Outsourcing Electric Reliability Standards

06/18/2008 | By Lew Tagliaferre

Someone once said, “If you are not scared and confused, you don’t know what’s happening.” You have a lot to think about these days (and I hate to give you any more energy worries), but there could be a storm brewing in electrical reliability that will trump those tornadoes plaguing the Midwest this season. To begin, you must understand that a once-smooth-running, dependable electrical system, owned and regulated at the state level since the 1930s, has been replaced with a patchwork of segments that now are close to being uncontrollable.

In the generation segment, you have both independent power producers selling power to wholesale markets across state lines, and integrated generators owned and operated by regulated and unregulated utility companies. They all must be precisely synchronized to produce the standard 60Hz sine wave of power that we all know and love (some of us anyway). Transmission lines are owned both by independent operators and utilities, but they are regulated by the Federal Energy Regulatory Commission (FERC) under the “commerce clause” of the U.S. Constitution (Article 1, Section 8, Clause 3). Local area distribution systems that carry power to the meters take several different corporate forms and can be public stock corporations, municipal power companies, and rural electric cooperatives.

Over the years, interconnections were constructed between adjacent systems to help provide for reliability in emergencies. They multiplied until the transmission system became a large, interconnected national grid (literally controlled by nobody, although there are eight regionally organized control centers, called Regional Transmission Organizations [RTOs], attempting to do so). The Northeast regional blackout of 2003 was a wakeup call, letting us know that the system needed some fixing.

Recognizing a need for operating standards to assure reliability of power delivery, the utility industry had previously organized the North American Electric Reliability Corp. (NERC) as a voluntary, member-driven, non-profit association. It produced a lot of good work for nearly 40 years, but it had no legal authority for control and no penalties for violations. Enter the Energy Policy Act of 2005 (EPAct 2005), which amended the Federal Power Act. It gave new authority to FERC for setting standards of reliability and provided severe penalties for disobedience. As things happen slowly in Washington, it took FERC a while to decide – no doubt from serious prompting by industry lobbyists – that outsourcing this new responsibility was a good thing to do. In casting about for a partner, the logical choice was NERC. So, there was born a new independent regulatory body by NERC, termed the Electric Reliability Organization (ERO).

As demanded by law, ERO was granted the authority by FERC on June 18, 2007, to produce mandatory reliability standards with FERC approval, to audit their practice, and to invoke severe penalties, up to $1 million per day, for violations. Furthermore, since the 2003 blackout affected Canada and the United States, NERC’s efforts soon will create standards for both neighboring countries once the Canadian provinces pass their laws as well. Ontario, Quebec, and Manitoba have already done so. Eventually, Mexico should participate, making the grid-reliability standards seamless throughout the three countries. The question is: Will it work?

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