Outsourcing Electric Reliability Standards

June 18, 2008
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.

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?


The electricity industry has had planning and operating criteria and guidelines for decades, but compliance was always voluntary. The creation of mandatory standards enforceable under U.S. federal law represents a major shift in the industry’s regulation. A reliability standard defines obligations or requirements of utilities and other entities that operate, plan, and use the bulk power system in North America. Each NERC Reliability Standard details the purpose of the standard, the entities that must comply, the specific actions that constitute compliance, and how the standard will be measured. Standards address aspects of the operation and planning of the bulk power system, such as real-time transmission operations, balancing load and generation, emergency operations, system restoration and blackstart, voltage control, cyber security, vegetation management, facility ratings, disturbance reporting, connecting facilities to the grid, certifying system operators, and personnel training. Compliance with standards will be enforced via a rigorous program of monitoring, audits, and investigations. More than 1,400 entities that carry out functions necessary to ensure a reliable bulk power system must comply with the NERC Reliability Standards. Meeting these requirements helps ensure the reliable planning and operation of the bulk power system. (The bulk power system consists of the power plants, transmission lines and substations, and related equipment and controls that generate and move electricity in bulk to points from which local electric companies distribute the electricity to customers.)

According to Gerry Cauley, vice president and director of standards at the Princeton, NJ-based ERO, the early response from utility companies is encouraging. But, imposing 115 existing standards as mandatory and developing new ones will obviously mean a change in operations for many of them. In an updated review by CyberTech Inc., published by EnergyBiz Insider, Cauley made some positive observations. Insiders suggested that some utilities showed a lack of urgency about complying with NERC’s voluntary recommendations. Because NERC now operates as the Electric Reliability Organization and the stakes have been raised, meeting its standards has become part of a utility’s risk management portfolio. “They’ll pay more attention to where they are exposed and in violation. No one wants to get penalized,” Cauley notes.

Utilities are responding to NERC’s expanding role. At investor-owned utility American Electric Power, for example, Scott Moore, its vice president in charge of transmission operations, says AEP has established a new executive-level reliability compliance committee. AEP has assigned dedicated personnel to follow the process “to ensure that, after we’re audited, documentation is in place” and recommendations are acted on. Compliance with NERC’s standards at AEP “gets much more attention. There’s been a cultural change within the organization driving down to the lowest level.”

“In general, because of the ability to assess monetary penalties, the focus will move from the regional reliability organizations to the NERC,” adds Herbert Schrayshuen, vice president of reliability compliance at National Grid. Making NERC’s role mandatory – not voluntary – also strengthens its recommendations, he suggests.

NERC’s ability to gain access to information will be enhanced. Cauley notes that, by law, utilities are now required to submit information and data to NERC. “We have clear authority and expect to receive data on their systems,” he says. In the past, utilities might have claimed confidentiality or sensitivity to security data. Now, if NERC needs to know every transmission line that tripped over a year’s time, utilities will be required to provide that information or face heavy fines.

NERC works closely with utilities to establish new standards. Its standards-authorizing committee consists of a wide range of utility executives who recommend experts to populate committees and establish standards. After being named ERO, it started developing Version 0 standards, the aim of which is to formalize and update existing standards. Version 0 currently includes 115 standards, covering 14 different specialties, including emergency preparedness, personnel performance, critical infrastructure protection, and resource and demand balancing. According to NERC, “We expect a significant number of NERC’s existing 115 electric reliability standards to be approved to become mandatory and enforceable under the Federal Power Act. This means that a violation of the standard and its requirements will be a violation of federal law.”

When it comes to increasing reliability, Cauley points to demand balancing as one critical element in helping prevent any future blackouts. One standard refers to utilities making sure they have enough generation online to meet all power demands in real time, preventing any power shortages and possessing enough electricity to meet customer demands, balanced with the needs of the electric grid. Balancing the electric grid is critical to preventing system collapse, he adds. NERC can also play a role in helping to set the agenda for meeting future power needs. NERC’s responsibility is “to shine a bright line on it” and then let FERC and state regulatory commissions handle future power generation needs, adds Cauley.

Perhaps, next time, we can discuss some of the latest developments at NERC. Let’s hope that this new organization can assure building managers and consumers a reliable electrical resource for the present hot summer season. Meanwhile, what is your contingency plan for a power outage?

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