On June 21, 2016, the Federal Energy Regulatory Commission (FERC or Commission) issued three orders related to the North American Electric Reliability Corporation’s (NERC) critical infrastructure protection reliability standards (CIP reliability standards). The Commission issued a final rule directing NERC to develop a new or modified reliability standard, an Order Denying Rehearing and a Notice of Inquiry.
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On November 24, 2014, FERC approved a settlement with Western Area Power Administration – Desert Southwest Region  (Western-DSW) related to its involvement in the blackout in the southwestern U.S. on September  8, 2011.  This blackout left more than 5 million people in Southern California, Arizona, and Baja California, Mexico without power for up to 12 hours.  According to FERC’s press release on the Western-DSW settlement, this is the fourth settlement arising out of this blackout.
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In a unanimous opinion issued on August 22nd, the U.S. Court of Appeals for the District of Columbia (D.C. Circuit) vacated an order issued by the Federal Energy Regulatory Commission (FERC) upholding the assessment of a monetary penalty against the Southwestern Power Administration (SWPA), a federal Power Marketing Administration (PMA) under the jurisdiction of the Department of Energy (DOE).  In reviewing Section 215 which instituted the current electric reliability paradigm, the D.C. Circuit found that in the Energy Policy Act of 2005 Congress had not unequivocally waived the Federal Government’s sovereign immunity to allow for the assessment of monetary penalties.
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At its meeting on July 17, 2014, FERC took three significant actions.

Physical Security NOPR

First, and most significantly, FERC issued a notice of proposed rulemaking (NOPR) proposing to approve NERC’s proposed Reliability Standard CIP-014-1, which addresses physical security of certain transmission substations that are the most critical to the operation of the Bulk-Power System.  In a blog article we posted last March, we reported that FERC had directed NERC to promulgate new standards related to physical security within 90 days after significant attention to the issue was raised in the press and in Congress earlier in the year.  Reliability Standard CIP-014-1 tracks the directives FERC had set forth in March to establish standards that provided for the identification of the substations most critical to Bulk-Power System reliability, development of risk assessments and security plans for such critical substations, and verification of those assessments and plans.
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Agreement with Arizona Public Service Company Suggests More to Come

Background

On July 7, 2014, the Federal Energy Regulatory Commission (FERC) issued the first, but likely not the last, Enforcement Order addressing the events of the September 8, 2011 Southwest Regional Blackout.  As described by the Commission in its new release, “[t]he agreement marks the first settlement stemming from the FERC-[North American Electric Reliability Corporation (NERC)] joint investigation into the outage, which left more than 5 million people in Southern California, Arizona and Baja California, Mexico without power for up to 12 hours.”  The Order approves a Stipulation and Consent Agreement between FERC Enforcement, NERC, and Arizona Public Service Company (APS) and assesses a $3.25 million civil penalty, $1.25 million of which is in the form of an offset for the cost of remediation and mitigation under the Agreement.   See Arizona Public Service Company, 148 FERC ¶ 61,009 (2014) (Order). In describing the events in the Southwest on September 8, 2011, the Commission identifies a series of cascading failures that lead to outages that began with a three-phase fault which led to the loss of APS’ Hassayampa-N.Gila 500kV transmission line (H-NG).  The H-NG line is part of the Southwest Power Link (SWPL), which is a major transmission corridor transporting power east-west from generators in Arizona, through the Imperial Irrigation District (IID), into Southern California.  The failure of the H-NG line rendered the SWPL ineffective and resulted in the re-distribution of power throughout the Pacific Southwest and Southern California. Ultimately, approximately 2.7 million customers were without power, some for multiple hours extending into the next day. 
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On March 7, 2014, the Federal Energy Regulatory Commission (FERC) issued an order directing the North American Electric Reliability Corporation (NERC) to develop reliability standards requiring owners and operators of the Bulk-Power System to address risks due to physical security threats and vulnerabilities within 90 days of the date of the order (June 5, 2014). FERC expects the proposed Reliability Standards to “require owners or operators of the Bulk-Power System to take at least three steps to address the risks that physical security attacks pose to the reliable operation of the Bulk-Power System,” the results of which should be updated periodically and verified independently by NERC, the Regional Entities, reliability coordinators or some other third parties. Order at P 6.
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In addition to the reliability-related decisions and Notices of Proposed Rulemaking (NOPR) issued during the Federal Energy Regulatory Commission’s (FERC) July 18, 2013 Open Meeting, there are two reliability-related dockets that are worthy of mention and provide an opportunity for interested parties to submit comments.
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On July 18, 2013, FERC issued a report on its audit of Salt River Project Agricultural Improvement and Power District (SRP). This audit commenced on November 15, 2011, and it reviewed SRP’s compliance with the NERC reliability standards for the entire period from June 18, 2007 (when the reliability standards became mandatory and enforceable) until March 14, 2013. According to the audit report, the focus of the audit was on the last two years.
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During its July 18 Open Meeting, the Federal Energy Regulatory Commission made several reliability-related issuances: three Notices of Proposed Rulemakings (NOPR), one final rule approving a reliability standard, and a decision regarding South Louisiana Electric Cooperative Association’s (SLECA) North American Electric Reliability Corporation’s (NERC) registry appeal.
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The Federal Energy Regulatory Commission (FERC) will hold a Commissioner-lead technical conference on Tuesday, July 9, 2013 from 8:45 a.m. to 5:00 p.m. to discuss policy issues related to the reliability of the Bulk-Power System. According to the agenda released on June 19, the conference will be comprised of four panels:

  1. State of Reliability and Emerging Issues;
  2. Continuing Evolution of NERC Enforcement and Compliance Activities;
  3. NERC Standards Development Process and Priorities; and
  4. Other Issues.