
[Federal Register: October 27, 2010 (Volume 75, Number 207)]
[Rules and Regulations]               
[Page 65964-65975]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr27oc10-5]                         

-----------------------------------------------------------------------

DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 40

[Docket No. RM09-15-000; Order No. 740]

 
Version One Regional Reliability Standard for Resource and Demand 
Balancing

Issued October 21, 2010.
AGENCY: Federal Energy Regulatory Commission, DOE.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: Under section 215 of the Federal Power Act, the Commission 
hereby remands a revised regional Reliability Standard developed by the 
Western Electricity Coordinating Council and approved by the North 
American Electric Reliability Corporation, which the Commission has 
certified as the Electric Reliability Organization responsible for 
developing and enforcing mandatory Reliability Standards. The revised 
regional Reliability Standard, designated by WECC as BAL-002-WECC-1, 
would set revised Contingency Reserve requirements meant to maintain 
scheduled frequency and avoid loss of firm load following transmission 
or generation contingencies.

DATES:  Effective Date: This rule will become effective November 26, 
2010.

FOR FURTHER INFORMATION CONTACT: 
Nick Henery (Technical Information), Office of Electric Reliability, 
Federal Energy Regulatory Commission, 888 First Street, NE., 
Washington, DC 20426, (202) 502-8636.
Scott Sells (Technical Information), Office of Electric Reliability, 
Federal Energy Regulatory Commission, 888 First Street, NE., 
Washington, DC 20426, (202) 502-6664.
A. Cory Lankford (Legal Information), Office of General Counsel, 
Federal Energy Regulatory Commission, 888 First Street, NE., 
Washington, DC 20426, (202) 502-6711.

SUPPLEMENTARY INFORMATION:

Table of Contents


                                                              Paragraph
                                                                 Nos.

I. Background..............................................            3
    A. Mandatory Reliability Standards.....................            3
    B. Western Electricity Coordinating Council............            6
    C. WECC Regional Reliability Standard BAL-002-WECC-1...            9
II. Discussion.............................................           14
    A. Due Weight and Effect of Remand.....................           15
    B. Contingency Reserve Restoration Period..............           22
    C. Calculation of Minimum Contingency Reserve..........           31
    D. Use of Firm Load To Meet Contingency Reserve                   42
     Requirement...........................................
    E. Demand-Side Management as a Resource................           50
    F. Miscellaneous.......................................           63
III. Information Collection Statement......................           67
IV. Environmental Analysis.................................           68
V. Regulatory Flexibility Act..............................           69
VI. Document Availability..................................           70
VII. Effective Date and Congressional Notification.........           73


Before Commissioners: Jon Wellinghoff, Chairman; Marc Spitzer, Philip 
D. Moeller, John R. Norris, and Cheryl A. LaFleur
    1. Pursuant to section 215 of the Federal Power Act (FPA),\1\ the 
Commission hereby remands a revised regional Reliability Standard 
developed by the Western Electricity Coordinating Council (WECC) and 
approved 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.\2\ The revised regional Reliability Standard, 
designated by WECC as BAL-002-WECC-1,\3\ is meant to ensure that 
adequate resources are available at all times to maintain scheduled 
frequency, and avoid loss of firm load following transmission or 
generation contingencies. As discussed below, the Commission finds that 
the proposed regional Reliability Standard does not meet the statutory 
criteria for approval that it be just, reasonable, not unduly 
discriminatory or preferential, and in the public interest.\4\
---------------------------------------------------------------------------

    \1\ 16 U.S.C. 824o (2006).
    \2\ North American Electric Reliability Corp., 116 FERC ] 
61,062, order on reh'g & compliance, 117 FERC ] 61,126 (2006), aff'd 
sub nom. Alcoa, Inc. v. FERC, 564 F.3d 1342 (D.C. Cir. 2009).
    \3\ NERC designates the version number of a Reliability Standard 
as the last digit of the Reliability Standard number. Therefore, 
original Reliability Standards end with ``-0'' and modified version 
one Reliability Standards end with ``-1.''
    \4\ 16 U.S.C. 824o(d)(2).
---------------------------------------------------------------------------

    2. The Commission remands the proposed regional Reliability 
Standard based on concerns that WECC has not provided adequate 
technical support to demonstrate that the requirements of the proposed 
regional Reliability Standard are sufficient to ensure the reliable 
operation of the Bulk-Power System within WECC. Specifically, WECC's 
data indicates that extending the reserve restoration period from 60 to 
90 minutes presents an unreasonable risk that a second major 
contingency could occur before reserves are restored after an initial 
contingency. Without further technical justification demonstrating that 
this less stringent requirement will adequately support reliability in 
the Western Interconnection, the Commission is unable to determine that 
the proposed regional Reliability Standard is just, reasonable, not 
unduly discriminatory or preferential, and in the public interest. 
Accordingly, we remand WECC regional Reliability Standard BAL-002-WECC-
1 to the ERO so that the Regional Entity may develop further 
modifications consistent with this final rule.\5\
---------------------------------------------------------------------------

    \5\ In Order No. 672, the Commission found that it should order 
only the ERO to modify a Reliability Standard because the ERO is the 
only entity that may directly submit a proposed Reliability Standard 
to the Commission for approval. 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, at P 423, order on reh'g, Order No. 672-A, 71 FR 
19814 (Apr. 18, 2006), FERC Stats. & Regs. ] 31,212 (2006).

---------------------------------------------------------------------------

[[Page 65965]]

I. Background

A. Mandatory Reliability Standards

    3. 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.\6\
---------------------------------------------------------------------------

    \6\ 16 U.S.C. 824o(e)(3).
---------------------------------------------------------------------------

    4. Reliability Standards that the ERO proposes to the Commission 
may include Reliability Standards that are proposed to the ERO by a 
Regional Entity.\7\ A Regional Entity is an entity that has been 
approved by the Commission to enforce Reliability Standards under 
delegated authority from the ERO.\8\ When the ERO reviews a regional 
Reliability Standard that would be applicable on an interconnection-
wide basis and that has been proposed by a Regional Entity organized on 
an interconnection-wide basis, the ERO must rebuttably presume that the 
regional Reliability Standard is just, reasonable, not unduly 
discriminatory or preferential, and in the public interest.\9\ In turn, 
the Commission must give ``due weight'' to the technical expertise of 
the ERO and of a Regional Entity organized on an interconnection-wide 
basis.\10\
---------------------------------------------------------------------------

    \7\ 16 U.S.C. 824o(e)(4).
    \8\ 16 U.S.C. 824o(a)(7) and (e)(4).
    \9\ 18 CFR 39.5 (2010).
    \10\ 16 U.S.C. 824o(d)(2).
---------------------------------------------------------------------------

    5. In Order No. 672, the Commission urged uniformity of Reliability 
Standards, but recognized a potential need for regional 
differences.\11\ Accordingly, the Commission stated that:
---------------------------------------------------------------------------

    \11\ Order No. 672, FERC Stats. & Regs. ] 31,204 at P 290.

    As a general matter, we will accept the following two types of 
regional differences, provided they are otherwise just, reasonable, 
not unduly discriminatory or preferential and in the public 
interest, as required under the statute: (1) A regional difference 
that is more stringent than the continent-wide Reliability Standard, 
including a regional difference that addresses matters that the 
continent-wide Reliability Standard does not; and
    (2) A regional Reliability Standard that is necessitated by a 
physical difference in the Bulk-Power System.\12\
---------------------------------------------------------------------------

    \12\ Id. P 291.

B. Western Electricity Coordinating Council

    6. On April 19, 2007, the Commission accepted delegation agreements 
between NERC and each of eight Regional Entities.\13\ In its order, the 
Commission accepted WECC as a Regional Entity organized on an 
Interconnection-wide basis. As a Regional Entity, WECC oversees 
transmission system reliability in the Western Interconnection. The 
WECC region encompasses nearly 1.8 million square miles, including 14 
western U.S. states, the Canadian provinces of Alberta and British 
Columbia, and the northern portion of Baja California in Mexico.
---------------------------------------------------------------------------

    \13\ North American Electric Reliability Corp., 119 FERC ] 
61,060, at P 432 (2007).
---------------------------------------------------------------------------

    7. In June 2007, the Commission approved eight regional Reliability 
Standards for WECC including the currently effective regional 
Reliability Standard for operating reserves, WECC-BAL-STD-002-0.\14\ 
The Commission found that the current regional Reliability Standard was 
more stringent than the corresponding NERC Reliability Standard, BAL-
002-0, since WECC required a more stringent minimum reserve requirement 
than the continent-wide requirement.\15\ Moreover, the Commission found 
that WECC's requirement to restore contingency reserves within 60 
minutes was more stringent than the 90 minute restoration period as set 
forth in NERC's BAL-002-0.\16\
---------------------------------------------------------------------------

    \14\ North American Electric Reliability Corp., 119 FERC ] 
61,260, at P 53 (2007).
    \15\ Id.
    \16\ Id.
---------------------------------------------------------------------------

    8. The Commission directed WECC to develop certain minor 
modifications to WECC-BAL-STD-002-0, as identified by NERC in its 
filing letter for the current standard.\17\ For example, the Commission 
determined that: (1) Regional definitions should conform to definitions 
set forth in the NERC Glossary of Terms Used in Reliability Standards 
(NERC Glossary) unless a specific deviation has been justified; and (2) 
documents that are referenced in the Reliability Standard should be 
attached to the Reliability Standard. The Commission also found that it 
is important that regional Reliability Standards and NERC Reliability 
Standards achieve a reasonable level of consistency in their structure 
so that there is a common understanding of the elements. Finally, the 
Commission directed WECC to address stakeholder concerns regarding 
ambiguities in the terms ``load responsibility'' and ``firm 
transaction.'' \18\
---------------------------------------------------------------------------

    \17\ Id. P 55.
    \18\ Id. P 56.
---------------------------------------------------------------------------

C. WECC Regional Reliability Standard BAL-002-WECC-1

    9. On March 25, 2009, NERC submitted a petition (NERC Petition) to 
the Commission seeking approval of BAL-002-WECC-1\19\ and requesting 
the concurrent retirement of BAL-STD-002-0.\20\ In that March petition, 
NERC states that the proposed regional Reliability Standard was 
approved by the NERC Board of Trustees at its October 29, 2008 meeting. 
NERC also requests an effective date for the regional Reliability 
Standard of 90 calendar days after receipt of applicable regulatory 
approval.
---------------------------------------------------------------------------

    \19\ See 18 CFR 39.5(a) (requiring the ERO to submit regional 
Reliability Standards on behalf of a Regional Entity).
    \20\ The proposed regional Reliability Standard is not attached 
to the NOPR. It is, however, available on the Commission's eLibrary 
document retrieval system in Docket No. RM09-15-000 and is on the 
ERO's Web site, available at http://www.nerc.com.
---------------------------------------------------------------------------

    10. The proposed regional Reliability Standard contains three main 
provisions. Requirement R1 provides that each reserve sharing group 
\21\ or balancing authority must maintain a minimum contingency reserve 
that is the greater of (1) an amount of reserve equal to the loss of 
the most severe single contingency; or (2) an amount of reserve equal 
to the sum of three percent of the load and three percent of net 
generation. Requirement R2 states that each reserve sharing group or 
balancing authority must maintain at least half of the contingency 
reserve as spinning reserve. Requirement R3 identifies acceptable types 
of reserve to satisfy Requirement R1:
---------------------------------------------------------------------------

    \21\ A ``reserve sharing group'' is a group whose members 
consist of two or more balancing authorities that collectively 
maintain, allocate, and supply operating reserves required for each 
balancing authority's use in recovering from contingencies within 
the group. See NERC Glossary, available at http://www.nerc.com/docs/
standards/rs/Glossary_2009April20.pdf.

R3.1. Spinning Reserve;
R3.2. Interruptible Load;
R3.3. Interchange Transactions designated by the source Balancing 
Authority as non-spinning contingency reserve;
R3.4. Reserve held by the other entities by agreement that is 
deliverable on Firm Transmission Service;
R3.5. An amount of off-line generation which can be synchronized and 
generating; or
R.3.6. Load, other than Interruptible Load, once the Reliability 
Coordinator has declared a capacity or energy emergency.

In addition, compliance measure M1 provides that a reserve sharing 
group or balancing authority must have documentation that it maintained 
100 percent of required contingency reserve levels ``except within the 
first 105 minutes (15 minute Disturbance Recovery Period, plus 90 
minute

[[Page 65966]]

Contingency Reserve Restoration Period) following an event requiring 
the activation of Contingency Reserves.'' \22\
---------------------------------------------------------------------------

    \22\ Proposed WECC Reliability Standard BAL-002-WECC-1, 
Compliance Measure M1.
---------------------------------------------------------------------------

    11. The NERC Petition explains that, because WECC developed the 
modifications to the regional Reliability Standard submitted in the 
instant proceeding, and the standard applies on an Interconnection-wide 
basis, NERC must rebuttably presume that the WECC Reliability Standard 
is just, reasonable, not unduly discriminatory or preferential, and in 
the public interest.\23\ NERC states that it agrees with WECC that the 
proposed WECC regional Reliability Standard establishes requirements 
that are more stringent than those provided in the corresponding NERC 
Reliability Standard.
---------------------------------------------------------------------------

    \23\ See NERC Petition at 8; and 16 U.S.C. 824o(d)(3).
---------------------------------------------------------------------------

    12. On March 18, 2010, the Commission issued a Notice of Proposed 
Rulemaking (NOPR) proposing to remand the proposed regional Reliability 
Standard to the ERO so that the Regional Entity may develop further 
modifications.\24\ The Commission's proposal to remand the proposed 
Regional Reliability Standard was based on a lack of technical support 
for the adoption of less stringent requirements than those in the 
currently effective WECC regional Reliability Standard and out of 
concern that the proposed regional Reliability Standard is less 
stringent than the NERC continent-wide Reliability Standard pertaining 
to contingency reserves. The Commission expressed particular concern 
with respect to a provision in the proposed regional Reliability 
Standard that would permit a balancing authority, when an emergency is 
declared, to count ``Load, other than Interruptible Load'' as 
contingency reserve. The Commission understood this provision to allow 
a balancing authority to shed firm load when a single contingency 
occurs instead of procuring and utilizing generation or demand response 
resource held in reserve for contingencies to balance the Bulk-Power 
System. The Commission also proposed to direct WECC to develop certain 
modifications to the regional Reliability Standard that would 
explicitly allow demand-side management to be used as a resource for 
contingency reserves.
---------------------------------------------------------------------------

    \24\ North American Electric Reliability Corp., NOPR, 75 FR 
14,103 (March 24, 2010), FERC Stats. & Regs. ] 32,653 (2010).
---------------------------------------------------------------------------

    13. In response to the NOPR, comments were filed by 16 interested 
parties.\25\ Several commenters, including WECC, opposed the proposed 
remand, while others supported it. In its comments, WECC included 
supplemental data to support the Commission's approval of the proposed 
regional Reliability Standard. In the discussion below, we address the 
issues raised by these comments and, pursuant to section 215(d)(4) of 
the FPA, we adopt the NOPR proposal to remand the proposed regional 
Reliability Standard.
---------------------------------------------------------------------------

    \25\ See Appendix A, List of Commenters.
---------------------------------------------------------------------------

II. Discussion

    14. Applying the principal of due weight to the technical expertise 
of NERC and WECC, the Commission finds that the proposed regional 
Reliability Standard BAL-002-WECC-1 does not meet the statutory 
criteria for approval, that it be just, reasonable, not unduly 
discriminatory or preferential, and in the public interest. In 
particular, the Commission is concerned that reliability would be 
reduced upon approval of the proposed regional Reliability Standard 
because WECC's data indicates that extending the reserve restoration 
period from 60 to 90 minutes would create an unreasonable risk that a 
second major contingency could occur before reserves are restored after 
an initial contingency. There must be sufficient technical 
justification showing that the Western Interconnection can be operated 
reliably with the reduced stringency. The Commission finds that the 
NERC and the Regional Entity have failed to demonstrate that the 
proposal is adequate to ensure the reliability of the Bulk-Power System 
within WECC. Accordingly, under section 215(d)(4) of the FPA, the 
Commission remands regional Reliability Standard BAL-002-WECC-1 to the 
ERO with instruction for the Regional Entity to develop modifications, 
as discussed below.

A. Due Weight and Effect of Remand

    15. Several commenters point out that, under section 215(d)(2) of 
the FPA, the Commission must give due weight to the technical expertise 
of the ERO and WECC as the Regional Entity organized on an 
Interconnection-wide basis.\26\ These parties argue that, applying the 
principal of due weight, the Commission should approve the proposed 
regional Reliability Standard. In addition, NERC states that it must 
rebuttably presume that a standard developed by WECC is just, 
reasonable, not unduly preferential, and in the public interest. NERC 
states that, as a Regional Entity organized on an interconnection-wide 
basis, WECC has exercised its technical expertise in regard to this 
interconnection-wide Reliability Standard, supplemented by the 
additional technical analyses provided in its response. Xcel agrees and 
states that the Commission has not allowed any deference to WECC and 
stakeholder experts that worked diligently to develop this Reliability 
Standard.
---------------------------------------------------------------------------

    \26\ E.g., NERC, WECC, MISO, WIRAB, and Xcel.
---------------------------------------------------------------------------

    16. Several commenters contend that the proposed regional 
Reliability Standard offers significant benefits over the current 
version.\27\ Sempra states that the proposed standard would advance 
three goals: It simplifies reserve accounting at balancing authorities 
by clarifying which party carries reserves for power imports and 
exports; it includes renewable resources; and it clarifies reserves 
responsibility. If the Commission decides to remand the proposed 
Reliability Standard, Sempra urges the Commission to require expedited 
procedures because of the importance of replacing the current regional 
Reliability Standard, which, Sempra contends, contains its own flaws 
and ambiguities. WECC argues that remand of the proposed standard would 
cause a greater probability of frequency-related instability, 
uncontrolled separation, or cascading outages because the current WECC 
standard does not take renewable resources, such as wind and solar, 
into account when calculating minimum contingency reserve requirements.
---------------------------------------------------------------------------

    \27\ E.g., NERC, WECC, Bonneville, Idaho Power, NV Energy, SCE, 
WIRAB, and Xcel.
---------------------------------------------------------------------------

    17. By contrast, Puget Sound states that, while FERC is required to 
give due weight to the technical expertise of the ERO no deference is 
due when the action of the ERO and Regional Entity are patently 
unreasonable and arbitrary. Puget Sound contends that a regulatory 
decision based on a review of only eight hours of data, as provided by 
WECC, cannot be reasonably explained or considered to be supported by 
substantial evidence. Powerex and NV Energy agree that WECC provided 
insufficient data in its request for approval with respect to whether 
the proposed regional Reliability Standard is just and reasonable.
Commission Determination
    18. Section 215(d)(2) of the FPA provides that the Commission 
``shall give due weight to the technical expertise'' of the ERO or a 
Regional Entity organized on an Interconnection-wide basis ``with 
respect to the content of a proposed standard or modification.'' As the 
Commission explained in Order No. 672, the ERO or Interconnection-

[[Page 65967]]

wide Regional Entity ``must justify to the Commission its contention 
that the proposed Reliability Standard is just, reasonable, not unduly 
discriminatory or preferential, and in the public interest.''\28\ Thus, 
consistent with our explanation in Order No. 672, it is necessary for 
the ERO or Regional Entity to explain adequately a Reliability Standard 
or modifications to a Reliability Standard.
---------------------------------------------------------------------------

    \28\ Order No. 672, FERC Stats. & Regs. ] 31,204 at P 345.
---------------------------------------------------------------------------

    19. The Commission has given due weight to the technical expertise 
of the Regional Entity as it is presented both in the NERC Petition and 
in WECC's comments and supporting data and we have determined that WECC 
provided inadequate support for approval of the proposed regional 
Reliability Standard. In its petition, NERC provides a detailed 
explanation of why it believes the proposal satisfies the statutory 
criteria for approval based on the guidance provided by the Commission 
in Order No. 672 regarding the factors it would consider in making that 
determination.\29\ However, this explanation fails to adequately 
address the substantive modifications to the regional Reliability 
Standard. Moreover, WECC's comments and supplemental data did not 
adequately address the Commission's concerns expressed in the NOPR that 
the extension of the reserve restoration period will maintain reliable 
operation of the Western Interconnection. Without adequate explanation 
and technical justification, we are unable to determine whether the 
proposal satisfies the statutory criteria for approval and, therefore, 
remand the revised Reliability Standard to the ERO with instruction for 
the Regional Entity to develop modifications, as discussed below.
---------------------------------------------------------------------------

    \29\ Order No. 672, FERC Stats. & Regs. ] 31,204 at P 320-337.
---------------------------------------------------------------------------

    20. The Commission does not take lightly its authority to remand a 
Reliability Standard. We understand that before a Reliability Standard 
reaches the Commission it must be vetted through an intensive standard 
development process. Nevertheless, despite the efforts of the different 
drafting team members who contributed to the development of this 
regional Reliability Standard, for the reasons discussed below, we 
believe that the statutory standard for approval has not been met on 
the record before us.
    21. We do not believe, as WECC suggests, that this remand will 
cause a greater probability of frequency-related instability, 
uncontrolled separation or cascading outages. WECC does not provide any 
supporting data or technical analysis to support this claim. By 
remanding the proposed regional Reliability Standard, the Commission is 
upholding the currently effective regional Reliability Standard. The 
Commission recognizes that the Western Interconnection is experiencing 
substantial growth in variable renewable generation. We believe that 
the current regional Reliability Standard has proved effective for many 
years and will continue to do so until WECC can modify as necessary, 
through the standards development process, this regional Reliability 
Standard to ensure adequate reserves to reliably accommodate this 
expansion. Furthermore, we decline to set expedited procedures for the 
development of a replacement regional Reliability Standard, but WECC is 
free to expedite its process to the extent WECC finds appropriate.

B. Contingency Reserve Restoration Period

    22. The current regional Reliability Standard sets a maximum 
contingency reserve restoration period that is more stringent than the 
continent-wide requirement. NERC Reliability Standard BAL-002-0 
provides that a balancing authority or reserve sharing group responding 
to a disturbance must fully restore its contingency reserves within 90 
minutes following the disturbance recovery period, which is set at 15 
minutes.\30\ The current WECC regional BAL Reliability Standard 
requires reserve sharing groups and balancing authorities to maintain 
100 percent of required operating reserve levels except within the 
first 60 minutes following an event requiring the activation of 
operating reserves.\31\ In approving WECC-BAL-STD-002-0, the Commission 
found that WECC's requirement to restore contingency reserves within 60 
minutes was more stringent than the 90 minute restoration period set 
forth in NERC's BAL-002-0.\32\ WECC now proposes to replace the current 
60 minute restoration period requirement with a new provision that 
would require the restoration of contingency reserves within 90 minutes 
from the end of the disturbance recovery period (15 minutes), thus 
matching the continent-wide requirement.
---------------------------------------------------------------------------

    \30\ Reliability Standard BAL-002-0, Requirements R4 and R6.
    \31\ WECC regional Reliability Standard WECC-BAL-STD-002-0, 
Measure of Compliance WM1.
    \32\ North American Electric Reliability Corp., 119 FERC ] 
61,260 at P 53.
---------------------------------------------------------------------------

NOPR Proposal
    23. In the NOPR, the Commission proposed to remand the regional 
Reliability Standard BAL-002-WECC-1 based on, among other things, a 
lack of any technical justification or analysis of the potential 
increased risk to the Western Interconnection resulting from the 
increase in the contingency reserve restoration period. The Commission 
noted that, without sufficient data and analysis, it is unable to 
determine whether the increase in contingency reserve restoration 
period is sufficient to maintain the reliable operation of the Bulk-
Power System in the Western Interconnection. The Commission also noted 
that in the Western Interconnection a significant number of 
transmission paths are voltage or frequency stability-limited, in 
contrast to other regions of the Bulk-Power System where transmission 
paths more often are thermally-limited. Disturbances that result in a 
stability-limited transmission path overload, generally, must be 
responded to in a shorter time frame than a disturbance that results in 
a thermally-limited transmission path overload. The Commission stated 
its understanding that this physical difference is one of the reasons 
for the need for certain provisions of regional Reliability Standards 
in the Western Interconnection.
Comments
    24. WECC, supported by Bonneville, Idaho Power, SCE, and Xcel, 
argues that additional studies are unnecessary because the proposed 
restoration period is identical to the continent-wide restoration 
period. WECC comments that the Commission should defer to WECC's 
technical expertise in concluding that more stringent contingency 
reserve restoration period is no longer necessary. WECC also offers 
historical data that demonstrates that a second contingency involving 
the loss of a resource greater than 1000 MW between 60 and 90 minutes 
after a first contingency occurred six times in the last 15 years or 
0.4 events on an annual basis, which, WECC argues, is insufficient to 
require rejection of a proposed standard on the basis of reliability 
impact. Bonneville and Xcel argue that increasing the contingency 
reserve restoration period will result in more efficient system 
operation without sacrificing reliability. Xcel adds that it will allow 
for more efficient communication among balancing authorities because 
the restoration period will be closer to the e-tagging system approval 
cycle.

[[Page 65968]]

    25. MISO comments that it is imperative that the Commission give 
due consideration to approving modifications to Reliability Standards 
so that Regional Entities can implement changes as understanding grows 
and experience is gained. MISO contends that disallowance of reasonable 
modifications, such as those presented here, will have the unintended 
consequence of fostering a reluctance to develop other regional 
standards, or encouraging a minimalist approach when standards must 
necessarily be developed. WECC echoes these concerns and argues that 
there is no requirement that a regional Reliability Standard can only 
be modified in a manner that makes it even more stringent. Such a 
requirement, WECC contends, would create a ``one-way ratchet'' that 
would severely inhibit the ability to adjust Reliability Standards to 
meet changing conditions, would encourage proposed standards reflecting 
the ``lowest common denominator'' and would fail to provide deference 
to the technical expertise of an interconnection-wide Regional Entity.
Commission Determination
    26. The Commission finds that the extension of the reserve 
restoration period has not been justified as an acceptable level of 
risk within the Western Interconnection. WECC's own analysis shows 
that, based on historical experience, replacing the 60 minute 
requirement with the continent-wide 90 minute requirement could result 
in a second major contingency before restoration of reserves would be 
required, and that a second major contingency occurred within WECC 
during this extended time frame six times in the last 15 years.\33\ 
WECC argues that in the Western Interconnection ``instability and/or 
underfrequency load shedding normally would not occur in the absence of 
a third contingency of significant magnitude within the restoration 
period.'' \34\ WECC's generalization, however, is unsupported by 
historical quantification or documentation in this record and, thus, 
does not persuade us.\35\
---------------------------------------------------------------------------

    \33\ WECC's analysis shows that, over the past 15 years, the 
proposed increased contingency reserve restoration period would have 
resulted in 139 more events within the proposed 90 minute 
contingency reserve restoration period. Limiting the analysis to 
losses of generation greater than 500 MW, there were only 58 events 
occurring within the proposed extended contingency reserve 
restoration period. Limiting the analysis to losses of generation 
greater than 1000 MW, there were only six events during the extended 
contingency restoration period. WECC contends that losses of less 
than 1,000 MW of generation have a minimal impact on the system 
frequency response of the Western Interconnection and have minimal 
impacts on the reliability of the interconnected system. WECC May 
24, 2010 Comments at 13.
    \34\ WECC May 24, 2010 Comments at 13 n.10.
    \35\ WECC's statement is consistent with a statement made in a 
2007 compliance filing that ``WECC operates its system in such a 
manner that the system is at least two contingencies away from a 
cascading failure.'' WECC Compliance Filing, Docket No. RR07-11-000, 
at 5 (filed July 9, 2007). Nevertheless, WECC is proposing to change 
its operating conditions by extending the reserve restoration 
period. Thus, it must provide adequate technical justification that 
the revised requirements will maintain reliable operation of the 
Bulk-Power System in the Western Interconnection.
---------------------------------------------------------------------------

    27. While it is not inevitable that the proposed extension of the 
contingency reserve restoration period would result in adverse 
reliability impacts in the Western Interconnection, the data provided 
shows that the Western Interconnection could be exposed to the 
potential for a major disturbance every two to three years that could 
result in frequency-related instability, uncontrolled separation or 
cascading outages. The Commission is particularly concerned about these 
potential events occurring in the Western Interconnection because, as 
the Commission discussed in the NOPR, it is our understanding that a 
significant number of transmission paths in the Western Interconnection 
are voltage or frequency stability-limited, in contrast to other 
regions of the Bulk-Power System where transmission paths more often 
are thermally-limited. Disturbances that occur in a stability-limited 
transmission path overload, generally, must be responded to in a 
shorter time frame than a disturbance that occurs in a thermally-
limited transmission path overload.\36\ A thermal limit is determined 
by how much a line can overheat without damaging equipment; lines that 
are thermally-limited can have short-term emergency limits that are 
higher than the normal line rating, since heating occurs over a period 
of time. This is different from a stability limit, which is determined 
by a system-wide voltage or frequency stability constraint, and loading 
the line above this limit for any amount of time could result in 
instability and cascading outages.
---------------------------------------------------------------------------

    \36\ NOPR, FERC Stats. & Regs. ] 32,653 at P 37.
---------------------------------------------------------------------------

    28. The reliance on stability-limited transmission paths becomes a 
concern during the contingency reserve restoration period because 
balancing authorities rely on imported power from external sources 
until the entity that had the disturbance replaces the resource lost 
during the disturbance.\37\ Since stability-limited lines do not have 
higher emergency ratings, as thermally-limited lines can, any 
disturbance that would result in increasing flows over a stability-
limited line must be addressed in a shorter time-frame than a 
disturbance that only affects thermally-limited lines. There will be 
some situations in which imports stress stability-limited transmission 
lines. In those circumstances, extending the contingency reserve 
restoration period would extend the amount of time the imported power 
could stress the stability limited transmission lines, potentially 
leaving the Western Interconnection in a stressed condition that could 
result in adverse reliability impacts if another disturbance were to 
occur. On remand, we direct WECC to develop a modification to the 
reserve restoration period or provide evidence demonstrating that 
extending the reserve restoration period to 90 minutes and adding a 
disturbance recovery period of 15 minutes would not increase the risk 
of a major disturbance in the Western Interconnection.
---------------------------------------------------------------------------

    \37\ See NERC, Balancing and Frequency Control, at 6-10 (Nov. 
2009), available at http://www.nerc.com/docs/oc/rs/NERC_Balancing_
and_Frequency_Control_Part_1_9Nov2009_(Revision2).pdf.
---------------------------------------------------------------------------

    29. The fact that the proposed extension of the reserve restoration 
period would match the continent-wide requirement and, thus, would 
foster certain operational efficiencies through the use of the e-
tagging system does not allay our concerns that the extension could be 
harmful to the reliable operation of the Western Interconnection. The 
e-tagging system is an efficient tool used for day-ahead and hour-ahead 
market accounting and as input for day-ahead and hour-ahead transfer 
capability analysis of scheduled interchange transactions and 
development of day-ahead and hour-ahead capacity and energy resource 
schedules. As such, it may allow for more efficient communication among 
balancing authorities during operational planning periods. However, in 
2008, a WECC task force expressed concern that the ``e-Tag and 
communications processes are time consuming and cumbersome when 
scheduling and tagging the large amounts of energy required to recover 
from system emergencies, particularly in mid-hour.''\38\ Although 
adoption of the e-tagging system may result in more efficient 
communication among transmission operators and balancing

[[Page 65969]]

authorities for day-ahead and hour-ahead scheduling, this fact alone is 
not sufficient to justify the potential reliability impacts involved 
with extending the reserve restoration period.
---------------------------------------------------------------------------

    \38\ WECC Disturbance Task Force, PacifiCorp East February 14, 
2008 Detailed Disturbance Report stated in Conclusion 17 (Aug. 2008) 
available at http://www.wecc.biz/committees/BOD/081308/Lists/
Agendas/1/
PacifiCorp%20East%20Disturbance%20Board%20presentation%20Aug%2008%20F
inal.pdf.
---------------------------------------------------------------------------

    30. The Commission's action in this proceeding does not create a 
``one-way ratchet'' for the development of regional Reliability 
Standards. In specific circumstances, the Commission could approve 
retirement of a more stringent regional requirement if the Regional 
Entity demonstrates that the continent-wide Reliability Standard is 
sufficient to ensure the reliability of that region. In this case, 
however, WECC argued only three years earlier that the added stringency 
of the current regional Reliability Standard was critical to the 
reliable operation of the Western Interconnection.\39\ We find that 
WECC provided insufficient technical detail and analysis for us to make 
a reasoned determination that the proposed requirement will adequately 
protect the reliability of the region. Regional Entities have the 
discretion to develop regional Reliability Standards and implement 
changes as understanding grows and experience is gained without concern 
that the Commission will always hold them to their more stringent 
requirements in all circumstances regardless of the provided 
justification. The Commission will evaluate such proposed changes, 
including those to a less stringent state, on their merit so long as 
adequate reliability is maintained. In this instance, given WECC's 
prior statements and its own analysis that such an extended restoration 
period could lead to major system disturbances, WECC has failed to 
demonstrate that its proposal will maintain adequate reliability, and 
therefore has failed to demonstrate that its proposal is just, 
reasonable, and in the public interest. Consequently, we remand this 
proposal.
---------------------------------------------------------------------------

    \39\ In its letter requesting approval of the current regional 
Reliability Standards WECC states:
    The WECC Operating Committee thereafter undertook a 
comprehensive review of all WECC criteria, policies, and guidelines 
in an effort to identify all unique (i.e., those not in NERC 
standards) and essential (i.e., necessary to protect WECC 
reliability) criteria that it believed critical to the reliability 
of the Western Interconnection. The Operating Committee concluded 
that eight regional standards, proposed for adoption here, are of 
the highest priority.''
    NERC, Request for Approval of Regional Reliability Standards, 
Docket No. RR07-11-000, at 4 (filed March 26, 2007) (NERC 2007 
Petition).
---------------------------------------------------------------------------

C. Calculation of Minimum Contingency Reserve

    31. NERC's Disturbance Control Standard, continent-wide Reliability 
Standard BAL-002-0, requires each balancing authority or reserve 
sharing group, at a minimum, to maintain at least enough contingency 
reserve to cover the most severe single contingency. Similarly, 
requirement WR1(a)(ii) of WECC's current WECC-BAL-STD-002-0 requires 
balancing authorities to maintain a contingency reserve of spinning and 
non-spinning reserves (at least half of which must be spinning), 
sufficient to meet the NERC Disturbance Control Standard, BAL-002-0, 
equal to the greater of: (1) the loss of generating capacity due to 
forced outages of generation or transmission equipment that would 
result from the most severe single contingency; or (2) the sum of five 
percent of load responsibility served by hydro generation and seven 
percent of the load responsibility served by thermal generation. In 
approving the regional BAL-STD-002-0 Reliability Standard, the 
Commission noted that the regional Reliability Standard is more 
stringent than the NERC Reliability Standard, BAL-002-0, because WECC 
requires a more stringent minimum reserve requirement than the 
continent-wide requirement.
    32. As proposed, Requirement R1 of BAL-002-WECC-1 would require 
each reserve sharing group or balancing authority that is not a member 
of a reserve sharing group to maintain a minimum contingency reserve. 
NERC contends that the proposed minimum contingency reserve amount is 
more stringent than that required by the continent-wide Reliability 
Standard.\40\ NERC explains that, whereas Requirement R3.1 of BAL-002-0 
requires that each balancing authority or reserve sharing group carry, 
at a minimum, at least enough contingency reserve to cover the most 
severe single contingency, proposed Requirement R1.1 of BAL-002-WECC-1 
requires that each balancing authority or reserve sharing group 
maintain, as a minimum, contingency reserves equal to the loss of the 
most severe single contingency or an amount of reserve equal to the sum 
of three percent of the load (generation minus station service minus 
net actual interchange) and three percent of net generation (generation 
minus station service).\41\
---------------------------------------------------------------------------

    \40\ NERC Petition at 9.
    \41\ Id. at 14.
---------------------------------------------------------------------------

NOPR Proposal
    33. The Commission proposed to find that the eight hours of data 
provided by WECC in its initial filing is insufficient to demonstrate 
that the proposed minimum contingency reserve requirements are 
sufficiently stringent to ensure that entities within the Western 
Interconnection will meet the requirements of NERC's continent-wide 
Disturbance Control Standard, BAL-002-0. The Commission noted that, in 
its March 2007 petition proposing the currently effective regional 
Reliability Standard, NERC stated that the eight proposed regional 
Reliability Standards ``were critical to maintaining reliability within 
the Western Interconnection.'' \42\ The Commission expressed concern 
that the proposed regional Reliability Standard was less stringent than 
the current regional Reliability Standard and that NERC had not 
demonstrated that the proposed regional requirements were sufficient to 
meet the requirements of NERC's continent-wide Disturbance Control 
Standard, BAL-002-0.
---------------------------------------------------------------------------

    \42\ NERC 2007 Petition at 4.
---------------------------------------------------------------------------

    34. Although the proposed Reliability Standard offers some added 
clarity by eliminating reference to the term ``load responsibility'' 
and including renewable energy resources in the calculation of 
contingency reserves, the Commission proposed to find that NERC and 
WECC did not provide sufficient technical justification to support the 
proposed revised method for calculating contingency reserves. Thus, the 
Commission proposed to remand BAL-002-WECC-1 so that WECC could develop 
additional support and make modifications as appropriate for a future 
proposal.
Comments
    35. Several commenters argue that the proposed calculation of 
minimum contingency reserve levels is more stringent than the 
continent-wide NERC requirements under BAL-002-0.\43\ WECC comments 
that the Commission has failed to explain how the proposed regional 
Reliability Standard, which sets minimum contingency reserve level as 
the greater of the most severe single contingency or a calculation of 
net generation and load, could be less stringent than the continent-
wide requirement, which sets a minimum contingency reserve level as 
equal to the most severe single contingency. NERC, Bonneville, Idaho 
Power, NV Energy, SCE, WIRAB, and Xcel all agree that the proposed 
regional requirement for calculating minimum contingency reserve levels 
is more stringent than the current continent-wide requirement. NERC 
adds that, in addition to including a more stringent calculation of 
minimum reserve levels, the proposed regional Reliability Standard is 
more stringent than the current

[[Page 65970]]

continent-wide Reliability Standard because it includes a requirement 
that half of the contingency reserves must immediately and 
automatically respond proportionally to frequency deviations, e.g., 
through the action of a governor or other control system. Moreover, 
WECC points out that nothing in the proposed Reliability Standard 
excuses any balancing authority or reserve sharing group from 
satisfying the requirements of the continent-wide Reliability Standard 
BAL-002-0.
---------------------------------------------------------------------------

    \43\ E.g., WECC, NERC, Bonneville, Idaho Power, NV Energy, SCE, 
WIRAB, and Xcel.
---------------------------------------------------------------------------

    36. Several commenters argue that approval of the proposed 
Reliability Standard does not require any more technical justification 
to support the proposed calculation of minimum contingency reserve 
levels. WECC notes that the currently approved regional Reliability 
Standard was established through negotiations in the 1960s, and was 
based on engineering judgment, rather than on technical studies or 
simulations. Bonneville adds that the Commission did not require 
extensive data support when it approved the current regional 
Reliability Standard. NV Energy admits that NERC has provided 
insufficient data with respect to whether the requested revision is 
just and reasonable and that data may suggest that the proposed 
calculation may allow responsible entities to carry less contingency 
reserves than currently required under the existing regional 
Reliability Standard. Nevertheless, NV Energy argues that the 
Commission should approve the proposed Reliability Standard without 
requiring any further data because reserve levels required under the 
proposed Reliability Standard will be equal to or greater and, thus, 
more stringent than reserve levels required under the continent-wide 
Reliability Standard.
    37. Although WECC argues that it should not be required to provide 
any further technical justification, along with its NOPR comments WECC 
provided additional data from a frequency responsive reserve study as 
support for the proposed regional Reliability Standard. WECC states 
that the summary of data demonstrates that, based on stability 
simulations applied to varying load scenarios, a minimum of 2,400 MW of 
response reserve is necessary to prevent underfrequency load shedding. 
Based on a review of all hours during 2007-2008, WECC contends that the 
proposed regional Reliability Standard would result in at least 2,927 
MW of automatically responsive reserves; more than 500 MW above the 
amount required for stability purposes.
    38. Powerex and Puget Sound argue that the data provided by WECC in 
the NERC Petition are insufficient to support the proposed Reliability 
Standard and support the Commission's proposed remand. Puget Sound 
contends that WECC's reliance on only eight hours of data to support 
the proposed standard was unreasonable and arbitrary and, therefore, 
the Commission could not reasonably approve the proposed Reliability 
Standard. Powerex argues that the eight hours of data provided by WECC 
in the NERC Petition is insufficient to demonstrate that the proposed 
minimum contingency reserve requirements are sufficiently stringent to 
ensure that entities within the Western Interconnection will meet the 
requirements of the continent-wide Reliability Standard. Powerex 
reiterates a concern that it expressed during the standard development 
process that the proposed regional Reliability Standard assumes the 
existence of a liquid ancillary service market when no such market 
exists in WECC. Powerex comments that the proposed standard shifts the 
operating reserve responsibility away from the source to the load and 
will, thereby, result in significant increases in operating reserve 
requirements of a number of jurisdictions that are primarily load-based 
and will, therefore, require them to procure operating reserves.
Commission Determination
    39. We will accept WECC's proposal on this issue. We believe that 
WECC's proposed calculation of minimum contingency reserves is more 
stringent than the national requirement and could be part of a future 
proposal that the Commission could find to be just, reasonable, not 
unduly discriminatory or preferential, and in the public interest. In 
the NERC Petition for approval of the proposed regional Reliability 
Standard, WECC provided technical studies covering eight hours from 
each of the four operating seasons (summer, fall, winter, and spring, 
both on and off-peak). WECC acknowledges that this data illustrates 
that the methodology in the proposed regional Reliability Standard 
reduces the total reserves required in the Western Interconnection for 
each of the eight hours assessed when compared with the methodology in 
the current regional Reliability Standard.\44\ However, WECC also 
states that the proposed regional Reliability Standard does not excuse 
``any non-performance with the continent-wide Disturbance Control 
Standard,'' which requires each balancing authority or reserve sharing 
group to activate sufficient contingency reserve to comply with the 
Disturbance Control Standard.\45\ WECC's proposal would require 
reserves equal to the greater of: (i) The most severe single 
contingency; or (ii) the sum of three percent of the load and three 
percent of net generation. Moreover, the deliverability of these 
contingency reserves would continue to be assured under Requirement R7 
of Reliability Standard TOP-002. Any lack of deliverability would 
violate TOP-002 regardless of whether the amount of contingency 
reserves is based on WECC's current requirement or its proposed 
requirement.
---------------------------------------------------------------------------

    \44\ See NERC Petition, Exhibit C at 1 (``The estimated impact 
of these changes to the required level of reserves in the WECC is a 
reduction of 650 MWs or less, a decrease of approximately 9 
[percent] at most.'').
    \45\ WECC May 24, 2010 Comments at 6 n.7.
---------------------------------------------------------------------------

    40. Should WECC resubmit its proposed calculation of minimum 
contingency reserves as part of its response to our remand on the issue 
of the restoration period, NERC and/or WECC could buttress its proposal 
with audits specifically focused on contingency reserves and whether 
balancing authorities are meeting the adequacy and deliverability 
requirements. This auditing could provide additional assurance to the 
Commission that the proposed requirement is just, reasonable, and in 
the public interest. This auditing also could address the concerns 
raised by some entities in WECC that the original eight hours of data 
provided in NERC's petition is insufficient to demonstrate that the 
proposed minimum contingency reserve requirements are sufficiently 
stringent to ensure that entities within the Western Interconnection 
will meet the requirements of NERC's continent-wide Disturbance Control 
Standard, BAL-002-0.\46\ Thus, the auditing could provide adequate 
technical justification to support the proposed modification.
---------------------------------------------------------------------------

    \46\ See Powerex Comments at 4; Puget Sound Comments at 2.
---------------------------------------------------------------------------

    41. In response to Powerex's concerns, we believe that a 
calculation of minimum contingency reserves that is based on three 
percent of net generation and three percent of net load would fairly 
balance the responsibilities of contingency reserve providers with the 
financial obligations of those who would benefit most from those 
services. Under the current regional Reliability Standard, the total 
contingency reserve that a balancing authority must maintain is based 
only on generating resources. By contrast, under the proposed 
requirement, the total contingency reserve that a balancing

[[Page 65971]]

authority must maintain is based on a combination of the generating 
resources and the demand served within a balancing authority footprint. 
We agree with NERC that the equal split between load and generation 
represents a reasonable balance to moderate shifts in contingency 
reserve responsibility and costs among the applicable entities.\47\
---------------------------------------------------------------------------

    \47\ NERC Petition at 18.
---------------------------------------------------------------------------

D. Use of Firm Load To Meet Contingency Reserve Requirement

    42. Requirement R3 of proposed BAL-002-WECC-1 would require that 
each reserve sharing group or balancing authority use certain types of 
reserves that must be fully deployable within ten minutes of 
notification to meet their contingency reserve requirement. Requirement 
R3.6 of Reliability Standard BAL-002-WECC-1 would allow entities to use 
``Load, other than Interruptible Load, once the Reliability Coordinator 
has declared a capacity or energy emergency.'' \48\
---------------------------------------------------------------------------

    \48\ BAL-002-WECC-1, Requirement R3.6.
---------------------------------------------------------------------------

NOPR Proposal
    43. In its NOPR, the Commission proposed to find that Requirement 
R3.6 is not technically sound because it would allow balancing 
authorities and reserve sharing groups within WECC to use firm load to 
meet their minimum contingency reserve requirements ``once the 
Reliability Coordinator has declared a capacity or energy emergency,'' 
thus creating the possibility that firm load could be shed due to the 
loss of a single element on the system.\49\ The Commission stated that 
the currently effective regional Reliability Standard does not allow 
the use of firm load to meet minimum contingency reserve levels.
---------------------------------------------------------------------------

    \49\ Citing Order No. 672, FERC Stats. & Regs. ] 31,204 at P 324 
(identifying guidelines for what constitutes a just and reasonable 
Reliability Standard).
---------------------------------------------------------------------------

Comments
    44. WECC, supported by Bonneville, Idaho Power, and SCE, contends 
that the proposed regional Reliability Standard treats firm load no 
differently than the continent-wide Reliability Standard. WECC states 
that the proposed regional Reliability Standard permits the use of 
load, other than interruptible load, to meet a contingency only if 
``the Reliability Coordinator has declared a capacity or energy 
emergency.'' \50\ By contrast, WECC comments, the continent-wide 
Reliability Standard provides that contingency reserve may be met by 
Operating Reserve-Spinning and Operating Reserve-Supplemental, which 
include ``load fully removable from the system within the Disturbance 
Recovery Period following the contingency event'' to be used to meet 
contingencies.\51\ WECC points out that the continent-wide Reliability 
Standard does not refer to the declaration of an emergency. For the 
same reason, Idaho Power and Xcel state that the proposed provisions 
related to the use of firm load to meet contingency reserve 
requirements are more stringent than the continent-wide standards. They 
contend that, unlike the continent-wide Reliability Standard, the 
proposed regional Reliability Standard requires the declaration of an 
emergency prior to utilizing firm load to meet contingency reserve 
requirements.
---------------------------------------------------------------------------

    \50\ BAL-002-WECC-1, Requirement R3.6.
    \51\ See NERC Glossary, available at http://www.nerc.com/docs/
standards/rs/Glossary_of_Terms_2010April20.pdf.
---------------------------------------------------------------------------

    45. Idaho Power comments that if balancing authorities are unable 
to count firm load towards contingency reserve requirements, balancing 
authorities may have no choice but to shed firm load to remain in 
compliance with the continent-wide Reliability Standard BAL-002-0. 
Idaho Power explains that Requirement R6.2 of Reliability Standard EOP-
002-2.1 requires a balancing authority to deploy all available 
operating reserves if it cannot meet the Disturbance Control Standard. 
If the balancing authority deploys all available operating reserves, 
including interruptible loads pursuant to Reliability Standard EOP-002-
2.1, but cannot declare firm load interruptible to satisfy contingency 
reserve requirements, Idaho Power contends that the balancing authority 
may have no choice but to shed firm load to maintain compliance with 
the continent-wide Reliability Standard BAL-002. Thus, Idaho Power 
argues that not all emergencies are created equal and the flexibility 
to count firm load toward contingency requirements, in limited 
circumstances, would promote reliability but avoid unnecessary outages.
    46. WECC also states that nothing in the proposed standard directs 
any entity to take action that would violate the requirements relating 
to alert levels prescribed in EOP-002-2.1. Bonneville agrees and states 
that the Commission's concern is misplaced because the proposed 
Reliability Standard does not authorize an entity to interrupt firm 
load for contingency reserves during EOP-002-2.1 energy emergency 
alerts 1 and 2. If the Commission believes that the proposed 
Reliability Standard should further qualify the circumstances under 
which loads may be used for contingency reserves, WECC contends that 
the issue should be addressed in a manner and at a time that does not 
preclude approval of the proposed regional Reliability Standard. WECC 
adds that it is prepared to participate in any efforts intended to 
address the Commission's concerns in this regard.
    47. NERC agrees with WECC that a reliability coordinator must 
declare a capacity or energy emergency before firm load could be 
considered to maintain contingency reserves but also agrees with the 
Commission that greater specificity of the appropriate Energy Emergency 
Alert (EEA) level that must be declared would be helpful. Puget Sound 
argues that the proposed language could be interpreted to allow the use 
of firm load in a manner that is inconsistent with EOP-002-2.1. CDWR 
comments that reliability planning should not consider shedding firm 
loads as a contingency reserve. CDWR contends that balancing authority 
should plan for load interruption only if a customer voluntarily agrees 
to that specific use of its loads, and only upon clear terms and 
conditions.
Commission Determination
    48. We will accept WECC's proposal on this issue. The Commission 
finds that, similar to the current continent-wide Reliability Standard, 
the proposed regional Reliability Standard does not allow balancing 
authorities or reserve sharing groups to curtail firm load except in 
compliance with NERC's Reliability Standard EOP-002-2.1.
    49. The continent-wide Reliability Standard, BAL-002 does not 
contemplate the use of firm load as contingency reserve. In fact, it 
would be a violation of EOP-002-2.1 if balancing authorities or reserve 
sharing groups outside of WECC planned to shed firm load before the 
reliability coordinator issued a level 3 energy emergency alert.\52\ 
Similarly, although Requirement R3.6 of Reliability Standard BAL-002-
WECC-1 would allow balancing authorities and reserve sharing groups to 
use ``Load, other than Interruptible Load, once the Reliability 
Coordinator has declared a capacity or energy emergency,'' \53\ these 
entities would not be authorized to shed firm load unless the 
applicable reliability coordinator had issued a level 3 energy 
emergency alert pursuant to EOP-002-2.1. Thus, balancing authorities 
and reserve sharing groups within WECC are subject to the same 
restrictions regarding the use of firm load as contingency reserve as 
balancing authorities elsewhere

[[Page 65972]]

operating under the continent-wide Reliability Standard. On remand, we 
direct WECC to develop revised language to clarify this point.
---------------------------------------------------------------------------

    \52\ EOP-002-2.1, Requirement R7.
    \53\ BAL-002-WECC-1, Requirement R3.6.
---------------------------------------------------------------------------

E. Demand-Side Management as a Resource

    50. In Order No. 693, the Commission directed the ERO to submit a 
modification to continent-wide Reliability Standard BAL-002-0 that 
includes a Requirement that explicitly allows that demand-side 
management be used as a resource for contingency reserves, and 
clarifies that demand-side management should be treated on a comparable 
basis so long as it meets similar technical requirements as other 
resources providing this service.\54\ The Commission directed the ERO 
to list the types of resources that can be used to meet contingency 
reserves to provide users, owners and operators of the Bulk-Power 
System a set of options to meet contingency reserves.\55\ The 
Commission clarified that the purpose of this directive was to ensure 
comparable treatment of demand-side management with conventional 
generation or any other technology and to allow demand-side management 
to be considered as a resource for contingency reserves on this basis 
without requiring the use of any particular contingency reserve 
option.\56\ The Commission further clarified that in order for demand-
side management to participate, it must be technically capable of 
providing contingency reserve service, with the ERO determining the 
technical requirements.\57\
---------------------------------------------------------------------------

    \54\ Mandatory Reliability Standards for the Bulk-Power System, 
Order No. 693, 72 FR 16416 (Apr. 4, 2007), FERC Stats. & Regs. ] 
31,242, at P 330, order on reh'g, Order No. 693-A, 120 FERC ] 61,053 
(2007).
    \55\ Id. P 331, 335.
    \56\ Id. P 333.
    \57\ Id. P 334.
---------------------------------------------------------------------------

    51. In its petition, NERC states that it raised this concern with 
WECC, and WECC responded that the drafting team wrote the regional 
Reliability Standard ``to permit load, Demand-Side Management, 
generation, or another resource technology that qualifies as Spinning 
Reserve or Contingency Reserve to be used as such.'' WECC further 
explained that demand-side management that is deployable within ten 
minutes is a subset of interruptible load, which is an acceptable type 
of reserve set forth in proposed Requirement R3.2.\58\ WECC previously 
commented that, in the proposed standard, ``Loads and [demand-side 
management] were not allowed as Spinning Reserve because it is not 
permitted by the NERC Spinning Reserve definition.'' \59\
---------------------------------------------------------------------------

    \58\ NERC Petition at 40.
    \59\ NERC Petition at Exhibit C (Record of Development of 
Proposed Reliability Standard) WECC's Written Response to NERC's 
Written Comments, August 13, 2008 at page 4.
---------------------------------------------------------------------------

NOPR Proposal
    52. In its NOPR, the Commission stated that the proposed regional 
Reliability Standard does not explicitly address the use of demand-side 
management as a resource for contingency reserves. Accordingly, the 
Commission proposed to direct WECC to develop a modification to BAL-
002-WECC-1 that explicitly provides that demand-side management that is 
technically capable of providing this service may be used as a resource 
for contingency reserves. Consistent with the Commission's directive in 
Order No. 693, the Commission explained that the modification should 
list the types of resources, including demand-side management, which 
can be used to meet contingency reserves. The Commission also stated 
that the modification should ensure comparable treatment of demand-side 
management with conventional generation or any other technology and 
allow demand-side management to be considered as a resource for 
contingency reserves on this basis without requiring the use of any 
particular contingency reserve option.
    53. In addition, the Commission noted a conflict related to the 
definition of Spinning Reserve as it is used in the proposed regional 
Reliability Standard. The Commission stated that Requirement R3.1 
refers to the NERC Glossary definition of Spinning Reserve, which omits 
the use of demand-side management or other technologies that could be 
used as a resource because it limits acceptable Spinning Reserve 
resources to generation resources. The Commission proposed to direct 
WECC to develop a modification to the proposed regional Reliability 
Standard replacing the term Spinning Reserve with Operating Reserve-
Spinning, which includes as part of the definition of Operating 
Reserve, ``load fully removable from the system within the Disturbance 
Recovery Period following the contingency event.'' Since the term 
Spinning Reserve was not used in other Reliability Standards, the 
Commission proposed to direct the ERO to remove the term from the NERC 
Glossary upon approval of a modified Reliability Standard using 
Operating Reserve-Spinning.
Comments
    54. WECC, supported by NERC, Bonneville, CAISO, Idaho Power, and 
SCE, contends that the proposed regional Reliability Standard is 
inclusive of demand-side management as a resource to be used in the 
calculation of contingency reserve because it provides for the use of 
Interruptible Load for contingency reserve. WECC points out that the 
NERC Glossary defines Interruptible Load as ``demand that the end-use 
customer makes available to its load-serving entity via contract or 
agreement for curtailment.'' \60\ Nevertheless, if the Commission 
issues a remand, CAISO urges the Commission to provide NERC an 
opportunity to resubmit BAL-002-WECC-1 to address any definitional 
concerns within 90 days.
---------------------------------------------------------------------------

    \60\ See NERC Glossary available at http://www.nerc.com/docs/
standards/rs/Glossary_of_Terms_2010April20.pdf.
---------------------------------------------------------------------------

    55. Xcel comments that the Reliability Standard should not be more 
explicit about the inclusion of demand-side management as a resource 
because the term demand-side management encompasses many types of 
technologies and services, including reduction of energy consumption by 
use of high-efficiency light bulbs. If demand-side management is more 
explicitly included in the proposed regional Reliability Standard, Xcel 
contends that such a revision might cause entities that are working to 
provide value to the end-use customers to claim that a customer could 
get revenue by providing reserves.
    56. By contrast, Puget Sound and CDWR comment that they agree with 
the Commission that technically qualified demand-based resources--as 
well as other qualified non-generation resources such as energy storage 
devices--should be allowed to provide ancillary services. CDWR suggests 
that, if Spinning Reserve is meant to connote two products--a 
contingency reserve and a frequency regulation reserve--then 
consideration should be given to better defining the services and the 
associated technical criteria. Nevertheless, CDWR comments that demand-
based resources that agree to interruption for reliability purposes 
should receive reduced charges for lesser quality services, an 
exemption from charges associated with the same service that the 
demand-based resources are providing, and compensation for service they 
provide.
    57. Concerning the Commission's proposal to direct the ERO to 
remove the term Spinning Reserve upon approval of a modified regional

[[Page 65973]]

Reliability Standard, NERC points out that there are two definitions 
for Spinning Reserve; one from NERC, the other from WECC. NERC suggests 
that the Commission retain the NERC-defined term and retire the WECC 
term. NERC states that the proposed standard uses the NERC-defined term 
in Requirements R1, R2, and R3.
    58. Several commenters oppose the removal of the term Spinning 
Reserve from the NERC Glossary.\61\ Puget Sound states that retaining 
the term in the NERC Glossary is helpful to the development of a 
capacity/reserves market by facilitating the purchase and sale of 
spinning capacity that is not contingency-based. Similarly, NV Energy 
states that the term Spinning Reserve is useful because it describes a 
type of reserve that must be synchronized, unloaded generating 
capacity, as this is the only product that can provide the essential 
service of frequency and governor response under dynamic system 
conditions and disturbances. WSPP argues that the Commission's proposal 
is based upon a faulty understanding of the relationship between the 
terms Operating Reserve-Spinning and Spinning Reserve. WSPP and MISO 
agree that Spinning Reserve is used in the definition of Operating 
Reserve, which appears more than fifty times in the NERC Reliability 
Standards. WSPP further explains that Spinning Reserve can be used for 
the spinning component of Operating Reserve but also for other critical 
system requirements. In addition, MISO argues, generally, that it is 
not appropriate for the Commission to effect changes to the continent-
wide NERC standards by proposing a modification to the NERC Glossary 
within the context of a proceeding addressing a regional Reliability 
Standard.
---------------------------------------------------------------------------

    \61\ E.g., MISO, Puget Sound, WSPP, and Xcel.
---------------------------------------------------------------------------

    59. With respect to the Commission's proposed revisions of the 
definitions of the terms Operating Reserve--Spinning and Operating 
Reserve--Supplemental, NERC agrees that greater clarity is necessary 
regarding the meaning of ``load fully removable from the system.'' NERC 
states, however, that these modifications must be made through NERC's 
Reliability Standard Development Process and are, in fact, currently 
being addressed in Project 2007-05 Balancing Authority Controls, which 
is currently revising Reliability Standard BAL-002-0, as well as other 
standards.\62\
---------------------------------------------------------------------------

    \62\ As of July 28, 2010, this project has been merged with 
Project 2007-18--Reliability-based Controls and is now listed as new 
Project 2010-14--Balancing Authority Reliability-based Control. The 
new project page is available at http://www.nerc.com/filez/
standards/Project2010-14_Balancing_Authority_RBC.html.
---------------------------------------------------------------------------

Commission Determination
    60. We find that the proposed regional Reliability Standard does 
not provide that demand-side management that is technically capable of 
providing this service may be used as a resource for contingency 
reserves. The WECC definition of Spinning Reserve, like the NERC 
definition of the same term, is limited to ``unloaded generation which 
is synchronized and ready to serve additional demand.'' Thus, neither 
the WECC nor the NERC definitions of Spinning Reserve are inclusive of 
demand-side management as a resource.\63\ Nevertheless, WECC argues 
that the proposed regional Reliability Standard is inclusive of demand-
side management as a resource for contingency reserves because it lists 
interruptible load as an available resource for contingency reserve. 
The definition of interruptible load, however, is not inclusive of all 
forms of demand-side management.\64\ NERC defines demand-side 
management as ``all activities or programs undertaken by Load-Serving 
Entity or its customers to influence the amount or timing of 
electricity they use.'' \65\ This could include interruptible load but, 
as Xcel points out, demand-side management may encompass the use of 
many types of technologies and services. For example, according to the 
NERC Glossary, demand-side management includes controllable load, 
termed Direct Control Load Management, which is defined as demand-side 
management that is under the direct control of the system operator but 
does not include interruptible load.\66\ Thus, by simply listing 
interruptible load, the proposed regional Reliability Standard is not 
sufficiently inclusive of demand-side management as a resource.\67\
---------------------------------------------------------------------------

    \63\ In the transmittal letter of its compliance filing to Order 
No. 719, CAISO explained that demand-side management resources 
cannot currently provide regulation or spinning reserve services in 
its markets because of WECC's definitions of regulation and spinning 
reserve, which are limited to generation resources. CAISO, 
Compliance Filing, Docket No. ER09-1048-000, at 28-30 (April 28, 
2009).
    \64\ NERC defines Interruptible Load as ``Demand that the end-
use customer makes available to its Load-Serving Entity via contract 
or agreement for curtailment.'' NERC Glossary available at http://
www.nerc.com/docs/standards/rs/Glossary_of_Terms_2010April20.pdf.
    \65\ NERC Glossary available at http://www.nerc.com/docs/
standards/rs/Glossary_of_Terms_2010April20.pdf.
    \66\ Id.
    \67\ We also note that WECC's explanation that demand-side 
management that is deployable within ten minutes is a subset of 
interruptible load is not reflected in the definition of 
Interruptible Load.
---------------------------------------------------------------------------

    61. On remand, the Commission hereby adopts its NOPR proposal and 
directs the WECC to develop modifications to the proposed regional 
Reliability Standard that explicitly provide that demand-side 
management technically capable of providing this service may be used as 
a resource for both spinning and non-spinning contingency reserves.\68\ 
Consistent with the Commission's directive in Order No. 693, the 
modification should list the types of resources, including demand-side 
management, which can be used to meet contingency reserves.\69\ The 
modification also should ensure comparable treatment of demand-side 
management with conventional generation or any other technology and 
allow demand-side management to be considered as a resource for 
contingency reserves on this basis without requiring the use of any 
particular contingency reserve option. For example, consistent with our 
determinations in Order No. 693, the modification could replace the 
term Spinning Reserve with Operating Reserve--Spinning and Non-Spinning 
Reserve with Operating Reserve--Supplemental, since these glossary 
definitions are inclusive of demand-side management, including 
controllable load, in contrast to the current terms used in the 
proposed regional Reliability Standard.\70\
---------------------------------------------------------------------------

    \68\ In Order No. 693, the Commission clarified that, in order 
for demand-side management to participate as a resource for 
contingency reserves, it must be technically capable of providing 
contingency reserve service. For example, not every end-user who 
curbs electricity usage is technically capable of providing 
contingency reserve service. The Commission expects that the ERO 
would determine what technical requirements demand-side management 
would need to meet to provide contingency reserves. Order No. 693, 
FERC Stats. & Regs. ] 31,242 at P 334.
    \69\ Order No. 693, FERC Stats. & Regs. ] 31,242 at P 333.
    \70\ Id. P 1896.
---------------------------------------------------------------------------

    62. As commenters have pointed out, the term Spinning Reserve is 
used in the definition of Operating Reserve and in service agreements 
by and among certain WECC entities. Therefore, the Commission will not 
adopt its proposal to direct the ERO to remove the term from the NERC 
Glossary. However, as NERC points out WECC has maintained its own 
definition of the term Spinning Reserve. We find no substantial 
difference between the two terms. Both terms refer to ``unloaded 
generation that is synchronized and ready to serve additional demand.'' 
\71\ In its order approving WECC's current regional Reliability 
Standard, the Commission determined that regional definitions

[[Page 65974]]

should conform to the definitions set forth in the NERC Glossary, 
unless a specific deviation has been justified.\72\ WECC has not 
justified the need for a separate, regional definition of Spinning 
Reserve. Accordingly, we direct WECC to remove this regional definition 
from the NERC Glossary.
---------------------------------------------------------------------------

    \71\ NERC Glossary, available at http://www.nerc.com/docs/
standards/rs/Glossary_of_Terms_2010April20.pdf.
    \72\ North American Electric Reliability Corp., 119 FERC ] 
61,260 at P 54.
---------------------------------------------------------------------------

F. Miscellaneous

Comments
    63. In its petition, NERC contends that the industry will benefit 
from the improved clarity of the proposed regional Reliability 
Standard. Among its revisions, NERC presents a proposal from WECC for 
an interpretation of the term ``Load Responsibility.'' \73\ In the 
NOPR, the Commission stated its belief that any confusion regarding the 
term ``Load Responsibility'' has been addressed by WECC and therefore 
does not have a reliability impact. Xcel states that it agrees that 
WECC's interpretation is an improvement and that the standard is 
clearer without the term. Nevertheless, Xcel comments that more 
guidance on application is needed from both WECC and FERC before the 
western markets may operate efficiently.
---------------------------------------------------------------------------

    \73\ WECC's interpretation of ``Load Responsibility,'' which was 
approved by the WECC Board of Directors September 7, 2007, places 
the responsibility on the balancing authorities to determine the 
amount of and assure that adequate contingency reserves are 
provided. See WECC Interpretation of Load Responsibility (Sept. 7, 
2007), available at http://www.wecc.biz/Standards/Interpretations/
Interpretation%20of%20Load%20Responsibility.pdf. Likewise, the 
current regional Reliability Standard places the responsibility on 
the balancing authorities to determine the amount of contingency 
reserves and assure that adequate contingency reserves are provided.
---------------------------------------------------------------------------

    64. If the Commission decides to remand the proposed regional 
Reliability Standard, the QF Parties ask the Commission to direct WECC 
to define the term ``net generation.'' The QF Parties explain that the 
calculation of the amount of contingency reserves in the proposed 
standard is based, in part, on the amount of net generation, which is 
not defined. The QF Parties contend that, consistent with Commission 
precedent, the definition of net generation should not include 
generation used to serve load behind the meter.\74\
---------------------------------------------------------------------------

    \74\ Citing, Opinion No. 464, Docket No. ER98-997-000, at P 11 
et seq., 38-40 (August 12, 2003).
---------------------------------------------------------------------------

    65. Regarding the applicability of the proposed regional 
Reliability Standard, NV Energy expresses concern that it does not 
assign any responsibility or obligations for generator owners and 
generator operators. NV Energy states that a balancing authority does 
not have ownership or operational control over significant shares of 
generating resources within its footprint. Thus, NV Energy contends, a 
balancing authority may be required to carry a disproportionate share 
of the contingency reserve obligation within the Western 
Interconnection. For this reason, NV Energy asks the Commission to 
direct WECC to address this issue on remand.
Commission Determination
    66. The proposed regional Reliability Standard offers certain 
improvements over the current regional Reliability Standard as 
commenters point out. Nevertheless, for the reasons discussed above, we 
must remand the proposed regional Reliability Standard to the ERO. On 
remand, we direct WECC to consider the concerns raised by the QF 
Parties and NV Energy.

III. Information Collection Statement

    67. The Office of Management and Budget (OMB) regulations require 
that OMB approve certain reporting and recordkeeping (collections of 
information) imposed by an agency.\75\ The information contained here 
is also subject to review under section 3507(d) of the Paperwork 
Reduction Act of 1995.\76\ By remanding the proposed Reliability 
Standard the Commission is maintaining the status quo until future 
revisions to the Reliability Standard are approved by the Commission. 
Thus, the Commission's action does not add to or increase entities' 
reporting burden.
---------------------------------------------------------------------------

    \75\ 5 CFR 1320.11.
    \76\ 44 U.S.C. 3507(d).
---------------------------------------------------------------------------

IV. Environmental Analysis

    68. 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.\77\ The 
Commission has categorically excluded certain actions from this 
requirement as not having a significant effect on the human 
environment. Included in the exclusion are rules that are clarifying, 
corrective, or procedural or that do not substantially change the 
effect of the regulations being amended.\78\ The actions directed 
herein fall within this categorical exclusion in the Commission's 
regulations.
---------------------------------------------------------------------------

    \77\ Regulations Implementing the National Environmental Policy 
Act of 1969, Order No. 486, FERC Stats. & Regs. ] 30,783 (1987).
    \78\ 18 CFR 380.4(a)(2)(ii).
---------------------------------------------------------------------------

V. Regulatory Flexibility Act

    69. The Regulatory Flexibility Act of 1980 (RFA) \79\ generally 
requires a description and analysis of final rules that will have 
significant economic impact on a substantial number of small entities. 
The RFA mandates consideration of regulatory alternatives that 
accomplish the stated objectives of a final rule and that minimize any 
significant economic impact on a substantial number of small entities. 
The Small Business Administration's Office of Size Standards develops 
the numerical definition of a small business.\80\ For electric 
utilities, a firm is small if, including affiliates, it is primarily 
engaged in the transmission, generation and/or distribution of electric 
energy for sale and its total electric output for the preceding twelve 
months did not exceed four million megawatt hours. The RFA is not 
implicated by this final rule because by remanding the proposed 
Reliability Standard the Commission is maintaining the status quo until 
future revisions to the Reliability Standard are approved by the 
Commission.
---------------------------------------------------------------------------

    \79\ 5 U.S.C. 601-612.
    \80\ See 13 CFR 121.201.
---------------------------------------------------------------------------

VI. Document Availability

    70. 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.
    71. 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.
    72. 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

    73. This final rule shall become effective November 26, 2010. The 
Commission has determined, with the concurrence of the Administrator of 
the

[[Page 65975]]

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.

List of Subjects in 18 CFR Part 40

    Electric power, Electric utilities, Reporting and recordkeeping 
requirements.

    By the Commission.
Kimberly D. Bose,
Secretary.

                               Appendix A
------------------------------------------------------------------------
                           List of Commenters
-------------------------------------------------------------------------
                Commenter name                        Abbreviation
------------------------------------------------------------------------
Western Electricity Coordinating Council.....  WECC
North American Electric Reliability Corp.....  NERC
Bonneville Power Administration..............  Bonneville
California Independent System Operator Corp..  CAISO
California Dept of Water Resources, State      CDWR
 Water Project.
Idaho Power Co...............................  Idaho Power
Midwest Independent System Operator, Inc.....  MISO
Powerex Corp.................................  Powerex
Puget Sound Energy, Inc......................  Puget Sound
Cogeneration Association of California and     QF Parties
 the Energy Producers and Users Coalition.
Sempra Generation............................  Sempra
Sierra Pacific Power Co. and Nevada Power Co.  NV Energy
Southern California Edison Co................  SCE
Western Interconnection Regional Advisory      WIRAB
 Body.
WSPP Inc.....................................  WSPP
Xcel Energy Services Inc.....................  Xcel
------------------------------------------------------------------------

[FR Doc. 2010-27134 Filed 10-26-10; 8:45 am]
BILLING CODE 6717-01-P

