2. Protecting Grid Reliability
The North American Electric Reliability Council (NERC) is changing to accommodate the forces of electric industry restructuring and increased competition in electricity markets.
We expect to continue our reliability oversight role for the United States and Canada with an aggressive plan to transition NERC into the new North American Electric Reliability Organization (NAERO).
NAERO will be an industry-led self-regulatory organization with the key objective of setting and enforcing compliance with reliability standards in a fair and non-discriminatory manner, while maintaining the competencies that have made NERC successful.
NERC has also announced plans to become the single organization in North America to develop wholesale electric business practice standards.
These two activities are fully consistent with the two main principles driving NERC’s transition: "independence" and "market solutions." As NERC becomes more attuned to the commercial environment, our successes will be measured not only by how reliable the grid remains, but how well we embrace and adopt market-based solutions to the host of challenges competition brings.

3. North American Electric Reliability Council
NERC Regions
North American Electric Reliability Council

4. NERC’s History
Formed in 1968 as a VOLUNTARY organization to promote reliability of bulk power systems throughout North America
Members are 10 Regional Councils
Canadian utilities are members of three Regional Councils
NERC sets reliability standards for the high voltage electric grids
Standards MANDATORY but not ENFORCEABLE

5. Beginnings of Change Apr ‘96 – FERC Orders Open Access
More players, more transactions: a 100-fold increase over last 5 years
Transmission everywhere highly loaded
Economic pressure to bend reliability rules
Violations of rules going unpunished
Reliability of grids at risk
What has happened to the most reliable electric system in the World?
In 1996, the Federal Energy Regulatory Commission decreed that transmission systems in the U.S. must be opened to competition. This landmark order fundamentally changed the industry. But I believe it’s a cop-out to say that competition itself has caused reliability problems. In fact, one could make a case that the marketplace has really reduced the incidents of reliability problems. Here are some of the changes you can measure.
The magnitude of the number of transactions has changed.
All facilities than can be used are being used.
Summer price spikes are common – market prices are going to 100 times “normal” and maybe 200 times actual cost.
1999 summer’s constraints were in different places than 1998’s constraints, and 2000’s constraints were different than 1999.

6. Self-Regulated Reliability Org.
Sufficient authority to enforce compliance.
Recognition needed as a self-regulatory organization (SRO) by government bodies in Canada, the U.S. and Mexico.
Authority to collect funds to support its SRO function.
Use NASD as a model.
The Panel recommended the creation of an international, industry self-regulatory reliability organization (SRO) that would have sufficient authority to set and enforce compliance with reliability rules, and to collect funds to support this function.
In order for a private organization to be able to perform this kind of enforcement function, normally reserved for government, it needed recognition and a grant of authority from governments.
The model the Panel used was the National Association of Securities Dealers, which sets and enforces compliance with standards in the securities industry under the oversight of the Securities & Exchange Commission.

7. Mission and Functions
Develop and enforce reliability standards for high voltage grids in North America
Assess and report on supply adequacy
International scope and perspective
Only organization with this responsibility for North America
The mission and functions of the SRO will be to develop and enforce standards for the reliability of high voltage grids in North America, and assess and report on supply adequacy.
The SRO will have an international scope and perspective, and work closely with governments in the U.S., Canada, and Mexico.
It will be the only industry self-regulatory organization with this responsibility for North America.

8. Regional Relationships
Regional organizations essential part of implementation and enforcement function.
Strong positive working relations and shared responsibilities with regional organizations, including evolving ISOs and RTOs.
Delegation agreements between NAERO and each regional organization.
The SRO will depend significantly Regional Reliability Entities (RREs) to perform many of the compliance and enforcement functions.
The SRO must develop and maintain strong positive working relations and shared responsibilities with the RREs, which will likely include Regional Transmission Organizations as they evolve.
The SRO will enter into delegation agreements with each RRE, which will need to be approved by FERC and the appropriate government agencies in Canada.

9. Industry Participation & Excellence
Voluntary participation by technical personnel is indispensable.
Encourage voluntary efforts of the industry’s best technical experts.
Ensure “balanced” representation on all NERC committees.
Government regulators and other agencies encouraged to participate.
One of the key features of the SRO model is the voluntary participation by technical personnel from the industry. The SRO will continue to encourage voluntary efforts of the industry’s best technical experts. Their expertise is essential.
The SRO will have balanced representation on all its committees.
Federal, Provincial and State government regulators and other agencies are also strongly encouraged to participate.

10. Public Participation
Transparency, openness and accessibility essential to success.
Maximize participation among members and the public.
Board and Committee meetings open to the public.
Minutes of all meetings made public.
Independent review every 5 years.
The SRO has as one of its basic tenets transparency, openness and accessibility. These attributes are absolutely essential to its success.
Our goal is to maximize participation among members and the public.
To this end, our Board and Committee meetings are open to the public, and the minutes of all meetings are posted on the NERC web site (
Lastly, we will conduct an independent review of the organization every 5 years.

11. Operating Committee Develop Operating Standards
7:00
7:20
7:40
8:00
100 MW
The North American electric system was once described as the most complicated machine ever devised by man. It truly is. But like all machines, it needs some operating instructions if it is to continue to work as designed.
The Operating Committee develops standards to ensure that this “machine,” the interconnected grid systems on which we all depend, continues to be operated reliably. These are the “rules of the road” for reliable operations.
Develop Operating Standards
Ensure security or short-term reliability of interconnected transmission grids

12. The NERC Operating Manual serves as the common dictionary, encyclopedia, and book of rules, essentially the “Bible” for 21 security coordinators and 139 Control Areas. In addition to terms and definitions, history, procedures, training documents and references, the Manual is the home for the 10 Operating Policies.
The URL on the screen is THE manual. Everyone has access. It’s electronic.

13. Planning Committee
Develop Planning Standards
Ensure future reliability of interconnected transmission grids
Assess and report on long-term adequacy
As the electric system is expanded, we need rules to make sure that the new system will be able to be operated reliably. The Planning Committee develops standards that folks who plan future systems need to follow. These rules do not dictate WHAT needs to be built, but what tests the future system needs to be able to meet to assure that it can, in fact, be operated reliably after it is built.

14. Compliance Enforcement Program
Separate and independent from Standing Committees
Three key functions:
Compliance review process
Enforcement process (including a penalty structure)
System Operator Certification Process
The one feature that didn’t exist in the “old NERC” is our Compliance Enforcement function.
The CEP is separate and independent from the stakeholders who comprise the Standing Committees and the Stakeholders Committee.
The CEP is comprised of a:
Compliance review process
Enforcement process, and
System Operator Certification Process

15. NERC Organization Board of Trustees Standing Committees
Nine independent members
NERC President
Standing Committees
Broad Sector representation
Subcommittees
Working Groups
Task Forces
Operating
Committee
Planning
CIP
Stakeholders
Staff

16. Communications Network
3 RC
14 RC
1 RC

17. Defense Meteorological Satellite Program Images,
BLACKOUT 2003 – August 14 ~ 4:15 PM EDT
August 13 – 8:29 PM
~ 20 hours BEFORE
August 14 – 8:14 PM
~ 4 hours AFTER
Ottawa
Detroit
Toronto
Montreal
Boston
New York City
& Long Island
Cleveland
Buffalo
Columbus
Defense Meteorological Satellite Program Images,
courtesy of the United States Air Force Weather Agency

18. Questions ???

21. Legislation Needed in U.S.
FERC jurisdiction over reliability in U.S.
Designate new ERO to set and enforce reliability standards in the U.S.
Approve delegation to regional entities
Define role for States
Coordination with RTOs
Coordination with Canada and Mexico
Antitrust protection
In the U.S., legislation is needed to amend the Federal Power Act to give FERC jurisdiction over reliability, and to allow it to provide oversight to the SRO.
The legislation that NERC has developed also provides for:
Designation of an Electric Reliability Organization with authority to set and enforce compliance with reliability standards
Delegation to regional entities
A defined role for states
Coordination with RTOs
Coordination with Canada and Mexico
Antitrust protections

22. International Arrangements
Industry SRO develops standards to apply throughout North America
Government role to approve standards, hear appeals
International framework to assure coordination between U.S., Canada, and Mexico
Avoid dominance by FERC
One of the most unique features of NAERO is its international nature. Because our electricity grids span three countries, the SRO needs to develop standards that apply universally.
The role of governments in this model is to approve the standards developed by the SRO and to serve in a backstop role to the SRO for enforcement.
Having in place the necessary international framework will ensure that FERC does not dominate this process.

23. The Right Path = NAERO
Legislation (U.S.) to provide grant of authority
Similar grants from Canadian governments
Industry SRO with an independent board can do the best job
Emphasis on openness and due process
Everyone plays by the same rules
Send best people to do their best job
So the bottom line is we need U.S. legislation to create the SRO.
In Canada, the respective Provinces are already positioned to support the SRO framework. (NERC has worked actively with the Fed/Prov Reliability Working Group to assure that the necessary arrangements are in place.)
Governed by governed by an independent board, with open and fair processes, NAERO will be in the best position to see that everyone plays by the same set of rules and that the reliability of our international grids is maintained.

24. Issues Ahead… Adequacy and Performance
Coordination & Control Activities
Infrastructure Security
Monitoring, Assessing, & Enforcement
Congestion Management
Data Interchange
Send best people to do their best job
So the bottom line is we need U.S. legislation to create the SRO.
In Canada, the respective Provinces are already positioned to support the SRO framework. (NERC has worked actively with the Fed/Prov Reliability Working Group to assure that the necessary arrangements are in place.)
Governed by governed by an independent board, with open and fair processes, NAERO will be in the best position to see that everyone plays by the same set of rules and that the reliability of our international grids is maintained.