\ As for the third recommendation, NERC 
indicates that it is participating in ongoing efforts of an IEEE task 
force, working on the development of a report to provide guidance on 
the commissioning of power system protection systems.\55\ NERC commits 
in its Comments to keep the Commission informed on the progress of 
these ongoing efforts to reduce protection system misoperations related 
to commissioning testing practices.\56\
---------------------------------------------------------------------------

    \51\ NERC Comments at 4.
    \52\ Id. at 6.
    \53\ Id.
    \54\ Id.
    \55\ Id. at 7-8. Oncor agrees that the Commission should 
consider allowing NERC to continue its participation in efforts to 
create a document providing commissioning guidelines and best 
practices, instead of adding requirements to PRC-005-2. Oncor 
Comments at 1.
    \56\ NERC Comments at 4.
---------------------------------------------------------------------------

    38. The Cooperatives agree with NERC that PRC-005-2 cannot be read 
to include a requirement to verify operability and settings of new or 
modified protection system equipment, because there is no explicit 
language in the requirement that would allow such an interpretation and 
because it would disregard the standards development process.\57\ The 
Cooperatives argue that imposing a commissioning testing requirement as 
part of PRC-005-2 would constitute a material change to the standard, 
which must be addressed through the standards development process if 
needed.\58\ Similarly, ITC ``strongly opposes'' application of PRC-005-
2 to commissioning of new components, and stresses that the proposed 
standard was developed solely for the purpose of covering ``ongoing 
maintenance during the life of the component, and not an initial 
testing when the component is first commissioned.'' \59\ Oncor supports 
NERC's efforts to develop guidelines on commissioning testing practices 
instead of imposing additional requirements as part of PRC-005-2, and 
notes that there are many differences between commissioning testing and 
periodic

[[Page 77580]]

maintenance testing. In addition, Oncor notes that PRC-004-2a is 
designed to identify deficiencies in performance and provide for 
correction, while PRC-005-2 is not a deficiency in performance 
standard.\60\
---------------------------------------------------------------------------

    \57\ Cooperatives Comments at 3-4.
    \58\ Id. at 4.
    \59\ ITC Comments at 6-7.
    \60\ Oncor Comments at 1.
---------------------------------------------------------------------------

    39. The Cooperatives also argue that the Commission should not 
require the development of a commissioning testing requirement that 
would require verification of protection system operability and 
settings, because such a requirement ``would be redundant, difficult to 
formulate and enforce, and might affect some (but not all) Registered 
Entities' willingness to deploy new or upgraded protection systems.'' 
\61\
---------------------------------------------------------------------------

    \61\ Cooperatives Comments at 5-8.
---------------------------------------------------------------------------

    40. Idaho Power, on the other hand, believes that the Commission 
has identified a gap in the Reliability Standards that should be 
addressed by expanding PRC-005-2 to include newly-commissioned or 
modified equipment.
Commission Determination
    41. While we remain concerned about the continued possibility of 
misoperations resulting from a failure to properly verify the 
operability or settings of protection system equipment upon being 
placed in service or modified, we will not direct NERC to modify PRC-
005-2 to include such a requirement or to otherwise develop a separate 
commissioning testing standard at this time. Instead, we rely on NERC's 
discussion of its on-going efforts to reactively and proactively reduce 
protection system misoperations through improved commissioning testing 
practices, which includes the analysis of misoperations, sharing of 
lessons learned, and the development of a report intended to provide 
guidance concerning the commissioning of power system protection 
systems.\62\ As explained in the NOPR, our concern is with a protection 
system that has not been verified as capable of functioning according 
to its design when placed in service or modified. In its Comments, NERC 
describes an event studied by NERC's Event Analysis and Investigation 
Group, in which an entity did not perform in-service testing as part of 
commissioning a new protection system, ``resulting in line relays being 
placed in service with the incorrect transformer ratio.'' \63\ 
According to NERC, this situation remained undetected until the 
protection system was required to operate for a system disturbance. 
That protection system failed to operate correctly due to the defect, 
consequently increasing the magnitude and scope of the system 
disturbance.\64\ We believe that this example, provided by NERC, 
highlights our concern and the importance of commissioning testing.
---------------------------------------------------------------------------

    \62\ See NERC Comments at 5-8.
    \63\ Id. at 4.
    \64\ Id.
---------------------------------------------------------------------------

    42. We agree with a proactive approach to reducing misoperations, 
i.e., ensuring that a new or modified protection system, when placed in 
service, is capable of functioning according to its design so that an 
undetected defect resulting in a misoperation of that protection system 
does not negatively affect bulk electric system reliability. We 
encourage and accept NERC's commitment to keep the Commission informed 
of its efforts concerning this issue.\65\ Accordingly, we direct NERC 
to submit, within one year of issuance of this Final Rule, an 
informational filing on the status of these efforts, including the 
development of the guidance report as described in the NERC Comments.
---------------------------------------------------------------------------

    \65\ See id.
---------------------------------------------------------------------------

C. Four Percent Target for Countable Events in Performance-Based 
Program

NERC Petition
    43. Pursuant to Requirement R2 of Reliability Standard PRC-005-2, 
responsible entities may choose to establish performance-based 
maintenance intervals for individual component types, according to the 
procedures set out in Attachment A of the standard. Under these 
procedures, the responsible entity must first develop a list of 
components to be included in the designated segment (with a minimum 
population of 60 components).\66\ Using that analysis and looking at 
the greater of either the last 30 components maintained or all 
components maintained within the segment over the last year, the 
responsible entity must set a maximum allowable interval for each 
segment so that countable events will occur on no more than four 
percent of the components within that segment. In addition, the 
maintenance history of the segment is to be reviewed at least annually 
to determine the overall performance of the segment, and, if the four 
percent target is not met, the entity is required to develop and 
implement an action plan to reduce countable events to less than four 
percent within three years.\67\
---------------------------------------------------------------------------

    \66\ Until such time as the entity has performed and analyzed 
the required maintenance activities applicable to the segment for at 
least 30 individual components, it must maintain the segment using 
PRC-005-2's time-based intervals, as specified in Tables 1-1 to 1-5, 
2 and 3, i.e., it cannot adopt a performance-based interval until it 
has performed and analyzed the maintenance history for a minimum 
pool of components.
    \67\ As NERC explains in the Supplementary Reference and FAQ 
(Ex. E) attached to its petition, entities using a performance-based 
program must not only ``demonstrate how they analyze findings of 
performance failures and aberrations'' but must also ``implement 
continuous improvement actions'' to meet the failure rate targets. 
See NERC Petition, Ex. E at 40.
---------------------------------------------------------------------------

    44. Under PRC-005-2, an entity would not violate Requirement R2 
upon failing to achieve a four percent or less failure rate for a given 
segment in the first year the failure occurs, but would violate 
Requirement R2 if: (1) The entity could not show that the interval 
selected was initially set to expect a failure rate of no more than 
four percent; (2) the entity fails to make immediate changes to its 
performance-based maintenance program to achieve a four percent target 
within 3 years; or (3) the entity does not actually achieve a four 
percent failure rate for that segment within 3 years after adjusting 
its program.\68\
---------------------------------------------------------------------------

    \68\ See generally id. at 40-53.
---------------------------------------------------------------------------

    45. In the Technical Justification NERC submitted as part of its 
petition, NERC explained the basis for selecting a four percent target 
for countable events as follows:
    The 4% number was developed using the following:

    General experience of the drafting team based on open 
discussions of past performance.
    Test results provided by Consumers Energy for the years 1998-
2008 showing a yearly average of 7.5% out-of-tolerance relay test 
results and a yearly average of 1.5% defective rate.
    Two failure analysis reports from Tennessee Valley Authority 
(TVA) where TVA identified problematic equipment based on a 
noticeably higher failure of a certain relay type (failure rate of 
2.5%) and voltage transformer type (failure rate of 3.6%).\69\
---------------------------------------------------------------------------

    \69\ NERC Petition, Ex. D (Technical Justification) at 5.
---------------------------------------------------------------------------

NOPR
    46. In the NOPR, the Commission questioned whether NERC had 
provided sufficient support for the choice of a four percent target 
figure for countable events, particularly with respect to individual 
components known to have historically higher levels of reliability.\70\ 
The Commission requested support for NERC's proposed approach in PRC-
005-2, which adopts a single failure rate target for all component 
types, as opposed to establishing a target failure rate for each 
individual component.\71\ In addition, the Commission sought

[[Page 77581]]

comment on the selection of four percent as the appropriate target 
failure rate, assuming a blanket failure rate is used. Finally, the 
Commission proposed to direct NERC to study and submit a report and 
recommendations based on the study results concerning the expected 
failure rates for individual component types if the technical 
information to respond to the Commission's questions is not currently 
available.
---------------------------------------------------------------------------

    \70\ See NOPR, 144 FERC ] 61,055 at PP 32-33.
    \71\ Id. P 34.
---------------------------------------------------------------------------

Comments
    47. NERC comments that it continues to support the four percent 
failure rate target, arguing that an ``acceptable failure rate needs to 
balance between a goal of ultimate reliability and what could be 
reasonably expected of a well-performing component population.''\72\ 
NERC maintains that the four percent performance target was selected 
``based on the drafting team's experience and past studies performed by 
several utilities,'' and references back to Section 9 of the 
Supplementary Reference and FAQ appended to its Petition.\73\ In those 
supplementary materials, the choice of a four percent failure rate is 
explained as follows:
---------------------------------------------------------------------------

    \72\ NERC Comments at 10.
    \73\ Id. at 11.

    It is notable that 4% is specifically chosen because an entity 
with a small population (30 units) would have to adjust its time 
intervals between maintenance if more than one Countable Event was 
found to have occurred during the last analysis period. A smaller 
percentage would require that entity to adjust the time interval 
between maintenance activities if even one unit is found out of 
tolerance or causes a Misoperation.\74\
---------------------------------------------------------------------------

    \74\ NERC Petition, Ex. E (Supplementary Reference and FAQ) at 
42.

    48. NERC further maintains that ``it is appropriate to use a 
specified target percentage in a performance based maintenance program 
when applied to the results of time based maintenance of various 
component types'' because the ``variable performance expectations for 
different types of components are already reflected in the Table 1 time 
intervals.'' \75\ Thus, NERC explains, components with high failure 
rates would not generate significant extensions in allowed maintenance 
intervals ``unless dramatic advances in component reliability validate 
the use of significantly lower intervals.'' \76\ NERC further explains 
that extension of the maintenance interval will reduce the number of 
Countable Events for a given year, such that highly reliable components 
will have a low number of permitted ``failures'' per year.
---------------------------------------------------------------------------

    \75\ NERC Comments at 11-12.
    \76\ Id. at 12.
---------------------------------------------------------------------------

    49. NERC accordingly asks that the Commission approve the four 
percent target failure rate as proposed. In the alternative, if the 
Commission determines it needs additional information to support the 
four percent figure, NERC asks that it be given the opportunity to 
provide that additional support rather than have the Commission direct 
modification of the proposed standard. NERC also indicates that it will 
have the ``ability to track trends in Misoperations as industry gains 
practical experience with the performance based maintenance approach 
reflected in proposed PRC-005-2.'' \77\
---------------------------------------------------------------------------

    \77\ Id. at 13.
---------------------------------------------------------------------------

    50. Idaho Power, the only commenter other than NERC to address the 
four percent target failure rate, agrees with NERC that the four 
percent figure should be retained for all component types.\78\ Idaho 
Power believes that the cost of developing specific failure rates for 
component types would outweigh the benefit of doing so. Idaho Power 
points out the practical limitations of developing specific failure 
rates, which ``would need to account for different manufacturers, 
models, operating environments, production plants, and handling,'' and 
would need to be updated periodically.\79\
---------------------------------------------------------------------------

    \78\ Idaho Power Comments at 2.
    \79\ Id.
---------------------------------------------------------------------------

Commission Determination
    51. We are persuaded by the comments of NERC and Idaho Power to 
adopt the four percent target failure rate in performance-based 
maintenance programs, as described in Attachment A of PRC-005-2. In 
addition to the rationale provided by NERC, we recognize the practical 
need to adopt a target failure rate that is available to smaller 
organizations, and the cost and resources required to develop variable 
rates for different component types, and thus approve the approach set 
forth in Attachment A of PRC-005-2. While we do not direct the 
submission of further data or support for the target failure rate at 
this time, we note NERC's commitment to continue collecting data on 
misoperations,\80\ and expect that NERC will maintain sufficient data 
bases to allow future evaluation of performance-based maintenance 
programs as compared to time-based maintenance programs, including the 
frequency of misoperations (including clearly tracking the underlying 
cause of the misoperations).
---------------------------------------------------------------------------

    \80\ NERC Comments at 13.
---------------------------------------------------------------------------

D. Correcting Unresolved Maintenance Issues (Requirement R5)

NERC Petition
    52. Requirement R5 of PRC-005-2 obligates responsible entities to 
``demonstrate efforts to correct identified Unresolved Maintenance 
Issues.'' NERC defines an ``unresolved maintenance issue'' as a 
``deficiency identified during a maintenance activity that causes the 
component to not meet the intended performance, cannot be corrected 
during the maintenance interval, and requires follow-up corrective 
action.'' \81\ In its Petition, NERC explained the rationale behind 
providing some latitude to complete correction or restoration of a 
discovered problem outside of the normal maintenance interval as 
follows:
---------------------------------------------------------------------------

    \81\ NERC Petition at 14.

    The drafting team does not believe entities should be found in 
violation of a maintenance program requirement because of the 
inability to complete a remediation program within the original 
maintenance interval. The drafting team does believe corrective 
actions should be timely but concludes it would be impossible to 
postulate all possible remediation projects and therefore, 
impossible to specify bounding time frames for resolution of all 
possible Unresolved Maintenance Issues or what documentation might 
be sufficient to provide proof that effective corrective action has 
been initiated. Therefore Requirement R5 requires only the entity 
demonstrate efforts to correct the Unresolved Maintenance 
Issues.\82\
---------------------------------------------------------------------------

    \82\ Id. at 17.

NOPR
    53. In the NOPR, the Commission agreed that it may be appropriate 
in certain circumstances to allow entities additional time beyond the 
maximum maintenance interval period to complete restorative action, 
including when the corrective action involves redesign, ordering 
additional equipment, or timing corrective work to correspond to 
planned outages.\83\ However, the Commission noted its expectation that 
such instances would be limited, and that in most circumstances 
entities should have the capability to replace components and make 
minor repairs within the maximum maintenance interval.\84\
---------------------------------------------------------------------------

    \83\ NOPR, 144 FERC ] 61,055 at P 37.
    \84\ Id.
---------------------------------------------------------------------------

Comments
    54. ITC states that it ``does not oppose the overall structure'' in 
Requirement R5 for correcting an Unresolved Maintenance Issue, but has 
concerns

[[Page 77582]]

about the Commission's ``expectation that `entities should have the 
capability to replace components . . . within the maximum maintenance 
interval.' '' \85\ ITC maintains that this expectation ``ignores the 
challenges of maintaining older, well-functioning protection systems'' 
that are ``obsolete by current technology standards and/or for which 
replacement parts are no longer available.'' \86\ ITC notes that its 
own practice is to institute a new capital project to replace obsolete 
protection systems with new technologies when obsolete protection 
systems unexpectedly fail or are found to be unacceptable when tested, 
which could take up to a year or more to complete.
---------------------------------------------------------------------------

    \85\ ITC Comments at 5.
    \86\ Id.
---------------------------------------------------------------------------

    55. By contrast, the Bureau of Reclamation argues that the 
Requirement R5 obligation to ``demonstrate efforts to correct 
identified Unresolved Maintenance Issues'' is unclear, and asks the 
Commission to direct that NERC clarify the requirement ``by including a 
requirement for entities to develop plans with timeframes for 
corrective actions.'' \87\
---------------------------------------------------------------------------

    \87\ Bureau of Reclamation Comments at 2.
---------------------------------------------------------------------------

Commission Determination
    56. We are not persuaded that any modification to Requirement R5 is 
needed at this time, or that it is unreasonable to expect, as stated in 
the NOPR, that in most circumstances responsible entities should not 
need longer than the maximum maintenance interval to complete 
corrective actions. While we agree with the Bureau of Reclamation that 
the adoption of a formal plan for correcting an Unresolved Maintenance 
Issue may help to demonstrate that an entity has demonstrated 
sufficient efforts to meet Requirement R5, we note that the adoption of 
such a plan may not be necessary in all cases, e.g., if the issue will 
be quickly resolved. Moreover, we can conceive of situations where the 
adoption of a formal plan for resolution of the issue should not be 
treated as a sufficient demonstration of effort to correct the issue.
    57. With regard to ITC's comment regarding the time involved in 
certain replacements, particularly when they involve a new capital 
project, we recognize that in this circumstance (and others), it may 
appropriately require a significant period of time to address an 
Unresolved Maintenance Issue. Nonetheless, we do not believe that such 
a project is inconsistent with our expectation, as stated in the NOPR, 
that the instances in which restoration or repair is delayed beyond the 
normal maximum maintenance interval ``will be limited and, in most 
circumstances, entities should have the capability to replace 
components and make minor repairs within the maximum maintenance 
interval.'' \88\
---------------------------------------------------------------------------

    \88\ NOPR, 144 FERC ] 61,055 at P 37.
---------------------------------------------------------------------------

    58. In addition, we note that an Unresolved Maintenance Issue could 
degrade protection system performance to a level that requires 
notification and corrective action under Reliability Standard PRC-001-
1. Under PRC-001-1, if a protective relay or equipment failure reduces 
system reliability, the transmission operator or generator operator 
must notify relevant reliability entities (e.g. the host balancing 
authority, reliability coordinator, and affected transmission operators 
and balancing authorities) of the relay or equipment failure and must 
take corrective action as soon as possible.\89\
---------------------------------------------------------------------------

    \89\ Currently approved PRC-001-1 contains the following:
    R2. Each Generator Operator and Transmission Operator shall 
notify reliability entities of relay or equipment failures as 
follows:
    R2.1. If a protective relay or equipment failure reduces system 
reliability, the Generator Operator shall notify its Transmission 
Operator and Host Balancing Authority. The Generator Operator shall 
take corrective action as soon as possible.
    R2.2. If a protective relay or equipment failure reduces system 
reliability, the Transmission Operator shall notify its Reliability 
Coordinator and affected Transmission Operators and Balancing 
Authorities. The Transmission Operator shall take corrective action 
as soon as possible.
---------------------------------------------------------------------------

E. Violation Severity Level for Requirement R1 Violation--Station 
Batteries

NERC Petition
    59. Under the second sentence of Part 1.1 of Requirement R1, all 
batteries associated with station DC supply must be included in a time-
based maintenance program, i.e., they are not eligible for a 
performance-based program.\90\ In assigning violation severity levels 
for Requirement R1, NERC assigned a ``lower'' violation severity level 
for the failure to include applicable station batteries in a time-based 
maintenance program. NERC also assigned a ``lower'' violation severity 
level for the failure to specify whether one Component Type is being 
addressed by time-based or performance-based maintenance, or a 
combination of both. NERC explained that ``[t]here is an incremental 
aspect to the violation [of Requirement R1] and the VSLs follow the 
guidelines for incremental violations.'' \91\
---------------------------------------------------------------------------

    \90\ NERC explained this unique treatment of station batteries 
as follows:
    Batteries are the only element of a Protection System that is a 
perishable item with a shelf life. As a perishable item batteries 
require not only a constant float charge to maintain their freshness 
(charge), but periodic inspection to determine if there are problems 
associated with their aging process and testing to see if they are 
maintaining a charge or can still deliver their rated output as 
required. NERC Petition, Ex. D (Technical Justification) at 8.
    \91\ NERC Petition, Ex. I (Discussion of Assignments of VRFs and 
VSLs) at 10.
---------------------------------------------------------------------------

NOPR
    60. In the NOPR, the Commission proposed to direct NERC to change 
the violation severity level for the failure to include station 
batteries in a time-based program from a ``lower'' designation to a 
``severe'' designation, based on the binary nature of the 
requirement.\92\ The Commission noted that entities either satisfy the 
obligation to include station batteries in a time-based program or fail 
to meet the requirement in its entirety, which is indicative of a 
binary requirement.\93\ The Commission also noted that a low violation 
severity level designation does not properly reflect the number of 
historical violations associated with station battery maintenance.\94\
---------------------------------------------------------------------------

    \92\ NOPR, 144 FERC ] 61,055 at P 39.
    \93\ Id.; see also id. at n.53 (citing North American Electric 
Reliability Corporation, 135 FERC ] 61,166, at P 13 (2011).
    \94\ Id. P 39.
---------------------------------------------------------------------------

Comments
    61. NERC, Idaho Power, and the Cooperatives support NERC's initial 
``lower'' violation severity level designation for the failure to 
include station batteries in a time-based maintenance program. NERC 
notes that the purpose of Requirement R1 (as a whole) is ``to obligate 
the entity to establish a Protection System Maintenance Program for its 
Protection Systems,'' and that the subparts of the requirement are 
``not intended as separate subrequirements for compliance purposes.'' 
\95\ NERC further notes that ``it was not the intent of the standard 
drafting team to assign more importance to station batteries than any 
other Protection system component type as far as the initial 
establishment of the Protection System Maintenance Program.'' \96\ NERC 
explains that the violation severity levels for Requirement R1 were 
assigned based on the main Requirement, and argues that it is 
appropriate to measure compliance with that Requirement using ``a 
gradated level of non-compliance based on the number of component types 
missed. . . .'' \97\ NERC states that

[[Page 77583]]

deletion of the failure to include station batteries in a time-based 
maintenance program as a separately listed violation would be 
preferable to a directive requiring that failure to be treated as a 
``severe'' level violation.\98\
---------------------------------------------------------------------------

    \95\ NERC Comments at 14.
    \96\ Id. at 14-15 (emphasis in original).
    \97\ Id. at 15.
    \98\ Id.
---------------------------------------------------------------------------

    62. NERC also disagrees with the Commission's statement that an 
assignment of a ``lower'' violation severity level in this context is 
inconsistent with the Commission's approach to binary requirements. 
NERC asserts that neither it nor the standard drafting team considered 
Requirement R1 to be binary, and NERC points out that the Commission 
has adopted the general rule that ``gradated Violation Severity Levels, 
where possible, would be preferable to binary Violations Severity 
Levels since the application of any penalty for a violation could be 
more consistently and fairly applied commensurate with the degree of 
the violation.'' \99\
---------------------------------------------------------------------------

    \99\ Id. at 16 (citing North American Electric Reliability 
Corporation, 123 FERC ] 61,284, at P 27 (2008)).
---------------------------------------------------------------------------

    63. The Cooperatives and Idaho Power agree that a ``lower'' 
violation severity level is appropriate in this context.\100\ The 
Cooperatives assert that a ``severe'' designation does not reflect the 
level of risk associated with the failure to test a given battery, and 
that the number of historical violations associated with station 
battery maintenance merely reflects NERC's zero-tolerance policy for 
missing a defined testing interval by even one day.\101\ The 
Cooperatives agree with NERC that Requirement R1.1 is not binary,\102\ 
and Idaho Power maintains that NERC's proposed assignment properly 
takes into account ``the incremental aspect to potential violations.'' 
\103\
---------------------------------------------------------------------------

    \100\ Cooperatives Comments at 9-10; Idaho Power Comments at 2.
    \101\ Cooperatives Comments at 9.
    \102\ Id.
    \103\ Idaho Power Comments at 2.
---------------------------------------------------------------------------

    64. ITC supports the NOPR proposal to direct NERC to modify the 
violation severity level for Part 1.1 of Requirement R1, and agrees 
that the requirement is essentially binary with respect to 
compliance.\104\
---------------------------------------------------------------------------

    \104\ ITC Comments at 4-5.
---------------------------------------------------------------------------

Commission Determination
    65. We are not persuaded that the failure to include station 
batteries in a time-based maintenance program should be assigned a 
``lower'' violation severity level, when these components were singled 
out for special treatment in Requirement R1 as proposed. Furthermore, 
NERC does not propose gradated violation severity levels relating to 
whether a responsible entity includes station batteries in a time-based 
maintenance program. Nor does NERC explain how it would develop such 
gradated violation severity levels. NERC instead proposes a single, 
``lower'' violation severity level assignment as to this requirement. 
NERC treats the requirement as binary, while proposing gradated 
violation severity levels for all other portions of Requirement 
R1.\105\ In this situation, the violation severity level must be 
``severe,'' as NERC has previously stated.\106\ However, NERC is free 
to develop and propose gradated violation severity level assignments 
for its time-based maintenance program requirement as to station 
batteries.
---------------------------------------------------------------------------

    \105\ NERC refers to a Commission statement that BAL-005-0, 
Requirement R12, which requires an applicable entity to include all 
tie line flows in a calculation, is not a binary requirement and can 
be gradated. NERC Comments at 15-16 (citing North American Electric 
Reliability Corporation, 123 FERC ] 61,284, at P 26 (2008)). An 
applicable entity's failure to include any tie line flows in the 
calculation would represent the most serious excursion from 
compliance with this requirement and be appropriate for a ``severe'' 
violation severity level assignment. As to the requirement that a 
responsible entity include all batteries associated with DC station 
supply in a time-based maintenance program, the single instance of 
violation NERC identifies in its violation severity levels for PRC-
005-2 Requirement R1 is a failure to include any such batteries in a 
time-based maintenance program. Even if this requirement can be 
gradated for the purpose of assigning violation severity levels, the 
violation NERC identifies likewise would be the most serious 
excursion from compliance, so that a severe violation severity level 
assignment would be appropriate.
    \106\ ``NERC further states that it will determine whether a 
requirement has a single violation severity requirement or a set of 
violation severity levels by analyzing the performance required to 
satisfy a particular requirement. . . . Requirements that are 
binary, i.e., pass/fail, will have only one violation severity 
level--severe.'' North American Electric Reliability Corporation, 
135 FERC ] 61,166, at P 13 (2011).
---------------------------------------------------------------------------

    66. We also note that the level of risk associated with the failure 
to test a given battery is not an appropriate consideration in the 
context of assigning violation severity levels, but rather, should be 
considered when assigning a violation risk factor. In this case, 
Requirement R1 has been assigned a medium violation risk factor, which 
we accept as properly reflecting NERC's determination that a violation 
of Requirement R1 could directly affect the electrical state or the 
capability of the bulk-power system, but is unlikely to lead to bulk 
power system instability, separation, or cascading failures.\107\ We 
accordingly direct NERC to submit a compliance filing changing the 
violation severity level for the failure to include station batteries 
in a time-based maintenance program to ``severe.'' \108\
---------------------------------------------------------------------------

    \107\ NERC Petition, Ex. I (Discussion of Assignments of VRFs 
and VSLs) at 5-6.
    \108\ We disagree with NERC's suggestion to delete this VSL 
assignment rather than direct a change in it because ``the 
compliance element is covered adequately by the remaining language 
in the `lower' VSL'' for Requirement R1. NERC Comments at 15. Under 
NERC's suggestion, a responsible entity that specifies that it is 
using a performance-based maintenance program for station batteries 
would be in compliance with the first sentence of Requirement R1.1, 
but in violation of the second sentence, without an applicable 
violation severity level.
---------------------------------------------------------------------------

F. Definitions

NERC Petition
    67. NERC sought approval of six new definitions as part of proposed 
Reliability Standard PRC-005-2, i.e., Component, Component Type, 
Countable Event, Protection System Maintenance Program, Segment, and 
Unresolved Maintenance Issue. Of these newly defined terms, NERC 
proposed to include only the term Protection System Maintenance Program 
in its Glossary of Terms, with the remainder applying only to 
Reliability Standard PRC-005-2.
NOPR
    68. In the NOPR, the Commission proposed to approve all six 
definitions without modification.
Comments
    69. The Bureau of Reclamation asks the Commission to direct NERC to 
clarify section 4.2 (Applicability) to eliminate use of the vague or 
confusing terms ``such as,'' ``including,'' and ``etc.,'' including 
eliminating their use in the definition of the term ``Element'' (as 
referenced in PRC-005-2) and in the standard-specific definition of 
``Component.'' \109\ In addition, the Bureau of Reclamation suggests 
that the Commission require all definitions included in standards to be 
included in the NERC Glossary as a general matter, ``to promote 
consistency among standards.'' \110\
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    \109\ Bureau of Reclamation Comments at 2.
    \110\ Id. at 1-2.
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Commission Determination
    70. We are not persuaded that the use of the terms and phrases 
highlighted by the Bureau of Reclamation, which allow for the use of an 
illustrative list of elements or facilities that are included within a 
definition, renders that definition or the standard's applicability 
impermissibly vague. Nor are we persuaded that the definitions at issue 
in this docket that are used in the context of this standard must be 
adopted in NERC's Glossary of Terms for potential application to all

[[Page 77584]]

standards.\111\ However, we note that NERC should not adopt 
inconsistent definitions for the same term. We therefore accept the six 
definitions associated with PRC-005-2 as proposed by NERC without 
modification.
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    \111\ This appears to be a unique situation in that the five 
defined terms at issue have been developed specifically for use with 
PRC-005-2 and do not have broader applicability. However, we note 
that our approval of the defined terms as part of PRC-005-2 makes 
them binding on the ERO, regional entities, and registered entities 
for purposes of PRC-005-2, regardless of whether the terms appear in 
NERC's Glossary of Terms or as part of the individual standard. See, 
e.g., Notice of Proposed Rulemaking, Monitoring System Conditions--
Transmission Operations Reliability Standard, Transmission 
Operations Reliability Standards, Interconnection Reliability 
Operations and Coordination Reliability, 145 FERC ] 61,158, at P 66, 
n.81 (2013) (``The Commission has held that definitions are 
standards.'').
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III. Information Collection Statement

    71. The following collection of information contained in this Final 
Rule is subject to review by the Office of Management and Budget (OMB) 
under section 3507(d) of the Paperwork Reduction Act of 1995.\112\ 
OMB's regulations require approval of certain information collection 
requirements imposed by agency rules.\113\ Upon approval of a 
collection(s) of information, OMB will assign an OMB control number and 
an expiration date. Respondents subject to the filing requirements of a 
rule will not be penalized for failing to respond to these collections 
of information unless the collections of information display a valid 
OMB control number.
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    \112\ 44 U.S.C. 3507(d) (2012).
    \113\ 5 CFR 1320.11 (2012).
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    72. The Commission approves Reliability Standard PRC-005-2, which 
replaces PRC-005-1.1b (Transmission and Generation Protection System 
Maintenance and Testing), PRC-008-0 (Underfrequency Load Shedding 
Equipment Maintenance), PRC-011-0 (Undervoltage Load Shedding Equipment 
Maintenance) and PRC-017-0 (Special Protection System Maintenance and 
Testing). The Reliability Standard combines the requirements for 
maintenance and testing of protection systems, special protection 
systems, underfrequency load shedding equipment, and undervoltage load 
shedding equipment into one, comprehensive standard. In addition, the 
Reliability Standard sets out minimum maintenance activities and 
maximum maintenance intervals for the various components of these 
systems, but also allows applicable entities to adopt performance-based 
maintenance intervals in certain circumstances.
    73. Reliability Standard PRC-005-2 includes specific requirements 
about the minimum maintenance activities required for each type of 
applicable component, as well as a maximum time interval during which 
the maintenance must be completed. Because the specific requirements 
were designed to reflect common industry practice, entities are 
generally not expected to experience a meaningful change in actual 
maintenance and documentation practices. However, applicable entities 
will have to perform a one-time review of their current protection 
system maintenance programs to ensure that they meet the requirements 
of the revised standard PRC-005-2. Accordingly, all expected 
information collection costs are expected to be limited to the first 
year of implementation of the revised standard.
    74. Public Reporting Burden: Our estimate below regarding the 
number of respondents is based on the NERC compliance registry as of 
June 10, 2013. According to the compliance registry, 544 entities are 
registered as distribution providers, 898 entities are registered as 
generation owners, and 346 entities are registered as transmission 
owners within the United States. However, due to significant overlap, 
the total number of these affected entities (i.e., entities registered 
as a distribution provider, a generation owner, a transmission owner, 
or some combination of these three functional entities) is 867 
entities.
    75. Affected entities must perform a one-time review of their 
existing protection system maintenance program to ensure that it 
contains at a minimum the activities listed in Tables 1 through 3 in 
Reliability Standard PRC-005-2 and that the activities are performed 
within the applicable maximum interval listed in Tables 1 through 3. If 
the existing protection system maintenance program does not meet the 
criteria in Reliability Standard PRC-005-2, the entity will have to 
make certain adjustments to the program.

 
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                   Number  of      Number  of PSMP   Average number
                          Requirement                               affected        reviewed  per     of hours per      Total burden       Total cost
                                                                    entities           entity            review             hours
                                                                             (1)               (2)               (3)     (1)*(2)*(3) =     (4)*$70 \114\
                                                                                                                                   (4)
--------------------------------------------------------------------------------------------------------------------------------------------------------
One time review and adjustment of existing protection system                 867                 1                 8             6,936          $485,520
 maintenance program..........................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
\114\ This figure is the average of the salary plus benefits for a manager and an engineer. The figures are taken from the Bureau of Labor and
  Statistics at (http://bls.gov/oes/current/naics3_221000.htm).

    Title: FERC-725P, Mandatory Reliability Standards: Reliability 
Standard PRC-005-2
    Action: Proposed Collection of Information
    OMB Control No: To be determined
    Respondents: Business or other for-profit and not-for-profit 
institutions.
    Frequency of Responses: One time.
    Necessity of the Information: The Reliability Standard PRC-005-2 
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 new Reliability Standard ensures that transmission and generation 
protection systems affecting the reliability of the bulk electric 
system are maintained and tested.
    76. Internal review: The Commission has reviewed revised 
Reliability Standard PRC-005-2 and made a determination that approval 
of this standard 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 estimates 
associated with the information requirements.
    77. Interested persons may obtain information on the reporting 
requirements by contacting the Federal

[[Page 77585]]

Energy Regulatory Commission, Office of the Executive Director, 888 
First Street, NE., Washington, DC 20426 [Attention: Ellen Brown, email: 
DataClearance@ferc.gov, phone: (202) 502-8663, fax: (202) 273-0873].
    78. Comments concerning the information collections in this rule 
and the associated burden estimates should be sent to the Commission 
and to the Office of Management and Budget, Office of Information and 
Regulatory Affairs [Attention: Desk Officer for the Federal Energy 
Regulatory Commission]. For security reasons, comments to OMB should be 
sent by email to: oira_submission@omb.eop.gov. Please reference Docket 
No. RM13-7-000 (FERC-725P) in your submission.

IV. Regulatory Flexibility Act Analysis

    79. The Regulatory Flexibility Act of 1980 (RFA) \115\ generally 
requires a description and analysis of rules that will have significant 
economic impact on a substantial number of small entities. As discussed 
above, Reliability Standard PRC-005-2 will apply to an estimated 867 
individual entities (the number of entities registered as a 
distribution provider, a generator owner, a transmission owner, or any 
combination of those three functional entities). Comparison of the NERC 
Compliance Registry with data submitted to the Energy Information 
Administration on Form EIA-861 indicates that, of these entities, 230 
may qualify as small entities.\116\ Of the 230 small entities, 90 are 
registered as a combination of distribution providers, generator owners 
and transmission owners, but it is assumed that each entity would have 
only one comprehensive program to review.
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    \115\ 5 U.S.C. 601-12.
    \116\ The RFA definition of ``small entity'' refers to the 
definition provided in the Small Business Act (SBA), which defines a 
``small business concern'' as a business that is independently owned 
and operated and that is not dominant in its field of operation. See 
15 U.S.C. 632 (2006). According to the Small Business 
Administration, an electric utility is defined as ``small'' if, 
including its affiliates, it is primarily engaged in the generation, 
transmission, and/or distribution of electric energy for sale and 
its total electric output for the preceding fiscal year did not 
exceed 4 million megawatt hours.
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    80. The Commission estimates that, on average, each of the 230 
small entities affected will have a one-time cost of $560, representing 
a one-time review of the program for each entity, consisting of 8 man-
hours at $70/hour as explained above in the information collection 
statement. We do not consider this cost to be a significant economic 
impact for small entities. Accordingly, the Commission certifies that 
Reliability Standard PRC-005-2 will not have a significant economic 
impact on a substantial number of small entities.

V. Environmental Analysis

    81. 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.\117\ The 
Commission has categorically excluded certain actions from this 
requirement as not having a significant effect on the human 
environment. Included in the exclusion are rules that are clarifying, 
corrective, or procedural or that do not substantially change the 
effect of the regulations being amended.\118\ The actions taken herein 
fall within this categorical exclusion in the Commission's regulations.
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    \117\ Regulations Implementing the National Environmental Policy 
Act of 1969, Order No. 486, FERC Stats. & Regs. ] 30,783 (1987).
    \118\ 18 CFR 380.4(a)(2)(ii).
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VI. Document Availability

    82. In addition to publishing the full text of this document in the 
Federal Register, the Commission provides all interested persons an 
opportunity to view and/or print the contents of this document via the 
Internet through the Commission's Home Page (http://www.ferc.gov) and 
in the Commission'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.
    83. From the Commission's Home Page on the Internet, this 
information is available on eLibrary. The full text of this document is 
available on eLibrary in PDF and Microsoft Word format for viewing, 
printing, and/or downloading. To access this document in eLibrary, type 
the docket number excluding the last three digits of this document in 
the docket number field.
    84. User assistance is available for eLibrary and the Commission's 
Web site during normal business hours from the Commission's Online 
Support at (202) 502-6652 (toll free at 1-866-208-3676) or email at 
ferconlinesupport@ferc.gov, or the Public Reference Room at (202) 502-
8371, TTY (202) 502-8659. Email the Public Reference Room at 
public.referenceroom@ferc.gov.

VII. Effective Date and Congressional Notification

    85. This Final Rule is effective February 24, 2014.
    86. 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.\119\ 
The Commission will submit the Final Rule to both houses of Congress 
and to the General Accountability Office.
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    \119\ See 5 U.S.C. 804(2) (2007).

    By the Commission.
Nathaniel J. Davis, Sr.,
Deputy Secretary.

    Note:  The Appendix will not appear in the Code of Federal 
Regulations.

Appendix A

Commenters

Associated Electric Cooperative, Inc., Basin Electric Power 
Cooperative, Inc. and Tri-State Generation and Transmission 
Association (Cooperatives)
Duke Energy Corporation (Duke Energy)
Idaho Power Company (Idaho Power)
International Transmission Company d/b/a ITCTransmission, Michigan 
Electric Transmission Company, LLC, ITC Midwest LLC and ITC Great 
Plains, LLC (ITC)
North American Electric Reliability Corporation (NERC)
Oncor Electric Delivery Company LLC (Oncor)
United States Department of the Interior, Bureau of Reclamation 
(Bureau of Reclamation)
[FR Doc. 2013-30628 Filed 12-23-13; 8:45 am]
BILLING CODE 6717-01-P