Paragraph 81 Project

2RELIABILITY | ACCOUNTABILITY Background FERC March 15, 2012 Order regarding the Find, Fix, Track and Report (FFT) process  Paragraph 81 (P81)  Opportunity to “…remove from the Commission-approved Reliability Standards unnecessary or redundant requirements.” NERC Standard Process Input Group (SPIG) Recommendation No. 4  “Standards Product Issues: The NERC board is encouraged to require that the standards development process address:... The retirement of standards no longer needed to meet an adequate level of reliability.”

3RELIABILITY | ACCOUNTABILITY Collaboration Collaborative effort  The North American Electric Reliability Corporation (NERC)  The Regional Entity Management Group (Regions)  The Trades and their member companies (Industry) o Edison Electric Institute, American Public Power Association, National Rural Electric Cooperative Association, Large Public Power Council, Electricity Consumers Resource Council, The Electric Power Supply Association and the Transmission Access Policy Study Group

4RELIABILITY | ACCOUNTABILITY Standard Authorization Request (SAR) Standards Committee approved the draft SAR for posting during its July 2012 meeting The draft SAR:  Identifies criteria for retiring or modifying requirements o The criteria is broad enough to be used in all phases and to capture all Reliability Standard requirements that are unnecessary, redundant or provide little protection to the Bulk Electric System (BES)  Defines phases  Includes a suggested list of requirements put together by NERC, the Regions, and Industry for potential inclusion in the initial phase

5RELIABILITY | ACCOUNTABILITY Phased Approach Initial Phase  Shall identify for retirement all FERC-approved Reliability Standard requirements that easily satisfy the criteria set forth in the SAR Future Phases  Shall identify FERC-approved Reliability Standard requirements that satisfy the criteria set forth in the SAR, but could not be included in the Initial Phase due to the need for additional analysis or an editing of language  The composition of the Standard Drafting Team (SDT) may need to change in future phases based on the expertise required

6RELIABILITY | ACCOUNTABILITY Relevant Criteria The Reliability Standard requirement must satisfy both Criteria A and B, with consideration of Criteria C

7RELIABILITY | ACCOUNTABILITY Criteria A In the event no responsible entity performed the FERC-approved Reliability Standard requirement, there would be little or no impact to the protection or reliable operation of the BES

8RELIABILITY | ACCOUNTABILITY Criteria B Requirement fits any of the following:  Administrative  Data Collection/Data Retention  Purely Documentation  Purely Reporting  Periodic Updates  Commercial or Business Practice  Redundant  Hinders the protection or reliable operation of the BES  Little, if any, value as a reliability requirement

9RELIABILITY | ACCOUNTABILITY Criteria C Was the Reliability Standard requirement part of a FFT filing? Is the Reliability Standard requirement being reviewed in an ongoing standards development project? What is the Violation Risk Factor of the Reliability Standard requirement? In which tier of the Actively Monitored Standards does the Reliability Standard requirement fall? Would retiring the requirement have any negative impact on NERC’s published and posted Reliability Principles? Would retiring the requirement have any negative impact on the defense-in-depth protection of the BES? Does the retirement or modification promote results- or performance-based Reliability Standards?

10RELIABILITY | ACCOUNTABILITY Benefits of the P81 Project Responsive to P81 of FERC’s March 15, 2012 order and SPIG Recommendation No. 4 Requirements submitted for the initial phase appear to be clear candidates and should not require extensive technical research The collaborative nature of the project is an example for future work because it advances the project while reducing the impact on stakeholders and NERC staff  The project is proposed to be under a tight schedule so it will not impact resources for an expanded period of time  The pace of the project sets an example for future work

11RELIABILITY | ACCOUNTABILITY Benefits of the P81 Project Continued Furthers the focus on results- and performance-based Reliability Standards  May provide a roadmap of what should or should not be a requirement in future Reliability Standards Will increase efficiency of the ERO compliance programs

12RELIABILITY | ACCOUNTABILITY Next Steps Process  Post draft SAR for comment  Complete consideration of comments and finalize the SAR  Post the Reliability Standard requirements proposed for retirement in Phase 1 for a 45-day comment period and initial ballot  10-day recirculation ballot Schedule  Will be determined based on comments received during the draft SAR posting

13RELIABILITY | ACCOUNTABILITY Questions?