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Commissioner John R. Norris Statement
March 15, 2012
Docket Nos. RC11-6-000, RC12-1-000, RC12-2-000, RC12-6-000, RC12-7-000 and RC12-8-000
Item No. E-3

The New Enforcement Mechanism for Reliability Standards

“I am pleased to support today’s order accepting, with limited conditions, NERC’s proposal to implement its new Find, Fix, Track and Report (FFT) enforcement mechanism. Commission Staff from the Offices of Enforcement, Reliability and the General Counsel did a tremendous job assessing NERC’s proposal and crafting a thoughtful and balanced response. Please accept my sincere thanks for your efforts.

NERC, the Regional Entities, industry and the Commission all now have several years of experience with monitoring and enforcing compliance with the mandatory reliability standards established pursuant to section 215 of the Federal Power Act. During that time, we’ve evaluated and reevaluated programs for compliance monitoring and enforcement, and for addressing violations. One key conclusion from these years of experience and review is that minimal risk violations have been treated essentially the same as more serious violations, consuming time and resources disproportionate to the risk posed to reliability of the bulk power system.

This is not just a problem with efficiency. More importantly, it has the very real potential to divert the attention of NERC, FERC, and the industry away from what matters most: maintaining and improving bulk power system reliability. Instead of putting the limited resources of NERC, the Regional Entities and the industry to work addressing the most critical reliability risks and improving reliability generally, the focus can quickly shift to managing compliance risk associated with minimal risk violations. Simply put, fostering such a preoccupation with issues presenting a minimal risk to the bulk power system could be detrimental to reliability in the long run.

In fact, I’ve consistently heard from NERC, the Regional Entities and industry since I first came to the Commission that too much time and too many resources are already spent focused on the compliance risk associated with minor documentation and other requirements that do not pose the most risk to reliability.

The FFT initiative that we approve today is a much needed step to address this problem. NERC, in consultation with the Regional Entities and industry, developed this new program to provide a procedure to more swiftly address and remediate minimal risk violations. I’m pleased that we are approving it with limited conditions.

Taking action today to approve the FFT initiative is also consistent with the broader conversation that we began last year with NERC and industry in a technical conference about priorities; clearly we cannot make everything a priority, so we need to make sure we are focused on what is essential to maintaining reliability, whether we are talking about standards development or compliance and enforcement.

I understand where the drive to prioritize everything comes from. Congress tasked us with ensuring the reliability of the electric grid. We all take that responsibility very seriously and are extremely dedicated to that goal. However, Congress also set up a unique regulatory process in section 215. Part of the uniqueness of that process is that it gives the responsibility to enforce compliance with reliability standards not just to the Commission, but also to the Electric Reliability Organization. Given this framework, I believe we need to give NERC and the Regional Entities the flexibility to do the right thing and prioritize their resources to what is most important to protecting the reliability of the electric grid. This allows the focus to shift to the highest threats to the grid, while sending minimal risk issues through the FFT track. Going forward, we can be most productive by providing NERC and the Regional Entities with policy direction as to the areas we believe are most critical to reliability.

It is also critical to remember that these minimal risk issues are permitted to go through this different track because the most important thing occurs – they are mitigated so that there is not an ongoing reliability risk. This mitigation is essential to the entire program.

NERC’s proposal touches on many aspects of its Compliance Monitoring and Enforcement Program, so there is much to say. Let me take a few moments to highlight a few key points in the order.

    1. Minimal risk

Probably the most significant condition that the order establishes with respect to NERC’s proposal is that only minimal risk violations can be processed using the FFT mechanism, and not moderate risk violations. Methods for analyzing violations and determining how possible violations should be categorized in terms of their risk to the bulk power system are a work in progress, and reasonable minds can occasionally differ as to the correct categorization of a particular violation. Like many aspects of the mandatory reliability standards program, I believe risk assessments will become easier as we gain experience under the FFT mechanism.

NERC explains in its filing the guidelines that it will use in making a determination of risk, and requests that it not be held to rigid or inflexible criteria. I believe that what NERC requests is reasonable and consistent with the overall flexibility we are granting NERC and the Regional Entities so that they can focus on priority matters. However, our order does provide a discussion of some of the FFTs filed to date, to provide guidance to NERC and the Regional Entities as to our view of “minimal risk”. We also commit to continuing a dialogue with NERC regarding risk assessments in the FFT process.

    2. Finality

Our order appropriately recognizes that providing finality to matters receiving FFT treatment is critically important to the success of the FFT mechanism. Balancing this need for finality against our responsibility to ensure adequate oversight, the order establishes a time limit on the Commission’s ability to review remediated issues included in FFT informational filings. Specifically, the Commission commits to initiating any review within 60 days of the date an FFT is filed, and that all FFTs, unless a review is initiated and absent a material misrepresentation, will be considered closed 60 days after they are filed. Further, the order notes our expectation that the Commission would exercise its authority to review matters in FFT informational filings in only limited and rare circumstances. This is consistent with the Commission’s actions to date with respect to Notices of Penalties.

    3. Continued Dialogue with NERC and the Regional Entities

I also want to note that today’s order accepts NERC’s commitment to file additional reports and analysis on how the FFT initiative is working, and stresses that the Commission will use those reports as a “meaningful opportunity to review the initiative and to consider any necessary changes going forward, including expanding the scope and parameters of possible violations to be processed by FFT informational filings”. As I have said with regard to many other reliability matters, dialogue between the Commission and NERC is essential to making the mandatory reliability standards program enacted by Congress work. This order establishes a strong basis for a continued dialogue on improving the efficiency of the Compliance Monitoring and Enforcement program.

    4. Requirements within standards with little effect on reliability or that are redundant

Finally, I want to highlight the very last paragraph of the order, because it makes an important point about the content of Reliability Standards. Given that the FFT initiative is focused on more efficiently addressing a large volume of standards violations that pose a minimal risk to bulk power system reliability, it is fair to ask whether there are some requirements within the standards that have little value in achieving reliability, or are simply redundant. In today’s order, we seek to obtain views on whether such requirements could be removed from the Reliability Standards with little effect on reliability and an increase in the efficiency of compliance programs.”