“NERC Hot Topics” Marc Butts May 9, 2008 Marc Butts May 9, 2008

 List of “hottest” topics  Compliance - Are you ready?  Compliance Filings for 2008  “Audits for Dummies”!  Use the RSAWS  Way’s to keep track of the NERC requirements Hot Topics!

What are the Hottest Topics in the Industry?

The way that NERC reacts to FERC pressure? The continuous budget increases – costs? Will compliance violation penalties be substantial? The volume of work: –FERC NOPR’s, rulemakings –NERC standards comments, drafting teams –SERC standards comments, drafting teams Audit processes – lack of volunteers? What are Your Hot Items?

Compliance – Are you Ready?

Only the “Planning Standards (18) required ‘self-certification’ by 7/1/08. There are also “Statements of Certifications” that have to be signed by each ‘entities’ Executive Signatories. What has to be done by July 1, 2008

The “Cyber Standards (8) will require ‘self- certification’ by 7/13/08. There will be “Statements of Certification” that will need to be signed by your Compliance Officers or Executive Signatories. This standard touches Transmission and Generation. Since the standard covers almost all functions, we’ll all have to file something. The Cyber standards, starting this year, will require two ‘self-certifications’ instead of the normal filing one time (Order 706). What else has to be done in 2008?

The “Operating Standards (36) will require ‘self-certification’ by 10/1/08. What else has to be done in 2008?

What was that “Registration Thing” all about?

Balancing Authority Distribution Provider Generator Operator - G Generator Owner Interchange Authority Load Serving Entity Planning Authority Purchasing-Selling Entity - G Reliability Coordinator Regional Reliability Organization Resource Planner - G Transmission Operator Transmission Owner Transmission Planner Transmission Service Provider * ‘Black’ functions were registered at the SCS level * ‘Red’ functions were registered at the OPCO level Not registered as an RRONot registered as an RRO (This is SERC!!) (This is SERC!!) SoCo Registered for 14 NERC functions

As shown on the previous page, you probably have contact mostly with the Power Coordination Center (PCC) in Birmingham or the Southern Company Fleet Operations (GOP function). In the NERC-world, the PCC in Birmingham is the TOP, BA, INT and RC functions. The GCC, ACC and others in our system do local switching, voltage coordination and other tasks and probably communicate directly with you all also. Who do you make contact with?

Buy the Book: “Audits for Dummies”!

Step #1: Are you Registered for the Correct Functions? Have you reviewed the latest Version 3 of the Functional Model? Have you referred to NERC’s Compliance Monitoring & Enforcement Plan (CMEP) for applicability? Step #2: Review Standards applicable to each Function Are you satisfied that you are registered correctly? If not, contact Regional Entity staff. Review all standards and all requirements for those functions you are registered for. Roadmap for Audit Preparation!

Step #3: Who will be accountable for meeting the requirements of the standards? Will you make a department accountable? Or, will you make a Manager accountable? Maybe even make the specific employee “punching the button” accountable? Step #4: What Type of Documentation is Required? Does evidence warrant written procedure, methodology, or guideline being developed? Is your current documentation up to date for the requirement? Does it meet the latest version of standard? Roadmap for Audit Preparation!

Step #5: Select a Documentation Application It protects documents/evidence from unauthorized edits. Need formal process for making revisions; administrator of the application who is the gatekeeper for all revisions. Step #6: Review Reliability Standards Audit Worksheets for Applicable Standards In 2007, auditor’s questions originated from the corresponding RSAWs. Review the RSAWs thoroughly for each requirement of each standard and assemble evidence needed to prove compliance. Roadmap for Audit Preparation!

Step #7: Assemble all Documents Have an electronic copy of all procedures referenced and provide to the audit team; Flashdrives are great for holding large volumes of information. Projectors are an excellent means to show evidence during the audit. Step #8: Perform “Mock” Audit Prior to Real Audit Have internal team perform audit using RSAW questions. Request documentation and evidence necessary for compliance. Plan to present just like a real audit! Roadmap for Audit Preparation!

It is imperative to have Management place a high emphasis on getting procedures written early and the audit done right. Need to make assignments early. Have meetings regularly to assess where you are. Assign someone to handle the logistics of meals for the auditors, refreshments, parking, badge access, remote internet access, etc. Make the audit “easy” on the auditors! If you have multiple assets in various regions, it will be important for the procedures to look very similar for the same standard & requirement for consistency reasons. Key Lessons Learned

Why is this so important?

Sanction Table Ranges with Adjustment Factors Applied

Penalty and Fine Process ($) Aggravating factors increase the sanction –Time horizon of standard – operations vs. long term ( %) –Repetitive infractions (+ 10, 30, and 50% discrete steps) –Prior warnings (+ 25% initial; 50% multiple) –Lack of cooperation (+0-50%) Mitigating factors decrease the sanction –Prompt disclosure (- 0-25%) –Voluntary corrective measures (- 0-25%) –Substantial cooperation (- 0-25%)

Where Do I Find These Standards?

There are ~ 120 NERC Board Approved, Reliability Standards, with a total of approximately 1,500 specific requirements and sub- requirements 94 have been FERC approved, where fines can be levied ($)! What’s the Magnitude of work here?

Click here

Click here for all FERC approved standards

Click here for matrix of all standard Requirement and what functions they apply to.

This is a great matrix to help you decide what applies to your company and to get organized!

Going back a bit…..do you know where to find the RSAW’s?

Click here

These are the RSAW’s!!

…and Then there’s SERC!!! Also SERC Supplements (soon to be called ‘standards’ that we must consider as well.)