
[Federal Register: March 30, 2009 (Volume 74, Number 59)]
[Rules and Regulations]               
[Page 14008-14040]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr30mr09-4]                         

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 40

[Docket No. RM08-11-000; Order No. 722]

 
Version Two Facilities Design, Connections and Maintenance 
Reliability Standards

Issued March 20, 2009.
AGENCY: Federal Energy Regulatory Commission.

ACTION: Final rule.

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SUMMARY: Pursuant to section 215 of the Federal Power Act, the 
Commission approves three revised Reliability Standards developed by 
the North American Electric Reliability Corporation (NERC), which the 
Commission has certified as the Electric Reliability Organization 
responsible for developing and enforcing mandatory Reliability 
Standards. The three revised Reliability Standards, designated by NERC 
as FAC-010-2, FAC-011-2 and FAC-014-2, set requirements for the 
development and communication of system operating limits of the Bulk-
Power System for use in the planning and operation horizons. In 
addition, the Commission approves, with modifications, the violation 
severity levels for the three Reliability Standards.

DATES: Effective Date: This rule will become effective April 29, 2009.

FOR FURTHER INFORMATION CONTACT:
Cory Lankford (Legal Information), Office of the General Counsel, 
Federal Energy Regulatory Commission, 888 First Street, NE., 
Washington, DC 20426, (202) 502-6711.

Cynthia Pointer (Technical Information), Office of Electric 
Reliability, Division of Reliability Standards, Federal Energy 
Regulatory Commission, 888 First Street, NE., Washington, DC 20426, 
(202) 502-6069.

SUPPLEMENTARY INFORMATION: 

                            Table of Contents

                                                               Paragraph
                                                                numbers

I. Background...............................................           2
    A. Mandatory Reliability Standards......................           2
    B. NERC's Proposed Version Two FAC Reliability Standards           3
    C. Notice of Proposed Rulemaking........................           5
II. Discussion..............................................           9
    A. Load Greater Than Studied............................          12
    B. Cascading Outages....................................          17
    C. Loss of Consequential Load...........................          21
    D. Violation Severity Levels............................          26
        1. General Matters..................................          32
        2. Assignment of Violation Severity Levels to Sub-            37
         Requirements NERC Filing...........................
        3. Removal of Unnecessary Violation Severity Level            47
         Assignments NERC Filing............................
        4. Compliance With the Commission's Violation                 51
         Severity Level Guidelines..........................
            a. Requirement R1 of FAC-010-2 and FAC-011-2              54
             NERC Filing....................................
            b. FAC-010-2 Requirement R4 NERC Filing.........          60
            c. FAC-011-2, Requirement R3 NERC Filing........          66
            d. FAC-011-2, Requirement R4 NERC Filing........          72
            e. FAC-014-2, Requirements R1 Through R4 NERC             76
             Filing.........................................
            f. FAC-014-2, Requirement R5 NERC Filing........          82
            g. FAC-014-2, Requirement R6 NERC Filing........          85
    E. Violation Risk Factors...............................          90
    F. WECC Regional Differences............................          94

[[Page 14009]]


    G. Effective Date.......................................         101
III. Information Collection Statement.......................         102
IV. Environmental Analysis..................................         104
V. Regulatory Flexibility Act...............................         105
VI. Document Availability...................................         108
VII. Effective Date and Congressional Notification..........         111


    Before Commissioners: Jon Wellinghoff, Chairman; Suedeen G. Kelly, 
Marc Spitzer, and Philip D. Moeller.
    1. Pursuant to section 215 of the Federal Power Act,\1\ the 
Commission approves three revised Reliability Standards concerning 
Facilities Design, Connections and Maintenance (FAC) that were 
developed by the North American Electric Reliability Corporation 
(NERC), which the Commission has certified as the Electric Reliability 
Organization (ERO) responsible for developing and enforcing mandatory 
Reliability Standards. The three revised Reliability Standards, 
designated by NERC as FAC-010-2, FAC-011-2, and FAC-014-2, set 
requirements for the development and communication of system operating 
limits of the Bulk-Power System for use in the planning and operation 
horizons. In addition, the Commission approves, with modifications, the 
violation severity levels for the three Reliability Standards.
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    \1\ 16 U.S.C. 824o.
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I. Background

A. Mandatory Reliability Standards

    2. Section 215 of the FPA requires a Commission-certified ERO to 
develop mandatory and enforceable Reliability Standards, which are 
subject to Commission review and approval. Once approved, the 
Reliability Standards may be enforced by the ERO, subject to Commission 
oversight, or by the Commission independently.\2\
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    \2\ 16 U.S.C. 824o(e)(3).
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B. NERC's Proposed Version Two FAC Reliability Standards

    3. In Order No. 705, the Commission approved three ``version one'' 
FAC Reliability Standards, FAC-010-1, FAC-011-1, and FAC-014-1,\3\ 
which require planning authorities and reliability coordinators to 
establish methodologies to determine system operating limits for the 
Bulk-Power System in the planning and operation horizons.\4\ In 
addition, the Commission directed the ERO to develop modifications to 
the Reliability Standard; and remanded the ERO's proposed definition of 
``Cascading Outage.''
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    \3\ NERC designates the version number of a Reliability Standard 
as the last digit of the Reliability Standard number. Therefore, 
version one Reliability Standards end with ``-1'' and version two 
Reliability Standards end with ``-2.''
    \4\ Facilities Design, Connections and Maintenance Reliability 
Standards, Order No. 705, 73 FR 1770 (Jan. 9, 2008), 121 FERC ] 
61,296 (2007), order on reh'g and clarification, 123 FERC ] 61,239 
(2008).
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    4. On June 30, 2008, in response to the Commission's directives in 
Order No. 705, NERC submitted for Commission approval three revised FAC 
Reliability Standards: \5\ System Operating Limits Methodology for the 
Planning Horizon--FAC-010-2, System Operating Limits Methodology for 
the Operations Horizon--FAC-011-2, and Establish and Communicate System 
Operating Limits--FAC-014-2. NERC requests that FAC-010-2 be made 
effective on July 1, 2008, FAC-011-2 on October 1, 2008, and FAC-014-2 
on January 1, 2009, consistent with the implementation dates of version 
one of these Reliability Standards.
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    \5\ The FAC Reliability Standards are not codified in the CFR 
and are not attached to the Final Rule. They are, however, available 
on the Commission's eLibrary document retrieval system in Docket No. 
RM08-11-000 and are available on the ERO's Web site, http://
www.nerc.com.
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C. Notice of Proposed Rulemaking

    5. On October 16, 2008, the Commission issued a notice of proposed 
rulemaking (NOPR) proposing to approve the revised FAC Reliability 
Standards.\6\ In addition, the Commission expressed concern with 
several of NERC's proposed assignments of violation severity levels and 
proposed modifications. Further, the Commission proposed to apply the 
violation risk factors associated with the version one FAC Reliability 
Standards to the version two Reliability Standards approved here.
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    \6\ Version Two Facilities Design, Connections and Maintenance 
Reliability Standards, 73 FR 63105 (Oct. 23, 2008), FERC Stats. & 
Regs. ] 32,637 (2008) (NOPR).
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    6. In the NOPR, the Commission required that comments be filed 
within 30 days after publication in the Federal Register, or November 
24, 2008. Five parties filed comments in response to the FAC NOPR: 
NERC, the Midwest Independent System Operator, Inc. (Midwest ISO), the 
Bonneville Power Administration (BPA), the United States Department of 
the Interior, Bureau of Reclamation (Bureau of Reclamation), and the 
Independent Electric System Operator of Ontario (IESO). The Commission 
addresses these comments below.
    7. On October 15, 2008, NERC filed violation risk factors for the 
version two FAC Reliability Standards and a regional difference for the 
Western Interconnection. The violation risk factors filed by NERC are 
identical to the violation risk factors assigned to the version one FAC 
Reliability Standards.
    8. Notice of NERC's October 15, 2008 filing was published in the 
Federal Register, 74 FR 8082 (2009), with comments due on March 5, 
2009. None was filed.

II. Discussion

    9. As discussed below, the Commission finds the three FAC 
Reliability Standards to be just, reasonable not unduly discriminatory 
or preferential, and in the public interest. Further, the proposed 
Reliability Standards are consistent with our directives in Order No. 
705. The Commission therefore approves Reliability Standards FAC-010-2, 
FAC-011-2, and FAC-014-2, effective 30 days after publication of this 
final rule in the Federal Register.\7\
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    \7\ Reliability Standards cannot become effective before the 
effective date of a Commission order approving them. See, e.g., 
Mandatory Reliability Standards for Critical Infrastructure 
Protection, Order No. 706, 73 FR 7368 (Feb. 7, 2008), 122 FERC ] 
61,040 (2008) at n.190.
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    10. In addition, as discussed below, we approve the ERO's proposed 
violation severity levels and violation risk factors for the three FAC 
Reliability Standards and direct the ERO to make certain modifications 
to the violation severity levels within 30 days of the effective date 
of this final rule.
    11. In the sections below, we address each of the proposed 
revisions to the FAC Reliability Standards as well as comments received 
in response to the FAC NOPR.

[[Page 14010]]

A. Load Greater Than Studied

    12. Sub-requirement R2.3.2 of FAC-011-1 (the ``version 1'' 
standard) provided that the system's response to a single contingency 
may include, inter alia, ``[i]nterruption of other network customers, 
only if the system has already been adjusted, or is being adjusted, 
following at least one prior outage, or, if the real-time operating 
conditions are more adverse than anticipated in the corresponding 
studies, e.g., load greater than studied.'' NERC asserted that a 
significant gap between actual and studied conditions (such as a large 
error in load forecast) could be treated as though it were a 
contingency under the version 1 of FAC-011-1 Reliability Standard.
    13. In Order No. 705, the Commission disagreed with NERC's 
explanation of FAC-011-1, sub-Requirement R2.3.2 and use of the phrase 
``load greater than studied.'' \8\ However, the Commission found that 
the meaning of Requirement R2.3 and sub-Requirement R2.3.2 was clear 
without the phrase. The Commission therefore approved FAC-011-1, but 
directed the ERO to revise the Reliability Standard through the 
Reliability Standards development process. The Commission suggested 
that NERC could address the Commission's concern by deleting the 
phrase, ``e.g., load greater than studied.'' \9\
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    \8\ Order No. 705, 121 FERC ] 61,296 at P 70.
    \9\ Id.
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NERC Filing
    14. In response to the Commission's directive, NERC revised the 
Reliability Standard to remove the phrase ``e.g. load greater than 
studied'' from Requirement R2.3.2. NERC described the phrase as an 
example and stated that its removal does not materially change the 
requirement.
NOPR Proposal
    15. In the NOPR, the Commission proposed to approve NERC's removal 
of the phrase ``e.g., load greater than studied'' from sub-requirement 
R2.3.2 of FAC-011-2. The Commission noted that NERC's revision in FAC-
011-2 appeared reasonable and did not appear to change or conflict with 
the stated requirements set forth in the version one Reliability 
Standards approved in Order No. 705.
Commission Determination
    16. The Commission approves the ERO's removal of the phrase ``e.g., 
load greater than studied'' from sub-requirement R2.3.2 of FAC-011-2. 
As we explained in the NOPR, while NERC described the phrase ``load 
greater than studied'' as simply an example and its removal does not 
materially change the requirement, Order No. 705 found that the 
operating conditions referred to in sub-Requirement R2.3.2 exacerbated 
circumstances that were distinct from the actual contingency to be 
addressed that is referred to in Requirement R2.3. Further, the 
Commission, in Order No. 705, did not support treating ``load greater 
than studied'' as a contingency.\10\ Rather, correcting for load 
forecast error is not accomplished by treating the error as a 
contingency, but is addressed under other Reliability Standards.\11\ 
The removal of the phrase ``load greater than studied'' resolves our 
concern and, accordingly, we approve the revision.
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    \10\ NOPR, FERC Stats. & Regs. ] 32,637 at P 10 (citing Order 
No. 705, 121 FERC ] 61,296 at P 69).
    \11\ Id. (citing Order No. 705, 121 FERC ] 61,296 at P 68, which 
states that ``transmission operators are required to modify their 
plans whenever they receive information or forecasts that are 
different from what they used in their present plans. Furthermore, 
variations in weather forecasts that result in load forecast errors 
are more properly addressed through operating reserve 
requirements.'').
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B. Cascading Outages

    17. With the version one FAC Reliability Standards, NERC proposed 
to add the term ``Cascading Outages'' to its glossary. In Order No. 
705, the Commission noted that, although the glossary did not include a 
definition of Cascading Outages, it included a previously-approved 
definition of ``Cascading,'' which seemed to describe the same concept. 
The Commission remanded NERC's proposed definition of Cascading Outages 
because NERC did not describe either the need for two definitions that 
seem to address the same matter or the variations between the two. The 
Commission also raised specific concerns with NERC's proposed 
definition of Cascading Outages. However, the Commission allowed NERC 
to file a revised definition that addresses the Commission's 
concerns.\12\
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    \12\ Order No. 705, 121 FERC ] 61,296 at P 111.
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NERC Proposal
    18. In response, NERC proposed to withdraw the definition of 
Cascading Outages. Further, NERC revised Reliability Standards FAC-010-
2 and FAC-011-2 by removing the term Cascading Outages and replacing it 
with Cascading.
NOPR Proposal
    19. In the NOPR, the Commission proposed to approve NERC's 
substitution of Cascading for Cascading Outage in the FAC Reliability 
Standards.\13\ The Commission noted that NERC's proposed revisions to 
FAC-010-2 and FAC-011-2 appeared reasonable and did not appear to 
change or conflict with the stated requirements set forth in the 
version one Reliability Standards approved in Order No. 705.
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    \13\ NOPR, FERC Stats. & Regs. ] 32,637 at P 13.
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Commission Determination
    20. The Commission approves the ERO's decision to withdraw the 
definition of Cascading Outage, and to remove the term Cascading Outage 
from the FAC Reliability Standards and replace it with the term 
Cascading. This approach is consistent with Order No. 705 and provides 
further clarity to the FAC Reliability Standards.

C. Loss of Consequential Load

    21. Reliability Standard FAC-010-1 (version 1) Requirement R2.3, 
provided that the system's response to a single contingency may 
include, inter alia, ``planned or controlled interruption of electric 
supply to radial customers or some local network customers connected to 
or supplied by the Faulted Facility or by the affected area.'' \14\ In 
response to a question raised by the Commission, NERC clarified that 
the provision in FAC-010-1, Requirement R2.3 is limited to loss of load 
that is directly connected to the facilities removed from service as a 
direct result of the contingency, i.e., consequential load loss.
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    \14\ Identical language appears in FAC-011-1, Requirement R2.3.
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    22. In Order No. 705, the Commission reiterated its holding that 
addressed similar language on loss of load in Order No. 693, regarding 
Reliability Standard TPL-002-0. In Order No. 693, the Commission noted 
that ``allowing for the 30 minute system adjustment period, the system 
must be capable of withstanding an N-1 contingency, with load shedding 
available to system operators as a measure of last resort to prevent 
cascading failures.'' \15\ Order No. 693 directed the ERO to clarify 
the planning Reliability Standard TPL-002-0 accordingly. The Commission 
reached the same conclusion in Order No. 705. In Order No. 705, the 
Commission approved Reliability Standard FAC-010-1, Requirement R2.3 
and directed the ERO to ensure that the clarification developed in 
response to Order No. 693 is made to the FAC Reliability Standards as 
well.\16\
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    \15\ Mandatory Reliability Standards for the Bulk-Power System, 
Order No. 693, 72 FR 16416 (Apr. 4, 2007), FERC Stats. & Regs. ] 
31,242 at P 1788, order on reh'g, Order No. 693-A, 120 FERC ] 61,053 
(2007).
    \16\ Order No. 705, 121 FERC ] 61,296 at P 53.

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[[Page 14011]]

NERC Filing
    23. NERC, in its June 30, 2008 filing, stated its belief that 
revisions to the term ``loss of consequential load'' is best addressed 
in its ongoing project to modify the transmission planning (TPL) group 
of Reliability Standards. NERC explains that the term ``loss of 
consequential load'' is intrinsic to the scope of the project to revise 
the TPL Reliability Standards and will be addressed there.
NOPR Proposal
    24. In the NOPR, the Commission proposed to allow the ERO to 
address revisions to the term ``loss of consequential load'' in the 
modification being made to the TPL Reliability Standards. The 
Commission advised that such revisions should be consistent with the 
Commission's prior determinations in Order Nos. 693 and 705.\17\ The 
Commission preliminarily found that FAC-010-2 and FAC-011-2 were 
clearly understood as written and clarified in Order No. 705, including 
its holding with respect to ``loss of consequential load,'' \18\ and 
that NERC's proposal to deal with ``loss of consequential load'' in a 
more related project was appropriate.
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    \17\ See NOPR, FERC Stats. & Regs. ] 32,637 at P 17 (citing 
Order No. 705, 121 FERC ] 61,296 at P 53); Order No. 693, FERC 
Stats. & Regs. ] 31,242 at P 1788 & n.461.
    \18\ See id. P 53.
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Commission Determination
    25. The Commission adopts its NOPR proposal approving the ERO's 
proposal to address revisions to the term ``loss of consequential 
load'' in the modification being made to the TPL Reliability Standards.

D. Violation Severity Levels

    26. In the event of a violation of a Reliability Standard, NERC 
will establish the initial value range for the corresponding base 
penalty amount. To do so, NERC will assign a violation risk factor for 
each requirement of a Reliability Standard that relates to the expected 
or potential impact of a violation of the requirement on the 
reliability of the Bulk-Power System. In addition, NERC will define up 
to four violation severity levels--Lower, Moderate, High, and Severe--
as measurements for the degree to which the requirement was violated in 
a specific circumstance.
    27. In Order No. 705, the Commission approved 63 of NERC's 72 
proposed violation risk factors for the version one FAC Reliability 
Standards and directed NERC to file violation severity level 
assignments before the version one FAC Reliability Standards become 
effective.\19\ Subsequently, NERC developed violation severity levels 
for each requirement of the Commission-approved FAC Reliability 
Standards, as measurements for the degree to which the requirement was 
violated in a specific circumstance.
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    \19\ Order No. 705, 121 FERC ] 61,296 at P 137.
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    28. On June 19, 2008, the Commission issued an order approving the 
violation severity level assignments filed by NERC for the 83 
Reliability Standards approved in Order No. 693.\20\ In that order, the 
Commission offered four guidelines for evaluating the validity of 
violation severity levels, and ordered a number of reports and further 
compliance filing to bring the remainder of NERC's violation severity 
levels into conformance with the Commission's guidelines. The four 
guidelines are: (1) Violation severity level assignments should not 
have the unintended consequence of lowering the current level of 
compliance; (2) violation severity level assignments should ensure 
uniformity and consistency among all approved Reliability Standards in 
the determination of penalties; \21\ (3) violation severity level 
assignments should be consistent with the corresponding requirement; 
and (4) violation severity level assignments should be based on a 
single violation, not a cumulative number of violations.\22\ The 
Commission found that these guidelines will provide a consistent and 
objective means for assessing, inter alia, the consistency, fairness 
and potential consequences of violation severity level assignments. The 
Commission noted that these guidelines were not intended to replace 
NERC's own guidance classifications, but rather, to provide an 
additional level of analysis to determine the validity of violation 
severity level assignments.
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    \20\ North American Electric Reliability Corp., 123 FERC ] 
61,284 (Violation Severity Level Order), order on reh'g, 125 FERC ] 
61,212 (2008) (Violation Severity Level Order on Rehearing and 
Clarification).
    \21\ Guideline 2 contains two sub-parts: (a) The single 
violation severity level assignment category for binary requirements 
should be consistent and (b) violation severity levels assignments 
should not contain ambiguous language.
    \22\ Id. P 17.
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NERC Filing
    29. In its initial filing, NERC identified violation severity 
levels for FAC-010-2, FAC-011-2, and FAC-014-2. NERC acknowledged that 
it developed these violation severity levels prior to the issuance of 
the Violation Severity Level Order. NERC asked the Commission to accept 
its violation severity levels, as filed, for the version two FAC 
Reliability Standards even though it has not yet assessed their 
validity using the four guidelines established in the Violation 
Severity Level Order. NERC committed to assessing the violation 
severity levels for the FAC Reliability Standards in the six-month 
compliance filing required by the Violation Severity Level Order.\23\
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    \23\ NERC June 30, 2008 Filing, Docket No. RM07-3-000 at 5 
(citing Violation Severity Level Order, 123 FERC ] 61,284 at P 42 
(requiring NERC, within six months from the issuance of the 
Violation Severity Level Order, to conduct a review of the approved 
violation severity levels pursuant to the Commission guidelines, and 
submit a compliance filing)).
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NOPR Proposal
    30. The NOPR proposed to approve, with modification, NERC's 
proposed violation severity levels for FAC-010-2, FAC-011-2, and FAC-
014-2.\24\ The Commission acknowledged that NERC assigned its proposed 
violation severity levels before the Commission established the four 
guidelines for evaluating the validity of violation severity levels, 
and preliminarily found that certain proposed violation severity levels 
for the version two FAC Reliability Standards would not meet our 
guidelines. The Commission therefore proposed certain modifications to 
the violation severity levels to form a complete set of violation 
severity levels. The Commission acknowledged that NERC committed to 
assessing the violation severity levels in the compliance filing 
required by the Violation Severity Level Order and encouraged NERC to 
do so.\25\ If, however, NERC did not include an assessment of its FAC 
violation severity levels in its six-month evaluation following the 
issuance of the Violation Severity Level Order, the Commission proposed 
to direct the ERO to submit an assessment of the FAC violation severity 
levels within six months of the effective date of the final rule in 
this docket.
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    \24\ NOPR, FERC Stats. & Regs. ] 32,637 at P 22.
    \25\ The Violation Severity Level Order also, among other 
things, directed that the ERO submit a compliance filing within six 
months certifying that it had reviewed each of the violation 
severity levels for consistency with Guidelines 2b, 3, and 4, 
validating the assignments that meet those guidelines and proposing 
revisions to those that do not. The Violation Severity Level Order 
on Rehearing and Clarification extended the submission of ERO's 
compliance filing by six months to September 18, 2009.
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    31. In the sections below, the Commission addresses comments and 
approves, with modification, violation severity levels for FAC-010-2, 
FAC-011-2 and FAC-014-2.

[[Page 14012]]

1. General Matters
Comments
    32. NERC requests clarification regarding the Commission's 
direction in paragraph 24 of the NOPR. In that paragraph, the 
Commission states that it is concerned with several of the proposed 
violation severity levels and then provides two examples. NERC asks the 
Commission to clarify whether or not this was intended as a generic 
statement to preface later paragraphs of the NOPR. NERC also asks if 
the Commission has identified additional violation severity levels that 
need revision beyond those identified in the body of the NOPR.
    33. As a general matter, IESO supports the NERC's proposed 
modifications to the FAC Reliability Standards, including the 
associated violation risk factors and violation severity levels and 
asks the Commission to accept them as filed. IESO states that the 
violation risk factors and violation severity levels were developed in 
a stakeholder process with active industry participation through NERC's 
standards development process. IESO contends that the industry has the 
resources, technical capability, and the experience necessary to 
develop violation risk factors and violation severity levels that 
reflect the requirements embedded in the various reliability standards. 
IESO recommends that the Commission accept the industry developed and 
balloted violation risk factors and violation severity levels where 
these are established by NERC and the industry in adherence to a timely 
and due process.
    34. By contrast, the Bureau of Reclamation advocates that because 
the violation severity levels require refinement, the Commission should 
not approve NERC's proposed Reliability Standards. The Bureau of 
Reclamation states that the Commission relies on NERC to develop 
Reliability Standards and in the event a standard is found to be 
inadequate, the Commission should remand the standard back to NERC. The 
Bureau of Reclamation asks the Commission to rely on the existing 
version until the proposed changes are made and resubmitted to the 
Commission for approval. Otherwise, the Bureau of Reclamation contends, 
it will be difficult for regulating entities to enforce uncertain 
Reliability Standards.
Commission Determination
    35. In response to NERC's comment, we clarify that the Commission's 
statement in paragraph 24 of the NOPR that it is concerned with several 
of the proposed violation severity levels was intended as a generic 
statement to preface later paragraphs. In general, the Commission 
approves the violation severity levels proposed by NERC. As discussed 
in the NOPR, however, the Commission identified several violation 
severity levels that appeared either unclear or inconsistent with the 
Commission's guidelines for violation severity levels. In this final 
rule, the Commission approves certain violation severity levels as 
proposed by NERC and directs certain modifications, as discussed below.
    36. The Commission disagrees with IESO's proposal that because the 
violation severity levels proposed by NERC in this proceeding were 
developed by industry participants through NERC's standard development 
process, the Commission should approve the violation severity levels as 
filed. The Commission has previously determined that, similar to 
violation risk factors, violation severity levels are not part of the 
Reliability Standard and, thus, are appropriately treated as an 
appendix to NERC's Rules of Procedure.\26\ Revisions of violation 
severity levels do not modify the Reliability Standard. Accordingly, 
NERC is not required to comport with the Reliability Standards 
development provisions of Federal Power Act section 215 when revising a 
violation severity level assignment.\27\ It is for this reason that the 
Commission also rejects the Bureau of Reclamation's request that the 
Commission not approve the proposed Reliability Standards because the 
proposed violation severity levels applicable to them require 
additional work.
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    \26\ Violation Severity Level Order, 123 FERC ] 61,284 at P 15.
    \27\ See North American Electric Reliability Corporation, 120 
FERC ] 61,145, at P 16 (2007).
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2. Assignment of Violation Severity Levels to Sub-Requirements
NERC Filing
    37. NERC did not propose any violation severity level assignments 
for sub-requirements.
NOPR Proposal
    38. The Commission has directed NERC to develop violation severity 
levels for each requirement and sub-requirement of each Reliability 
Standard.\28\ The Commission therefore proposed to direct the ERO to 
assign binary violation severity levels for all of the proposed sub-
requirements.\29\ In Order No. 705, the Commission found that the 
binary approach is appropriate for certain violation severity level 
assignments.\30\ In this instance, the Commission determined that the 
binary approach is appropriate because the violation severity level of 
the base requirement is established by whether a sub-requirement is 
violated or not, not to the extent a sub-requirement is violated. Thus, 
the Commission preliminarily found that the proposed binary 
requirements satisfy guideline 3, which calls for consistency between 
the violation severity level assignments and their corresponding 
requirements. For example, FAC-010-2 Requirement R1.1 states that the 
planning authority's system operating limit methodology shall ``[b]e 
applicable for developing system operating limits used in the planning 
horizon.'' \31\ Because NERC did not propose any violation severity 
levels for this sub-requirement, the Commission proposed a binary 
severe violation severity level that would be triggered when the 
planning authority system operating limit methodology is not applicable 
for developing system operating limits in the planning horizon. The 
Commission stated that this binary approach for sub-requirements 
provides clear criteria to determine the violation severity level for a 
violation of the sub-requirement. The Commission proposed to direct the 
ERO to file the revised violation severity levels within 30 days of the 
final rule in this proceeding.
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    \28\ North American Electric Reliability Corp., 119 FERC ] 
61,248 at P 80 (June 2007 Order), order on clarification, 120 FERC ] 
61,239 (2007).
    \29\ Binary requirements of Reliability Standards define 
compliance in terms of ``pass'' or ``fail.''
    \30\ Order No. 705, 121 FERC ] 61,296 at P 24.
    \31\ NERC June 30, 2008 Filing, Docket No. RM07-3-000, ex. A.
---------------------------------------------------------------------------

Comments
    39. NERC states that it did not intend to assign a penalty or 
sanction based on the violation of each sub-requirement of a 
Reliability Standard separate and distinct from the base requirement it 
supports. Where a sub-requirement is phrased like a requirement and 
addresses a different reliability objective from the base requirement, 
NERC agrees that it is appropriate to assign a violation risk factor to 
the primary requirement and to each sub-requirement that addresses 
differing reliability objectives. NERC contends, though, that the 
version two FAC Reliability Standards do not include any sub-
requirements serving a reliability objective separate from the base 
requirement. NERC states that each of these sub-requirements is crafted 
as an integral component of the base requirement, and is not intended 
to be assessed for compliance independent of the base requirement. NERC 
states that each base requirement is assigned a

[[Page 14013]]

violation risk factor and a set of violation severity levels that 
incorporates each sub-requirement, irrespective of the number of sub-
requirements associated with the base requirement. Thus, NERC contends, 
the severity of violating the reliability objective of the base 
requirement and its associated sub-requirements is best assessed on the 
whole at the base requirement level rather than on the individual sub-
requirement level.
    40. NERC disagrees with the Commission's statement that NERC did 
not propose any violation severity level assignments for sub-
requirements. NERC states that it proposed violation severity levels 
for each sub-requirement by reference in the associated base 
requirement of the related sub-requirement. NERC also disagrees with 
the Commission's proposal to direct the ERO to assign ``Severe'' binary 
violation severity levels for all of the proposed sub-requirements of 
the base requirement. NERC contends that the assignment of ``Severe'' 
binary violation severity levels for all of the proposed sub-
requirements of a base requirement will create an overlap of violation 
severity levels between the base and sub-requirements that will have 
the unintended consequence of confusing the application of the NERC 
sanction guidelines to a particular set of circumstances that involves 
compliance with a particular sub-requirement as part of the base 
requirement. NERC further contends that its proposed application of 
violation severity levels relative to base and sub-requirements is 
consistent with the Commission's criterion for approving Reliability 
Standards.\32\ NERC contends that the approach proposed by the 
Commission would create inconsistencies in the application of the 
violation severity levels, contrary to the Commission's guidelines in 
Order No. 672. NERC further contends that the Commission's proposed 
approach fails to acknowledge that the purpose of the sub-requirement 
is to support the singular reliability objective of, and is a component 
of, the total intent of the base requirement and, as such, is not to be 
assessed independently from the base requirement.
---------------------------------------------------------------------------

    \32\ See Rules Concerning Certification of the Electric 
Reliability Organization; Procedures for the Establishment, Approval 
and Enforcement of Electric Reliability Standards, Order No. 672, 71 
FR 8662 (Feb. 17, 2006), FERC Stats. & Regs. ] 31,204 (2006); order 
on reh'g, Order No. 672-A, 71 FR 19814 (Apr. 18, 2006), FERC Stats. 
& Regs. ] 31,212 (2006). Order No. 672 states that ``[t]he possible 
consequences, including range of possible penalties, for violating a 
proposed Reliability Standard should be clear and understandable by 
those who must comply.'' Order No. 672, FERC Stats. & Regs. ] 31,204 
at P 326.
---------------------------------------------------------------------------

    41. IESO and Midwest ISO agree with NERC that the application of 
violation severity levels should be consistent and that the Commission 
should not require the assignment of a violation severity level to 
every sub-requirement. Midwest ISO contends that, in the event a sub-
requirement covers a different reliability objective than the base 
requirement and therefore does need its own violation severity level, 
the Commission should direct NERC to strike the sub-requirement and 
rewrite it as a separate base requirement. Midwest ISO also requests 
Commission confirmation that a penalty should be assessed through the 
main requirement rather than through the criteria in the sub-
requirements. Further, Midwest ISO contends that, because the violation 
severity levels of these base requirements cover the violation of the 
criteria in the sub-requirements, the violation risk factors associated 
with the sub-requirements should be removed, eliminating the need for 
additional violation severity levels for sub-requirements.
Commission Determination
    42. NERC's proposal to assign a penalty or sanction for a violation 
of a sub-requirement based on the violation severity level of the 
corresponding main requirement is not consistent with Commission 
precedent or with NERC's Sanction Guidelines. The Commission has 
directed NERC to develop violation severity levels for every 
requirement and sub-requirement.\33\ In addition, the Violation 
Severity Level Order stated that each requirement assigned a violation 
risk factor also must be assigned at least one violation severity 
level.\34\ As set forth in the NERC's Sanction Guidelines, the 
intersection of these two factors is the first step in the 
determination of a monetary penalty for a violation of a requirement of 
a Reliability Standard. The ERO and Regional Entities may assess 
penalties that relate to violations of particular sub-requirements of a 
requirement, where appropriate. For these reasons, the Commission 
disagrees with commenters who argue that the Commission should not 
require the assignment of violation severity levels to every sub-
requirement.
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    \33\ June 2007 Order, 119 FERC ] 61,248 at P 80.
    \34\ Violation Severity Level Order, 123 FERC ] 61,284 at P 3 
(citing June 2007 Order, 119 FERC ] 61,248 at P 74).
---------------------------------------------------------------------------

    43. The Commission understands that the Reliability Standards 
(Version 0 and Version 1) approved in Order No. 693 are, for the most 
part, a direct translation of the then voluntary NERC Operating 
Policies and Planning Standards, which employed a numbering hierarchy 
that does not consistently facilitate the assignment of violation risk 
factors and, consequently, violation severity levels. This numbering 
hierarchy, carried over during the translation, is at the heart of the 
distinction between ``main'' and ``sub'' requirements with respect to 
compliance with mandatory Reliability Standards.\35\
---------------------------------------------------------------------------

    \35\ NERC November 24, 2008 Comments at 6. As NERC points out in 
its comments, some requirements assigned to Version 0 Reliability 
Standards included sub-requirements that were phrased like a 
separate requirement and, in fact, addressed a separate reliability 
objective.
---------------------------------------------------------------------------

    44. The Commission appreciates the ERO's initiative to develop an 
alternative approach to facilitate the assignment of factors necessary 
for its compliance and enforcement program. As NERC acknowledges, some 
Reliability Standards include requirements with sub-requirements that 
address a different reliability objective from the main requirement. 
The Commission understands that the varied nature of the relationship 
between the main requirements and sub-requirements throughout the 
Reliability Standards has created concern whether a violation of a sub-
requirement is also a violation of the requirement itself. Due to these 
concerns, the Commission believes that it is premature to change its 
current policy in the current proceeding, which is limited to the three 
FAC Reliability Standards submitted by NERC.
    45. Rather, the Commission encourages the ERO to develop a new and 
comprehensive approach that would better facilitate the assignment of 
violation severity levels and violation risk factors both prospectively 
and to existing, Commission-approved, Reliability Standards. The ERO 
could raise its proposal for an alternative approach in a separate 
filing. This would allow the Commission to better understand the 
implications of the proposed change in approach, as opposed to having 
to act on an ad hoc basis.
    46. The Commission expects that the ERO's filing of its alternative 
approach would include a more detailed description of the proposal to 
assign violation severity levels for main requirements that would apply 
to sub-requirements, as well as the specific conditions under which its 
application

[[Page 14014]]

would or would not be appropriate.\36\ The Commission also expects that 
the ERO's filing would propose implementation of its approach 
comprehensively to all requirements of approved Reliability Standards 
and how that implementation would be accomplished. The ERO's filing of 
its alternative approach, however, must not postpone or preclude the 
Guideline 2b, 3, and 4 compliance filing which is due in September 
2009. Therefore, until the Commission has an opportunity to review such 
a proposal, the Commission directs the ERO to submit violation severity 
levels for all requirements and sub-requirements at issue in this 
proceeding within 30 days from the effective date of this final rule, 
as discussed below and as indicated in Attachment A. In light of 
concerns raised in the comments, the Commission has also made minor 
clarifying edits to the violation severity levels for certain of the 
requirements and sub-requirements approved in this proceeding.\37\ 
These clarifying edits are also reflected in Attachment A.
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    \36\ The Commission understands that this approach would also be 
applied in the assignment of violation risk factors to requirements 
of Reliability Standards.
    \37\ In particular, the Commission directs clarifying revisions 
to the violation severity levels that the Commission proposed to 
assign to sub-requirements R2.1, R2.2 and R2.5 of FAC-010-2 and R2.1 
and R2.2 of FAC-011-2. In addition, the Commission has made several 
typographical revisions to the violation severity levels the 
Commission proposed to assign to other sub-requirements. As noted 
above, these revisions are set forth in full in Attachment A to this 
order.
---------------------------------------------------------------------------

3. Removal of Unnecessary Violation Severity Level Assignments
NERC Filing
    47. NERC submitted violation severity levels for Requirement R2 of 
FAC-010-2 and Requirement R2 of FAC-011-2. Requirements R2 of FAC-010-2 
and FAC-011-2 require planning authorities and reliability coordinators 
to include in their system operating limit methodology a requirement 
that the system operating limits provide bulk electric system 
performance consistent with the terms established in the sub-
requirements.
NOPR Proposal
    48. In Order No. 705, the Commission found that Requirement R2 of 
FAC-010-1 and Requirement R2 of FAC-011-1, without their sub-
requirements, include no required performance or outcome.\38\ As such, 
no violation severity levels need to be assigned to these requirements. 
The Commission therefore proposed to delete the proposed violation 
severity levels for Requirement R2 of FAC-010-2 and FAC-011-2.
---------------------------------------------------------------------------

    \38\ Order No. 705, 121 FERC ] 61,296 at P 159.
---------------------------------------------------------------------------

Comments
    49. NERC disagrees with the Commission's proposal to remove the 
violation severity levels assigned to Requirement R2 of FAC-010-2 and 
Requirement R2 of FAC-011-2. NERC states that it did not intend to 
assign a penalty or sanction based on the violation of each sub-
requirement of a Reliability Standard. NERC states that although it has 
assigned a violation risk factor to every base requirement and sub-
requirement to comply with a Commission directive, it continues to 
expect that the compliance enforcement authority will assess each base 
requirement in total, irrespective of the number of sub-requirements 
associated with the base requirement.
Commission Determination
    50. As discussed above, each requirement that is assigned a 
violation risk factor also must be assigned at least one violation 
severity level. If the ERO does not assign a violation risk factor to a 
requirement, it should not assign violation severity levels. The NOPR 
identified requirements belonging to the proposed Reliability Standards 
that do not establish a required outcome or performance. In the 
Violation Risk Factor Order, the Commission described these types of 
requirements as explanatory statements, phrases and/or text, and 
determined that violation risk factors need not be assigned to such 
requirements.\39\ The Commission finds that Requirements R2 and R2.6 of 
FAC-010-2 and Requirement R2 of FAC-011-2 are such explanatory 
statements as they include no required performance or outcome. 
Accordingly, the Commission adopts the NOPR proposal and directs the 
ERO to remove violation severity level assignments for Requirements R2 
and R2.6 of FAC-010-2 and Requirement R2 of FAC-011-2. The ERO shall 
submit its revisions to the Commission within 30 days from the issuance 
of this final rule, as discussed above and as indicated in Attachment 
A.
---------------------------------------------------------------------------

    \39\ North American Electric Reliability Corporation, 119 FERC ] 
61,145 at P 45 (Violation Risk Factor Order), order on reh'g, 120 
FERC ] 61,145 (2007) (Violation Risk Factor Order on Rehearing and 
Clarification); Order No. 705, 121 FERC ] 61,296 at P 159.
---------------------------------------------------------------------------

4. Compliance With the Commission's Violation Severity Level Guidelines
    51. The Commission offers the following clarifications regarding 
its proposals for compliance with the guidelines established in the 
Violation Severity Level Order. As an initial matter, it has come to 
the Commission's attention that, in the NOPR, certain discussions were 
based on a draft version rather than the filed version of the ERO's 
proposed violation severity levels. As a result, some of the 
Commission's proposed revisions would not be appropriate to adopt here. 
Upon further examination of the ERO's filed violation severity levels, 
the Commission revises its earlier statements where appropriate, as 
discussed below.
    52. Since the Commission's concerns in these instances were not 
discussed in the NOPR for comment, the Commission approves the 
violation severity levels for those requirements as filed by the ERO. 
However, to ensure that the violation severity levels approved for 
those requirements are consistent with the guidelines established in 
the Violation Severity Level Order in a timely manner, the Commission 
directs the ERO to review those requirements for consistency with 
Violation Severity Level Order Guidelines 2b, 3, and 4 and submit the 
results of its review the earlier of six months of the effective date 
of the final rule or in its Violation Severity Level Order Guideline 
2b, 3, and 4 compliance filing due in September 2009, whichever is 
earlier.
    53. Not all of the Commission's proposed modifications of the 
violation severity levels were based on an unfiled draft of the 
violation severity levels. Where appropriate, the Commission clarifies 
its proposed modifications and adopts the NOPR proposal, as discussed 
below.
a. Requirement R1 of FAC-010-2 and FAC-011-2
NERC Filing
    54. Requirement R1 of FAC-010-2 and FAC-011-2 require planning 
authorities and reliability coordinators to establish a documented 
system operating limit methodology that satisfies the elements detailed 
in the sub-requirements. NERC proposed violation severity levels for 
both of these requirements based on whether the applicable entity has a 
documented system operating limit methodology and, if it does, the 
number of elements, from the sub-requirements, the planning authority 
or reliability coordinator was missing from its system operating limit 
methodology.
NOPR Proposal
    55. In the NOPR, the Commission commented on a lack of uniformity 
between FAC-010-2 Requirement R1

[[Page 14015]]

and FAC-011-2 Requirement R1. Accordingly, the Commission proposed to 
direct the ERO to modify the violation severity levels assigned to FAC-
011-2 Requirement R1 to make them consistent with the violation 
severity levels proposed for FAC-010-2 Requirement R1. The Commission 
reasoned that this uniformity would assist in the compliance and 
enforcement of these Reliability Standards because it is logical that 
nearly identical requirements should have nearly identical violation 
severity level structures.
Comments
    56. NERC states that the violation severity levels it filed with 
the Commission for FAC-010-2 Requirement R1 matched the set of 
violation severity levels balloted for FAC-011-2 Requirement R1. NERC 
therefore contends that the Commission's proposed modification to FAC-
011-2 is unnecessary. Midwest ISO agrees that Requirement R1 of FAC-
010-2 and Requirement R1 of FAC-011-2 were consistent as filed.
    57. Midwest ISO also asks the Commission to direct the ERO to 
remove the violation risk factors associated with the sub-requirements 
of Requirement R1 of FAC-010-2 and Requirement R1 of FAC-011-2. Midwest 
ISO states that these sub-requirements represent criteria that the 
system operating limit methodology must contain that are already 
considered and encompassed in the violation severity levels associated 
with the main requirement. Removing the violation risk factors 
associated with the sub-requirements, Midwest ISO contends, would 
eliminate the need for additional violation severity levels that would 
be duplicative of the violation severity level associated with the main 
requirement. Further, Midwest ISO requests that the Commission confirm 
that a penalty should be assessed through the main requirement rather 
than through the criteria in the sub-requirements.
Commission Determination
    58. FAC-010-2 Requirement R1 and FAC-011-2 Requirement R1 establish 
the same requirements for the planning authority and reliability 
coordinator, respectively. Accordingly, the Commission believes that 
the ERO should assign similar violation severity levels for these 
requirements, which it did. The Commission therefore approves the 
violation severity levels assigned to FAC-010-2 Requirement R1 and FAC-
011-2 Requirement R1 as filed by the ERO.
    59. Midwest ISO's request to eliminate violation severity levels 
for sub-requirements and assess a penalty through the violation 
severity level and violation risk factor assigned to the main 
requirements is similar to NERC's proposed alternative approach for 
assigning violation severity levels, which the Commission addresses 
above. For the same reasons discussed above, the Commission rejects 
Midwest ISO's request to remove violation risk factors for sub-
requirements. Also, for the reasons discussed above, the Commission 
finds that Midwest ISO's request is a Reliability Standards compliance 
issue best addressed in the context of a Reliability Standards 
compliance proceeding.
b. FAC-010-2 Requirement R4
NERC Filing
    60. FAC-010-2 Requirement R4 requires the planning authority to 
issue its system operating limit methodology, and any change to that 
methodology, to several identified entities prior to the effectiveness 
of the change. Sub-requirements R4.1 through R4.3 list the required 
entities to which the planning authority should provide the system 
operating limit methodology. NERC's proposed violation severity level 
assignments for FAC-010-2 Requirement R4 measure compliance based, in 
part, on the number of days the applicable entity failed to provide it 
system operating limit methodology to the required entities.
NOPR Proposal
    61. The Commission stated that it is difficult to discern which 
conditions trigger specific violation severity levels assigned to FAC-
010-2 Requirement R4. The Commission therefore proposed to direct the 
ERO to make modifications to clarify those conditions without changing 
the substance of the violation severity levels.
Comments
    62. NERC does not oppose the Commission's proposed change to the 
violation severity levels for FAC-010-2 Requirement R4, because, NERC 
states, the proposed modifications do not change the intent of the 
categories of the violation severity levels. NERC contends, however, 
that the Commission's proposed revisions are inconsistent with other 
violation severity levels already approved by the Commission. NERC also 
questions why the Commission would identify the violation severity 
levels for FAC-010-2 in paragraph 23 of the NOPR among other proposed 
assignments that are consistent with the Commission's violation 
severity level guidelines, and then propose modification in the 
following paragraph.
    63. IESO states that there is a time factor in question with 
respect to Requirement R4 of FAC-010-2 that requires a planning 
authority to issue to appropriate entities its system operating limit 
methodology, and any change to that methodology, prior to the 
effectiveness of the change. IESO contends that NERC's proposed 
violation severity level for Requirement R4 of FAC-010-2 accurately 
captures this requirement.
Commission Determination
    64. The Commission approves the violation severity levels for 
Requirement R4, as filed by NERC because the NOPR was silent as to 
NERC's proposal. However, to ensure that the violation severity levels 
approved for Requirement R4 are consistent with the guidelines 
established in the Violation Severity Level Order in a timely manner, 
the Commission directs the ERO to review the violation severity levels 
assigned to Requirement R4 for consistency with Violation Severity 
Level Order Guidelines 2b, 3, and 4 within six months of the effective 
date of the final rule or in its Violation Severity Level Order 
Guideline 2b, 3, and 4 compliance filing, whichever is earlier.\40\
---------------------------------------------------------------------------

    \40\ Based on the record to date, the Commission believes that 
NERC's proposed violation severity level assignment may not be 
consistent with Guideline 3, which requires that violation severity 
levels be consistent with the text of the corresponding requirement. 
The text of Requirement R4 states that, ``[t]he planning authority 
shall issue its system operating limit methodology, to all of the 
following prior to the effectiveness of the change.'' To whom the 
methodology must be issued is described in each of the sub-
requirements R4.1 through R4.3. The violation severity levels NERC 
proposes, however, would base compliance, in part, on the number of 
days the planning authority failed to deliver its system operating 
limit methodology to the required entities. The Commission believes 
that, consistent with Guideline 3, violation severity levels for 
Requirement R4 should be assigned based on the number of R4 sub-
requirements that are not met. For example, since there are three 
sub-requirements, a ``Moderate'' violation severity level would be 
triggered if the applicable entity did not comply with one of the 
three required sub-requirements; a ``High'' violation severity level 
if the applicable entity did not comply with two of the three sub-
requirements; and, a ``Severe'' violation severity level if the 
applicable entity did not comply with any of the sub-requirements.
---------------------------------------------------------------------------

    65. Although the Commission approves the violation severity levels 
assigned to Requirement R4 as filed by NERC, the Commission also adopts 
the NOPR proposal to direct the ERO to assign binary violation severity 
levels to each sub-requirement. Sub-requirements R4.1 through R4.3 are 
binary

[[Page 14016]]

requirements and should be assigned a single violation severity level. 
The ERO shall submit its revisions to sub-requirements R4.1 though R4.3 
to the Commission within 30 days from the issuance of this final rule, 
as discussed above and as indicated in Attachment A.
c. FAC-011-2, Requirement R3
NERC Filing
    66. Requirement R3 of FAC-011-2 requires a reliability coordinator 
to include in its methodology for determining system operating limits a 
description of the elements listed in the sub-requirements, ranging 
from R3.1 through R3.7, along with any reliability margins applied for 
each. NERC proposed to assign a ``Severe'' violation severity level if 
the reliability coordinator's methodology for determining system 
operating limits is missing a description of three or more of the sub-
requirements. At the same time, NERC proposed to assign a ``High'' 
violation severity level if the reliability coordinator's methodology 
for determining system operating limits includes a description for all 
but three sub-requirements within the same range.
NOPR Proposal
    67. In the NOPR, the Commission pointed out that, under NERC's 
proposed violation severity level assignments, if a reliability 
coordinator's methodology for determining system operating limits is 
missing a description of three sub-requirements, the resulting 
violation could be assigned both a ``High'' and a ``Severe'' violation 
severity level. To eliminate this overlap, the Commission proposed to 
direct the ERO to assign a ``Severe'' violation severity level to 
Requirement R3 of FAC-011-2 where the reliability coordinator is 
missing a description of four or more sub-requirements, within the 
range of R3.1 through R3.7, from its methodology for determining system 
operating limits.
Comments
    68. NERC states that it agrees with the Commission's proposed 
modification to the violation severity level for Requirement R3 of FAC-
011-2.
    69. Although Midwest ISO states that the Commission's proposal is 
reasonable, Midwest ISO requests that the Commission direct the ERO to 
assign violation severity levels for Requirement R3 based on the 
quartile approach.\41\ Midwest ISO argues that NERC's internal 
violation severity level development guidelines encourage a multi-
component or quartile methodology for assigning violation severity 
levels where the requirement has multiple sub-components or sub-
requirements that direct the responsible entity to comply with a 
multiple number of sub-requirements or sub-sub-requirements. 
Accordingly, Midwest ISO requests that the Commission direct the ERO to 
modify the violation severity levels for Requirement R3 of FAC-011-2 as 
detailed in the table below.
---------------------------------------------------------------------------

    \41\ In general, a quartile approach measures compliance in 25 
percent intervals by either using straight percentages around a 
determined value or 100 percent or by defining a minimum value and 
applying quartiles between the minimum value and 100 percent. NERC, 
Violation Severity Level Guidelines Criteria, Project 2007-23 at 18 
(2008), available at: http://www.nerc.com/docs/standards/sar/VSLDT_
Guidelines_Final_Draft_08Jan08.pdf.

----------------------------------------------------------------------------------------------------------------
           Requirement                   Lower             Moderate              High               Severe
----------------------------------------------------------------------------------------------------------------
FAC-011-2 R3....................  The Reliability     The Reliability     The Reliability     The Reliability
                                   Coordinator has a   Coordinator has a   Coordinator has a   Coordinator has a
                                   methodology for     methodology for     methodology for     methodology for
                                   determining         determining         determining         determining
                                   [system operating   [system operating   [system operating   [system operating
                                   limits] that        limits] that        limits] that        limits] that
                                   includes a          includes a          includes a          includes a
                                   description for     description for     description for     description for
                                   all but one or      all but three of    all but four or     all but six or
                                   two of the          the following:      five of the         seven of the
                                   following: 3.1      3.1 through R3.7.   following: 3.1      following: 3.1
                                   through R3.7.                           through R3.7.       through R3.7.
----------------------------------------------------------------------------------------------------------------

Commission Determination
    70. The Commission directs the ERO to modify Requirement R3 of FAC-
011-2 to assign a ``Severe'' violation severity level to Requirement R3 
of FAC-011-2 where the reliability coordinator is missing a description 
of four or more sub-requirements, within the range of R3.1 through 
R3.7, from its methodology for determining system operating limits.
    71. The Commission finds that Midwest ISO proposed violation 
severity levels are not appropriate for this requirement. In the 
Violation Severity Level Order, the Commission expressed concern that, 
in some instances, although consistent with NERC's guidelines, the 
quartile approach could result in the arbitrary assignment of violation 
severity levels and a reduction of the current levels of 
compliance.\42\ The assignment of violation severity levels is 
arbitrary when based on nothing other than ensuring an even 
distribution of the full range of missed sub-requirements to each of 
the four violation severity level categories under the premise of 
applying NERC's quartile approach. The Commission therefore adopts the 
NOPR proposal agreed to by NERC and directs the ERO to file revised 
violation severity levels for FAC-011-2, Requirement R3 within 30 days 
of the issuance of this final rule, as discussed above and as indicated 
in Attachment A.
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    \42\ Violation Severity Level Order on Rehearing and 
Clarification, 125 FERC ] 61,212 at P 25.
---------------------------------------------------------------------------

d. FAC-011-2, Requirement R4
NERC Filing
    72. Requirement R4 requires the reliability coordinator to issue 
its system operating limit methodology and any changes to that 
methodology, prior to the effectiveness or change of the methodology to 
all of the required entities identified in sub-requirements R4.1 
through 4.3. NERC's proposed violation severity levels for the subject 
requirement incorporate as a measure of compliance the number of days 
the applicable entity failed to issue its system operating limits 
methodology and any changes to that methodology, prior to the 
effectiveness or change of the methodology to the required entities.
NOPR Proposal
    73. The Commission did not discuss this requirement in the NOPR.
Commission Determination
    74. The Commission approves the violation severity levels for 
Requirement R4, as filed by the ERO because the NOPR was silent as to 
NERC's proposal. However, to ensure that the violation severity levels 
approved for Requirement R4 are consistent with the guidelines 
established in the Violation Severity Level Order in a timely manner, 
the Commission directs the ERO to review the violation severity levels 
assigned to Requirement R4 for consistency with Violation Severity 
Level Order Guidelines 2b, 3, and 4 and

[[Page 14017]]

submit the results of the review either within six months of the 
effective date of the final rule or in its Violation Severity Level 
Order Guideline 2b, 3, and 4 compliance filing, whichever is 
earlier.\43\
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    \43\ Based on the record to date, the Commission believes that 
NERC's proposed violation severity level assignment for FAC-011-2 
Requirement R4 may not be consistent with Guideline 3, which 
requires that violation severity levels be consistent with the text 
of the corresponding requirement. The text of Requirement R4 states 
that, ``[t]he planning authority shall issue its system operating 
limit methodology, to all of the following prior to the 
effectiveness of the change.'' To whom the methodology must be 
issued is described in each of the sub-requirements R4.1 through 
R4.3. The violation severity levels NERC proposes, however, would 
base compliance, in part, on the number of days the reliability 
coordinator failed to deliver its system operating limit methodology 
to the required entities. The Commission believes that, consistent 
with Guideline 3, violation severity levels for Requirement R4 
should be assigned based on the number of R4 sub-requirements that 
are not met. For example, since there are three sub-requirements, a 
``Moderate'' violation severity level would be triggered if the 
applicable entity did not comply with one of the three required sub-
requirements; a ``High'' violation severity level if the applicable 
entity did not comply with two of the three sub-requirements; and, a 
``Severe'' violation severity level if the applicable entity did not 
comply with any of the sub-requirements.
---------------------------------------------------------------------------

    75. Although the Commission approves the violation severity levels 
assigned to Requirement R4 as filed by NERC, the Commission also adopts 
the NOPR proposal to direct the ERO to assign binary violation severity 
levels to each sub-requirement. Sub-requirements R4.1 through R4.3 are 
binary requirements and should be assigned a single violation severity 
level. The ERO shall submit its revisions to sub-requirements R4.1 
through R4.3 to the Commission within 30 days from the issuance of this 
final rule, as discussed above and as indicated in Attachment A.
e. FAC-014-2, Requirements R1 Through R4
NERC Filing
    76. Requirements R1 through R4 of FAC-014-2 address the development 
of system operating limits and interconnection reliability operating 
limits consistent with the methodologies outlined in FAC-010-2 and FAC-
011-2. NERC proposed to assign violation severity levels to these 
requirements based on a quartile division of the total number of 
inconsistencies between the assigned system operating limits and the 
system operating limits that would be produced using the methodologies 
outlined in FAC-010-2 and FAC-011-2. For example, NERC proposed to 
assign a ``Lower'' violation severity level where 1 to 25 percent of a 
registered entity's system operating limits are inconsistent with the 
applicable entity's system operating limit methodology.
NOPR Proposal
    77. In the NOPR, the Commission expressed its belief that each time 
a system operating limit is inconsistent with the applicable entity's 
system operating limit methodology, the applicable entity violates the 
pertinent requirement of FAC-014-2. The Commission stated that its 
fourth guideline for evaluating violation severity levels makes clear 
that violation severity level assignments should be based on a single 
violation, not on a cumulative number of violations. To remedy this 
deficiency, the Commission proposed to direct the ERO to modify its 
violation severity levels for FAC-014-02 Requirement R1 through R4 
based on the percentage of deviation from the system operating limit 
methodology for each violation.
Comments
    78. NERC contends that the Commission's application of Guideline 4 
is confusing and inconsistent. NERC points to the approved violation 
severity levels for Reliability Standard VAR-001-1, where the 
Commission allowed NERC to use percentage ranges relating to the number 
of violations of system operating limits to define the violation 
severity levels. By contrast, NERC states, the Commission proposed in 
the NOPR to require every single violation of system operating limit to 
have a single penalty.
    79. Midwest ISO agrees with NERC that referencing percentage ranges 
relating to the number of violations of system operating limits is 
consistent with Guideline 4. Midwest ISO also contends that the use of 
percentage ranges facilitates enforcement. Because an entity may have 
tens of thousands of system operating limits, Midwest ISO contends that 
it is not practical to set a single penalty for every single violation 
of a system operating limit. Midwest ISO contends that a requirement 
with multiple sub-components or requirements should have a quartile 
approach applied to the violation severity levels, considering the full 
range of missed sub-components or requirements possibilities.
    80. In addition, NERC states that the Commission's proposed 
modifications to the violation severity levels for Requirements R1 
through R4 of FAC-014-02 are inconsistent with the modifications 
indicated in Attachment A to the NOPR. NERC states that the 
Commission's proposed modifications to the violation severity levels, 
set forth in Attachment A to the NOPR, includes some typographical 
errors. For example, NERC states that there appears to be an errant 
``75%'' in the text of the ``Severe'' category for Requirement R1. NERC 
also points out that the ``Severe'' category for Requirement R4 
includes both the NERC-proposed text and the Commission-inserted text. 
NERC requests that the Commission clarify its direction on these 
points. If the Commission decides to direct the ERO to modify its 
violation severity levels for FAC-014-2 Requirements R1 through R4 
based on the percentage of deviation from system operating limit 
methodology for each violation, NERC requests additional clarification 
on the specific methodology to be used to determine the percentage of 
deviation from the system operating limit.
Commission Determination
    81. The Commission approves the violation severity levels for 
Requirement R1 through R4, as filed by the ERO because the NOPR was 
silent as to NERC's proposal. However, to ensure that the violation 
severity levels approved for Requirement R1 through R4 are consistent 
with the guidelines established in the Violation Severity Level Order 
in a timely manner, the Commission directs the ERO to review the 
violation severity levels assigned to the subject requirements for 
consistency with Violation Severity Level Order Guidelines 2b, 3, and 4 
and submit the results of its review either within six months of the 
effective date of the final rule or in its Violation Severity Level 
Order Guideline 2b, 3, and 4 compliance filing, whichever is 
earlier.\44\
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    \44\ Based on the record to date, the Commission believes that 
the violation severity levels assigned by NERC to Requirement R1 
through R4 of FAC-014-2 may not be consistent with Guideline 4 
because they evaluate compliance based on a cumulative number of 
violations instead of on a single violation. Since the Commission 
believes compliance with this requirement hinges on whether or not 
the applicable entity established its system operating limits and 
interconnection reliability operating limits consistent with its 
methodology (``pass'') or did not do so (``fail''), a binary 
approach is most appropriate for this requirement. By contrast, 
Requirement R10 of Reliability Standard VAR-001-1 requires each 
transmission operator to correct violations of interconnection 
reliability operating limits or system operating limits resulting 
from reactive resources deficiencies (interconnection reliability 
operating limit violations must be corrected within 30 minutes) and 
complete the required interconnection reliability operating limit or 
system operating limit violation reporting.
    In the Violation Severity Level Order, the Commission directed 
revisions to VAR-001-1 Requirement R10 that assigned violation 
severity levels based on the percentage of interconnection 
reliability operating limit and system operating limit violations 
that the applicable entity did not correct and/or report. Since a 
reactive resource deficiency may result in more than one violation 
of an interconnection reliability operating limit and system 
operating limit, the Commission believes the aggregate treatment, in 
this instance, of interconnection reliability operating limit and 
system operating limit violations attributable to a single 
deficiency in reactive resources for the purpose of assigning 
violation severity levels is appropriate. This treatment is 
consistent with the provisions of NERC's Sanction Guidelines, which 
states at section 3.21, ``[s]ome Reliability Standards may not 
support the assessment of penalties on a `per day, per violation' 
basis, but instead should have penalties calculated based on an 
alternative penalty frequency or duration.'' With regard to 
Reliability Standard FAC-014-2 Requirements R1 through R4, the 
Commission believes that each instance that the applicable entity 
did not establish a system operating limit or interconnection 
reliability operating limit consistent with the applicable entity's 
methodology would be a violation. Thus, the Commission's adherence 
to Guideline 4 has been consistent as applied to the Commission's 
revisions of violation severity levels assigned to VAR-001-1 
Requirement R10 and its concerns with the violation severity levels 
NERC assigned to FAC-014-2 Requirement R1 through R4.

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[[Page 14018]]

f. FAC-014-2, Requirement R5
NERC Filing
    82. Requirement R5 requires that the reliability coordinator, 
planning authority, and transmission planner shall each provide its 
system operating limits and interconnection reliability operating 
limits to those entities that have a reliability related need for those 
limits and provide a written request that includes a schedule for 
delivery of those limits as described in sub-Requirements 5.1 through 
5.4. NERC's proposed violation severity levels for the subject 
requirements factor in, as measure of compliance, the number of days 
the applicable entity failed to issue its system operating limits 
methodology and any changes to that methodology, prior to the 
effectiveness or change of the methodology to the required entities.
NOPR Proposal
83. The Commission did not comment on this requirement in the NOPR.
Commission Determination
    84. The Commission finds that the consideration of the time period 
for which an entity failed to issue its system operating limits 
methodology, as it relates to Requirement R5 of FAC-014-2, is not 
consistent with the text of the requirement and, thus, not consistent 
with Guideline 3. The Commission believes that the violation severity 
levels for Requirements R5 should be assigned based on the number of 
required elements, as identified in the relevant sub-requirements, with 
which the applicable entity did not comply. Sub-requirements R4.1 
through R4.3 and sub-requirements R5.1 through R5.4 are binary 
requirements and should be assigned a single violation severity level. 
Since the Commission's proposals for this requirement were not 
discussed in the NOPR for comment, the Commission approves the 
violation severity levels for Requirement R4, as filed by the ERO. To 
ensure that the violation severity levels approved for Requirement R4 
are consistent with the guidelines established in the Violation 
Severity Level Order in a timely manner, the Commission directs the ERO 
to review the violation severity levels assigned to Requirement R4 for 
consistency with Violation Severity Level Order Guidelines 2b, 3, and 4 
and submit the results of its review either within six months of the 
effective date of the final rule or in its Violation Severity Level 
Order Guideline 2b, 3, and 4 compliance filing, whichever is earlier.
g. FAC-014-2, Requirement R6
NERC Filing
    85. Requirement R6 of FAC-014-2 requires a planning authority to 
identify the subset of multiple contingencies (if any) from Reliability 
Standard TPL-003, which results in stability limits. Sub-requirements 
R6.1 and R6.2 require that the planning authority provide the list to 
the reliability coordinator, or if no multiple contingencies exist, to 
notify the reliability coordinator, respectively. NERC assigned 
violation severity levels based on a combination of compliance 
scenarios relevant to sub-requirements R6.1 and R6.2.
NOPR Proposal
    86. In the NOPR, the Commission expressed concern that the 
violation severity levels assigned to FAC-014-2 Requirement R6 do not 
address a scenario where the planning authority fails to provide a 
complete subset of contingencies to the reliability coordinator and 
proposed a revision of the violation severity level assignments. The 
Commission expressed concern that this omission could prevent the 
reliability coordinator from having the information it needs for its 
situational awareness that system operating limits and interconnection 
reliability operating limits that impact the reliable operation of the 
Bulk-Power System are being exceeded. The Commission therefore proposed 
to direct the ERO to add the following ``Lower'' violation severity 
level: ``The Planning Authority failed to provide a complete subset of 
contingencies to the reliability coordinator in accordance with R6.'' 
The Commission also proposed to direct the ERO to reassign NERC's 
current ``Lower'' violation severity level as the new ``Moderate'' 
violation severity level to emphasize the need to notify the 
reliability coordinator.\45\ The Commission stated that the proposed 
revisions would make the violation severity level assignments for 
Requirement R6 consistent with NERC's own guidelines for the 
development of violation severity levels related to communication or 
coordination requirements.\46\
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    \45\ NERC did not propose a ``Moderate'' violation severity 
level for requirement R6.
    \46\ NERC, Violation Severity Level Guidelines Criteria, Project 
2007-23 at 19 (2008), available at: http://www.nerc.com/docs/
standards/sar/VSLDT_Guidelines_Final_Draft_08Jan08.pdf. The NERC 
Guidelines indicate that a Moderate violation severity level should 
be selected when the responsible entity's coordination/communication 
is non-compliant with respect to at least one significant element 
within the requirement. In this case, the significant element is the 
failure to notify the Reliability Coordinator.
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Comments
    87. NERC disagrees with the Commission's assertion that the 
proposed violation severity levels for Requirement R6 of FAC-014-2 do 
not identify a situation where a planning authority fails to provide a 
complete subset of contingencies to the reliability coordinator. NERC 
contends that the ``High'' and ``Severe'' violation severity levels for 
Requirement R6 of FAC-014-2 satisfy the Commission's concerns by 
stating that the planning authority identified the subset of multiple 
contingencies which result in stability limits but did not provide the 
list of multiple contingencies and associated limits to one or more 
reliability coordinators that monitor the facilities associated with 
these limits. NERC contends that a planning authority will fail to 
comply with sub-requirement R6.1 of FAC-014-2 if they do not provide 
the complete set of contingencies to the reliability coordinator.
    88. The Bureau of Reclamation and IESO separately take issue with 
the Commission's proposed revisions to violation severity levels 
applicable to Requirement R6 of FAC-014-2. The Bureau of Reclamation 
contends that the Commission's proposal would require auditors to 
perform studies independent from the planning authority in order to 
determine whether all contingencies were considered. IESO contends that 
both the ``High'' and ``Severe'' violation severity levels address the 
planning authority's failure to communicate multiple contingency 
scenarios to the reliability coordinator. IESO, however, agrees with 
the Commission that there

[[Page 14019]]

should not be a gap in the violation severity levels and states that 
the ``Lower'' violation severity level for FAC-014-2 Requirement R6 
should be assigned a ``Moderate'' violation severity level.
Commission Determination
    89. The Commission agrees with NERC that a planning authority's 
requirement to provide the reliability coordinator with a complete set 
of contingencies is addressed in the ``High'' and ``Severe'' violation 
severity levels assigned to Requirement R6 of FAC-014-2. However, the 
Commission also believes that it is appropriate to apply a binary, 
pass/fail approach to the violation severity levels because a planning 
authority either will or will not satisfy this requirement. As proposed 
by NERC, violations of the sub-requirements are addressed only in the 
violation severity levels assigned to the main requirement. In keeping 
with the Commission's decision that the ERO must assign a violation 
severity level to every sub-requirement, the Commission adopts the NOPR 
proposal and directs the ERO to assign binary violation severity levels 
to Requirement R6 and sub-requirements R6.1 and R6.2. Although the 
enforcement of Requirement R6, and its sub-requirements, may require 
the use of auditors, this is a compliance issue best addressed on a 
case-by-case basis in the context of a compliance proceeding. The 
Commission directs the ERO to file revised violation severity levels 
for Reliability Standard FAC-014-2 Requirement R6 within 30 days of the 
effective date of this final rule, as discussed above and indicated in 
Attachment A.

E. Violation Risk Factors

    90. NERC did not submit violation risk factors for the version two 
FAC Reliability Standards in its original filing. On October 15, 2008, 
NERC filed violation risk factors for the version two FAC Reliability 
Standards.
NOPR Proposal
    91. In the NOPR, the Commission noted that the Commission approved 
the majority of NERC's proposed violation risk factors for the version 
one FAC Reliability Standards in Order No. 705.\47\ On April 1, 2008, 
NERC filed revised violation risk factors for the version one FAC 
Reliability Standards. These were accepted by delegated authority on 
May 29, 2008. The Commission proposed to direct the ERO to apply those 
same violation risk factors to the version two FAC Reliability 
Standards approved in the final rule in this proceeding. With respect 
to the Western Interconnection regional difference, the Commission 
proposed to direct Western Electricity Coordinating Council (WECC) to 
apply the NERC violation risk factors to the Western Interconnection 
regional difference until after WECC develops its own violation risk 
factors and they are approved by the ERO and the Commission.
---------------------------------------------------------------------------

    \47\ NOPR, FERC Stats. & Regs. ] 32,637 at P 31 (citing Order 
No. 705, 121 FERC ] 61,296 at P 137).
---------------------------------------------------------------------------

NERC's Violation Risk Factor Filing
    92. On October 15, 2008, NERC filed violation risk factors for the 
proposed version two FAC Reliability Standards. These violation risk 
factors were identical to the version one violation risk factors. NERC 
asked the Commission to apply the violation risk factors and violation 
severity levels filed for FAC-010-2, Requirements R2.4 and R2.5, and 
FAC-011-2, Requirement R3.3, to the Western Interconnection regional 
differences for these same requirements.
Commission Determination
    93. The Commission approves the violation risk factors filed by 
NERC for the version two FAC Reliability Standards. Because these 
violation risk factors are identical to the violation risk factors 
approved for the version one FAC Reliability Standards, this approval 
is consistent with our direction in the NOPR.

F. WECC Regional Differences

NERC Filing
    94. Although NERC submitted requirements for FAC-010-2 and FAC-011-
2 that address the Western Interconnection regional difference, NERC 
did not submit violation severity levels or violation risk factors for 
these requirements in its initial filing. On October 15, 2008, NERC 
filed violation risk factors for the version two FAC Reliability 
Standards and asked the Commission to accept the violation risk factors 
and violation severity levels filed for FAC-010-2, Requirements R2.4 
and R2.5, and FAC-011-2, sub-requirement R3.3, to apply to the WECC 
regional difference.
NOPR Proposal
    95. The Commission proposed to adopt the proposed regional 
differences for FAC-010-2 and FAC-011-2. The Commission also proposed 
to direct NERC to modify the violation severity levels assigned to the 
national versions of FAC-010-2 and FAC-011-2 to accommodate the 
regional differences. The Commission noted that, in Order No. 705, the 
Commission approved version one of the FAC Reliability Standards and 
directed WECC to develop and submit violation risk factors and 
violation severity levels that apply to the Western Interconnection 
regional difference.\48\ In the interim, the Commission approved WECC's 
proposal to assign the same violation risk factors to the WECC regional 
difference as are assigned to NERC sub-requirement R2.4 and R2.5 in 
FAC-010-1 and sub-requirement R3.3 in FAC-011-1. The Commission 
directed WECC to file its violation risk factors and violation severity 
levels no later than the effective date of the applicable version one 
Reliability Standard. FAC-010-1 became effective on July 1, 2008 and 
FAC-011-1 became effective on October 1, 2008 without violation 
severity levels or violation risk factors.
---------------------------------------------------------------------------

    \48\ NOPR, FERC Stats. & Regs. ] 32,637 at P 32 (citing Order 
No. 705, 121 FERC ] 61,296 at P 146).
---------------------------------------------------------------------------

    96. To remedy this deficiency, the Commission proposed 
modifications to the violation severity level assignments assigned to 
FAC-010-2 and FAC-011-2 that address the Western Interconnection 
regional differences. Consistent with our decision in Order No. 705, 
the Commission also proposed to direct WECC to apply the NERC violation 
risk factors to the Western Interconnection regional difference until 
after WECC develops its own violation risk factors for the difference 
and they are approved by the ERO and the Commission.\49\ The Commission 
noted that WECC is still obligated to comply with the Commission's 
directives in Order No. 705 to file violation risk factors and 
violation severity levels addressing the Western Interconnection 
regional difference.
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    \49\ Id.
---------------------------------------------------------------------------

Comments
    97. BPA requests that the Commission direct the ERO to designate 
the regional differences section of FAC-011-2 as section ``E.'' BPA 
points out that the requirement makes multiple references to the 
regional differences section for the Western Interconnection as section 
``E,'' but there is no corresponding designation of the regional 
differences section as section ``E.''
Commission Determination
    98. The Commission agrees with BPA's comment relevant to 
designating the Regional Differences section of FAC-011-2 as section 
``E'' and directs the ERO to file this revision within 30 days of the 
effective date of this final rule.

[[Page 14020]]

    99. As discussed above, the Commission approves the violation risk 
factors filed by NERC for the version two FAC Reliability Standards. 
These violation risk factors are identical to those approved for the 
version one FAC Reliability Standards. The Commission also adopts the 
NOPR proposal with respect to the Western Interconnection regional 
difference and directs WECC to apply the violation risk factors 
approved for FAC-010-1 Requirements R2.4 and R2.5 and FAC-011-1 
Requirement R3.3 to the WECC regional difference version of FAC-010-2 
Requirements 1.1 through 1.3 and FAC-011-2 Requirement 1.1 through 
1.3.\50\ With regard to the WECC regional differences FAC-010-2 
Requirement 1 and Requirement 1.4 and FAC-011-2 Requirement 1 and 1.4, 
the Commission believes that these requirements are explanatory 
statements and that a violation risk factor need not be assigned.
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    \50\ This direction is consistent with NERC's October 15, 2008 
proposal.
---------------------------------------------------------------------------

    100. The Commission finds that each of the WECC regional difference 
requirements is a binary requirement and, therefore, a single violation 
severity level is appropriate. Accordingly, until such time as WECC 
develops and submits violation severity levels for the version two FAC 
Reliability Standards, the Commission adopts the NOPR proposal and 
directs WECC to assign a ``Severe'' violation severity level to the 
WECC regional difference FAC-010-2 Requirement 1.1 and FAC-011-2 
Requirement 1.1. In addition, the Commission directs WECC to apply a 
``Severe'' violation severity level to the WECC regional difference 
FAC-010-2 Requirement 1.2 through 1.3 and FAC-011-2 Requirements 1.2 
through 1.3. These revisions will create a complete and consistent 
penalty setting mechanism for the WECC regional difference 
requirements. The Commission directs the ERO to file revised violation 
risk factors and violation severity levels for the regional difference 
within 30 days of the effective date of this final rule, as discussed 
above and indicated in Attachment A.

G. Effective Date

    101. NERC requested that the Commission make the version two FAC 
Reliability Standards effective according to a staggered schedule, 
consistent with the implementation dates of the version one FAC 
Reliability Standards. NERC's proposed effective dates have all since 
passed. Accordingly, the version two FAC Reliability Standards shall 
become effective April 29, 2009.

III. Information Collection Statement

    102. The Office of Management and Budget (OMB) regulations require 
that OMB approve certain reporting and recordkeeping (collections of 
information) imposed by an agency.\51\ The information contained here 
is also subject to review under section 3507(d) of the Paperwork 
Reduction Act of 1995.\52\ As stated above, the Commission previously 
approved, in Order No. 705, each of the Reliability Standards that are 
the subject of the current rulemaking. The modifications to the 
Reliability Standards are minor and, therefore, they do not add to or 
increase entities' reporting burden. Thus, the modified Reliability 
Standards do not materially affect the burden estimates relating to the 
earlier version of the Reliability Standards presented in Order No. 
705.
---------------------------------------------------------------------------

    \51\ 5 CFR 1320.11.
    \52\ 44 U.S.C. 3507(d).
---------------------------------------------------------------------------

    Title: Version Two Facilities Design, Connections and Maintenance 
Reliability Standards.
    Action: Proposed Collection.
    OMB Control No.: 1902-0247.
    Respondents: Businesses or other for-profit institutions; not-for-
profit institutions.
    Frequency of Responses: On Occasion.
    Necessity of the Information: This final rule approves three 
modified Reliability Standards that pertain to facilities design, 
connections and maintenance. The Reliability Standards will require 
planning authorities and reliability coordinators to establish 
methodologies to determine system operating limits for the Bulk-Power 
System in the planning and operation horizons. This final rule finds 
the Reliability Standards and interpretations just, reasonable, not 
unduly discriminatory or preferential, and in the public interest.
    103. Interested persons may obtain information on the reporting 
requirements by contacting: Federal Energy Regulatory Commission, Attn: 
Michael Miller, Office of the Executive Director, 888 First Street, 
NE., Washington, DC 20426, Tel: (202) 502-8415, Fax: (202) 273-0873, e-
mail: michael.miller@ferc.gov, or by contacting: Office of Information 
and Regulatory Affairs, Attn: Desk Officer for the Federal Energy 
Regulatory Commission (Re: OMB Control No. 1902-0247), Washington, DC 
20503, Tel: (202) 395-4650, Fax: (202) 395-7285, e-mail: oira_
submission@omb.eop.gov.

IV. Environmental Analysis

    104. The Commission is required to prepare an Environmental 
Assessment or an Environmental Impact Statement for any action that may 
have a significant adverse effect on the human environment.\53\ The 
Commission has categorically excluded certain actions from this 
requirement as not having a significant effect on the human 
environment. The actions directed here fall within the categorical 
exclusion in the Commission's regulations for rules that are 
clarifying, corrective or procedural, for information gathering, 
analysis, and dissemination.\54\ Accordingly, neither an environmental 
impact statement nor environmental assessment is required.
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    \53\ Regulations Implementing the National Environmental Policy 
Act, Order No. 486, 52 FR 47897 (Dec. 17, 1987), FERC Stats. & Regs. 
] 30,783 (1987).
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V. Regulatory Flexibility Act

    105. The Regulatory Flexibility Act of 1980 \55\ generally requires 
a description and analysis of final rules that will have significant 
economic impact on a substantial number of small entities. Most of the 
entities, i.e., planning authorities, reliability coordinators, 
transmission planners and transmission operators, to which the 
requirements of this final rule apply do not fall within the definition 
of small entities.\56\
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    \54\ 18 CFR 380.4(a)(5).
    \55\ 5 U.S.C. 601-612.
    \56\ The definition of ``small entity'' under the Regulatory 
Flexibility Act refers to the definition provided in the Small 
Business Act, which defines a ``small business concern'' as a 
business that is independently owned and operated and that is not 
dominant in its field of operation. See 15 U.S.C. 632.
---------------------------------------------------------------------------

    106. As indicated above, based on available information regarding 
NERC's compliance registry, approximately 250 entities will be 
responsible for compliance with the three revised Reliability 
Standards. It is estimated that one-third of the responsible entities, 
about 80 entities, would be municipal and cooperative organizations. 
The approved Reliability Standards apply to planning authorities, 
transmission planners, transmission operators and reliability 
coordinators, which tend to be larger entities. Thus, the Commission 
believes that only a portion, approximately 30 to 40 of the municipal 
and cooperative organizations to which the approved Reliability 
Standards apply, qualify as small entities.\57\ The Commission does

[[Page 14021]]

not consider this a substantial number. Moreover, as discussed above, 
the approved Reliability Standards will not be a burden on the industry 
since most if not all of the applicable entities currently perform 
system operating limit calculations and the approved Reliability 
Standards will simply provide a common methodology for those 
calculations. Accordingly, the Commission certifies that the approved 
Reliability Standards will not have a significant adverse impact on a 
substantial number of small entities.
---------------------------------------------------------------------------

    \57\ According to the Department of Energy's (DOE) Energy 
Information Administration (EIA), there were 3,284 electric utility 
companies in the United States in 2005, and 3,029 of these electric 
utilities qualify as small entities under the SBA definition. Among 
these 3,284 electric utility companies are: (1) 883 cooperatives of 
which 852 are small entity cooperatives; (2) 1,862 municipal 
utilities, of which 1842 are small entity municipal utilities; (3) 
127 political subdivisions, of which 114 are small entity political 
subdivisions; and (4) 219 privately owned utilities, of which 104 
could be considered small entity private utilities. See Energy 
Information Administration Database, Form EIA-861, DOE (2005), 
available at http://www.eia.doe.gov/cneaf/electricity/page/
eia861.html.
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    107. Based on this understanding, the Commission certifies that 
this rule will not have a significant economic impact on a substantial 
number of small entities. Accordingly, no regulatory flexibility 
analysis is required.

VI. Document Availability

    108. In addition to publishing the full text of this document in 
the Federal Register, the Commission provides all interested persons an 
opportunity to view and/or print the contents of this document via the 
Internet through FERC's Home Page (http://www.ferc.gov) and in FERC's 
Public Reference Room during normal business hours (8:30 a.m. to 5 p.m. 
Eastern time) at 888 First Street, NE., Room 2A, Washington, DC 20426.
    109. From FERC's Home Page on the Internet, this information is 
available on eLibrary. The full text of this document is available on 
eLibrary in PDF and Microsoft Word format for viewing, printing, and/or 
downloading. To access this document in eLibrary, type the docket 
number excluding the last three digits of this document in the docket 
number field.
    110. User assistance is available for eLibrary and the FERC's Web 
site during normal business hours from FERC Online Support at 202-502-
6652 (toll free at 1-866-208-3676) or e-mail at 
ferconlinesupport@ferc.gov, or the Public Reference Room at (202) 502-
8371, TTY (202) 502-8659. E-mail the Public Reference Room at 
public.referenceroom@ferc.gov.

VII. Effective Date and Congressional Notification

    111. These regulations are effective April 29, 2009. The Commission 
has determined, with the concurrence of the Administrator of the Office 
of Information and Regulatory Affairs of OMB, that this rule is not a 
``major rule'' as defined in section 351 of the Small Business 
Regulatory Enforcement Fairness Act of 1996.

    By the Commission.
Nathaniel J. Davis, Sr.,
Deputy Secretary.

Attachment A

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 [FR Doc. E9-6823 Filed 3-27-09; 8:45 am]

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